Copy
The Times They Are A-Changin' ...And How Reasonable Is This?
View this email in your browser

The Times They Are A-Changin'...And How Reasonable Is This?

MOST of us would be aware how difficult it is for Motions without Dissent to pass: just 1 ‘NO’ vote can have the final say, no matter how many ‘YES’ votes there are. 

And we will have seen similar difficulties with Special Resolutions, where a small, but active minority can override the wishes of the majority.

Ordinarily, most owners accept these negative outcomes no matter how unreasonable they seem.

Recently however, some owners have not been happy with these outcomes and have gone to adjudication… often with startling success.  In terms of authorative impact, it has all came together in the Viridian Decision.

THE VIRIDIAN DECISION

WHO would have thought a ‘7 FOR’ v ‘7 NO’ vote on a Motion without Dissent could be challenged successfully on the basis the Body Corporate was acting unreasonably?  Maybe, just maybe, if there was only 1 lonely ‘NO’ vote… but not with numbers like these.

Well, an owner at Viridian Noosa Residences, Martin Albrecht, obviously thought differently and went to adjudication late-2012.  In September 2013, the Adjudicator, I Rosemann, agreed with the owner and ordered:
  • The Motion was not passed because of opposition that was unreasonable in the circumstances
  • The Motion is deemed to have been passed
  • The Body Corporate must lodge a new Community Management Statement incorporating the amendments proposed by the Motion  ie a grant of exclusive use rights to the owner.[i]
The Body Corporate then appealed to the QLD Civil and Administrative Tribunal (QCAT), where the Member, Roney QC, decided in October 2014 the Body Corporate had acted reasonably in opposing the Motion, and overturned the Adjudicator.[ii]

For those of us following this matter, it was becoming clear there was serious interest in the outcome: 
  • The applicants had been represented by C Francis of Counsel, instructed by Hynes Legal
  • The respondent, Mr Albrecht, was represented by B Kidston of Counsel, instructed by Mahoney Lawyers.
Mr Albrecht then appealed to the Court of Appeal Division of the Supreme Court of Queensland.  This is when things got really serious, and presumably very costly: 
  • Mr Albrecht was now represented by Senior Counsel, D R Gore QC, instructed by Mahoney Lawyers
  • The respondents were now represented by Senior Counsel, K N Wilson QC with D A Skennar, instructed by Morgan Conley Solicitors.
When you consider the grant sought by Mr Albrecht only involved an extension between 2 decks across common property airspace valued at no more than $20,000, he obviously is a person of both principle and principal.
 
In November 2015, the Court of Appeal ruled ‘3 : NIL’ in favour of the applicant, and ordered the decision of QCATA be set aside and the appeal to QCATA be dismissed. [iii] In other words, Adjudicator Rosemann got it right, way back in 2013.


THE ‘REASONABLENESS’ LAW…AND HOW IT IS APPLIED NOW

A Body Corporate must act reasonably in anything it does in regard to its general functions, including in making or not making a decision.  S.94(2) of the Act

An Adjudicator is required to make an order that is just and equitable in the circumstances.  S. 276(1) of the Act.  The Act also provides examples of the type of orders which can be made, including deeming a Motion without Dissent to have passed, if the opposition to it was unreasonable. Schedule 5, Item 10

There is nothing new here as far as the law is written, but the Viridian Decision is seen as a real ‘game changer’ in the way in which the law is applied, and this change has the weight of the Court of Appeal behind it.

So… we have seen a flurry of adjudication requests arguing unreasonableness.[iv] Some have failed, some have succeeded.  The jury is still out on where this will lead to but there are some points worth noting:
  • Some commentators question whether it is right for any Adjudicator to act as a ‘Virtual Body Corporate’, substituting his/her opinion for those of the owners voting as a Body Corporate within the legislative framework.
    To put things in context: in her decision in Albrecht v Ainsworth and Ors, Margaret McMurdo P noted at para.84   “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 view being uniquely right.  Had QCATA’s views as to reasonableness been the views of the adjudicator, and had the adjudicator made no errors of law, that finding would have been unassailable on a QCATA appeal which was limited to a question of law.”  This means that while the views of the Adjudicator and the Queen’s Counsel in QCATA were different, the Court considered them both to be reasonable.
    This process does seem a bit random for such an important decision, turning on the luck of the draw, on the day, at the Commissioner’s Office.  Looks a bit like NRL’s Golden Point system?
  • If this authority is to vest in an Adjudicator, other commentators question whether the process should be more transparent, robust  and fair, rather than leaving it to a single, relatively anonymous (and not necessarily legally qualified) Adjudicator making decisions ‘off the papers’.
  • Given that an Adjudicator’s decision on questions of fact, like ‘reasonableness’, are final and cannot be appealed to QCAT, these concerns are worthy of further discussion.
  • How far does this ‘game changer’ extend?  So far, Viridian has been applied to purely internal disputes between owners.  But what about matters concerning external parties like Caretakers/Resident Unit Managers (RUM), and their contractual relationships with Bodies Corporate…especially when they are seeking premature top-ups of their contracts? 
    In this context, we have at least 2 major issues involving systemic and systematic ‘unreasonableness’:
1. No Expert Advice Before Granting the Top-Up Request:

There have been numerous instances where Body Corporate Committees have refused to obtain independent legal and costings advice for the benefit of the owners, before putting top-up requests to the vote.  Similarly, many Bodies Corporate have voted down Owners‘ Motions proposing access to this independent advice before the General Meetings.

It is questionable whether any sensible, reasonable owner can exercise an informed vote on such a complex matter without being fully advised on all of the issues, and costs, involved.

2. Then Granting the Top-Up Request:

In effect, the grant provides a major financial windfall to the Caretaker/RUM, yet the Body Corporate receives nothing in return. 

The top-up also extends, and prolongs, the existing contract: this contract may have been drafted by the developer 20 or so years ago; the annual cost of the contract will have grown significantly over those years; these contracts are generally very vague and therefore difficult to performance-manage; and as the circumstances of the complex change, many of the aspects of the contract will become redundant.

Furthermore, the grant today not only binds the current owners: it also binds the future owners 10 or 20 years down the track.

Refusing top-ups seems like a No Brainer… and yet so many owners continue to grant them.

How can any of this be reasonable?  


We live in interesting times in Strata World.  We are seeing more and more owners questioning the status quo, and succeeding.  The times they are a-changin… admittedly slowly, but with increasing momentum.  We look forward to the day when reasonableness rules, especially when it concerns the Queensland Body Corporate Cancer we know as long-term management contracts.

In the meantime, our advice is as follows:

‘Reasonableness’ means that an objective test must be applied to the subject matter in order to determine whether or not a Body Corporate has acted reasonably.

The requirement that a Body Corporate must always act reasonably in its decision making, applies also to the Body Corporate Committee and to the owners.

We therefore caution that all parties always act reasonably, based on what might be considered by a reasonable person to be a reasonable decision.
 
[i] Viridian Noosa Residences[2013] QBCCMCmr 351
[ii] Re Body Corporate for Viridian; Kjerulf Ainsworth and Ors v Martin Albrecht & Anor [2014] QCATA 294
[iii] Albrecht v Ainsworth and Ors [2015] QCA 220
[iv] Refer recent Adjudications  http://www.austlii.edu.au/au/qld/

 
 
 

 
Copyright © 2016 UOAQ, All rights reserved.


Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list

Email Marketing Powered by MailChimp