Who would have thought? A body corporate dispute about a balcony before the High Court

A lot owner was in dispute with other lot owners in the scheme with respect to the lot owner’s desire to join the lot owner’s two decks together.  After a decision by the Office of the Commissioner for Body Corporate and Community Management, an appeal to the Queensland Civil and Administrative Tribunal (QCAT), an appeal to the Queensland Court of Appeal, and then a further appeal to the High Court of Australia, the High Court recently handed down its decision in Ainsworth v Albrecht [2016] HCA 40 to finally resolve that dispute. 

In this Alert, Special Counsel, Anthony Pitt, and Associate, Hayley Schindler, review the High Court’s decision and the issues that were determined.  The Court considered whether the grounds for opposition to a motion, where the proposal required a resolution without dissent, was unreasonable; 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 Body Corporate and Community Management Act 1997 (Qld) (BCCM Act).  The High Court also considered whether it was necessary for an adjudicator to consider competing interests in determining whether such opposition was unreasonable.

Background

As to the parties to the proceeding, Martin Albrecht (the first respondent) was the owner of a lot in Viridian Noosa Residences.  The Body Corporate was the second respondent.  The appellants (Mr Ainsworth and others) were other lot owners within the Scheme. 

A summary of the history to the dispute is as follows:

• Mr Albrecht’s lot had two decks, and he wanted to join them together.  Mr Albrecht could only do so if the body corporate approved the proposal, without dissent, to grant Mr Albrecht exclusive use rights over the common property airspace between his two existing decks, which was estimated to be an area of 5m2.
• Mr Albrecht sought such a resolution without dissent at an extraordinary general meeting, but the motion was not passed without dissent.
• Mr Albrecht applied to the Office of the Commissioner for Body Corporate and Community Management for a referral of the dispute between himself and the Body Corporate to an adjudicator seeking an order under s.276 of the BCCM Act and Item 10 of Schedule 5 of the BCCM Act that effect be given to the motion on the basis that opposition to the motion was, in the circumstances, unreasonable.  The Adjudicator granted Mr Albrecht’s application and made the requested orders.
• Other lot owners within the scheme appealed to QCAT and QCAT allowed the appeal and set aside the Adjudicator’s orders.  QCAT held that the Adjudicator did not focus on whether the other lot owners’ grounds of opposition were reasonably held but rather had merely substituted the Adjudicator’s own opinion as to the reasonableness of Mr Albrecht’s proposal.
• Mr Albrecht applied for leave to appeal to the Queensland Court of Appeal contending that the appeal to QCAT should have been dismissed.  Mr Albrecht argued that questions of reasonableness and unreasonableness were questions of fact and it was not open to QCAT to review the correctness of the Adjudicator’s fact finding, except on orthodox administrative law grounds. 
• The Court of Appeal allowed Mr Albrecht’s appeal and held that QCAT erred in concluding that the Adjudicator had erred in law in the Adjudicator’s understanding of the task required, and that the Adjudicator did not adopt the wrong approach in balancing the interests of Mr Albrecht and the other lot owners.  The Court of Appeal held that the issue for the adjudicator was “whether the body corporate had complied with its obligation under s94(2) BCCM Act to act reasonably.”
• Mr Ainsworth and other lot owners then appealed the Queensland Court of Appeal’s decision to the High Court.  

Appellants’ submissions

In summary, the appellants submitted that:

• The Court of Appeal erred in finding that the Adjudicator was required to reach their own conclusion as to the reasonableness of the decision of the Body Corporate in failing to pass the necessary resolution without dissent and in approving the Adjudicator’s approach;
• No balancing exercise was involved in the Adjudicator’s task, which should have been focused upon whether the opposition of lot owners to Mr Albrecht’s proposal was unreasonable;
• To balance the right of Mr Albrecht to improve his lot with the rights of the other lot owners to retain their property rights fails to recognise that what is in issue under Item 10 of Schedule 5 of the BCCM Act is the reasonableness of an insistence by a lot owner on maintaining his or her property rights under the scheme;
• Each of the lot owners was entitled to vote in his or her own interests, and only if the position adopted was unreasonable, having regard to those interests, could the Adjudicator override that vote;
• The Adjudicator did not find that the lot owners’ opposition was unfounded or vexatious and expressly acknowledged that the lot owners voted against the motion in good faith and placed genuine reliance on architectural and other advice;
• The lot owners’ opposition was premised on real concerns about architectural opinions, privacy and noise issues and, accordingly, was, in the circumstances, not unreasonable; and
• There was also evidentiary support for the fact that the use of the common property would be of value to Mr Albrecht, but Mr Albrecht offered nothing to the lot owners in return for the grant of such a right, such that the Adjudicator erred in concluding that it was not reasonable to oppose the motion because the common property was not worth anything to those dispossessed lot owners.

Mr Albrecht’s submissions

Mr Albrecht submitted that the Adjudicator did not misunderstand the task committed to the Adjudicator, which was to conduct a merits review and engage in the exercise of balancing the interests of Mr Albrecht and the lot owner opponents of the proposed alteration to the common property.

The High Court’s decision

The High Court held that:

• Section 94(2) of the BCCM Act did not govern the resolution of the matter.
• The determination of the dispute turned on whether a resolution by the lot owners in relation to their property rights could be overridden under Section 276 and Item 10 of Schedule 5 of the BCCM Act, and that question concerned the quality of the grounds of opposition of each dissentient lot owner, not the reasonableness of the decision of the Body Corporate.
• The Adjudicator’s attention should have been focused squarely upon whether the opposition by a lot owner, or owners, to the passing of the resolution was unreasonable.
• The BCCM Act allows opposition to a resolution to be overridden only where opposition by lot owners, other than the proponent, is unreasonable.
• The unreasonableness of the opposition to the proposal is to be determined in a context in which lot owners voting in respect of the proposed resolution are exercising their right to vote as an aspect of their proprietary rights as owners of lots in the scheme.  In that context, the unreasonableness with which Item 10 of Schedule 5 is concerned is unreasonableness on the part of the opposing lot owners having regard to those lot owners’ interests under the scheme.
• There is nothing in the BCCM Act which suggests that a lot owner may be required by an adjudicator to assist another lot owner to enhance that lot owner’s interest, or be regarded as acting unreasonably in declining to do so, at least where the enhancement of the proponent’s interest is reasonably viewed as adverse to the interests of the opponent.
• While the Court could not set out an exhaustive statement of the circumstances in which an order pursuant to Item 10 of Schedule 5 could be made, opposition to a proposal that could not, on any rational view, adversely affect the material enjoyment of an opponent’s property rights may be seen to be unreasonable, or opposition prompted by spite or ill-will or a desire for attention may be seen to be unreasonable in the circumstances of a particular case.
• The proposal in question was apt to create a reasonable apprehension that it would affect adversely the property rights of opponents of the proposal and the enjoyment of those rights, such that opposition of the lot owners who dissented from the proposal could not be said to be unreasonable.

In light of the above findings, the High Court allowed the appeal, which meant that the lot owners’ opposition to the motion was upheld and not disturbed.

The High Court’s decision solely relates to the power of an adjudicator, pursuant to Section 276 and Item 10 of Schedule 5 of the BCCM Act, to overturn a decision by lot owners to oppose a motion, where a resolution without dissent is required to approve that motion, and must be considered in that context. 

The High Court confirmed that an adjudicator may overturn such a decision if the proposal could not, on any rational view, adversely affect the material enjoyment of an opponent’s property rights or if the opposition to the proposal was prompted by spite or ill-will or a desire for attention (depending on the circumstances of the case). 

In contrast to the situation in dispute as described above, the High Court appears to have accepted that where Section 94(2) of the BCCM Act applies (being the general obligation of a Body Corporate to act reasonably in making a decision – which was not the applicable provision here), the Body Corporate is required to achieve a reasonable balance of the competing interests affected by a proposal in order to comply with that obligation. 

For more information, please contact HopgoodGanim Lawyers' Litigation & Dispute Resolution or Commercial Property teams.