Clews v The Owners - Units Plan No 3069 (Unit Titles)
[2018] ACAT 82
•23 August 2018
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
CLEWS v THE OWNERS – UNITS PLAN NO 3069 (Unit Titles) [2018] ACAT 82
UT 8/2018
Catchwords: UNIT TITLES – merits review of an unsuccessful motion at a general meeting – request for variation to Crown lease purpose clause – commercial property – what is the correct and preferable decision – whether the objections were reasonable – the need to balance the loss of a fairly marginal existing benefit, or interest, in maintaining a competitive advantage against other unit holders against the broader concerns interests of the owners’ corporation and the pressing concerns of the applicant
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 48
Units Titles Act 2001 s 166
Unit Titles (Management) Act 2011 s 129
Planning and Development Act 2007 s 247
Cases cited:Ainsworth v Albrecht [2016] HCA 40
Artico Holdings Pty Ltd & the Owners Unit Plan No 3491 [2012] ACAT 31
Brudenall v Owners Corporation Unit Plan No. 202 [2016] ACAT 101
Floro v The Owners-Units Plan No 630 [2017] ACAT 4
Lanfranchi & Owners Unit Plan 809 [2011] ACAT 73
Meaney v The Owners Corporation Units Plan 40 [2013] ACAT 72
Nash v the Owners – Unit Plan 2413 & Ors [2018] ACAT 54
Owners Units Plan 768 v Lokusooriya [2013] ACAT 80
Rampala v The Owners – Units Plan 1330 [2018] ACAT 35
The Owners – Unit Plan No 396 v Uren & Blundell [2017] ACAT 100
Uren & Anor v The Owners – Units Plan No 396 [2017] ACAT 51
List of
Texts/Papers cited: Explanatory Memorandum to the Unit Titles Bill 2000
Tribunal: Senior Member H Robinson
Date of Orders: 23 August 2018
Date of Reasons for Decision: 23 August 2018
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) UT 8/2018
BETWEEN:
CLAYTON NEAL LORNE CLEWS
Applicant
AND:
THE OWNERS - UNITS PLAN NO 3069
Respondent
TRIBUNAL:Senior Member H Robinson
DATE:23 August 2018
ORDER
The Tribunal orders that:
1.The application is dismissed.
………………………………..
Senior Member H Robinson
REASONS FOR DECISION
1.This is an application, pursuant to section 129(1)(g) of the Unit Titles (Management) Act 2011 (UTM Act), for a review of an unsuccessful motion put to members of the respondent corporation (Corporation) at a general meeting on 25 January 2018. The applicant also seeks or order that the Corporation pay him an amount of $1000, under section 129(1)(d) of the UTM Act, as partial compensation for the costs incurred in this application.
The orders sought
2.The applicant is the owner of Unit 10, a commercial property located in the unit plan. He seeks an order giving effect to a motion that would permit him to undertake a lease variation to the purpose clause for Unit 10.
3.The specific orders sought are as follows:
(a)An order, pursuant to section 129(1)(g) of the UTM Act, that the motion put by the applicant at the general meeting of the Corporation held on 25 January 2018 that the owners corporation allow the owner of Unit 10 to undertake a lease variation for Unit 10 to include the “community use” purpose be given effect as if it were authorised by an opposed resolution of the owners corporation (the motion); or in the alternative
(b)The Tribunal, pursuant to section 129(1)(g) of the UTM Act , order that the motion by the applicant at the general meeting of the corporation held on 25 January 2018 to undertake a lease variation for Unit 10 to include the term “community use” be amended by deleting “community use” and inserting “health facility” and as so amended is given effect under section 166(1) of the Unit Titles Act 2001 (UT Act) as if it were authorised by an unopposed resolution of the owners corporation (the alternative motion); and
(c)The Tribunal, in accordance with section 129(1)(d) of the UTM Act orders that the corporation pay the applicant the amount of $1,000.
The Tribunal’s review power
4.Section 129(1) of the UTM Act lists a number of orders which the ACAT may make in relation to a unit titles dispute. It states, relevantly, that:
(1) The ACAT may make the following orders:
(g) an order giving effect to an unsuccessful motion for a resolution of a general meeting (either as originally proposed or as amended by the ACAT) if the ACAT is satisfied after merits review of the motion that opposition to the motion was unreasonable;
5.The Tribunal has considered the application of this provision in a number of previous decisions. In one of the more recent matters, Uren & Anor v The Owners – Units Plan No 396 [2017] ACAT 51, Senior Member Sutherland undertook a review of the relevant authorities, and summarised the principles, relevantly, as follows[1]:
(a)The provision involves a two-step process, firstly to undertake a merits review to determine which is the correct and/or preferable decision, and then to determine whether opposition to the motion was ‘unreasonable’.
(b) The review is de novo and the Tribunal is able to consider issues of both fact and law.
(c) The ACAT considers and determines issues as at the date of the hearing and is able to consider evidence not available to, or not considered by, the owners corporation at the time of their decision.
(d) When conducting the merits review, there is no threshold question of reasonableness or unreasonableness of the original decision to be determined before the ACAT may proceed to make an order. However, before an order giving effect to an unsuccessful motion is made, the ACAT must be satisfied that opposition to the motion was unreasonable.
(e)The test to determine if the opposition to the motion was unreasonable is not a subjective test of the intentions of the unit owners who opposed the motion. Rather, it is an objective test taking into account all relevant circumstances.
(f) An opponent to the motion is not required to act with altruism or sympathy for the interests of the proponent, at the expense of the opponent’s reasonably held view of their own interests.
(g) Whether or not there is evidence of other pending applications, it may be reasonable to consider the cumulative effect of multiple identical improvements generating an adverse impact in deciding whether to oppose a motion.
[1] At [17]-[18]
18. To the matters above concerning unreasonableness, the Tribunal would add that opposition to a motion may be unreasonable where the opposition is based on discriminatory grounds that are unlawful in other contexts or where the grounds for opposition are essentially de minimis, that is they are so minimal as to be immaterial or subjective in their essential character.
6.These observations were not disturbed on appeal before Presidential Member McCarthy in The Owners – Unit Plan No 396 v Uren & Blundell [2017] ACAT 100 (Uren Appeal). They were cited with approval by Senior Member Orr in Nash v the Owners – Unit Plan 2413 & Ors[2] (Nash), and are consistent with the approach taken by the Tribunal in other cases.[3] I adopt them accordingly.
Background
[2] [2018] ACAT 54, at footnote 32
[3] Meaney v The Owners Corporation Units Plan 40 [2013] ACAT 72, Owners Units Plan 768 v Lokusooriya [2013] ACAT 80, Brudenall v Owners Corporation Unit Plan No. 202 [2016] ACAT 101; Floro v The Owners-Units Plan No 630 [2017] ACAT 4 at [18]; Uren v The Owners – Units Plan No. 396 [2017] 51; Rampala v The Owners – Units Plan 1330 [2018] ACAT 35
7.The applicant is, and has been since 11 July 2007, the sole proprietor of unit 10, Block 4, Section 3, Greenway (Unit 10). Unit 10 is one of twenty four units in Units Plan 3069 (the Units Plan), for which the Corporation is responsible. The Units Plan is a commercial building located in the Tuggeranong commercial precinct.
8.Section 247(1) of the Planning and Development Act 2007 (Planning Act) provides that Territory land, or a building or structure on Territory land, in relation to which a lease has been granted, may not be used for a purpose other than a purpose authorised by the lease (the Crown lease)[4].
[4] See also section UTM Act section 33
9.Under the Crown lease for the Units Plan, all 24 units can be used for a variety of common commercial purposes, including:
(a)bulky goods retailing;
(b)childcare centre;
(c)community activity centre;
(d)funeral parlour;
(e)indoor recreational facility;
(f)industrial trades limited to vehicle repair;
(g)motel;
(h)office;
(i)place of assembly;
(j)place of worship;
(k)plant and equipment hire establishment;
(l)religious associated use;
(m)retail plant nursery;
(n)shop (excluding supermarket or shop selling food, other than produce market); and
(o)veterinary hospital.
10.The evidence put before the Tribunal suggests that this is a very wide purpose clause.[5]
[5] Transcript of proceedings page 31
11.The crown lease also states that some units have additional permitted purposes. Most relevantly, units 1, 3, 5, 6, 7, 14 and 19-24 may be used for the purpose of “health facility”. ‘Health facility’ is defined to mean “use of the parcel for providing health care services (including diagnosis, preventative care or counselling) or medical or surgical treatment to out-patients only”.[6]
[6] Clause 6(k), “Schedule of Provisions Covenants and Conditions subject to which leases of units are held”.
12.The applicant has owned Unit 10 for more than ten years. It has been unoccupied for six of those years. The uncontested evidence is that this is, at least partially, due to a depressed commercial property market in the Tuggeranong Valley. The unit has been on the market for some time, and the applicant’s holding costs are significant.
13.During the time that Unit 10 has been on the market, the applicant has received enquiries from two separate dentists who wished to purchase it, but only if it could be used as a dental surgery. As it currently cannot be so used, neither sale was finalised. There have been no other serious offers.
14.What makes Unit 10 so attractive to dentists is unclear, but whatever the reason, the applicant wishes, understandably, to capitalise on it. He seeks to amend the purpose clause in the unit plan Crown lease to permit Unit 10 to be used, ideally, for any ‘community use’, but alternatively, if that is not acceptable, for use by a ‘health facility’.
15.Section 166 of UT Act sets out when a variation to a Crown lease can be made. The requirements include that all members of the owners corporation have been given notice of the proposed application, and the application is authorised by unopposed resolution. An ‘unopposed resolution’ is a resolution of the owners, at a general meeting, where “no votes are cast against the resolution”.
16.At a general meeting of the owners corporation on 20 March 2017, the applicant informed the other members of his desire to change the purpose clause for Unit 10 to permit it to be used for a dental surgery. Some members asked the applicant to provide further information, particularly additional information about the consequences for the value of their property.
17.A proposed motion to amend the purpose clause to allow a dentist to operate was put first at the annual general meeting on 19 June 2017. The motion failed.
18.The applicant then obtained the two expert reports and circulated them to other owners.
19.The applicant put a motion to the owners again at a general meeting on 25 January 2018, this time seeking approval to change the purpose clause to include “community facilities”. This was the only motion on the agenda. Again, the motion failed. The draft minutes for the general meeting held on 25 January 2018 record that when the applicant’s motion was put to the vote, one owner voted for the motion and two proxies (votes from absent owners) were cast against it. No further votes were counted because the motion was not capable of passing unopposed.
The applicant’s evidence
20.The applicant submitted a very thorough, evidence-based case through which he sought to demonstrate that his proposal was well-founded and that concerns held by the objectors were not justified. He had, prior to these proceedings, understood that the opposing owners were concerned about the consequences of a change in the Unit 10 purpose clause for the value of their own units. To address these concerns, he called evidence from a valuer, Ms Carolyn Mowbray, and a town planning expert, Mr Trevor Fitzpatrick, both of who opined that the change in the purpose clause for Unit 10 was unlikely to have any significant effect on the value of the other owner’s property.
Ms Mowbray’s evidence
21.Ms Carolyn Mowbray is a certified practising valuer engaged by Egan National Valuers ACT. She prepared a report dated 27 July 2017. Ms Mowbray attended the hearing and gave evidence. She was cross examined on her report.
22.In her report, Ms Mowbray expressed the opinion that amendment of the purpose clause for Unit 10 to add community use or health facility use would not affect the value of Unit 10 or the other units and would not impact on the value of the overall development.
23.When questioned about whether particular additional uses may affect the value of a unit, Ms Mowbray said that the overall commercial value would be determined by a lot of factors,[7] including the location and the uses to which they could be put. She also agreed that some additional uses, like restaurant, may have an impact on the value of the unit. However, the implication from her evidence was that adding the purposes of community facility or health facility was unlikely to add much value in circumstances where, as here, the property already had a very broad purpose clause and the additional purposes are not inconsistent with those uses.[8]
[7] Transcript of proceedings, page 45
[8] Transcript of proceedings, pages 30, 33
24.When asked about the other owners’ concerns about the impact of any change to the Unit 10 purpose clause for their property values, Ms Mowbray said:
Yes. I can understand that they might feel initially worried, but they have already got very wide Crown leases, like public agencies, very valuable shop, bulky goods, they are all … quite attractive uses, and the market is picking up there very quickly at the moment, so I just can’t see … that it’s going to have an impact on the other unit owners and their unit values.[9]
[9] Transcript of proceedings, page 31
25.I accept Ms Mowbray’s evidence as the best evidence before the Tribunal of the effect of the purpose clause on the value of other units.
Mr Fitzpatrick’s evidence
26.Mr Fitzpatrick provided a report dated 30 June 2017 and a witness statement dated 4 May 2018. Mr Fitzpatrick attended the Tribunal and gave evidence. He was cross-examined on his report.
27.Mr Fitzgerald described his expertise as:
I am certainly no expert in the dollars and dollars per square metre that were discussed before [by Ms Mowbray]. What my advice was about is whether or not the lease purpose clauses and the leases for properties contribute to a diversity of uses or a concentration of uses and whether they collectively create what’s called a critical mass and therefore promote, from a market perspective, properties that are noted for their specific sort of attributes that that property provide.[10]
[10] Transcript of proceedings, page 50
28.Mr Fitzpatrick’s evidence was that:
The current lease provides a range of land uses which is reflected in the diversity of businesses occupying the building. However, from a planning perspective there are clear community benefits and enhanced urban outcomes for range of similar or interrelated businesses are located in close proximity.… Adding a dentist is complimentary to the services already provided without competing with other businesses
and
…from a planning perspective, that the proposed lease variation will have any adverse impact on other businesses in the building. On the contrary we would consider that a building that is fully rented, providing a range of health facilities (e.g. podiatry, physiotherapy, dentist etc), together with other businesses would make a positive contribution due to increased patronage and activity in the immediate neighbourhood. We would expect that an overall increase in activity in and around the building would enhance any other existing businesses (including existing health related businesses) rather than provide any direct competition of threat to those businesses.
29.Mr Fitzpatrick explained that lease amendments were “very common” – he had dealt with hundreds in his 20 years of experience.[11]
[11] Transcript of proceedings, page 56
30.The Tribunal asked Mr Fitzpatrick whether, from a planning perspective, there was a reason why certain units had different purposes. He said that:
In my experience there’s, and this is at least from 10 years or more ago and my experience in dealing with ACT government staff and leasing staff at the time, there were two schools of thought basically. One was release land and allow the widest purposes. Others in government involved in it had the reverse school of thought in that they would look at a site and said this is a good site for that use and therefore, and apply that use. So in that sense a lot of the leasing staff were undertaking their own private semi-feasibility studies and determining yes, unit 1 is good for this use and so we’ll allow these but unit 2 might be a bit small hypothetically and they would adjust lease purpose clauses accordingly without, you know, the real understanding and it may be that it was the simple fact that unit 10 might have been two square metres smaller than another unit so therefore they added or didn’t add a clause to that particular unit. I can’t speak on behalf of those authors but there’s a whole range of factors that were going through the process at the time leases were written in those days. Not so much in the last few years but certainly 10 or more years ago that was not an uncommon consideration in the preparation of leases.[12]
[12] Transcript of proceedings, page 62
31.Mr Fitzpatrick did not accept that merely changing a lease to increase the range of purposes for which a unit could be used would increase the value of that unit – rather, the ‘highest order use’ was what was relevant. However, he agreed that changing the purpose clause may make the unit easier to rent.[13]
Mr Clew’s evidence
[13] Transcript of proceedings, page 65
32.Mr Clew’s evidence went to the steps that he had taken to address the concerns of the other tenants. It is acknowledged that he had little to work with in this regard – at no stage prior to these proceedings, it appears, did any of the objectors clearly articulate to him exactly why they opposed the objection. However, he understood, in broad terms, that the majority of objector had concerns about the impact of the development on their property values, and he sought, through evidence, to address those concerns.
33.Much of Mr Clew’s evidence was particularly relevant to his claim for the payment of $1,000 under section 129(1)(d) of the UTM Act – the applicant argued that such a payment would address some of his costs in circumstances where compensation for costs are not otherwise available.
34.One other aspect of Mr Clew’s evidence, addressed more fully below, are allegations of improper conduct by a member of the owners corporation, Mr Dunne.
35.The applicant alleged that at the January general meeting:
Mr Dunne, while chairing the meeting, said Mr Clews’ request for the Owners Corporation to pass an unopposed resolution in support of the motion could be progressed if Mr Clews were to pay all members of units with a health clause, which allows for a health facility, between $5,000 and $10,000.[14]
[14] Witness statement of Francois Janse Van Rensberg dated 3 May 2018
36.Mr Dunne said this was a misrepresentation of a private conversation. He said he was trying to be helpful – if the objectors felt they were being financially disadvantaged, then perhaps they would be more inclined to support the motion if offered some compensation for doing so.[15] The clear import of Mr Clews’ position is that I should draw some adverse or sinister implication from this. I did not do so, and indeed I am of the view that Mr Dunne has done nothing inappropriate. I make some further comments about this below, under “Mr Dunne’s evidence”.
The Corporation’s position
[15] Transcript of proceedings page 75
37.The Corporation was represented at the hearing by agents of its strata manager. The agents relied on a two page submission. The corporation filed little in the way of evidence, and no witness statements.
38.Fortunately, several members of the Corporation were in attendance and were available to give oral evidence as to their reasons for objecting to the proposal. The applicant’s solicitor, understandably, objected to this late admission of evidence. I acknowledge that admitting the oral evidence had the potential to disadvantage the applicant, but as the evidence of those witnesses was largely consistent with the summary of their positions set out in the applicant’s own submissions, I am satisfied that was no substantive disadvantage in accepting the oral evidence largely confirming the matters alleged in the applicant’s submissions.
39.The respondent’s position was primarily advanced by Mr Cameron and Mr Dunne, both unit owners within the complex. A third member of the corporation, Mr Huynh, did not give evidence, but the reason why he opposed the motion was agreed between the parties.
Mr Cameron’s evidence
40.Mr Cameron is the owner of a unit that currently has ‘health facility’ as one of its purposes. He opposed the motion on the basis that it will remove a competitive advantage he has over the applicant when seeking a tenant. This was despite the fact twelve other units were also permitted to be used as a ‘health facility’.
41.His position is reflected by the following exchange:[16]
MR CHIN: So 12 others. So do you think that you have a competitive disadvantage compared with those 12 others?
MR CAMERON: Obviously I am compared to them, against those 11 others, because I am one of the 12, but I knew that when I bought into the complex, that that was my competition, and I was obviously not thinking there was going to be more competition after that, yes.
MR CHIN: But what is the competitive advantage if there was advantage as between you and the other 11 and Mr Clews of unit 10?
MR CAMERON: We had this separate purpose clauses and Mr Clews doesn’t.
MR CHIN: But you had - - -
MR CAMERON: That’s the advantage.
[16] Transcript of proceedings, page 142
42.Mr Cameron also observed that:
I guess we go right back to the day when I first bought the unit. I bought it for a specific purpose… to use it for my business, but also knowing what I can use it for down the track, because I knew my business would eventually outgrow that. Obviously, I did my research. There was other factors of the location, being on the corner, purpose clause. It came with six car spots…
… I looked at all the other units, what they could be used for. Obviously being a commercial property you don’t want any competition with everyone else. I’ve been in real estate for 15 years doing financial brokering. I understand if – an analogy I would like to use is if everybody bought one bedroom units and someone had two-bedroom units and they decided that they wanted to sell their one-bedroom unit compared to everybody else, they are on the same playing field. You buy the two-bedroom unit, then I’m on a different playing field to everyone else. That gives me more advantage to get a better price for my unit.[17]
And
…If you’ve got more of the same facility, then the prices aren’t going to be as high as if you’ve got an individual where I can say well, I’ve got these facilities, compared to that person that hasn’t, then I can actually … a higher premium. The other concern I do have is if I do allow the resolution to go through, what else are we opening the doors to? We may as well put 24 units as all health facility, as the same. Then we are all on the same playing field as everyone else in the units.[18]
[17] Transcript of proceedings, page 135-136
[18] Transcript of proceedings, page 137
43.There was no evidence that Mr Cameron actually did pay a premium for the broader purpose clause, but nor was there any convincing evidence that he did not. I accept Mr Cameron’s evidence that the somewhat broader purpose clause was a factor that he took into account when deciding which of the units to purchase, but not the only factor.
Mr Huynh
44.Mr Huynh is the owner of unit 6. The agreed position is that he has a daughter who is currently studying dentistry, and he is intending to allow her to lease or purchase the unit to set up practice. His admitted reason for not wanting to amend the purpose clause was that he did not want another dentist, a potential competitor, setting up a practice in the building. Clearly, he cannot stop any of the 11 other units with the health facility purpose clause from being used as a dentist, but on his argument, he can stop the applicant’s from being so-used.
Mr Dunne
45.Mr Dunne was the chairman of January 2018 meeting. He has interests, through a trust arrangement, in eight of the units in the corporation, and he operates an IT consulting business from unit 15. He holds no position on the executive committee. One of his units has a purpose clause that allows it to be used as a health facility, but the others do not.
46.Dr Dunne explained his reason for opposing the motion as follows:
… I oppose it because I understand the arguments put forward by the other members that they bought those units with their eyes open on the basis of the, and relying on the purpose clauses in the unit plan. They had, many of them had the opportunity to buy units without those purpose clauses but they chose to buy the ones with. Mr Clews had the opportunity to buy units with those purpose clauses and chose not to so you know, to understand their concern that you know, why should Mr Clews get the benefit of that change because he’s been able to find a buyer who is prepared to pay a higher price because of that purpose.[19]
[19] Transcript of proceedings, page 83
47.When questioned about whether it would be in the interests of the owners to ensure the corporation as fully tenanted, he said:
It would and I can guarantee that at some price point, you know, those units would be leased or sold. They’re unsold or unleased because the owners still have, well are asking a higher price than the market is prepared to bear. We bought our units at less than half probably what, at a substantial discount to what they originally sold for because the market has moved in Tuggeranong. We’ve already heard Ms Farrelly testify to that. It’s a stagnant market at the moment. You know, in my view Mr Clews wants it rezoned because he can achieve a higher price because he’s presented two dentists as potential purchasers so far. He is just looking at that market sector because it’s going to be more lucrative for him so the issue to me is: is that fair on the other owners who paid a premium or thought they paid a premium or selected and bought the units they did based on the unit plan and the purpose clauses of all the units in the building.[20]
[20] Transcript of proceedings, page 87
48.There was another aspect to Mr Dunne’s evidence. On Mr Clews’ evidence, set out above, Mr Dunne suggested that he make a payment of money to the other owners with ‘health facility’ in their purpose clauses in order to secure their agreement to the motion.
49.Mr Dunne agreed that he told a friend of Mr Clews, at the general meeting, that: “…those owners being or feeling they were being financially disadvantaged by the motion” could perhaps be persuaded were they offered compensation.”[21] He suggested something in the order of $10,000.[22] He said that he made this offer as part of a “personal” conversation he had with the friend of Mr Clews, not in his role as chairman.
[21] Transcript of proceedings, page 75
[22] Transcript of proceedings, page 76
50.I decline to draw any adverse conclusions about this offer. I accept Mr Dunne’s evidence that he was trying to be helpful in resolving the impasse and see no cause to draw any implication beyond this. As was observed by the High Court in Ainsworth v Albrecht[23] (Ainsworth) – a case that will be discussed further below – it may be unreasonable to expect a person to forgo a property right without some form of compensation. Mr Dunne’s solution was a practical one that dealt with the compensation issue.
The other owners
[23] [2016] HCA 40
51.The owners of units 7 and 22 did not attend the hearing or give evidence. According to the applicant, both are concerned about potential adverse consequences for the value of their units.
Consideration
52.The applicant is in a very unfortunate position. He has an asset that is not only failing to make money, but appears to be losing it. He has a method that may alleviate some of his difficulties – an increase the scope of the unit’s purpose clause. This method requires the agreement of all the other members of the corporation, but that agreement has not been forthcoming. Indeed, some of the other members actively oppose the amendment, and do so for the patently self-centred and not very neighbourly reasons that the change to the applicant’s purpose clause may, at some time, disadvantage them. I can fully understand why the applicant is frustrated. But his frustration, alone, does not make actions of the opponents unreasonable.
53.However, the issue of unreasonableness is the secondary issue. Before considering that issue, the Tribunal must undertake a merits review of the application. During on Uren and Nash, this means that the tribunal must consider what the correct and preferable decision is.
54.A ‘correct’ decision is a decision that it without legal error or other fundamental problems. None of the options before the Tribunal would be an ‘incorrect’ decision. Which is the ‘preferable’ decision is somewhat more complicated.
55.Senior Member Orr observed in Nash that:
… the preferable decision is one that will ensure the efficient and effective management of the complex, protect and advance the interests of the owners corporation as a whole, and protect the interests of the individual unit holders[24]
[24] Nash v the Owners – Unit Plan 2413 & Ors [2018] ACAT 54 at [58]
55.Having had regard to all the evidence, I largely accept that the decision that would best protect and advance the interests of the owners corporation as a whole is a decision that would enhance the attractiveness of the building to tenants so that it would be fully, or nearly fully, let. A decision that would preserve the status quo, where a large and prominent ground floor unit is vacant, and has been for some time, cannot be the decision that would be protect and advance the interests of the owners corporation as a whole, even if it does protect some aspect of the interests of the individual unit holders. That is not to say that I accept that a change to the Unit 10’s purpose clause would necessarily make the building more attractive, but it is unlikely to do any harm.
56.However, against that benefit to the efficient and effective management of the corporation as a whole, it is necessary to balance the interests of the individual unit holders. But, what are the interests of the individual unit holders that are being protected?
57.The ‘interest’ that was commonly identified by the unit holder witnesses was the value of their individual units. The weight of expert evidence, which I accept, is that the change in the purpose clause to allow Unit 10 to be used as either a ‘health facility’ or a ‘community use’ is not likely to have any significant effect on the relative or absolute value of any other individual owner’s unit. It may increase the worth of the applicant’s unit – a matter that ACTPLA will need to consider in assessing any change in use levy – but I do not understand any person to suggest that the increase in the value of the applicant’s unit (if any) would of itself amount to detriment to the another owner. Consequently, I am not satisfied that either motion is likely to affect the value of any other unit in any real or substantial way.
58.That said, I understand Mr Cameron’s concerns (at least) are not limited to a concern about his property value, per se. His concerns arise in the hypothetical situation where two units within the units plan are in competition with each other, be it for tenants or a purchaser. Mr Cameron’s evidence was that he chose his unit having regard to a number of considerations, one of which was the breadth of the purpose clause, including the ability to have a health service provider as a tenant. That breadth, he said, gives him an advantage. At present, his unit is one of only 12 that can be used as a health facility. A change to Mr Clews’ purpose clause will result in competition with 13 unit holders. That potentially increased competition is, of itself, he suggests, a detriment that accrues to him by reason of the change to the Unit 10 purpose clause.
59.The chance that this potential would become a reality is, it seems to me, pretty low. Both properties would need to be available for lease, or up for sale, at the same time, and the prospective tenant or purchaser would need to wish to operate a health facility in the building, such that he would potentially be choosing between the two units. However, while the risk is low, I cannot conclude that it is non-existent.
60.There is also a risk that a health practitioner of a certain kind – for example, a dentist – operating within the applicant’s unit may reduce the attractiveness of Mr Cameron’s unit to another health practitioner of that same kind, hence reducing his market. The reduction in the margin would be a marginal one, at worst. One must also consider the possibility of a ‘hub’ of the kind Mr Fitzpatrick envisaged as perhaps having the opposite effect.
61.Where the risk becomes more significant is if other owners seek to follow suit, with similar changes to their purpose clauses. It is conceivable that, if allowed, Mr Clews’ amended could be the first of a series of owners to propose changes to their purpose clauses. This would result in differences between the purpose clauses of the various units being eroded overtime. The cumulative effect of this could deprive owners of units with currently wider purpose clauses of the benefit of those clauses (whatever those benefits are).
62.Conversely, this may increase the value or attractiveness of the entire building as a whole.
63.In undertaking a merits review, it is necessary to balance the loss of this fairly marginal existing benefit, or interest, in maintaining a competitive advantage against other unit holders against the broader concerns interests of the owners’ corporation and the pressing concerns of the applicant. An argument could be made that, in the totality of the circumstances, changing the purpose clauses of one unit, and even perhaps even of all units, is justified in the interests of getting a fully tenanted building, and is therefore the preferable decision. On balance, I tend to this view, although it is not an easy decision, as it clearly takes away a competitive advantage held from some individual unit holders.
64.However, a merits of review is not the end of the matter. Even if I accept that the passage of one of the motions (being the original motion or its alternative form) is the correct and preferable decision, before giving effect those that motion, I must also be satisfied that the objections of the opponents to those motions are unreasonable.
65.In Lanfranchi & Owners Unit Plan 809 [2011] ACAT 73, Senior Member Lennard opined that ‘unreasonably’ is to be given its ordinary meaning. She referred to the Macquarie Dictionary definition of ‘unreasonable’, being: “not reasonable, not endowed with reason, not guided by reason or good sense, not based on or in accordance with reason or sound judgement.”
66.The same Macquarie Dictionary definition of the word was cited with approval by Presidential Member McCarthy in the Uren Appeal[25]. The Presidential Member also observed that:
[25] At [66]
The test is whether the Tribunal is satisfied that opposition to the motion in issue was unreasonable, not “so unreasonable that no reasonable person could have opposed the motion.[26]
[26] At [66]
67.As per Uren, the assessment of ‘reasonableness’ is an objective one[27] – the test looks at the objective circumstances rather than the mindset of the individuals. However, some regard must be had to the nature and purpose of these units. There are commercial units from which persons run businesses. They are a commercial investment, owned and occupied with an intention to make a profit. It is understandable that the objectors, including Mr Cameron, will be concerned about actions that have the potential to affect the return on their investment, even if only in an indirect sense.
[27] The Owners – Unit Plan No 396 v Uren & Blundell [2017] ACAT 100 at [57]
68.One of the leading cases on ‘reasonableness’ is the High Court’s decision in Ainsworth. In that case, the respondent wished to amalgamate two balconies so as to make a deck area at the front of his apartment. This required the use of about 5m2 of common property airspace that lay between the two balconies. The objectors opposed the acquisition of the common property.
69.In considering the matter, the majority of the High Court said that:
…the unreasonableness of the opposition of the first respondents’ proposal is to be determined in a context in which lot owners voting in respect of the proposed resolution are exercising their right to vote on an aspect of their proprietary rights as owners of lots included in the scheme. In this context, the unreasonableness with which [the review right] is concerned is unreasonableness on the part of the opposing lot owners having regard to those lot owners’ interests under the Scheme.[28]
[28] Ainsworth v Albrecht [2016] HCA 40 at [58]
And:
A person with a property interest may reasonably insist on conserving that interest even if it is not presently being employed to that person’s material advantage. That is so, if for no other reason than that he or she may reasonably expect to be offered something in return for agreement to part with it to another lot owner.[29]
[29] Ainsworth v Albrecht [2016] HCA 40 at [62]
70.Ainsworth was about the appropriation of common property for a private purpose (albeit a common property in an small amount of airspace). The ‘right’ claimed in this case is arguably even less tangible. At best, the objectors have a slight positional or competitive advantage in the market by reason of their broader purpose clauses. They seek to preserve that status quo. However, when considered in the context of the commercial sphere in which the various parties are operating, that interest cannot be said to be de minimis – so minimal as to be immaterial, subjective or illusory.
71.The practical nature of the interest is best demonstrated by Mr Huynh’s position. His daughter is completing her university studies in dentistry, and may wish to establish a dentist practice in his unit. Ms Mowbray agreed that it was possible that if a potential unit owner were a dentist, and a dentist opened next door, the value of the unit for a dentist may be diminished.[30] On Mr Fitzpatrick’s evidence, it may be extrapolated that this loss may be offset by significant advantages should a number of medical or health facilities be established in the area, but there is nothing to suggest that that is likely to happen in the subject building in the short to medium term as least. Even setting aside the inter-family aspects of this situation, I cannot find it is unreasonable for Mr Huynh to seek to protect the commercial advantage that his broader purpose clause gives him in relation to the ability to lease his premises to a dentist. I find similarly in relation to Mr Cameron.
[30] Transcript of proceedings, page 35
72.Another principle that can be drawn from Ainsworth is that there is no requirement that a lot owner assist another out of altruism or sympathy, at least if it may reasonably be adverse to their own interest. Further, opposition will not be unreasonable if for no other reason than the objector may expect something in return for giving up a right. Again, in this case, the right is a fairly minimum one – a positional advantage at best. However, minimal or not, it is real, and the applicant has offered nothing to the other owners in compensation for their loss of it. That the objectors may wish to negotiate something in exchange, as suggested by Mr Dunne, is not unreasonable (although in making that observation, I make no observations on the reasonableness or otherwise of the amount suggested).
73.There is a final factor that also weights in favour of the respondent. Section 166 of the UT Act has established a scheme that permits changes to the Crown lease only with the unopposed approval of the other owners. There must have been a legislative intention behind such a high threshold for change. Unfortunately, the Explanatory Memorandum to the Unit Titles Bill 2000 is a minimalist document that largely repeats and summarises the legislative provisions, and provides no guidance about the thinking behind section 166. However, the requirement for unanimous approval for lease variation is in similar terms to that required for the granting of a special privilege or other use of common property, the maintenance of a bank account (UTM Act, section 68); the method of calculating the general fund contribution (section 78(2)) and sinking fund contributions (section 90). These are matters that are of fundamental importance to the operation and cooperative nature of the body corporate. They should be matters decided largely by consensus. While the Tribunal is given a role in reviewing these decisions, in a marginal case, such as this, some weight must be given to the fact that a not insubstantial number of the other unit holders have concerns with the proposal.[31] The Tribunal should not lightly view commonly held concerns about the protection of their interests as unreasonable. It certainly should not substitute its own value judgements about the altruism or lack thereof of the other members for an appropriate objective assessment as to whether they could reasonably be considered to be protecting any genuinely held interest.[32]
[31] See Artico Holdings Pty Ltd & the Owners Unit Plan No 3491 [2012] ACAT 31 for a similar case where there the proposal was largely supported by the corporation, save the objections of only one member.
[32] The Owners – Unit Plan No 396 v Uren & Blundell [2017] ACAT 100
74.I am satisfied that the opponents’ objections to the motions are based on their assessment as to their own commercial, financial and, in one case, family interest. There is no guaranteed benefit to the rest of the owners from the applicant’s proposal, and there is the slight but real possibility of a detriment. That slight possibility will become significantly greater is other owners in similar positions to the applicant seek similar amendments to the crown lease. The applicant has offered the objectors nothing in exchange for foregoing their interests. In all these circumstances, the objectors’ opposition is not unreasonable, and consequently I dismiss the applications for orders under section 129(1)(g) of the UTM Act.
75.In relation to the application under section 129(1)(d) of the UTM Act, I note that the $1,000 was effectively sought as a form of compensation for costs incurred by the applicant – a means of indirectly circumventing section 48 of the ACT Civil and Administrative Tribunal Act 2008.[33]I accept, without finally deciding, that that it may be permissible for the Tribunal to make an order under section 129(1)(d) for payments of amounts that cover expenses incurred by an applicant in a successful application. However, as the applicant has not been successful in this matter, I am not persuaded that such an order should be made on this occasion. There is no other aspect of the respondent Corporation’s conduct that would found the making of such an order. I therefore dismiss the application for an order under section 129(1)(d) of the UTM Act.
[33] Transcript of Proceedings, Page 11, pages 35-39
………………………………..
Senior Member H Robinson
HEARING DETAILS
FILE NUMBER:
UT 8/2018
PARTIES, APPLICANT:
Clayton Neal Lorne Clews
PARTIES, RESPONDENT:
The Owners – Units Plan No 3069
COUNSEL APPEARING, APPLICANT
N/A
COUNSEL APPEARING, RESPONDENT
N/A
SOLICITORS FOR APPLICANT
Nelson & Co
SOLICITORS FOR RESPONDENT
N/A
TRIBUNAL MEMBERS:
Senior Member H Robinson
DATES OF HEARING:
19 June 2018
11
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