Case note: What is “unreasonable” to refuse?

In Floro v Owners – Units Plan No 630 (Unit Titles) [2017] ACAT 4  the applicant, Ms Floro, sought a review of a decision of the respondent owners corporation to decline to grant owners within the complex a ‘special privilege’ to erect support poles for a carport on an area of common property adjoining their units.

The resolution was opposed by one of the twenty six members of the owners corporation (the Objector) but given the requirement for unanimous approval, the opposition of one person was sufficient to ensure that the resolution was not successful. Neither the Objector nor the owners corporation participated in the ACAT proceedings.

In summary, the proposal allowed the owners of several units to put up practical and useful carports. The proposal appeared to have a minimal impact on the common property and was consistent with other current uses of the common property. No person, including the Objector, pointed to any evidence that the proposal could have any effect on any person’s material enjoyment of their property, or even of the common property. Indeed, no basis for an objection to the motion was advanced at all.

When assessing the unreasonableness of the objection to the motion, Senior Member Robinson turned to the recent High Court decision in Ainsworth v Albrecht [2016] HCA 40 which considered the concept of unreasonableness as it appears in the Queensland Body Corporate and Community Management Act 1997 (QLD). This Queensland decision concerned a similar application but was brought under the Queensland Body Corporate and Community Management Act 1997. ACAT held that while the Queensland Act is different to the ACT legislation in some respects, the concept of reasonableness was sufficiently common that the reasoning of the High Court should be applied by ACAT.

In Ainsworth, the High Court provided some guidance on the concept of unreasonableness in the context of reviews of decisions of owners corporations. The majority held that the unreasonableness of opposition to a proposal can only be determined by considering the circumstances of the proposal and its likely impact on the opponents’ property interests. However, consideration of whether a person is acting unreasonably in protecting their property interest does not require that they act with altruism or sympathy for the interests of the proponent. Lot owners are entitled to take steps in their own self-interest to protect their property interests. In the Queensland case, it was sufficient that the objectors had a reasonable apprehension that the proposal would adversely affect their property rights and consequently opposition could not be said to be unreasonable.

The High Court in Ainsworth held that the first step in considering whether the opposition was unreasonable is identification of a ground of opposition and the second step is an enquiry into whether that ground is a rational basis for opposition.

In this ACAT case, the difficulty was defining the interest to be protected given neither the owners corporation nor the Objector had articulated it. Consequently, while ACAT could theorise the basis upon which an objection might be made, there was no evidence that any of those rationales was the basis for the objection in this case and consequently ACAT held that an objection to a resolution, without any basis, was unreasonable.

Case Note: What is “unreasonable” to refuse?

Introduction

A dispute over the airspace between two balconies in Queensland has provided the most comprehensive authority to date as to what is considered an ‘unreasonable refusal’ by owners corporations for the purposes of granting a common property right.

The High Court decision in Ainsworth v Albrecht [2016] HCA 40 (Ainsworth) turned on the exercise of clause 10 of schedule 5 of the Body Corporation and Community Management Act 1997 (Qld) (BCCMA), namely,  what should be taken into consideration when determining whether a motion to grant a common property right had been unreasonably refused. The High Court found that it is not whether the functions of the body corporate (in NSW the owners corporation) such as administering the common property, enforcing the community management statement and by-laws etc. – see section 94 of the BCCMA – were reasonable, but whether refusal by the individual lot owners who opposed the motion to grant a common property right were unreasonable. On the latter point, the High Court concluded that it is not unreasonable for a lot owner to refuse a motion if the motion could adversely affect their property rights. The High Court also noted that individual lot owners should not be held to the same standard of decision making as a company or corporation would.

Background and outcome

This case came about when Mr Albrecht requested the common property rights to the airspace between the two balconies of his lot so that he could connect them and create one large deck. At the body corporate meeting to determine the motion seven lot owners refused to pass the motion. Under the BCCMA, the motion required no dissents be recorded. Mr Albrecht applied for Adjudicator’s orders. The Adjudicator determined that the body corporate had breached its obligations under section 94(2) of the BCCMA to act reasonably in exercising its general functions when it refused to pass the motion. Mr Albrecht appealed to Queensland Civil and Administrative Tribunal (QCAT) who ruled that the Adjudicator had impermissibly substituted their own opinions for that of the body corporate, thus siding with the body corporate and refusing to make the by-law. Mr Albrecht appealed to the Supreme Court which upheld the Adjudicator’s decision. The body corporate appealed to the High Court who comprehensively rejected the Supreme Court’s conclusion, finding that the Adjudicator’s reliance on section 94(2) led them to ask the wrong questions and that was an error of law and an error which affected the Supreme Court as well. Mr Albrecht did not get the right to connect his two balconies.

What impact does this case have in NSW?

The NSW equivalent to clause 10 of schedule 5 of the BCCMA is found under section 149 of the Strata Schemes Management Act 2015 (NSW) (SSMA), which provides that the NSW Civil & Administrative Tribunal (NCAT) may order the change of a common property by-law if it is found that an owners corporation has unreasonably refused to make a common property rights by-law. In this regard, the NCAT must consider the interests of all the owners in their use and enjoyment of the common property as well as the rights and reasonable expectations of the owners.  In NSW, decisions made by NCAT often cite Curragh Coal Sales Co Pty Ltd v Wilcox (1984) FCR 46 as authority that the word ‘unreasonable’ is to be given it’s every day definition as defined by the Macquarie dictionary, that is, ‘not reasonable, not endowed with reason, not guided by reason or good sense, not based on or in accordance with reason or sound judgement’. The decision in Ainsworth arguably provides clarity on the definition of unreasonable in that it applies to individual lot owners voting as part of the owners corporation, ie, it is not unreasonable for them to refuse a motion to grant a common property right if the grant would materially affect their property right. In regards to considering the interests of all owners in a scheme, Ainsworth also held that it is the Adjudicator’s role to do precisely that, give consideration to all the owners in the scheme, not to strike a reasonable balance between two interests.

What does this mean for owners corporations and owners?

For owners corporations, the decision in Ainsworth will arguably ensure that all lot owners interests are considered when granting a common property right which would confirm the owners corporations’ responsibility under the SSMA to manage the common property for the benefit of all owners. For individual lot owners, the case highlights the importance of having their votes regarding common property rights properly recorded.

Building certifier liability after Brookfield: Where to now?

Background

1. On 8 October 2014, the High Court handed down its decision in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36 which curtails the rights of apartment owners to sue builders in negligence.

2. The case involved a long-running dispute between the builder, Brookfield Multiplex, and the owners corporation with respect to building defects in the common property of a commercial building, The Mantra Chatswood Hotel, run as a serviced apartment business.

3. The High Court adopted a case-by-case approach prescribed by previous judgments including Bryan v Maloney (1995) 182 CLR 609 (Bryan v Maloney) and Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 (Woolcock), holding that the builder did not owe the owners corporation a duty of care in these circumstances.

Reasoning

4. There were two questions that the Court answered in coming to its ruling: firstly, whether the builder owed a duty of care to the developer and, secondly, whether the builder owed a duty of care to the owners corporation independently of any duty of care owed to the developer. i A duty of care must be established in order for an action in negligence to be successful. Continue reading