Acting reasonably: What your Owners Corporation needs to know

We often hear of the Owners Corporation’s responsibility to act in good faith on behalf of fellow owners. In fact, the Owners Corporation Act (VIC) 2006, says as much.

In keeping with this, the Owners Corporation’s must also act reasonably when making decisions.

But what is reasonable?

Billed as one of the most significant strata cases in recent times, Ainsworth v Albrecht – which originated in Queensland – dealt with and set precedent around what constitutes “reasonable action” by a body corporate.

The case of Ainsworth v Albrecht [2016] High Court of Australia – which resolved around the wish of one lot owner to extend their decking five square meters into common property airspace – started in Queensland and made it all the way to the High Court of Australia

CASE SUMMARY

Mr. Albrecht owned a lot in the Veridian Noosa Residences (Queensland) and wanted to extend his decking by approximately five square metres into airspace which was deemed common property.

To do this, he needed approval from the Body Corporate by way of special resolution, which was refused. Mr. Albrecht felt the refusal was unreasonable and pursued his interest through the courts.

If you’re confused by what constitutes “reasonable”, don’t worry, you’re not alone.

By the time a final decision was made, the dispute passed through the Queensland Civil and Administrative Appeal Tribunal, the Queensland Court of Appeal and finally the High Court of Australia.

Mr. Albrecht applied to an independent Adjudicate to have the motion overturned and was successful, with the Adjudicator arguing the Body Corporate had acted “unreasonably” in refusing the motion.

The Body Corporate appealed to the Queensland Civil and Administrative Appeal Tribunal, who set aside the Adjudicator’s decision and deemed the Body Corporate’s original decision “reasonable”.

Mr. Albrecht appealed to the Queensland Court of Appeal where it was unanimously agreed that the Adjudicator’s decision should be re-instated, in effect deeming the Body Corporate’s original refusal as “unreasonable”.

Determined to uphold the original decision, another lot owner, Mr Ainsworth led an appeal with the other lot owners to the High Court of Australia, who eventually allowed the appeal and declared the Body Corporate’s original decision was “reasonable”.

CASE PROGRESSION

Mr. Albrecht requires approved Body Corporate motion to allow extension of deck into common property airspace.
Motion denied

Mr. Albrecht makes application to Office of the Commissioner for Body Corporate and Community Management
Approves motion, deems BC decision “unreasonable”

BC appeals to QCAT
Appeal allowed. Says BC acted “reasonably”

Mr. Albrecht appeals to Queensland Court of Appeal
Re-instates approved motion. Deems BC acted “unreasonably”

Mr. Ainsworth leads BC appeal to High Court of Australia
Allows appeal. Judges that BC acted “reasonably”

 

CASE BACKGROUND

  • The First Respondent, Mr. Albrecht, owned a lot in the Veridian Noosa Residences.
  • Mr Albrecht wanted to extend the deck of his home but required Body Corporate approval to do so.
  • The extension would require the use of approximately five square metre of airspace between two balconies.
  • The airspace was a part of common property.
  • Albrecht required the Body Corporate to approve it by way of resolution without dissent.
  • The motion was unsuccessful.

Mr. Albrecht escalated the case to an Adjudicator, making an application to the Office of the Commissioner for Body Corporate and Community Management, arguing that the other owners had acted “unreasonably” in refusing his motion. The Adjudicator agreed with Mr. Albrecht’s argument and deemed the motion approved.

WHAT HAPPENED NEXT?

The other lot owners appealed the Adjudicator’s decision to the Queensland Civil and Administrative Appeal Tribunal (QCAT) and ruled that the Body Corporate’s original decision to deny Mr. Ainsworth was “reasonable”.

Albrecht appealed to the Queensland Court of Appeal where the appeal was unanimously allowed. The lead judgement from Justice Margaret McMurdo stated:

“The adjudicator’s reasons make clear that she conscientiously considered all of the material and submissions relied upon by the applicant and the respondents, made findings of fact, all of which were open on that material, and was ultimately satisfied as a matter of fact that the applicant’s motion was not passed because of the respondents’ opposition to it that in the circumstances was unreasonable.”

APPEAL TO THE HIGH COURT

Unhappy with decision made by the Queensland Court of Appeal, Mr. Ainsworth (another lot owner within Veridian Noosa Residences) and the other lot owners appealed to the High Court of Australia.

Their argument centred on three points:

  1. Allowing Mr. Albrecht to extend his balcony would adversely affect the architectural integrity of Veridian – a position supported by three separate architects;
  2. It may increase noise emanating from Mr Albrecht’s lot – a position supported (in part) by the architect who designed Viridian to avoid large decks; and
  3. It may offer Mr Albrecht greater visibility into neighbouring lots, effectively reducing the level of privacy they enjoyed.

The High Court allowed the appeal, ruling:

[64] 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. In these circumstances, opposition of the lot owners who dissented from the proposal could not be said to be unreasonable.” (emphasis added)

CONCLUSIONS:

Your Owners Corporation should keep in mind that whatever actions they take have to be “reasonable”, as well as in good faith to other owners.

While the case started in Queensland, the decision from the High Court of Australia has had national repercussions.

This case might not define “reasonable”, but the High Court’s judgment sets some precedents around what factors should be considered, for instance:

  • Will other lot owners be affected by allowing/not allowing a change?
  • What other flow on effects may be caused? (Noise, outward appearance, overall value of the property)

On the other hand, an action or decision by the Owners Corporation might be considered “unreasonable” if:

  • The decision was reached because of a personal disagreement
  • The committee does not like one particular lot owner
  • Allowing the change/taking the action would have no effect on other lot owners
  • Allowing the change/taking the action would have no flow on effects for the property as a whole

Read more about this case HERE.

If you, your fellow owners or Owners Corporation are facing a decision and need further help in defining what a reasonable response may be, or if you have recently made an application to your Owners Corporation and believe its decision was unreasonable, you should check with your Strata Manager or seek advice from a legal professional.

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