Nash v The Owners - Units Plan 2413 & Ors

[2018] ACAT 54

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

NASH v THE OWNERS – UNITS PLAN 2413 & ORS (Unit Titles) [2018] ACAT 54

UT 22/2017

Catchwords:              UNIT TITLES – review of motions defeated at annual general meeting – motions required to be unopposed – motions providing for an alternative method of fund contribution because one unit has an unfairly low unit entitlement – Tribunal able to give effect to an unsuccessful motion if satisfied on merits review of the motion that opposition was unreasonable – correct and preferable decision – unreasonable opposition – property or financial interests of opponents not affected by the proposal – proposal will remedy unfairness and is not itself discriminatory or unfair – proposal has significant support of owners – defeat of the proposal will deny a benefit to owners

Legislation cited:      Unit Titles (Management) Act 2011 ss 78, 89, 125, 129

Cases cited:               Ainsworth v Albrecht [2016] HCA 40

Brudenall v Owners Corporation Unit Plan No. 202 [2016] ACAT 101

Floro v The Owners-Units Plan No. 630 [2017] ACAT 4

Meaney v The Owners Corporation Units Plan 40 [2013] ACAT 72

Owners Units Plan 768 v Lokusooriya [2013] ACAT 80

Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457

Rampala v The Owners – Units Plan 1330 [2018] ACAT 35

The Owners – Strata Plan No. 69140 v Drewe [2017] NSWSC 845

Uren v The Owners – Units Plan No. 396 [2017] ACAT 51

Tribunal:                   Senior Member R Orr QC

Date of Orders:  16 May 2018

Date of Reasons for Decision:         16 May 2018

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          UT 22/2017

BETWEEN:

IAN NASH

Applicant

AND:

THE OWNERS – UNITS PLAN 2413

Respondent

AND:

KENNETH JONES

First Party Joined

AND:

GAIL JONES

Second Party Joined

TRIBUNAL:Senior Member R Orr QC

DATE:16 May 2018

ORDER

The Tribunal orders that:

1.Under section 129(1)(g) of the Unit Titles (Management) Act 2011, motions 6 and 7 at the annual general meeting of The Owners - Units Plan No 2413 held on 27 September 2017 (set out in paragraph 15 of the reasons for decision) be given effect.

………………………………..

Senior Member R Orr QC

REASONS FOR DECISION

1.The applicant in this proceeding is Ian Nash (applicant or Mr Nash) who is the owner of one of the units at Landmark Apartments, Units Plan 2413 (UP 2413), which comprises 282 apartments (Landmark).

2.Mr Nash makes an application under section 129(1)(g) of the Unit Titles (Management) Act 2011 (Unit Titles Management Act) seeking orders that the Tribunal gives effect to motions 6 and 7 at the annual general meeting held on 27 September 2017 which failed because of the opposition of one owner (motions or resolutions or proposal, set out at paragraph [15] below). In summary, the motions sought to address an issue concerning unit 58, which used to be occupied by an on-site manager, and is now owned by a company, Landmark Management (ACT) Pty Ltd (LMPL), the shareholders of which are in effect the owners of the apartments in UP 2413 and which is let out commercially. LMPL did from time to time pay dividends. But unit 58 has a unit entitlement of only 6, much less than equivalent apartments, and therefore pays levies to the general fund and sinking fund much less than equivalent apartments. The motions proposed an arrangement whereby the company LMPL and the executive committee of UP 2413 agreed on payment by LMPL in relation to unit 58 of an amount additional to the levies based on the 6 unit entitlements.

3.The Owners - Units Plan No 2413 (Owners Corporation) is the formal respondent in these proceedings but did not take a substantive role in them. Kenneth Jones and Gail Jones (parties joined or Mr and Mrs Jones) voted against the motions at the annual general meeting, oppose the application in the tribunal and were joined as parties to these proceedings.

Summary of Tribunal decision

4.The Tribunal can only make an order giving effect to unsuccessful motions if satisfied after a merits review of the motions that opposition to the motions was unreasonable.

5.As to the merits review, the Tribunal regards the proposal in the resolutions as a correct and preferable way to address the anomaly in relation to unit 58’s low unit entitlement and fund contributions. As to the opposition of Mr and Mrs Jones to the proposal, the Tribunal regards this as rational, and based on their view as to the best interests of the Owners Corporation. However, the proposal does not detrimentally affect their property or financial interests. The proposal will provide a benefit to them, and all other owners, except the owner of unit 58. It is not discriminatory or detrimental to them, or any other owner, except the owner of unit 58. No other owner opposes the proposal, and the position of Mr and Mrs Jones is preventing a resolution of the anomaly and provision of a benefit to all owners, except the owner of unit 58. In this context, the Tribunal finds their opposition unreasonable in the relevant sense, and makes an order giving effect to the motions.

Hearing

6.Mr Nash made an Application under the Unit Titles Management Act on 6 October 2017 (Application). The hearing before the Tribunal took place on 13 December 2017. The applicant Mr Nash attended and appeared for himself. Mr Nash provided documents entitled ‘Applicant’s submissions’ and ‘Applicant’s submissions in reply’.

7.Mr and Mrs Jones had previously made an application for an order to be joined as a party dated 22 November 2017 which contained relevant materials, and this application was successful (Application for order to be joined as a party). Mr and Mrs Jones also attended and appeared for themselves and provided a document entitled ‘Joined parties’ submissions’. An email dated 6 November 2017 to the tribunal which set out their position was also provided.

Background

8.Landmark has 282 apartments and 10,000 unit entitlements. The 2017 annual general meeting of the Owners Corporation set a general fund levy of $1,013,047 and a sinking fund levy of $430,191.[1]

[1]     Applicant’s submissions, annexure 2, minutes of meeting of 27 September 2017, motions 12 and 13

9.The Application and relevant motions put at the 2017 annual general meeting relate to unit 58, a unit comprising two bedrooms, one with an ensuite, separate bathroom, lounge/dining room, kitchen and study/office with two car parking spaces. It has a unit entitlement of 6. This was apparently because it was the former resident manager’s unit which was owned by the developer.[2] Section 8 of the Unit Titles Act 2001 provides that ‘the schedule of unit entitlement forming part of a units plan is a schedule indicating (by numbers assigned to each unit) the improved value of each unit relative to each other unit (the unit’s unit entitlement)’.[3]

[2]     Applicant’s submissions at [1]

[3] This definition is picked up by the Dictionary in the Unit Titles Management Act

10.The unit entitlement of 6 for unit 58 is however much less than for other comparable units. It was said that the next lowest unit entitlement was 21 for a one bedroom unit. Other two bedroom units without a separate study/office have an entitlement of between 34 and 40.[4] Therefore unit 58’s unit entitlement is well below what they should be for a unit of its size, and as a result unit 58’s body corporate fees for the general fund and sinking fund are well below what it should be for a unit of its size. This is because section 78(2)(a) of the Unit Titles Management Act provides that the general fund contribution payable for each unit is generally “(a) the proportional share for the unit of the total general fund contribution”. Section 89 in relation to the sinking fund is in an equivalent form. The Dictionary to the Unit Titles Management Act provides that “proportional share, of a contribution payable for a unit, is the proportion of the total contributions payable for all units worked out” by multiplying the total contribution, by the unit entitlement of the unit divided by the total unit entitlement.

[4]     Application, attachment A; applicant’s submissions at [1]

11.The ownership of Lot 58 was transferred in February 2006 from the developer to LMPL, a company set up to own and manage the unit with all Landmark owners as shareholders apparently through the Owners Corporation.[5] LMPL did from time to time pay dividends. Since 2013 Landmark has not had a resident manager, a completely separate office for the building was constructed, and unit 58 has been privately tenanted.[6]

[5]     The specific terms of this relationship were not provided to the Tribunal.

[6]     Applicant’s submissions at [3]

12.In 2016 Landmark’s executive committee and the board of LMPL agreed to attempt to redress what was described as the “inequitable effect on all other owners of unit 58’s low unit entitlement”. It was submitted by the applicant that the process to change all the entitlements of the 282 units to increase the entitlements of unit 58 was “expensive, impractical and virtually impossible to achieve.”[7]

[7]     Applicant’s submissions at [5]

13.The more realistic approach was said to be to use sections 78(2)(b) and 89(2)(b) of the Unit Titles Management Act. As noted above section 78(2) provides that the general fund contribution payable for each unit is “(a) the proportional share for the unit of the total general fund contribution”; but it goes on to provide, or “(b) a proportion of the total general fund contribution worked out in accordance with a method set out in an unopposed resolution”.[8] Section 89 in relation to the sinking fund is in an equivalent form.

[8] See section 3.17 of Schedule 3 of the Unit Titles Management Act in relation to unopposed resolutions

14.Resolutions to use sections 78(2)(b) and 89(2)(b) were proposed for the 2016 annual general meeting of the Owners Corporation, but when it became clear that there were objectors, the motions were withdrawn, but, it was said, with an indication that they would be presented to the 2017 annual general meeting. At the 2017 annual general meeting the motions were presented in the same form as those withdrawn from the 2016 annual general meeting. The applicant asserts that requests were made that owners with any questions or problems with the resolutions should speak to executive committee members, but that there was not an approach from Mr and Mrs Jones following the 2016 annual general meeting or before the 2017 annual general meeting.[9]

[9]     Applicant’s submissions at [6]-[10]

Motions at the 2017 annual general meeting

15.The relevant motions put at the 2017 annual general meeting were in the following terms.[10]

[10]    Application, part of attachment B; joined parties’ submissions, annexure 1; emphasis in the original

Motion 6  Unopposed resolution

Owners confirm that, while soever Unit Plan 2413 owns unit 58/47 Blackall St (Lot 58), the following method shall be applied to determine general fund contributions:

1.   An amount determined annually by agreement between the Executive Committee and Landmark Management (ACT) Pty Ltd shall be paid by Lot 58, and

2.   The balance of the total general contribution fund contributions payable by each unit (including Lot 58) is the proportional share of that amount for the unit.

PROPOSED BY:         Executive Committee and Landmark Management (ACT) Pty Ltd (LMPL)

COSTS INVOLVED:   The proposal will reduced (sic) the level of Body Corporate (BC) fees paid by all owners other than LMPL. For 2017/18 it will enable your BC fees to be held at the same level as for last year.

EXPLANATION

…

Motion 7  Unopposed resolution

Owners confirm that, while soever Unit Plan 2413 owns unit 58/47 Blackall St (Lot 58), the following method shall be applied to determine sinking fund contributions:

1.   An amount determined annually by agreement between the Executive Committee and Landmark Management (ACT) Pty Ltd shall be paid by Lot 58, and

2.   The balance of the total sinking fund contributions payable by each unit (including Lot 58) is the proportional share of that amount for the unit.

PROPOSED BY:         Executive Committee and Landmark Management (ACT) Pty Ltd (LMPL)

COSTS INVOLVED:   The proposal will reduced (sic) the level of Body Corporate (BC) fees paid by all owners other than LMPL. For 2017/18 it will enable your BC fees to be held at the same level as for last year.

1.   EXPLANATION

…

The Explanation for motion 7 stated: “In light of the recommended budget for 2017/18 the EC and LMPL have agreed that, for 2017/18, the amount determined under provision 1 of the proposed method would be $20,000 if this motion is successful as it is proposed to increase the Administrative Fund contribution by the same $20,000. This will mean that for all owners other than lot 58 their BC fees will not be increased in 2017/18” (emphasis in the original).

16.The minutes of the meeting record that each “motion failed (64 votes in favour of the motion, 3 votes against)”. Directed proxies from the owners covering three lots were against the motion, and these were from the parties joined, Mr and Mrs Jones.[11]

[11]    Application, part of attachment B; application for an order to be joined as a party, attachment C

17.Mr and Mrs Jones pointed out that it appears from the minutes that a total of 76 votes were possible at the meeting (45 by persons present, 30 by proxies, one absentee vote), but that only 64 votes were recorded as in favour of the motion, and 3 against. This left 9 votes unaccounted for. It also left 206 owners who did not participate in the meeting at all.[12] 

[12]    Joined parties’ submissions at pages 3 and 4

18.In the Tribunal’s view the vote of the annual general meeting should be taken as indicating that only Mr and Mrs Jones opposed the motions. The motions required an unopposed resolution; without the vote of Mr and Mrs Jones this would have been achieved. The vote also indicates that all other owners voting at the meeting were in favour of the proposal. Under the formal mechanism provided by the Unit Titles Management Act there was significant support for the resolutions. Those who did not vote at the meeting had an opportunity to but did not oppose the resolutions. Therefore of those who cast votes at the meeting, about 5%, opposed the proposal; of those who were present or provided proxies at the meeting, about 4% opposed it; of those who could have voted, about 1% opposed it.

19.Section 125 of the Unit Titles Management Act provides that it applies to a dispute relating to an owners corporation for a units plan between the corporation and an owner or occupier of a unit in the units plan. This is in effect such a dispute. A party to the dispute may apply to the ACAT for an order in relation to the other party if the application relates to the dispute. Section 129 of the Unit Titles Management Act relevantly provides as follows:

129Kinds of ACAT orders

(1)The ACAT may make the following orders:

(a)an order requiring a party to do, or refrain from doing, a stated thing;

…

(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 a merits review of the motion that opposition to the motion was unreasonable;

…

(2)The ACAT may make any other order it considers reasonably necessary or convenient to resolve a dispute under this part.

(3)This section does not limit the orders the ACAT may make in relation to a dispute under this part.

20.The Tribunal is therefore able to give effect to an unsuccessful motion if satisfied on merits review of the motion that opposition was unreasonable.[13] Mr Nash seeks such orders in relation to motions 6 and 7 at the annual general meeting of the Owners Corporation for UP 2413 held on 27 September 2017 which were defeated by Mr and Mrs Jones. 

[13] Section 129(1)(g) of the Unit Titles Management Act

Applicant’s arguments

21.The applicant argued that the passage of the resolutions is the correct and preferable decision, and that Mr and Mrs Jones’ opposition was unreasonable. He provided a number of reasons for this, which in summary were as follows.

1.       Practical method of addressing unfairness

22.First, the resolutions if passed will provide a once only and the only practical method of redressing the unfairness arising from the entitlement of unit 58 and the ongoing cost to all owners.[14] It appears that the parties joined agree that the process to change all the entitlements of the 282 units to increase the entitlements of unit 58 is impractical.[15]

[14]    Applicant’s submissions at [21]

[15]    Joined parties’ submissions at [14]

2.       Avoids relying on annual resolutions

23.Second, the resolutions avoid the impracticality and inconvenience of annual general meeting resolutions to approve the payment of a dividend by LMPL. This is one of the issues with which the parties joined disagree; they argued that there is no necessity for this step and that the problem can continue to be managed through the existing process (see below at [30]-[31]).

3.       Financial benefit to all owners and a detriment to none (except unit 58)

24.Third, the applicant argued that the resolutions would result in a financial benefit to all owners and a detriment to none (except the owner of unit 58).[16] As noted at para [‘15] above, the explanation to motion 7 stated that LMPL had agreed that for 2017/18, the amount $20,000 would be paid as such additional fees. This is another issue on which the parties joined disagreed, as discussed below under the heading of ‘materiality.’ In essence they say any benefit is minimal (see below at [32]-[34]).

[16]    Applicant’s submissions at [21]

4.       Significant support for the resolutions and very limited opposition

25.Fourth, the applicant argued that all owners voting at the annual general meeting were in favour of the resolutions, except Mr and Mrs Jones.[17] The voting is discussed at paragraphs [17] and [18] above. While the parties joined indicated that others had suggested to them that they did not understand the motions but relied on the executive committee, or did not care enough to engage, or did not vote because they were aware there were going to be opposing proxies, none of these people were identified nor were statements provided from them.[18]

[17]    Applicant’s submissions at [21]

[18]    Joined parties’ submissions at page 3

5.       More efficient than dividend

26.Fifth, the resolutions would provide a more efficient means of eliminating the ongoing costs to owners than could the payment of an equivalent fully franked dividend from LMPL, and in particular there were taxation advantages to the proposed method.[19]

[19]    Applicant’s submissions at [21]

6.       Parties joined had changed their position and had not discussed their concerns with executive committee

27.Sixth, the applicant argued that because the parties joined had changed their primary arguments, and added further arguments, in support of their opposition this demonstrated that their position was unreasonable.[20] The applicant also seemed to argue that the fact that the parties joined did not raise their concerns with members of the executive committee suggested unreasonableness.[21] I do not think that either of these arguments of themselves support a finding as to the proposals or the unreasonableness of Mr and Mrs Jones’ opposition. Mr and Mrs Jones can oppose the proposals in the meeting, have no obligation to give any reasons in the meeting, can do so for whatever reasons they think appropriate, and can consider and reconsider the issue as it arises from time to time. They can express their views in the formal mechanisms of the Owners Corporation by voting at the meeting; there is no obligation on them to use other channels and certainly no adverse inference can be drawn from the fact they expressed their reasons in various ways and that they did not use channels other than the meeting to express their opposition.

[20]    Applicant’s submissions in reply at [4] and ff

[21]    Applicant’s submissions at [10]

Arguments of the parties joined

28.After the annual general meeting the parties joined provided an open letter to the Chairperson of the executive committee setting out their position, dated 9 October 2017.[22]

29.This letter first complained that the annual general meeting involved a “Name, Shame and Blame” exercise in relation to their position and that the Chairperson was not even handed and neutral in the comments she made. I note that Mr and Mrs Jones can express their views by voting at the meeting, and indicating their position in the minutes seems appropriate. Other people can also express their views and noting these in the minutes also seems appropriate. They then set out two primary objections.

1.       No necessity

[22]    Application for order to be joined as a party, attachment D

30.First, the parties joined set out their necessity objection, and stated: “The necessity for the Motions eludes us as it should be a simple straightforward process whereby LMPL has an agreed policy to annually transfer any profit after operating costs (including tax liabilities) to the Owners Corporation who are the shareholders of the company. We believe that no motions are required for this to take place”.

31.A letter in response by the manager on behalf of the executive committee stated that the constitution of LMPL requires that each dividend be proposed by the directors and approved by the Owners Corporation.[23] The parties joined appear to accept the necessity for such a motion, but noted that in all the time the current system has been in place, the owners had never opposed a motion to receive a dividend from LMPL. Further, the proposal is for a different annual process removed from the owners whereby the executive committee and the directors of LMPL are to meet and agree a dividend and it cannot be assumed that there will always be agreement.[24] 

2.       No materiality

[23]    Applicant’s submissions, annexure 5

[24]    Joined parties’ submissions, page 5

32.The second objection was based on materiality. In summary, the parties joined argued that the benefit to unit owners would be minimal. Using the statement that in 2016/17 the fees of unit holders would under the proposal be reduced by $10,000, the parties joined deducted the proposed dividend under the current arrangement of $4,350, and then divided what remained by the 10,000 unit entitlements, to give a benefit of 56.5 cents per unit entitlement for that year.[25]

[25]    Application for order to be joined as a party, attachment D, letter to the chairperson dated 9 October 2017. The parties joined provided a range of other calculations in making this point

33.In their submissions they argued in addition that the financial benefits would be hypothetical at best, as they are based on unknown future agreements.[26]

[26]    Joined parties’ submissions, page 9

34.Further the parties joined seemed to argue that having a live-in manager residing in unit 58 had value to them and others and that in the future it may be appropriate or of benefit to return to this position. They implied that the proposal may limit this possibility.

3.       Proposal unclear

35.In their submissions to this Tribunal the parties joined also argued that the motions and the proposal they contained were “defective, misleading, confusing and lacking clear, easily understood explanations”.[27]

[27]    Joined parties’ submissions, page 9

36.The motions are set out above, and are reasonably clearly expressed. The explanations, only a small part of which are quoted above, are in a similar position. The authors clearly sought to set out the proposal concisely, focussing on the practical benefits. As is often the case, in retrospect there could have been some improvements and further detail, but there is sufficient detail to indicate the primary points in the proposal. Mr and Mrs Jones contested the benefits, some of the figures used and likely future developments, but this does not undercut the reasonably clear motions and explanations provided. The Tribunal does not think that this argument is determinative of its consideration.

4.       Unintended consequences

37.The parties joined also argued that the motions may have unintended consequences. The main one of these seems to be that “dynamics along with competing priorities of the parties may not always result in agreement of the quantum of fees and contribution that the company must make to the owners corporation”.[28]

5.       Conflict of interest

[28]    Joined parties’ submissions, page 2

38.The parties joined also raised the fact that the Chair of the executive committee is a barrister, like Mr Nash, and his partner, and that the fact that the committee did not oppose the application could be viewed as meaning that they are “one and the same” and that the application could be viewed as a “cynical exercise (using ‘insider knowledge’ of the law) to use the Tribunal to overturn a legitimate, reasoned, opposition to motions requiring unopposed resolutions”.[29]

[29]    Joined parties’ submissions, page 9

39.As noted, the Unit Titles Management Act provides in sections 78(2)(b) and 89(2)(b) that the resolutions need to be unopposed. Mr and Mrs Jones can express their views by voting against the motions. There can be no legitimate criticism of them for exercising this right. But the Act also provides a mechanism for reviewing the decisions of the meeting, and no legitimate criticism can be made of Mr Nash for exercising this right. There was no evidence of any conflict of interest or inappropriate conduct, disclosure or knowledge by Mr Nash or the Chair, and this argument is rejected by the Tribunal.

6.       Proposal of the parties joined

40.The parties joined asked that the Tribunal reject Mr Nash’s application. Further, they also proposed their own resolutions for a three step process, namely: “(1) Landmark adopts a resolution to the effect that it requests its nominated directors on LMPL board to propose that at each AGM the shareholders approve a dividend equal to net profit be payable (subject to sufficient cash reserves to pay the dividend and franking credits to fully frank the dividend both being available). (2) After the close of each financial year and accounts are finalised the directors calculate the dividend that can be paid consistent with (1) and recommend this to LMPL’s AGM. (3) The shareholder (Landmark) then approves the dividend payment”.[30]

[30]    Joined parties’ submissions, annexure 4

41.Mr and Mrs Jones provided no indication of the support for this proposal from other owners. Mr Nash stated that this proposal was similar to one which was put in place at the 2015 annual general meeting but then revoked at a 2016 special general meeting and replaced by a motion that “LMPL directors are encouraged to return funds surplus to the needs of LMPL to shareholders in the most effective manners in the interest of Landmark owners”. The revocation passed by 43 votes for with 14 against; the replacement approach passed 45 to 12.[31]

Consideration

[31]    Applicant’s submissions in reply at [44] and annexure 3

42.The applicant submitted that it was appropriate to adopt the approach taken in Floro v The Owners-Units Plan No 630 [2017] ACAT 4 at [18], namely first a review to determine the correct and preferable decision,[32] and second to consider whether the objectors objections are objectively unreasonable.[33] This flows from the structure of section 129(1)(g) which provides for an order giving effect to an unsuccessful motion if the Tribunal is satisfied after a merits review of the motion, that opposition to the motion was unreasonable. The Tribunal follows this structure, noting that the two issues can raise similar considerations, and that the concept of unreasonable opposition depends to some extent on contextual considerations, as discussed below.

1.       The current arrangements are anomalous and unfair

[32]    See also 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; Uren v The Owners – Units Plan No. 396 [2017] 51; Rampala v The Owners – Units Plan 1330 [2018] ACAT 35

[33]    See also Ainsworth v Albrecht [2016] HCA 40; The Owners – Strata Plan No. 69140 v Drewe [2017] NSWSC 845; Uren v The Owners – Units Plan No. 396 [2017] 51

43.In considering these issues, a number factors are relevant. First, the applicant argued that the motions sought to redress what was described as the inequitable effect on all other owners of unit 58’s low unit entitlement. The proposition that the arrangement is unfair appears to be correct. It may not have been so, or at least not to the same extent, when unit 58 was a manager’s residence, but this is no longer the case. The unit entitlement for unit 58 is considerably less than that for equivalent units. This means that unit 58 does not pay an appropriate amount in fund contributions. This amounts to discrimination or a distinction, in favour of unit 58 and against the other unit owners, for which there is no rational basis.

2.       The proposal can and is likely to address this unfairness

44.Second, the applicant argued that addressing this unfairness fully by changing all the entitlements of the 282 units to increase the entitlements of unit 58 would be “expensive, impractical and virtually impossible to achieve”. This proposition also seems correct.

45.Further, the proposal would provide an additional mechanism to address this unfairness. It may not wholly do so, but it would do so to some extent. The current mechanisms, payment of the levies for 6 unit entitlements and of dividends, remain in place. Even if there are unintended consequences, the Owners Corporation and individual unit owners will not be worse off. For example if the relevant parties do not reach agreement, unlikely as that seems, there will be no detriment to the Owners Corporation or individual unit owners under the proposal. They will simply be in the same position they are now.

46.The main concern of the parties joined was that the proposal was not in their view the preferred mechanism, which was either leaving the situation as it has been, or moving to their proposed position and proposed resolutions.

3.       The proposal is likely to provide a benefit to owners, and will not result in a detriment to them (except for the owner of unit 58)

47.Third, the proposal is likely to provide a benefit to, and will not be detrimental to, any unit owner (other than the owner of unit 58) when compared to the current arrangement. The proposal will provide an additional mechanism whereby the anomalous and unfair contributions of unit 58 to the funds are addressed.

48.Under the current arrangement unit 58 only pays into the general fund and sinking fund in accordance with its unit entitlement of 6. This will be maintained by the proposal. The motions provide that after the payment of the agreed amount, “the balance of the total … contributions payable by each unit (including unit 58) is the proportional share of that amount for the unit” (emphasis added).

49.Further, the unit owners will also continue to receive any dividends from LMPL. It is true that amounts paid by agreement may impact as a matter of practicality on the amount of any dividends.[34] But as the applicant points out, dividends have to date been quite modest, namely $7,641 in 2010/11, and $14,000 in 2015/16, provided as part of a funding package to construct a new manager’s office, and $4,350 in 2017/18.[35] As noted above at para [15] the explanation to motion 7 stated that LMPL had agreed that for 2017/18, the amount $20,000 would be paid as additional fees. This is a significant amount, and the applicant argued that payment under the agreement had tax advantages over payment of a dividend.

[34]    Indeed at the 2017 annual general meeting, failure of the resolutions led to the payment of a dividend, which apparently would not have been paid if the resolutions had passed. See the minutes in Application to be joined as a party, attachment C, concerning motion 8

[35]    Applicant’s submissions in reply at [39]

50.The parties joined in some of their calculations also included the rent payable under the lease of unit 58 as a benefit to unit owners. This seems inappropriate. This benefit will continue to accrue to LMPL as the owner of unit 58.  It will accrue as income from which expenditure will need to be deducted to obtain any profit. That expenditure will under the proposal include the additional payments, so LMPL will be disadvantaged to this extent, but that is the very purpose of the proposal. The other unit owners will continue to benefit from the payments based on the 6 unit entitlement and dividends, but will also benefit from the additional payments under the proposed agreement mechanism. 

51.Further, the Owners Corporation, and unit owners, as shareholder will continue to benefit from any appreciation in the value of unit 58 in the hands of LMPL.

52.The parties joined seemed to argue that having a live-in manager residing in unit 58 had value to them and others, that in the future it may be appropriate or of benefit to return to this position, and that the proposal may prevent this. The proposal could not have caused the move away from a live-in manager, which occurred some time ago. Implementing the proposal while unit 58 is commercially let will not prevent the return to a live-in manager. If that is to occur, new arrangements may be necessary, but the proposal does not prevent these.

4.       The proposal will not discriminate against owners (except the owner of unit 58)

53.Fourth, the proposal will not itself discriminate against any unit owner except the owner of unit 58. As noted LMPL is significantly benefited by its current unit entitlement, an arrangement which discriminates against the other owners. None-the-less LMPL proposed the motions at the 2017 annual general meeting, and any payment under the proposal will be with the agreement of LMPL. All other unit owners will be affected equally.

54.One of the reasons for requiring an unopposed resolution in relation to a change to the general position for fund contribution is to prevent discrimination by a majority of owners, even a super majority, against a minority, even a very small minority, of owners in relation to fund contributions. In this case the minority, the parties joined, disagree with the proposal, but they do so on intellectual grounds, not because their property or financial interests will in any way be adversely affected, or because they will be required to pay discriminatory or unfair contributions.

5.       The proposal has the significant support of owners

55.Fifth, it is clear that as expressed under the processes established by the Unit Titles Management Act a significant number of unit owners support the proposal, and a very significant number do not oppose it.

56.There is no direct evidence of any support for the parties joined counter-proposal; the evidence there is is that it was not supported at the 2016 special general meeting, and was defeated by 45 to 12 votes.

57.It is also noted that future annual general meetings can change the proposal if it is implemented. Section 78(4) of the Unit Titles Management Act provides that a resolution may only be amended by unopposed resolution, but can be revoked by special resolution.[36] Revocation does not require an unopposed resolution.

Merits review of the proposal

[36] As to a special resolution, see section 3.16 of Schedule 3 of the Unit Titles Management Act. This provides generally that what is required is that (i) the number of votes cast in favour of the resolution is greater than the number of votes cast against it; and (ii) the votes cast against the resolution number less than 1/3 of the total number of votes that can be cast on the resolution by people present at the meeting (including proxy votes)

58.On the basis these 5 factors Tribunal thinks that on a merits review of the proposal it is a correct and preferable approach. As to correct, there are no legal or other fundamental problems with the proposal.

59.As to preferable, developing the comments by Senior Member Robinson in Rampala v The Owners – Units Plan 1330[37] at [60], having regard to the framework of the Unit Titles Management Act 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. The proposal meets this test. There is current unfairness. Fully resolving the issue is impractical. The proposal provides some remedy to the unfairness of the current arrangements. It is likely to provide some benefits to all owners except the owner of unit 58. It provides no detriment except to unit 58, which currently has a significant benefit, proposed the motions, and will need to agree to any new payments. It provides a further mechanism for addressing the unfairness and making additional payments, which has taxation benefits, and leaves in place the mechanisms of payments based on 6 unit entitlements and dividends. It has very significant support from unit owners.[38] The parties joined were the only people to vote against the proposal, the vote demonstrated significant support for changing the current arrangements, and the alternative proposal of the parties joined has limited support. For these reasons giving effect to the resolutions and the proposal is preferable to not doing so.

Is the opposition unreasonable?

[37] [2018] ACAT 35

[38]    Rampala v The Owners – Units Plan 1330 [2018] ACAT 35 at [73]

60.The issue as to whether the opposition to the proposal is unreasonable is a different one, and poses a significant hurdle for the applicant.

61.Generally, unit owners at a general meeting are free to vote on motions however they see fit. They are equivalent to shareholders of a corporation.[39] It is clear that Mr and Mrs Jones hold their views for rational reasons. However, the power in section 129(1)(g) of the Unit Titles Management Act allows unreasonable votes in relation to unit titles management to be overridden. In my view the concept of unreasonable means objectively unreasonable in the particular context.

[39]    Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457, at 504 Dixon J

62.In Ainsworth v Albrecht[40](Ainsworth) the High Court[41] considered this type of provision in the context of construction on common property and stated at [55] that it “is no light thing to conclude that opposition by a lot owner to a resolution is unreasonable where adoption of the resolution will have the effect of appropriating part of the common property to the exclusive use of the owner of another lot, for no return to the body corporate or the other lot owners; … and potentially creating a risk of interference with the tranquillity or privacy of an objecting lot owner”. The judgment at [57] noted that nothing in the legislative scheme suggested that an opponent to a proposal acts unreasonably in failing to act sympathetically or altruistically towards a proponent who seeks to diminish the property rights of the opponent.

[40] [2016] HCA 40

[41]    French CJ, Bell, Keane and Gordon JJ. There is a separate judgment by Nettle J

63.However, in contrast, in Ainsworth the High Court stated that “… opposition to a proposal that could not, on any rational view, adversely affect the material enjoyment of an opponent’s property rights may be seen to be unreasonable”.[42] This suggests attention to the interests of Mr and Mrs Jones which are affected by the proposal. Their property interests will not be affected by implementation of the proposal. Nothing in the proposal will affect their rights in relation to their units, or their rights in relation to common property. Their financial interests are not affected and are likely to be improved. It is noted that they regard the likely improvement in their financial position as minimal, but clearly there is no detriment to their financial interests. The proposal will not affect their other broader ‘property’ interests, such as the amenity of their unit or the complex as a whole, their view, their quiet enjoyment, or their access rights.[43] Mr and Mrs Jones argued that the move away from a live-in manager was a loss and detrimental to them, but the proposal did not cause this change and does not prevent a return to a live-in manager.

[42]    French CJ, Bell, Keane and Gordon JJ at [63]

[43]    Discussed in Uren v The Owners – Units Plan No. 396 [2017] ACAT 51

64.Further, leaving aside unit 58, the proposal will not discriminate against any unit owner and will affect all unit owners in the same way. All that will be affected by overriding the objection of Mr and Mrs Jones will be their intellectual position that they are against the proposal.

65.Further again, their intellectual position is not shared by other owners. The parties joined are the only people who voted against the resolutions. Depending on how it is calculated they represent between 5% and 1% of owners in their opposition (see paragraph [18] above). The requirement for an unopposed resolution is an important protection for minority rights, but it also gives minority owners significant power. Its use to protect property rights, financial rights, in particular against unfair or discriminatory levies, and even broader ‘property’ rights should not be lightly overridden. But its use to oppose a proposal which has no detrimental impact on the opponents’ property rights, financial rights, in particular against unfair or discriminatory levies, and even broader ‘property’ rights, can be unreasonable. This is particularly so where the opposition prevents the implementation of a proposal to which no one else has expressed opposition in any formal process, and which enjoys significant support, and which provides a financial benefit to all owners except one, the owner of unit 58.

66.Given these factors and context the Tribunal thinks that the position of the parties joined is unreasonable. In particular, the proposal if implemented will not detrimentally affect the property, financial or broader ‘property’ interests of the Mr and Mrs Jones and will not be discriminatory or unfair to them. Rather their opposition is based on purely intellectual concerns, and if allowed to operate will deny a financial benefit to other unit owners and prevent them implementing a proposal with significant support.

67.The Tribunal will therefore under section 129(1)(g) of the Unit Titles Management Act order that motions 6 and 7 at the annual general meeting of the Owners Corporation for Units Plan 2413 on 27 September 2017 be given effect.

………………………………..

Senior Member R Orr QC

HEARING DETAILS

FILE NUMBER:	UT 22/2017
PARTIES, APPLICANT:	Ian Nash
PARTIES, RESPONDENT:	The Owners – Units Plan 2413
PARTIES JOINED	Kenneth Jones & Gail Jones
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Senior Member R Orr QC
DATES OF HEARING:	13 December 2017