Case note: Statutory provisions prevails over rules in regards to special privilege rights

In The Owners – Units Plan 68 v Haughey (Unit Titles) [2016] ACAT 131 the respondent installed a hot water system on the back wall of his unit which was common property where it remained for nearly five years. Ultimately, a question arose as to whether the respondent had permission to place the hot water system on common property and whether a special privilege right was required.

Senior Member Robinson reviewed the judgment of Douglas J of the Queensland Court of Appeal in Katsikalis v Body Corporate for “The Centre” [2009] QCA 77 and concluded that the reasoning in that judgment applied equally to ACT legislation and should be applied. That is, where there is to be a disposal or alienation of the common property, then it is necessary that that be done by a clear and unopposed process that is consistent with the legislative scheme. The granting of a special privilege would have required an unopposed resolution of the owners corporation following appropriate notification but this requirement was not met.

The respondent argued that he had obtained permission for the installation under rule 4(1)(a) which only required a special resolution on a motion that could be brought from the floor.

Senior Member Robinson rejected this argument on two grounds. Firstly, the relevant section of the ACT legislation was a statutory provision and as such it prevailed over any inconsistent article or rule (see Unit Titles (Management) Act 2011 (ACT) s 128(4)(a)). Secondly, rule 4 did not remove or ameliorate the requirement for a special privilege in any case. Adopting the reasoning of Douglas J, rule 4(1)(a) cannot be read independently of the ACT provision. A resolution under a rule could not grant a special privilege or otherwise authorise the exclusive use of the common property.

In conclusion, the installation of the hot water system on the complex wall amounted to an appropriation of the common property for the personal use of the respondent. Two steps, which did not occur, were required to be completed for this to happen:

  • the words and nature of the motion for an unopposed resolution to grant the special privilege at the general meeting had to be notified to all members – and these words needed to clearly state that the hot water system was to be placed on the wall; and
  • at that general meeting there had to be the express act of an unopposed resolution of the owners to grant the special privilege over the common property.

Consequently, the respondent did not have authorisation to install the hot water system on the complex wall.

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.