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Body Corporate Law

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High Court statement on a Body Corporate’s obligation to act reasonably

Ainsworth v Albrecht [2016] HCA 40

We all know someone who lives in a community titles scheme. We probably know someone who isn’t happy with decisions made by the Body Corporate.

A recent decision of the High Court of Australia now provides some guidance about how a Body Corporate makes a decision which is “reasonable”. In giving its judgement, the High Court has emphatically rejected a decision of the Queensland Court of Appeal and ended a long running saga by upholding a Body Corporate’s opposition to an owner’s application to extend a balcony over common property.

The Body Corporate and Community Management Act 1997 (the Act) required the balcony extension to be approved without any dissenting vote. In the circumstances, 7 votes were cast against the proposal. The Act variously requires the Body Corporate to act reasonably in its determinations. In the case of a resolution without dissent, an Adjudicator of the Office of the Commissioner for Body Corporate and Community Management may order that the motion be approved if the opposition to the proposal was unreasonable in the circumstances.

The matter ebbed and flowed from the decision of an Adjudicator that the opposition to the balcony extension was unreasonable and to allow the balcony extension. Ultimately, the High Court’s decision in Ainsworth v Albrecht [2016] HCA 40 has resulted in the balcony extension being defeated and the original decision of the Body Corporate restored.

The Adjudicator’s decision was rejected by the Queensland Civil and Administrative Tribunal (QCAT) which found that the opposition to the balcony extension was not unreasonable. The QCAT decision was overturned by the Court of Appeal. The Court of Appeal decision was overturned by the High Court.

In relation to a Body Corporate’s obligation to act “reasonably” in the case of a resolution without dissent, the High Court stated that it is not unreasonable to oppose a proposal that adversely affects the material enjoyment of an opponent’s property rights. An attempt to determine the better outcome based on all circumstances should not be undertaken. The determination is not to strike a reasonable balance between competing positions. The focus is squarely upon whether the opposition by a lot owner or owners to the passing of the resolution was unreasonable. Focus must be on whether the opposition to the proposal was unreasonable, not whether the decision of the Body Corporate (in rejecting the motion) was unreasonable.

The High Court also stated that opposition prompted by spite, or ill-will, or a desire for attention, may be seen to be unreasonable in the circumstances of a particular case.

In the circumstances of this case, the motion required a resolution without dissent. The motion requiring a resolution without dissent could only be disturbed if the opposition is unreasonable. he High Court’s comments should be restricted to that type of motion and contrasted with a motion at a general meeting (where the Body Corporate must act reasonably in the general functions and powers in relation to the administration of a community titles scheme) which the High Court stated must achieve a reasonable balance of the competing interests affected by the proposal.

This decision reinforces the need for owners of lots held under community title schemes to be mindful of the restrictions and obligations they agree to abide by and follow when purchasing into such schemes. It also highlights the risk of decisions of the Body Corporate being overturned if they do not achieve a reasonable balance of the competing interests or, in the case where a resolution without dissent is required, they adversely affect the material enjoyment of property rights.

Kathleen Ready | Senior Partner | +61 7 3238 0604 | kready@dowdandco.com.au

Dan McManus | Special Counsel | +61 7 3238 0611 | dmcmanus@dowdandco.com.au

 

Author

Dan McManus - Special Counsel

Area of Expertise

Commercial Property


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