The Reasonableness Test


Viridian Apartments Noosa. Proudly managed by SSKB Sunshine Coast

by Jason Carlson, Grace Lawyers

Bodies corporate in Queensland are required to act reasonably in everything they do.  What that means, and how an Adjudicator in the Commissioner’s Office should resolve a dispute about whether a body corporate has acted reasonably, may be dealt with by the High Court of Australia shortly.

The case
On 6 November 2015 the Queensland Court of Appeal (the Court) handed down a decision on whether opposition to an exclusive use grant was reasonable.1  The grant was necessary to allow an owner to extend a deck into common property airspace for a scheme called Viridian Noosa Residences.  The airspace was valued at no more than $20,000.

A group of dissenting owners opposed the grant on a number of grounds, including that the extended deck would adversely affect the amenity, privacy and view from other lots, it would be inconsistent with the original architectural design intent for the development, and no compensation was offered for the land being acquired.

An Adjudicator found those grounds to be unreasonable.  In an appeal to the Queensland Civil and Administrative Tribunal (QCATA), a Queen’s Counsel then decided that those grounds were reasonable.2

Upholding the further appeal, the Court reinstated the Adjudicator’s decision on the basis that there was no legal error in it, even though the Court acknowledged that QCATA’s views on the grounds for opposing the exclusive use grant could also be reasonably held.

The Adjudicator’s role
To resolve a dispute of this kind, an Adjudicator can make an order giving effect to the proposal (or a variation of the proposal) “if satisfied a motion … considered by a general meeting and requiring a resolution without dissent was not passed because of opposition that in the circumstances is unreasonable”.3  This raises issue with what the role of an Adjudicator is when an aggrieved person (i.e. a lot owner) challenges the reasonableness of a body corporate’s decision.

Does the Adjudicator assume the body corporate’s position and make a decision that the Adjudicator considers to be reasonable in the circumstances?   Or is the Adjudicator limited to determining whether the body corporate breached its duty to act reasonably, and then only substituting their own decision if they are satisfied that a breach occurred?

The Court held:

 “…the Adjudicator is not limited to determining whether the … opposition to the motion could have been reasonably held.  She was required to reach her own conclusion after considering all relevant matters.”4

The Court then went on to find that:

 “As the reasons of both the Adjudicator and QCATA demonstrate, views as to what was reasonable or unreasonable involved value judgments on which there was room for reasonable differences of opinion, with no opinion being uniquely right. Had QCATA’s views as to unreasonableness been the views of the Adjudicator, and had the Adjudicator made no errors of law, that finding would have been unassailable…”

This means that while the views of the Adjudicator and the Queen’s Counsel in the QCATA were different, the Court considered them both to be reasonable.

However, an appeal against an Adjudicator’s decision is limited to legal errors.  The Court held that an Adjudicator’s views as to unreasonableness are reached by making findings of fact, not law.  That means they are generally not open to appeal.

The implications of this decision
The approach taken by the Court may cause concerns for bodies corporate, committees and lot owners across the industry.  It permits an Adjudicator to impose their own value judgment on what is reasonable in the circumstances of a particular scheme, as opposed to simply determining whether the grounds for the body corporate’s decision were reasonably held and allowing the stakeholders involved to form their own value judgments on what is appropriate for their scheme.

In the case of Viridian Noosa Residences, a group of owners were concerned that the proposed deck extension was inconsistent with the way the villas were purposefully designed with small balconies – this was intended to discourage external use, parties and noise in a dense residential environment.   The dissenting owners were primarily concerned that the deck extension would be incompatible with that design intent, mindful that the architectural design of Viridian was subject to significant recognition in the industry and owners spent millions of dollars purchasing these villas.

In Viridian, both sides were supported by numerous architectural opinions.  The Adjudicator found that some of those architectural opinions were “more supportable” than the others.5

Architecture is in many respects an art.  People will appreciate it in different ways and to varying degrees based on their unique tastes, preferences and values.  An implication of the Court’s decision is that the values of an Adjudicator can be substituted for the values of lot owners that have invested and live in a community titles scheme, and the Adjudicator’s value judgment is “unassailable”.

Hypothetically, one group of owners could hold a reasonable view in support of a proposal, another group could hold a reasonable view opposing the proposal, and the Adjudicator may very well hold a different view entirely and impose that view on the community.

The High Court
We understand that this case has now been taken to the High Court of Australia.  Before the case is dealt with, the dissenting owners will have to convince the High Court that:

  • the legal issues involved are of public importance or the High Court is required to resolve difference of opinions between different courts as to the state of the law; and
  • the interests of the administration of justice warrant consideration of the case.

At face value, this case concerns the construction of a deck into airspace that is valued at no more than $20,000.  However, the Queensland Court of Appeal found that the issues raised were of “considerable importance” to the owners of “valuable homes” in that scheme, and the matter was of general importance to the conduct of adjudications under the Body Corporate and Community Management Act 1997 (Qld).

If the High Court sees it the same way, this will be the first time in more than two decades that Queensland’s body corporate law comes under the scrutiny of the highest judicial forum in Australia.

Lessons to be learnt
While the lawyers, barristers and judges resolve this matter, these are the lessons that can be learnt:

  • While a committee does not have to give reasons for a decision it makes, you should encourage committees to prepare an internal list of their reasons.  This can be a useful frame of reference if a dispute develops months later.  The exercise of preparing a list of reasons also encourages the writer to adopt a more logical frame of mind and reflect on their position.
  • You should encourage committees to take external advice where appropriate.  Vetting the merits of a building application should not be left to the treasurer because he or she is a “hands-on” sort of person.
  • When confronted with a challenge, a body corporate will have to consider how an Adjudicator (even different Adjudicators) would deal with the proposal and take that into account when formulating their own position.
  • Parties to a dispute of this kind should be mindful that, unless they can resolve the dispute between themselves, an Adjudicator might make a decision neither party wants.
  • Adjudications in the Commissioner’s Office should be taken seriously.  Do not wait until the Adjudicator finds against the body corporate before the committee decides the outcome is important to them.  A body corporate can only appeal an Adjudicator’s order if authorised by resolution passed in general meeting, and it generally cannot put forward new evidence or arguments in the appeal.

Reproduced with kind permission

Jason Carlson, Partner
Grace Lawyers
T: (07) 3232 1119
E: jason.carlson@gracelawyers.com.au

 

1 Albrecht v Ainsworth & Ors [2015] QCA 220.
2 Re Body Corporate for Viridian; Kjerulf Ainsworth & Ors v Martin Albrecht & Anor [2014] QCATA 294.
3 Item 10, Schedule 5 of the Body Corporate and Community Management Act 1997 (Qld).
4 Albrecht v Ainsworth & Ors [2015] QCA 220 at [82].
5 Viridian Noosa Residences [2013] QBCCMCmr 351 at [63].



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