Property pitfalls: when it is unreasonable for a body corporate to refuse a motion?

In community titles schemes, body corporates are often called upon to make decisions concerning the rights of owners. Tensions can rise where a lot owner has proposed a motion and their motion is rejected – and often parties will seek to take the matter further.

Section 276 of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) provides adjudicators with certain powers to make orders to resolve disputes in community titles schemes. An adjudicator can make an order giving effect to, or varying, a motion that has been considered but not passed, provided the opposition to the motion is ‘unreasonable’ in the circumstances.

The relevant enquiry for the adjudicator in these types of decisions will be whether the opposition was unreasonable, not whether the decision itself was unreasonable. This distinction can be easily muddied. The leading case on this issue is Ainsworth v Albrecht [2016] HCA 40.

Ainsworth v Albrecht [2016] HCA 40

Mr Albrecht owned a lot in a community titles scheme. He sought to join two existing balconies on his lot into one balcony. To do so, Mr Albrecht required the use of the 5 m² of airspace between the two balconies – an area that was ‘common property’ in the sense of the BCCM Act.

Mr Albrecht put a proposal to the body corporate to alter the rights of lot owners to allow him exclusive use of the airspace. To pass an exclusive use by-law, the BCCM Act requires resolution without dissent. Lot owners at the Extraordinary General Meeting submitted dissenting votes and defeated Mr Albrecht’s motion.

Mr Albrecht applied for adjudication of the matter, and the adjudicator ordered that the motion be passed, on the basis that the body corporate had not acted reasonably in deciding not to pass the motion. The matter found its way to the High Court.

The High Court unanimously held the adjudicator should not have focussed on whether the decision of the body corporate was unreasonable. The correct test was whether the opposition to passing the resolution was unreasonable.

In considering whether opposition was unreasonable, the Court made the following comments:

• Reasonableness does not mean whatever the adjudicator considers ‘just and equitable’.
• A lot owner does not act unreasonably by failing to act ‘sympathetically or altruistically’.
• The standard of reasonableness is objective, taking into account all relevant factors, including factors the parties may not have been aware of, or appreciated, at the time of rejection.
• Where the proposed motion raises questions to which reasonable minds may differ as to the answer, the opposition is not likely to be unreasonable.

What will be ‘unreasonable’?

There have been a number of decisions where opposition to a motion has been held to be unreasonable.

• In Tinaroo Falls [2016] QBCCMCmr 499 (1 November 2016), the Commissioner suggested that opposition to a proposal prompted by spite, ill-will or a desire for attention may be unreasonable in the circumstances of a particular case.
• In River Park [2007] QBCCMCmr 244 (20 April 2007), the Commissioner said:

I fail to see how dissent by a lot owner to a motion of beneficial effect to that lot owner might be considered reasonable by an ordinary person, in the circumstances I consider it unreasonable.

In The Commissioner in River Park also considered that dissent by lot owners to the following motions was unreasonable:

• a change to exclusive use areas that would not affect the rights of lot owners and would create an aesthetic benefit to the premises (here, by creating a new basement car park having the effect of removing from view the vehicles presently parked at the front of the lot); and
• granting exclusive use over an area, already inaccessible to other lots in the scheme, that would reduce the body corporate liability for maintenance.

Comments

No matter how unfair a member considers a decision of a body corporate to be, there is a relatively high threshold for establishing that an adjudicator should vary that decision.

Recent case law has clarified that a decision of a body corporate not to pass an exclusive use by-law is not liable to be substituted or varied because an adjudicator considers the decision itself to be unreasonable.

Given the current approach taken by the courts, taking legal advice before opposing a motion as ‘unreasonable’, or responding to an application regarding the reasonableness of a motion, may assist in ensuring any challenge has the best chance of success.

If you would like more information on these issues, please contact Miranda Klibbe on +61 3231 2998, Courtney Flynn on +61 3231 2565 or the leader of our litigation and dispute resolution team, Rocco Russo, on +61 3231 2468.