Queensland Court of Appeal confirms the test for reasonableness

In this Alert, Partner Anthony Pitt and Special Counsel Hayley Harvey review the recent Queensland Court of Appeal decision in Albrecht v Ainsworth & Ors [2015] QCA 220 in which the Court considered the test for determining whether a body corporate has acted reasonably in carrying out its general functions under s.94 of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) as well as the relationship between voting rights and the power of an adjudicator to make just and equitable orders under s.276 of the BCCM Act.

Background

The Applicant was the owner of a lot in Viridian Noosa Residences, a multi dwelling complex in Noosa.  The Respondents included the body corporate and other lot owners within the complex.

The Applicant’s lot had two decks, and the Applicant wanted to extend the deck area of his home to join the two decks together.  The applicant could only do so if the body corporate, in an extraordinary general meeting, approved the proposal without dissent and amended its community management statement to grant the applicant exclusive use rights over the common property airspace between his two existing decks.

At the extraordinary general meeting, out of the 23 lot owners, 7 voted in favour of the motion, 7 voted against, 1 abstained and the remaining 8 lot owners did not vote.  Accordingly, the motion was not passed without dissent, as required.

Application to the Office of the Commissioner for Body Corporate and Community Management

The Applicant lodged an application with the Office of the Commissioner for Body Corporate and Community Management seeking orders to give effect to his motion. 

The Applicant argued that the body corporate’s refusal to pass the motion was unreasonable as the proposed deck alteration:

• was objectively minor in scope and effect;
• utilised only a small volume of airspace which could never be of use to any other owner;
• would improve the safety and amenity of the decks;
• was designed by Viridian’s original architect and was consistent with the existing architectural design for the scheme;
• would not impede the view, aspect, privacy or use and enjoyment of any lot; and
• would comply with the conditions of approval for the scheme.

The Respondents argued that their opposition to the Applicant’s motion was not unreasonable and that the body corporate acted reasonably in refusing the motion based on a number of considerations, including:

• the impact on the architectural integrity of the scheme;
• the “floodgates” argument, that other lot owners would follow suit and seek to extend their decks;
• the absence of an offer of proper compensation to the body corporate;
• noise issues; and
• privacy issues with respect to Lot 10.

In granting the application and making the orders sought, the adjudicator identified that the issue for determination was “whether the opposition to [the] motion was unreasonable in the circumstances and whether the body corporate acted reasonably in refusing to give approval”. The adjudicator found that the test was objective and required a balancing of factors in all of the circumstances according to the ordinary meaning of the term “reasonable”, that is, not whether the decision was “correct” but whether it was objectively reasonable.

Appeal to the Queensland Civil and Administrative Appeal Tribunal

The Respondents appealed the adjudicator’s decision to the Queensland Civil and Administrative Appeal Tribunal (QCATA).

QCATA allowed the Appeal and set aside the adjudicator’s orders, finding that the adjudicator had erred in law in a number of material respects.  QCATA determined that the adjudicator ought to have found that the Applicant had not established that the body corporate had acted unreasonably.

Appeal to the Queensland Court of Appeal

The Applicant applied for leave to appeal to the Queensland Court of Appeal on a question of law.  The Applicant argued that questions of reasonableness and unreasonableness were questions of fact and that it was not open to QCATA to review the correctness of the adjudicator’s findings of fact and that the appeal to QCATA should have been dismissed.

In its decision, the Court of Appeal noted that the adjudicator had considered numerous relevant factors in determining the question of reasonableness, including that:

• the body corporate could only pass the Applicant’s motion if there was no dissent;
• the BCCM Act allowed the Applicant to apply to have the dispute referred to an adjudicator for resolution and empowered the adjudicator to give effect to the motion if the opposition to the motion was unreasonable and it is just and equitable to give effect to it;
• seven of the twenty-three Viridian lot owners opposed the motion;
• the Applicant had a legitimate interest in improving his lot; and
• the common property airspace was of no use to anyone but the Applicant.

Court of Appeal’s decision

In allowing the Applicant’s appeal and setting aside QCATA’s decision, the Court of Appeal held that:

• the adjudicator’s role under s. 276 and Item 10 in Schedule 5 of the BCCM Act, consistent with the objects of the BCCM Act and the obligation on bodies corporate in carrying out their general functions to act reasonably under s. 94 of the BCCM Act, is to determine whether the adjudicator is satisfied that the body corporate did not pass the Applicant’s motion because of opposition that was, in the circumstances, unreasonable;
• the question of reasonableness is objective, requiring a consideration of all relevant circumstances; and that the determination of whether opposition to the motion was unreasonable required a consideration in an objective and fair manner of all the relevant facts and circumstances;
• the competing submissions and supporting material made the question of reasonableness difficult to resolve;
• what will be relevant in determining reasonableness (or unreasonableness) will vary from case to case, depending on the issues raised and the relevant material submitted;
• the adjudicator was not limited to determining whether the Respondents’ opposition to the motion could have been reasonably held;
• the adjudicator was required to reach their own conclusion after considering all relevant matters; and
• the adjudicator’s reasons made it clear that the adjudicator had conscientiously considered all of the material and submissions relied upon by both parties, made findings of fact all of which were open on that material, and was ultimately satisfied as a matter of fact that the Applicant’s motion was not passed because of the other owners’ opposition to it that in the circumstances was unreasonable.

The Court of Appeal noted that the question of what was reasonable or unreasonable involved value judgments of which there was room for reasonable differences of opinion, with no opinion being uniquely right.  The Court of Appeal confirmed that a QCATA appeal is limited to a question of law such that, as the adjudicator made no errors of law, the adjudicator’s view of what was reasonable or unreasonable could not be overturned on appeal.

Accordingly, an adjudicator’s view of what is reasonable in the circumstances can only be overturned on appeal if it is determined that there was an error of law in reaching that view.

Therefore, when faced with a situation where a motion has not been passed, before deciding to take action to dispute it, one must be aware that an adjudicator will be required to decide whether the body corporate has acted reasonably in not passing the motion, which will involve a consideration of all relevant facts and circumstances in an objective and fair manner.  

For further information or discussion, please contact HopgoodGanim Lawyers' Litigation & Dispute Resolution team.