Re Body Corporate for Viridian; Kjerulf Ainsworth & Ors v Martin Albrecht & Anor
[2014] QCATA 294
•17 October 2014
| CITATION: | Re Body Corporate for Viridian; Kjerulf Ainsworth & Ors v Martin Albrecht & Anor [2014] QCATA 294 |
| PARTIES: | Kjerulf Ainsworth, Lisa Charlotte Martoo, John Charles Mainwaring, John Morris and Mark Lang (Applicants) |
| v | |
| Martin Albrecht and Body Corporate for Viridian Noosa Residences CTS 34034 (Respondents) |
| APPLICATION NUMBER: | APL418-13 |
| MATTER TYPE: | Appeals |
| HEARING DATE: | 30 April 2014, 15 May 2014, inspection on 13 and 14 June 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Roney QC |
| DELIVERED ON: | 17 October 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The appeal is allowed. 2. The orders of the Adjudicator dated 2 September 2013 are set aside. |
| CATCHWORDS: | Duty of Bodies Corporate to act reasonably in general meeting, motions without dissent – interaction between s 94 of the BCCM Act, and BCCM Schedule 5 – principles applicable to deciding reasonableness by Bodies Corporate – voting rights and the power under s 276 to make just and equitable orders – onus of proof of unreasonableness – inappropriateness of balancing of interests – compensation for the acquisition of common property rights Body Corporate and Community Management Act 1997 ss 2, 4, 62, 92, 94, 152, 171, 276, 289, 290, Schedule 5 Associated Provision Pictures Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 |
APPEARANCES:
| APPLICANTS: | Mr C Francis of Counsel, instructed by Hynes Legal |
| RESPONDENT: | Mr B Kidston of Counsel, instructed by Mahoney Lawyers |
TABLE OF CONTENTS
Introduction
The decision under review
The relevant statutory provisions
The jurisdictional provisions
The grounds of appeal
The interaction between s 94 of the BCCM Act, and Schedule 5 to it
The duty to act reasonably – what does it mean?
Summary of principles applicable to deciding reasonableness
Relevance of individual concerns – motions without dissent
The “onus reversal”
The relationship between voting rights and the power under s 276 to make just and equitable orders
The Adjudicator’s balancing of interests
The design integrity issue
Privacy and noise issues
The floodgates concern
The question of the absence of compensation for the acquisition of common property rights
Conclusion
REASONS FOR DECISION
Introduction
The Applicants, who are a group of owners of lots in a residential development known as Viridian Noosa Residences (“Viridian”) have appealed against a decision of an Adjudicator appointed by the Commissioner for Body Corporate and Community Management which had the effect of overriding the will of a substantial majority of owners at Viridian who opposed allowing one of the owners, Mr Albrecht, who is the Respondent here, to construct an extension to elevated deck areas on his lot, with consequential grants of exclusive use rights over common property beneath them.
The appeal squarely throws up for consideration the question as to how to resolve the tension between the provisions of the Body Corporate and Community Management Act 1997 (“BCCM Act”) which give rights to owners to veto certain proposals by Bodies Corporate, and the duty of Bodies Corporate under s 94(2) of the BCCM Act to act reasonably. It also raises questions about the circumstances in which an Adjudicator can determine that opposition to a proposal which affects common property of all lot owners might be held to be unreasonable, and substitute a different decision, notwithstanding that to be effective at law, a resolution which permitted the relevant proposal to occur was required to be passed without dissent by lot owners in general meeting. It also squarely raises for consideration what is the relevant test for “unreasonableness” on the part of a Body Corporate, and how that conduct is to be assessed in particular circumstances where motions without dissent are a prerequisite to certain conduct by the Body Corporate affecting its common property.
The decision under review
The decision which is under review is that of an experienced Adjudicator, Ms Rosemann, dated 2 September 2013. The Adjudicator was considering an application under s 276 of the BCCM Act by the owner of Lot 11, the Respondent here, for a declaration that opposition to his proposal to combine and extend decks to the front of his lot, and accordingly amend the Community Management Statement (“the CMS”) to include a grant to that owner of exclusive use of the common property airspace between those deck spaces, was unreasonably opposed.
The motion was in these terms:
1. APPROVAL FOR THE EXTENSION OF DECK TO LOT 11 AND AMENDMENT TO COMMUNITY MANAGEMENT STATEMENT TO ALLOW FOR THE EXTENSION
Motion by Resolution Without Dissent proposed by Mr Martin Albrecht of Lot No 11
THIS MOTION WAS LOST: that the Body Corporate consent to the owners of lot 11 extending the deck on the upper level of lot 11 in accordance with the plans prepared by Opus and reports provided to the Body Corporate and circulated with this motion, subject to the owners of Lot 11 seeking, obtaining and complying with any and all relevant regulatory and legislative requirements.
AND THAT the Community Management Statement for the scheme be amended by the inclusion of the following by-law
Special Rights – lot 11
The owner of lot 11:
a) May, provided the owner has obtained the consent of the body corporate to the plans for such works and seeks, obtains and complies with any and all relevant regulatory and legislative requirements, extend outwards into common property airspace outside lot 11 the middle deck on the upper level of lot 11 so that it joins the other deck on that level which is closet to lot 10 so as to create a single deck, the front external boundary of which is a straight line;
b) Is granted the exclusive use and enjoyment of the common property airspace into which the extended deck protrudes;
c) Is responsible for the upkeep and maintenance of the deck.
AND THAT the Body Corporate endorse it’s (sic) consent on a new Community Management Statement identical to the existing Community Management Statement but incorporating such new by-law, subject to such minor and/or technical variations or additions as may be necessary to enable the new Community Management Statement to be recorded in the relevant Department including if necessary the inclusion of an exclusive use plan that shows the area of common property the exclusive use of which is allocated to lot 11 under the proposed new by-law and which complies with the Department’s requirements, such plans to be provided by and at the expense of the owner of lot 11
AND THAT the Body Corporate execute under it’s (sic) common seal and authorise its solicitors to execute all documents necessary to record the new Community Management Statement by affixing the seal in the presence of any two committee members.
That motion was one which required a resolution of the Body Corporate in general meeting, and for it to be passed without dissent. That followed a long history of dissent about the deck proposal. The level of dissent to the resolution which was put at an extraordinary general meeting (“the EGM”) held on 10 August 2012 was that 7 owners voted for the motion, and 7 against, with one abstention.
Before the Adjudicator, the owner of Lot 11 had contended that opposition by owners to the motion was unreasonable, and by way of subordinate argument contended that:
a) the proposed alteration was only minor in scope and effect;
b) it used only a small area of airspace which was part of common property;
c) the airspace it did use could not be put to use by any other owner in any event even if it were not appropriated to Lot 11;
d) it would improve the safety and amenity of the deck area to that lot;
e) it was designed by the scheme’s original architect, a matter of some importance;
f) it was sympathetic to if not in keeping with the existing architectural design for the scheme;
g) it would not impede view aspect, privacy or other use of the enjoyment of any of the other lots; and
h) it would comply with the other conditions of approval for the scheme.
The Adjudicator heard the matter on the papers. That made it difficult to resolve conflicting factual issues of which there were many. The Adjudicator determined, after reviewing a considerable body of evidence, all of which was also before me, as was some additional material in submissions, that she was not satisfied that the Body Corporate had acted reasonably in deciding not to pass the relevant motion. Although finding that individual owners may have voted against the motion in good faith and in general reliance on architectural and other advice, she held that they nevertheless relied on that advice in ways which were irrelevant and which involved unsubstantiated considerations. She determined that the impact on the adjoining Lot 10 was minimal, and that to the extent that there was any impact on it, that did not constitute a reasonable basis to refuse the proposal. In arriving at her conclusion, the Adjudicator gave consideration to the history of the matter and to the submissions by all of those that had been put before her. She did not order that any compensation be paid by the owner of Lot 11 for the right sought to exclusive use of what was part of the common property.
Amongst the material considerations reviewed, the Adjudicator considered various architectural opinions which had been expressed concerning the desirability or appropriateness of the proposed modifications to Lot 11. I shall deal with these in due course.
The designer of Viridian Noosa Residences was by the time he designed it a well known architect, Mr John Mainwaring. He is now a lot owner. Before the Body Corporate when it held its meeting and also the Adjudicator was a body of evidence from Mr Mainwaring showing the history and design intentions for three stages to the Viridian project. As Mr Mainwaring describes it in his history, the project was a mixed-use condominium with an aspect facing Laguna Bay. This followed in the tradition of European or alpine hillside villages. Stage 1 consisted of six houses sitting amongst the trees higher up on the ridge, with Stage 2, this stage, consisting of 22 permanent residential villas. Stage 3 was constructed more recently and included a resort hotel.
She considered the law which applied to the decision that she was to make in circumstances in which the decision of the Body Corporate was one which was required to be made without dissent. She conducted an analysis of arguments, which were also put before me, as to whether the appropriate test for reasonableness was the so-called “Wednesbury” test with which those involved in administrative review would be well familiar. And whether, in the alternative, the test was an objective one that required a ‘balancing of factors in all the circumstances according to the ordinary meaning of the term reasonable’. In the end the Adjudicator accepted the latter to be the appropriate test, rejected the Wednesbury test and concluded that a finding that ‘an impugned requirement is logical and understandable does not necessarily mean that the requirement was reasonable in the circumstances’.
She further held that the expression “reasonable” should be given a broad common sense meaning, and the question is not whether the decision was correct but whether it is objectively reasonable. She therefore concluded that
considering an order of this nature enables an Adjudicator to determine the balance between the need to protect the genuine interests of owners and their voting entitlements, and upholding the justifiable position of proponents (in) the face of unfounded or vexatious opposition. I will consider the decision of the Body Corporate in that context.
The Adjudicator also considered the extent of opposition to the proposal and the basis for it in various subcategories, as follows:
a) the question of whether the construction of the deck would improve the amenity of the lot;
b) whether there were safety issues;
c) the alternative uses to which the common property affected might be put and the issue of compensation to the Body Corporate;
d) concerns about whether this would create a precedent or open the floodgates;
e) the original architectural design intent and its compatibility with this proposal;
f) the question of whether architectural integrity of the original design was preserved and its significance;
g) noise concerns;
h) privacy and view concerns;
i) structural requirements;
j) stormwater runoff;
k) compliance with architectural landscaping codes;
l) planning approvals; and
m) financial obligations arising out of allowing the extension.
In the end she decided that she was ‘not satisfied that the Body Corporate had acted reasonably in deciding not to pass the motion’. The Adjudicator declared that the motion put to the EGM on 10 August 2012 was not passed because of opposition that was unreasonable in the circumstances. She further ordered that that motion was deemed therefore to have been passed and directed that the Body Corporate within three months lodge with the Registrar of Titles a request to record a new CMS which incorporated the amendments authorised by the now deemed passed motion. The Applicant was ordered to pay the costs of the new CMS.
The relevant statutory provisions
Section 2 of the BCCM Act sets out the primary object of the Act as follows:
2 Primary object
The primary object of this Act is to provide for flexible and contemporary communally based arrangements for the use of freehold land, having regard to the secondary objects.
Section 4 of the BCCM Act provides for the secondary objects as follows:
4 Secondary objects
The following are the secondary objects of this Act—
(a)to balance the rights of individuals with the responsibility for self management as an inherent aspect of community titles schemes;
(b)to promote economic development by establishing sufficiently flexible administrative and management arrangements for community titles schemes;
(c)to encourage the tourism potential of community titles schemes without diminishing the rights and responsibilities of owners, and intending buyers, of lots in community titles schemes;
(d)to provide a legislative framework accommodating future trends in community titling;
(e)to ensure that bodies corporate for community titles schemes have control of the common property and body corporate assets they are responsible for managing on behalf of owners of lots included in the schemes;
(f)to provide bodies corporate with the flexibility they need in their operations and dealings to accommodate changing circumstances within community titles schemes;
(g)to provide an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes;
(h)to ensure accessibility to information about community titles scheme issues;
(i)to provide an efficient and effective dispute resolution process.
Section 94 of the BCCM Act relates to the general functions of the Body Corporate and provides:
94 Body corporate's general functions
(1) The body corporate for a community titles scheme must—
(a) administer the common property and body corporate assets for the benefit of the owners of the lots included in the scheme; and
(b) enforce the community management statement (including enforcing any by-laws for the scheme in the way provided under this Act); and
(c) carry out the other functions given to the body corporate under this Act and the community management statement.
(2) The body corporate must act reasonably in anything it does under subsection (1) including making, or not making, a decision for the subsection.
Examples for subsection (2) of a body corporate making a decision—
·passing a motion by resolution at a general meeting or a committee meeting
·not passing a motion after a vote at a general meeting or a committee meeting
·owners of lots included in a specified two-lot scheme entering into a lot owner agreement for the scheme (see section 111E(2))
·owners of lots included in a specified two-lot scheme failing to enter into a lot owner agreement following a request made by one of the owners (see section 111H(3))
Schedule 5 to the BCCM Act states:
10If satisfied a motion (other than a motion under section 47A for the adjustment of contribution schedule lot entitlements, or a motion for reinstatement of scheme land or termination or amalgamation of the scheme) considered by a general meeting of the body corporate and requiring a resolution without dissent was not passed because of opposition that in the circumstances is unreasonable—an order giving effect to the motion as proposed, or a variation of the motion as proposed.
...
17If satisfied the body corporate's decision about a proposal by the owner of a lot to make improvements on or changes to common property is an unreasonable decision—an order requiring the body corporate—
(a) to reject the proposal; or
(b) to agree to the proposal; or
(c) to ratify the proposal on stated terms.
...
24If satisfied a decision to pass or not pass a motion at a general meeting of the body corporate was unreasonable—an order declaring that a motion was invalid or giving effect to the motion as proposed, or a variation of the motion as proposed.
Section 152 of the BCCM Act provides:
152 Body corporate's duties about common property etc.
(1) The body corporate for a community titles scheme must—
(a)administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners; and
(b)comply with the obligations with regard to common property and body corporate assets imposed under the regulation module applying to the scheme.
(2)Nothing in this part, or in a regulation made under this part, stops—
(a)an item of personal property that is a body corporate asset from becoming part of the common property because of its physical incorporation with common property; or
(b)a part of common property from becoming a body corporate asset because of its physical separation from common property.
Section 159(2) to the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (“Accommodation Module”) states:
(2)The body corporate may—
(a)if authorised by resolution without dissent—
(i)sell or otherwise dispose of part of the common property; or
(ii)grant or amend a lease or licence for more than 10 years over part of the common property; and
(b)if authorised by special resolution—grant or amend a lease or licence for 10 years or less over part of the common property.
In my view, it is critical to observe in deciding this appeal that the language in s 94 of the BCCM Act is of course directed to the Body Corporate as a corporate entity, and not to individuals who collectively constitute the Body Corporate in general meeting. The conundrum that this presents, is of course that the will of the Body Corporate as a corporate entity, can only reflect the collective decisions of individual lot owners who participate in voting upon motions at general meetings. Therefore, in broad terms, were one to be considering general motions at which a bare majority is sufficient to pass a motion, the will of the Body Corporate is to be determined by the position of the majority of voters who vote upon a motion. Conversely, where the motion in question is required to be one passed without dissent for it to be lawful, the will of the Body Corporate may well be effectively expressed by the dissent of a single lot owner who participates in the voting process. Thus, although a substantial majority of lot owners might approve of a certain course of action, the will of the Body Corporate will not be reflected in that majority expression of will.
The second thing to be observed is that the language of section 94(2) is directed specifically to a duty upon a Body Corporate. It is not a duty to make reasonable decisions, it is a duty to “act reasonably” in anything it does under the previous section, which is referenced to it carrying out the functions given to it under the Act. One of these functions, relevantly for present purposes, is of course to conduct general meetings and to ascertain the vote upon motions put to that general meeting. Neither s 94 nor anything else in the Act provide guidance in how it is that one is to determine whether the Body Corporate has acted reasonably in any given environment. But clearly amongst the examples provided that in s 94 itself are actions by a Body Corporate in making a decision in not passing a motion after a vote at a general meeting.
It is important to keep in mind the precise language of s 94 when discussing what is meant by the Body Corporate obligation to “act reasonably”. That is so particularly when one is seeking assistance from case law where some similar, but not identical language is used, or involved. Different contexts for different notions of reasonableness arise, particularly those that reference whether for example a policy or decision is a reasonable one or whether there was a reasonable basis for particular conduct by a person. Similarly where cases where there is a commercial interest held by a party but in whom there is a duty to act reasonably in the exercise of some discretion, such as whether to approve a transfer of an interest to some other party.
Section 171 of the BCCM Act provides:
171 Requirements for exclusive use by-law
(1) The common property or body corporate asset to which an exclusive use by-law for a community titles scheme applies must be—
(a) specifically identified in the by-law; or
(b) allocated—
(i) by a person (who may be the original owner or the original owner's agent) authorised under the by-law to make the allocation (an authorised allocation); or
(ii) by 2 or more lot owners under a reallocation agreement (an agreed allocation).
(2)An exclusive use by-law that specifically identifies the common property or body corporate asset to which it applies, other than an exclusive use by-law contained in the first community management statement for the scheme—
(a) may attach to a lot only if the lot owner agrees in writing before the passing of the resolution without dissent consenting to the recording of the new community management statement to incorporate the exclusive use by-law, or the lot owner votes personally in the resolution; and
(b) may stop applying to the lot only if the lot owner agrees in writing before the passing of the resolution without dissent consenting to the recording of the new community management statement that does not incorporate the exclusive use by-law, or the lot owner votes personally in the resolution.
(3) If an exclusive use by-law authorises the allocation of common property or a body corporate asset for the purpose of the by-law—
(a) the by-law may attach to a lot on the basis of an authorised allocation only if the lot owner agrees in writing before the allocation of the common property or body corporate asset to which the by-law applies; and
(b) the by-law may stop applying to the lot only if the lot owner agrees in writing before—
(i) the allocation is revoked under the by-law (if the by-law provides for the revocation of an allocation); or
(ii) the passing of the resolution without dissent—
(A) consenting to the recording of the new community management statement that does not incorporate the exclusive use by-law; or
(B) in which the lot owner voted personally.
The jurisdictional provisions
Section 276 of the BCCM Act provides:
276 Orders of adjudicators
(1)An adjudicator to whom the application is referred may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about—
(a) a claimed or anticipated contravention of this Act or the community management statement; or
(b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or
(c)a claimed or anticipated contractual matter about—
(i)the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or
(ii) the authorisation of a person as a letting agent for a community titles scheme.
(2) An order may require a person to act, or prohibit a person from acting, in a way stated in the order.
(3) Without limiting subsections (1) and (2), the adjudicator may make an order mentioned in schedule 5.
(4) An order appointing an administrator—
(a)may be the only order the adjudicator makes for an application; or
(b) may be made to assist the enforcement of another order made for the application.
(5)If the adjudicator makes a consent order, the order—
(a) may include only matters that may be dealt with under this Act; and
(b) must not include matters that are inconsistent with this Act or another Act.
Section 289 of the BCCM Act provides:
289 Right to appeal to appeal tribunal
(1) This section applies if—
(a) an application is made under this chapter; and
(b) an adjudicator makes an order for the application (other than a consent order); and
(c) a person (the aggrieved person) is aggrieved by the order; and
(d)the aggrieved person is—
(i) for an order that is a decision mentioned in section 288A, definition order—an applicant; or
(ii) for another order—
(A) an applicant; or
(B) a respondent to the application; or
(C) the body corporate for the community titles scheme; or
(D) a person who, on an invitation under section 243 or 271(1)(c), made a submission about the application; or
(E) an affected person for an application mentioned in section 243A; or
(F) a person not otherwise mentioned in this subparagraph against whom the order is made.
(2) The aggrieved person may appeal to the appeal tribunal, but only on a question of law.
Section 290 of the BCCM Act provides:
290 Appeal
(1) An appeal to the appeal tribunal must be started within 6 weeks after the aggrieved person receives a copy of the order appealed against.
(2) If requested by the principal registrar, the commissioner must send to the principal registrar copies of each of the following—
(a)the application for which the adjudicator's order was made;
(b)the adjudicator's order;
(c)the adjudicator's reasons;
(d) other materials in the adjudicator's possession relevant to the order.
(3) When the appeal is finished, the principal registrar must send to the commissioner a copy of any decision or order of the appeal tribunal.
(4) The commissioner must forward to the adjudicator all material the adjudicator needs to take any further action for the application, having regard to the decision or order of the appeal tribunal.
Section 146 of the Queensland Civil and Administrative Tribunal Act 2009 provides:
146 Deciding appeal on question of law only
In deciding an appeal against a decision on a question of law only, the appeal tribunal may—
(a) confirm or amend the decision; or
(b) set aside the decision and substitute its own decision; or
(c)set aside the decision and return the matter to the tribunal or other entity who made the decision for reconsideration—
(i) with or without the hearing of additional evidence as directed by the appeal tribunal; and
(ii) with the other direct ions the appeal tribunal considers appropriate; or
(d) make any other order it considers appropriate, whether or not in combination with an order made under paragraph (a), (b) or (c).
The grounds of appeal
The grounds of appeal are that the Adjudicator erred in law in:
a) finding and declaring that Motion 1, considered at the EGM of the Second Respondent held on 10 August 2012, regarding a proposed extension to the Lot 11 decks and consequential grant of exclusive use rights (“the motion”), was not passed because of opposition that was unreasonable in the circumstances;
b) finding and ordering that the motion was deemed to have been passed without dissent;
c) finding that the correct test for determining whether the opposition to the Motion was unreasonable in the circumstances for the purposes of item 10 of Schedule 5 of the BCCM Act (“the correct test of unreasonableness”) was not the “Wednesbury test” (referred to in Associated Provision Pictures Houses Ltd v Wednesbury Corporation [1948] 1 KB 223);
d) failing to find that, in accordance with the “Wednesbury test”, the opposition to the motion was not unreasonable in the circumstances.
Alternatively, the Adjudicator erred in:
a) finding that there is no distinction between the correct test of unreasonableness and the test whether or not a Body Corporate decision is reasonable for the purposes of s 94(2) of the BCCM Act;
b) considering, and/or finding, that the correct test of unreasonableness:
i)required a consideration of questions of fairness;
ii)required in effect the individual owners opposing the motion (“the opposing owners”) to discharge the onus of proving that the opposition was reasonable, whereas the First Respondent was required to discharge the onus of proving that the opposition was unreasonable;
c) failing to consider, and find, that the correct test of unreasonableness:
i)involved a consideration of the subjective views and reasons of the opposing owners;
ii)required the decisions of the opposing owners merely be decisions which might be reached by a reasonable man in the circumstances, and be decisions which were genuine and not wholly fanciful;
iii)did not require the decisions of the opposing owners to be right or justifiable, or to be correct, or to be justified by reference to some objective standard of correctness;
iv)involved a consideration that the fact that the decisions of the opposing owners were logical and understandable was a very important factor;
v)involved a consideration that the opposition of the opposing owners would not be unreasonable merely because the opposing owners could have made better or more informed decisions;
vi)involved a consideration that the opposition of the opposing owners would not be unreasonable if reasonable persons in the opposing owners’ positions might have regarded the motion as damaging to their property interests;
d) giving undue consideration to the interests of the First Respondent over the interests and concerns of the opposing owners;
e) failing to find that, in accordance with the correct test of unreasonableness, the opposition to the motion was not unreasonable in the circumstances;
f) finding that the opposition to the motion was unreasonable, despite the Adjudicator having found that:
i)the test involved a consideration of whether the opposition was ‘unfounded or vexatious’, but not finding that such opposition existed;
ii)the opposing owners voted against the motion in good faith and in genuine reliance on architectural and other advice.
Alternatively, it is contended that she erred in law in:
a) failing to give any, or any sufficient, weight to the fact that the motion was required to be passed without dissent in order to be valid, and almost one-half of the voters on the motion opposed it (in fact one half did);
b) finding that the alienation of part of the common property for the exclusive use of the First Respondent had no material or adverse impact on any other person;
c) making such finding, by failing to give any, or any sufficient, consideration to the fact that the First Respondent had not offered any consideration for such alienation of the common property in circumstances where such common property was part of the freehold and had a value of $10,000.00, and had an added value to Lot 11 of between $10,000.00 to $20,000.00;
d) finding that such alienation of common property was not a reasonable basis to oppose the Motion;
e) finding that the opposing owners’ concerns about “opening the floodgates” for other changes to the scheme were not justified and was not a reasonable basis for the opposing owners to oppose the motion;
f) finding that she was not satisfied that it was reasonable to oppose the motion on the basis that it would alter the original design intent, in circumstances where she found that it was entirely understandable that the opposing owners relied upon the expressed views of Mr Mainwaring (the original architect of the scheme, and the owner of Lot 1);
g) disregarding the architectural opinions that objected to the motion (including the opinion of Mr John Mainwaring);
h) finding that, after having assessed the competing architectural opinions, she was not satisfied that the opposing owners have demonstrated that the proposal in the motion would materially offend the integrity of the architectural design of the scheme;
i) making such finding on the basis of a consideration that the architectural opinions relied upon by the First Respondent were “more supportable” than the architectural opinions relied upon by the opposing owners;
j) finding that no opposing owner had demonstrated that the expansion of the deck will inherently increase the disturbance to other occupiers or users of common property;
k) finding that the unsubstantiated risk of a potential nuisance is not a reasonable basis to refuse the proposal, in circumstances where any affected occupiers and the Second Respondent could pursue their concerns under the by-laws and under s 157(2) of the BCCM Act;
l) finding that she did not consider that the privacy and view issues found to exist amounted to a sufficient basis to refuse approval for the proposal entirely;
m) finding that such privacy and view issues (particularly in respect of the owners of the adjoining Lot 10) could be ameliorated by the installation of an additional privacy “blade”;
n) making such findings, by failing to give any, or any sufficient, consideration to the fact the First Respondent had not offered in the proposal in the motion to install any such privacy “blade” and there was no obligation on the First Respondent to so install one;
o) making such findings on the basis of a consideration of conflicting expert architectural opinions and a preference for the architectural opinions relied upon by the First Respondent to the architectural opinions relied upon by the opposing owners.
The interaction between s 94 of the BCCM Act, and Schedule 5 to it
One of the issues upon which substantial time and effort was spent in submissions both in writing and orally, was the question of whether the Adjudicator made her decision by invoking the operation of s 94 and s 276(1)(a) of the BCCM Act in relation to the duty of the Body Corporate to act reasonably, and as to whether there was a breach of that obligation. This in turn involved consideration of an argument which was a corollary to it, namely that she apply some jurisdiction which accrued because of the terms in clause 10, 17 and 24 of Schedule 5 to the BCCM Act and which, in the examples which are set out earlier in these reasons, refer to circumstances in which an Adjudicator is satisfied that a motion requiring resolution without dissent ‘was not passed because of opposition that in the circumstances is unreasonable’ or alternatively was a decision being an “unreasonable” decision, and referring to the Adjudicator being satisfied that a decision to pass or not pass a motion at general meeting was “unreasonable”.
The Adjudicator correctly identified in her reasons[1] what it was that s 92(2) required of a Body Corporate. She identified that one of the arguments put before her, as was also put to me, was that the application did not challenge whether the decision was reasonable pursuant to s 94 and that there was a distinction between the test for whether a Body Corporate decision is unreasonable and whether the opposition of owners to a motion is unreasonable. In my view the Adjudicator correctly rejected that argument as being without substance.
[1]Pars 25-30
She went on to hold that what Schedule 5 sets out are not rights and obligations of Bodies Corporate or those associated with them, but merely gave examples of orders which Adjudicators may make if they determine that certain matters have been proven. In my view she correctly concluded that a different legal obligation arose depending upon whether the application was one for an order under Schedule 5 or whether reliance was placed upon s 94. A precondition to the making of any of those orders is a determination relevantly for present purposes that s 94 had not been complied with.[2]
[2]Body Corporate for Palms Springs Residences CTS 29467 v J Patterson Holdings Pty Ltd [2008] QDC 300.
The duty to act reasonably – what does it mean?
There can be no doubt that s 94, like all other provisions of the Act, must be construed in a way that promotes the object of the Act.
Section 94 obliges the Body Corporate to act reasonably only in limited circumstances, those being (a) in administering the common property and Body Corporate assets for the benefit of the owners of the lots included in the scheme; (b) enforcing the community management statement; and (c) in carrying out the other functions given to the Body Corporate under this Act and the Community Management Statement. It does not require it to act reasonably in its other conduct, for example its contractual or commercial activity.
Complications arise when it is discharging the third of those functions, and it is dealing with other persons or entities, or even lot holders, whose commercial or other interests conflict with those of the Body Corporate. Common enough examples are in disputes with caretakers, onsite letting agents or Body Corporate managers.
The Appellant has submitted that the Adjudicator erred in law in failing to apply what it contends is the proper legal test, namely that enunciated in Associated Provisional Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. For the Appellant it was submitted that the Wednesbury test would have the result here, if applied, that the opposition of lot owners to the motion would only be unreasonable, and therefore the Body Corporate would not have acted reasonably if:
a) its opposition was so absurd that no sensible person could ever dream to oppose the motion in that way;
b) it is so outrageous in its defiance of logic, or accepted moral standards, that no sensible person who had applied their mind to the issue to be decided could have arrived at it;
c) it is so unreasonable that it verges on an absurdity; or
d) it is absurd, irrational or illogical.
The Wednesbury test is to ask whether the opinion held was so devoid of any plausible justification that no reasonable person could ever have reached it.
Lord Greene MR said in that case:
It is true that discretion must be exercised reasonably. Now what does that mean? ... [T]here may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington LJ in Short v Poole Corporation (1) gave the example of the red-haired teacher, dismissed because she had red hair. That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and, in fact, all these things run into one another.
Later he said:
It is true to say that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere. That, I think, is quite right; but to prove a case of that kind would require something overwhelming, and, in this case, the facts do not come anywhere near anything of that kind.
The Wednesbury principle was conclusively adopted in Australia by the High Court in Parramatta City Council v Pestell (1972) 128 CLR 305, but in the context of judicial review of administrative decisions, not the present context, or anything like it.
Australian courts have continued to adopt his Lordship’s definition by reason of the statutory regime for judicial review and subjected the ground to a much more limited application than Lord Greene has initially envisaged. Codification of the grounds for judicial review has restricted the development of this ground of review in Australia. In Minister for Immigration and Multi Cultural Affairs v Eshetu (1999) 162 ALR 577, the Full Federal Court precluded an applicant from seeking judicial review of a decision under the unreasonableness ground of review on the basis that the applicant merely disagreed with the decision maker’s reasoning. In doing so, the Court prescribed limited boundaries for unreasonableness, insisting that it be used only in the most extreme circumstances, such as where the evidence could only indicate one possible conclusion and not be supportive of any other possible conclusions. The Court’s decision was affirmed in Minister for Immigration and Multi Cultural Affairs; Ex Parte Applicant S20/2002 (2003) 198 ALR 59 where Gleeson J held that unreasonableness could not be used merely because there was a divergence of opinion. Thus, the application of Wednesbury unreasonableness in Australia is narrow and extremely confined (Attorney General v Quinn (1990) 170 CLR 1, per Brennan J at p 36) with cases that meet the stringent standard of Wednesbury unreasonableness being rare. A v Pelekanakis (1999) FCR 70, per Weinburg J.
The High Court recently affirmed in Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332 per French CJ at [22], Hayne, Kiefel and Bell JJ at [63], [64] and Gageler J at [106] that the concept of “Wednesbury unreasonableness” has unique application to the exercise of a discretionary power given by statute. See also McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd & Ors [2014] QCA 232. This is not such a case.
The Adjudicator here decided not to debate the application of the test, or the arguments advanced in support of it. She was correct to do so. She adopted the approach of the Adjudicator in Zenith [2007] QBCCMCmr 115 who she said took the approach that:
a) the application of the Wednesbury test had occurred particularly in the context of common law grounds of review of administrative decisions;
b) that that test was confined in scope and the Courts have held that where a statute expressly provides that a decision is to be made reasonably, or upon reasonable grounds, the test is an objective one that requires a balancing of factors in all the circumstances according to the ordinary meaning of the term reasonable;
c) a finding that an impugned requirement is logical and understandable does not necessarily mean that the requirement was reasonable in the circumstances; and
d) this is a different test from the Wednesbury test of unreasonableness.
What the Adjudicator in Zenith held was:
The question for me to determine is whether the votes by two owners that prevented the exclusive use amendment motion from passing constituted "opposition that in the circumstances is unreasonable".
The appropriate test is to determine whether it is just and equitable to override the opposition because the opposition was unreasonable when viewed objectively. I do not consider there is any particular formula or test for reasonableness and note that the High Court has supported a view that a paraphrase can place an unwarranted gloss on relatively plain words applying a test of reasonableness[3]. The preferred approach is to determine objectively whether the votes against the proposed amendment of the exclusive use by-laws constitute opposition in the circumstances is unreasonable.
Submissions on behalf of the owner of lot 28 were to the effect that in evaluating whether opposition to a motion is unreasonable the adjudicator should have regard to whether the decision of the lot owner to oppose the motion was so unreasonable that no reasonable person could ever have reached that decision, whether the opposition has no plausible basis, and whether the opposition was so outrageous that no sensible person could have logically reached it. I am not persuaded that this is the appropriate test. These submissions are related particularly to the common law grounds of review of administrative decisions formulated in Wednesbury. However, this test is confined in scope and the courts have held that where a statute expressly provides that a decision is to be made ‘reasonably’ or upon ‘reasonable grounds’, the test is an objective one that requires a balancing of factors in all the circumstances according to the ordinary meaning of the term ‘reasonable’[4]. A finding that an impugned requirement is logical and understandable does not necessarily mean that the requirement was reasonable in the circumstances[5]. This is different from the Wednesbury test of unreasonableness.
In determining whether votes against a motion constitute opposition that in the circumstances is unreasonable it is necessary to consider all the material facts. What is material will vary from case to case but typically the requirement for an adjudicator to make a just and equitable decision involves some balancing of the interests of the majority and minority and raises questions of fairness[6]. It is therefore relevant to determine if a minority owner will suffer any real loss or detriment if their objection is overruled”.
[3]Citing McKinnon v Treasury[2006] HCA 45 per Hayne J at paragraph 61 and Waters v Public Transport Corporation[1991] HCA 49; (1991) 173 CLR 349.
[4]Citing Secretary, Department of Foreign Affairs and Trade v Styles[1989] FCA 342; (1989) 88 ALR 621.
[5]Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission(1997) 75 FCR 551.
[6]Citing other adjudicator’s decisions. Points North, Order 0261-2004, CJ Carrigan, 2 September 2004 at paragraph 44. Ocean Plaza Apartments, Order 0262-2004, CJ Carrigan, 23 September 2004 at paragraph 26.
In Boston on Belgrave [2005] QBCCMCmr 556 an adjudicator adopted and applied the Wednesbury test for reasonableness. The case concerned a situation like the present where an owner sought to be granted exclusive use to an area of common property to increase the owners’ patio area by 74 m2. Compensation other than a “nominal” $1,000.00 was not offered. It is not apparent from the reasons whether the Adjudicator was addressed upon what the alternative basis might be or other authority which indicated a different conclusion ought have been reached. He found that the refusal to pass the motion was not unreasonable, principally because the applicant owners had bought their lot in full knowledge that the relevant area was common property, and that there was no basis to think it was for their use. But most importantly because of the absence of compensation being paid for the right sought.
The Adjudicator in the present appeal also identified that there had been a number of occasions when the alternative, i.e. non-Wednesbury test had been applied in considering the operation of s 94(2) by adjudicators. Indeed, she described this as having happened in “innumerable adjudications” as well as in a QCAT decision in Luadaka v Body Corporate for the Clover Emerald Lakes [2013] QCATA 183.
The decision of Mr Barlow QC in Luadaka v Body Corporate for Clover Emerald Lakes to which the learned Adjudicator made reference involved an appeal by a self-represented Appellant. She appealed the decision of an Adjudicator dismissing an application which challenged the reasonableness of the Body Corporate’s actions in refusing to remove certain conduits from some units at its own expense in the context of her attempts to carry out some improvements.
The learned Member applied the reasoning of Davies J in Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission (1997) 150 ALR 1. That decision was concerned with the language of s 5(2) of the Sex Discrimination Act 1984 which provided at the relevant time (but by the time of the decision had changed):
For the purposes of this Act, a person (in this subsection referred to as the "discriminator") discriminates against another person (in this subsection referred to as the "aggrieved person") on the ground of the sex of the aggrieved person if the discriminator requires the aggrieved person to comply with a requirement or condition: (a) with which a substantially higher proportion of persons of the opposite sex to the aggrieved person comply or are able to comply; (b) which is not reasonable having regard to the circumstances of the case; and (c) with which the aggrieved person does not or is not able to comply.
So it was not concerned with conduct by Bodies Corporate whose conduct collectively was determined by individual shareholders or lot holders. It was not focussed on a general requirement that in all categories of particular conduct, particularly where there might be competing interests between individual participants, that they act reasonably. It was conceptually focussed on whether the term which was imposed was reasonable and specifically as the reasons put it ‘whether the requirements laid down by the CBA were not, in the circumstances of the case, reasonable’. A reading of that judgement, with an understanding of the complexities of the statutory context would not readily lend application of the notions of reasonableness there to the present problem.
In that context Mr Barlow QC summarised some propositions he extracted from the judgement of Sackville J. It is critical to place these remarks into the context of that statutory problem. I am not convinced that they are as Mr Barlow QC said, ‘of general application’, and therefore applicable to the s 94 context.
His summary of the position was as follows:
(a) The test of reasonableness is less demanding than one of necessity, but more demanding than a test of convenience. The criterion is an objective one, which requires the decision maker to weigh the nature and extent of the effect of the relevant conduct, on the one hand, against the reasons advanced in favour of it. All the circumstances of the case must be taken into account. (b) Since the test is objective, the subjective preferences of the aggrieved persons cannot be determinative of the reasonableness of the impugned conduct. Subjective preferences may be relevant in determining the reasonableness of the conduct, but ultimately the test is an objective one, applied by the decision maker after considering all the material facts. (c) Reasonableness is a question of fact for the decision maker to determine, but it can only do so by weighing all relevant factors. What is relevant differs from case to case and reasonableness cannot be determined in the abstract. “Reasonable” speaks of a term, condition or requirement that is dictated by reason and rationality - not necessarily in which all people or even most people agree.
I respectfully suggest that this summary, in its attempt to paraphrase what was being said in Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission is capable of leading one into error. As has been said by Hayne J referring to a paraphrase of “reasonable grounds” as ‘not irrational, absurd or ridiculous’, it will ‘seldom be helpful, and it will often be misleading, to adopt some paraphrase of [statutory words]’: McKinnon v Secretary, Dept of Treasury[2006] HCA 45; (2006) 228 CLR 423 at 445 [60].
Moreover adopting what was said in Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission runs the risk of not paying sufficient attention to the High Court’s warnings that, in cases of statutory construction the correct approach, wherever possible, is ‘to ask the question in terms of the language of the legislation itself’ and not to permit ‘decided cases … to distract attention from the language of the … statute’.[7]
[7]McKinnon v Department of Treasury (2006) 228 CLR 423; 229 ALR 187; [2006] HCA 45 at [131] and Shi v Migration Agents Regulation Authority (2008) 235 CLR 286; 248 ALR 390; [2008] HCA 31 at [92].
The passages in Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission from which these principles were said to have been extracted, and which, as summarised by Mr Barlow QC were thus applied by the Adjudicator in the present case are as follows:
First, the starting point in determining whether a requirement or condition is "not reasonable having regard to the circumstances of the case" are the observations of Bowen CJ and Gummow J in Styles (at 263) that:
"the test of reasonableness is less demanding than one of necessity, but more demanding than a test of convenience....The criterion is an objective one, which requires the court to weigh the nature and extent of the discriminatory effect, on the one hand, against the reasons advanced in favour of the requirement or condition on the other. All the circumstances of the case must be taken into account. "This passage was approved in Waters, at 395-396, per Dawson and Toohey JJ; at 383, per Deane J; compare at 365, per Mason CJ and Gaudron J. It was applied in Dopking (No 2), at 82, per Lockhart J; at 86, per Sheppard J; at 96, per Lindgren J; and in AMC v Wilson, at 60, per Heerey J (with whom Black CJ and Sackville J agreed).
In Dopking (No 2), at 82-83, Lockhart J said that the test "required the Commission, first, to examine the reasons in favour of the condition, and secondly, to weigh those reasons against the nature and extent of the discriminatory effect of the condition. The conclusion of discrimination within s6(2) of the [SD] Act can be valid only when the Commission determines that, in all the circumstances, the difference of treatment between members without a family and members with a family is not reasonable."
Since the test is objective, the subjective preferences of the aggrieved persons cannot be determinative of the reasonableness of the impugned condition requirement. Subjective preferences "may be relevant in determining the reasonableness of the alleged discriminatory conduct; but ultimately, the test must be an objective one, applied by the Commission after considering all the material facts.” Dopking (No 2), at 83, per Lockhart J.
Secondly, the non-reasonableness of the requirement or condition is itself part of the definition of discrimination in s 5(2). Thus s 5(2)(b) is to be applied according to its terms and is not to be influenced by any concept of discrimination existing outside the statutory definition: Waters v PTC, at 409-410, per McHugh J; see also at 378, per Brennan J; at 394-396, per Dawson and Toohey JJ; at 383-384, per Deane J; at 365, per Mason CJ and Gaudron J; Dopking (No 2), at 96, per Lindgren J.
As Brennan CJ and McHugh J observed in IW v City of Perth, at 702, many anti-discrimination statutes define discrimination and the activities which cannot be the subject of discrimination "in a rigid and often highly complex and artificial manner. As a result, conduct that would be regarded as discriminatory in its ordinary meaning may fall outside the [Equal Opportunity Act 1984 (WA)]. The object referred to in s3(a) of the Act must, therefore, be understood by reference to the definitions of discrimination which occur in various parts of the Act". [Citations omitted.]
Thirdly, it would be erroneous for the Commission to assume that any difference of treatment between the complainants and (in this case) other employees of the Bank is prima facie discriminatory and therefore unreasonable: Dopking (No 2), at 82-83, per Lockhart J. The complainants bear the onus of establishing that the condition or requirement is not reasonable in the circumstances of the case: Waters v PTC, at 411, per McHugh J, Dopking (No2), at 83, per Lockhart J; Dopking (No 2), at 96, per Lindgren J; AMC v Wilson, at 62, per Heerey J.
Fourthly, reasonableness (or non-reasonableness), for the purposes of s 5(2)(b) of the SD Act, is a question of fact for the Commission to determine, but it can only do so by weighing all relevant factors. What is relevant differs from case to case, but will, usually at least, include the financial or economic circumstances of the alleged discriminator, including its ability to accommodate the needs of the aggrieved persons. It may also be relevant to consider the availability of alternative approaches which would achieve the objectives of the alleged discriminator, but "in a less discriminatory way": Waters v PTC, at 394-395, per Dawson and Toohey JJ; and see at 383-384, per Deane J; at 410, per McHugh J.
As Brennan J pointed out in Waters v PTC (at 378), reasonableness cannot be determined in the abstract: "[I]t must be determined by reference to the activity or transaction in which the putative discriminator is engaged. Provided the purpose of the activity or transaction is not to discriminate on impermissible grounds, the reasonableness of a requirement or condition depends on whether it is reasonable to impose the requirement or condition in order to perform the activity or complete the transaction. There are two aspects to this criterion of reasonableness: first, whether the imposition of the condition is appropriate and adapted to the performance of the activity or the completion of the transaction; second, whether the activity could be performed or the transaction completed without imposing a requirement or condition that is discriminatory (that is, one to which para(a) and para(b) of s 17(5) [equivalent to s 5(2)(a) and s 5(2)(c) of the SD Act, respectively] would apply) or that is as discriminatory as the requirement or condition imposed. These are questions of fact and degree. Effectiveness, efficiency and convenience in performing the activity or completing the transaction and the cost of not imposing the discriminatory requirement or condition or of substituting another requirement or condition are relevant factors in considering what is reasonable."
Fifthly, the role of the Commission is not to determine whether the decision to impose the condition or requirement was the "correct" one. The point was put this way by Heerey J in AMC v Wilson (at 61-62), adopting a passage in the judgment of Sheppard J in Dopking (No 2): 'reasonable' in this context speaks of a term, condition or requirement that is dictated by reason and rationality - not necessarily in which all people or even most people agree. In Dopking Sheppard J emphasised what is in my respectful opinion an important aspect of reasonableness in an indirect discrimination context. The case was concerned with a complaint by Mr Dopking that a Defence Department determination that a benefit for the reimbursement of legal and other costs in connection with the acquisition of off-base accommodation by armed services personnel discriminated against him because it was restricted to personnel with families. Mr Dopking, being single, was entitled to full board in barracks but wished to live in his own home. Sheppard J said (at 87): 'The basis for the discrimination which results from [the determination's] application only to married members is, in the circumstances of the case, within the bounds of objective reasonableness. In other words, the point of distinction which has been adopted has a logical and understandable basis. There may have been other ways of approaching the problem; views may differ about the matter. But, in my opinion, there was nothing unreasonable in adopting the point of distinction applied by those responsible for the determination. With respect, I do not consider any other view to be open. I am thus unable to see how it can be said that the adoption of the policy to which the determination gives effect is unreasonable having regard to the relevant circumstances.'"
It may be that the passage cited from the judgment of Sheppard J in Dopking (No 2) somewhat overstates the position. The fact that a distinction has a "logical and understandable basis" will not always be sufficient to ensure that a condition or requirement is objectively reasonable. The presence of a logical and understandable basis is a factor - perhaps a very important factor - in determining the reasonableness or otherwise of a particular condition or requirement. But it is still necessary to take account of both the nature and extent of the discriminatory effect of the condition or requirement (in the sense in which the authorities interpret that concept) and the reasons advanced in its favour. A decision may be logical and understandable by reference to the assumptions upon which it is based. But those assumptions may overlook or discount the discriminatory impact of the decision. Depending on the circumstances, such a decision might be legitimately characterised as not reasonable, having regard to the circumstances of the case, within the meaning of s5(2)(b) of the SD Act. I do not understand Heerey J to have intended to express a different view in AMC v Wilson. However, in my respectful view, Sheppard J's judgment correctly emphasises that the question is not simply whether the alleged discriminator could have made a "better" or more informed decision. The issue is that posed by the legislation, namely, whether the requirement is not reasonable having regard to the circumstances of the case.
It does not appear that there was specific argument addressed to the member in Luadaka v Body Corporate for Clover Emerald Lakes on the question of whether some different test might be with a preferred test, or whether the Wednesbury test was a preferable test. He was apparently not taken to what the High Court said in McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423, which I discuss below. The issue in Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission was rather different, and arose in an entirely different statutory context to the present.
Related to the requirement to act reasonably is the notion, discussed in a body of case law as to what is necessary to have “reasonable grounds” for a belief, conclusion or conduct. Hence one might assume for the sake of argument that s 94 had provided that Bodies Corporate were required to have reasonable grounds for defeating a motion required to be passed without dissent. The meaning of having “reasonable grounds to believe” (or variants of it) has a well understood and well settled meaning. In George v Rockett (1990) 170 CLR 104 at 112; 93 ALR 483 at 488 the High Court said that: ‘When a statute prescribes that there must be “reasonable grounds” for a state of mind — including suspicion and belief — it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person’.
Later, in its joint judgment, the court continued (at CLR 116; ALR 491):
The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of mind may, depending on the circumstances, leave something to surmise or conjecture.
In subsequent cases the High Court and the Federal Court have cautioned against adopting paraphrases such as “not irrational, absurd or ridiculous” in construing the phrase “reasonable grounds”: see McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423 at 445; 229 ALR 187 at 203–4; 91 ALD 516 at 532–3; [2006] HCA 45 per Hayne J and at CLR 467–8; ALR 221; ALD 550 per Callinan and Heydon JJ; Attorney-General’sDepartment v Cockcroft (1986) 10 FCR 180 at 190; 64 ALR 97 at 106–7; 12 ALD 468 per Bowen CJ and Beaumont J. The words are to be given their ordinary meaning. What is needed is a sufficient factual basis supporting the relevant belief.
The High Court in McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423; 229 ALR 187 considered access to Treasury documents under the Freedom of Information Act 1982 (Cth) (“FOI Act”) where the Minister had issued a ‘conclusive’ certificate that disclosure was contrary to the public interest. The case was fundamentally about who decides what is in the public interest, and whether there was any scope for independent external review of a Minister’s decision. One of the issues which is relevant to the current problem was what is to occur where, once the Administrative Appeals Tribunal was satisfied that a document subject to a conclusive certificate is an internal working document, the Tribunal cannot then make its own decision about whether disclosure would be contrary to the public interest. Under s 58(5) of the FOI Act, the Tribunal is limited to determining whether reasonable grounds existed for the claims made in the certificate. How the Tribunal should have approached such a review was the central question in the case.
Gleeson CJ and Kirby J (in the minority on the ultimate issue but in the majority with Hayne J on this issue) said at 229 ALR 187 at 191-2 in relation to reasonableness and whether something was reasonably open to a decision maker;
[11] To decide whether it was reasonably open to a decision-maker, on the evidence, to make a judgment such as a decision whether a person was (or was not) negligent, or whether the known facts are sufficient to induce in a reasonable person a suspicion or belief that someone is guilty of a crime, or whether there are reasonable grounds for a claim that a course of action (such as disclosure of a document) would be contrary to the public interest, involves an evaluation of the known facts, circumstances and considerations which may bear rationally upon the issue in question. A judgment as to whether information or argument bears rationally upon a question is also a familiar exercise. It is usually discussed by courts under the rubric of relevance. If a piece of information, or an opinion, or an argument, can have no rational bearing upon a question for decision, it is irrelevant, and must be left out of further consideration. Otherwise, being relevant, just decision-making requires that it be taken into account.
[12] Where a claim, or an argument, or a conclusion or some other state of mind (such as suspicion, or belief, or satisfaction) involves an interplay of observation (of objective facts and circumstances), opinion and judgment (which may involve an evaluation of matters such as reasonableness of conduct, or of the public interest), the question whether there are reasonable grounds for such a claim, or argument, or state of mind requires a consideration of all relevant matters and an assessment of the reasonableness of the claim, or argument, or state of mind having regard to all relevant considerations. Suppose the question is whether there are reasonable grounds for suspecting that A killed B. Suppose that A is a person of violent propensity, who had a motive to kill B, and had declared an intention to do so. Let it be assumed that those three facts are incontestable. In the absence of any other facts they may lead to a conclusion that there are reasonable grounds for suspecting that A killed B. Suppose, however, that A has an undisputed alibi. The first three facts then cease to constitute reasonable grounds for the suspicion. The question cannot be answered without considering all four facts. It is not a hypothetical question. It is a question to be answered in the light of all the known circumstances. This applies to all relevant considerations whether they be matters of objective fact (as in the example given), or of opinion, or of argument. Until all relevant considerations, that is, all (known) considerations that could have a rational bearing upon the claim, or state of mind, or decision under review, are taken into account, it is impossible to form a just and fair judgment whether, objectively considered, there are reasonable grounds for the claim that the disclosure of the document would be contrary to the public interest. It is not enough for the tribunal to ask whether there are facts, or opinions, or arguments that rationally bear upon that topic. All relevant matters must be taken into account; not for the purpose of deciding whether the tribunal agrees with the minister, but for the more limited purpose of deciding whether there are reasonable grounds for the claim which the minister accepted.
[13] A problem may arise from an ambiguity in the word “grounds”. A proposition (in the form of a statement of fact, or an opinion, or an argument) may be relevant to, and capable of supporting, a claim or a conclusion. There may be a number of such propositions. But that does not of itself mean that there are reasonable grounds for the claim or the conclusion. That is a question that can only be decided after considering all relevant propositions. The task of the tribunal is not performed if, looking at a particular proposition, it says: “Other things being equal, that would be sufficient to induce in the mind of a reasonable minister this state of mind.” The tribunal must look at, and take account of, any other relevant considerations as well. Section 36(3) requires the minister, when giving a certificate, to specify “the ground of public interest” upon which he or she relies. There may be more than one such ground. But when s 58(5) refers to “reasonable grounds for the claim that the disclosure of the document would be contrary to the public interest” it raises the question whether, having regard to all the relevant considerations available to the tribunal, there are matters that are sufficient to induce in a reasonable person a state of satisfaction that disclosure of a document would be contrary to the public interest. The expression “reasonable grounds for the claim” means reasonable grounds for contending that the minister should be so satisfied. That is the nature of the claim. The ground or grounds specified by the minister as the basis of his or her satisfaction must, of course, be relevant to the conclusion reached by the minister. If they are not, then that is the end of the matter. The application will succeed. However, more than that is required. They must be reasonable grounds for a conclusion (or a claim that a conclusion should be reached). That can only be determined in the light of all relevant considerations.
...
[17] It is undoubtedly correct that the tribunal’s function under s 58(5) is not to decide whether the tribunal is satisfied that disclosure would be contrary to the public interest; just as an appellate court’s function on an appeal from a jury in a negligence case is not to decide whether it finds that the defendant was negligent. It does not follow, however, that the tribunal is not required to take account of all relevant considerations, or that the circumstance that there is something relevant to be put against disclosure is the end of the matter. It is not the end; it is the beginning.
Hayne J said at 229 ALR 187 at 204;
[59] The appellant sought support for the first step in these submissions from what was said by this court in George v Rockett. But that case concerned a very different legislative provision which governed a justice’s issuing of a warrant where there were “reasonable grounds for suspecting” certain matters. In that context, the references to inducing a particular state of mind are apposite. But the question presented by s 58(5) makes no reference to the state of mind of any person. It asks whether there exist reasonable grounds for a claim that has been made. And it may seriously be doubted that the understanding of the tribunal’s task is assisted by injecting notions of persuasion or satisfaction of the kind with which George was concerned. Such notions are unhelpful in this context because they all too readily may be understood as requiring the tribunal to make its own assessment of where the public interest lies. That is not what s 58(5) permits or requires. It requires an assessment of the grounds for the conclusion that disclosure is not in the public interest. Do reasonable grounds exist for that conclusion?
[60] The expression “not irrational, absurd or ridiculous” is not synonymous with “reasonable grounds”. Of course, absurd, irrational or ridiculous grounds are not reasonable grounds. But the words “reasonable grounds” do not denote grounds which are “not irrational, absurd or ridiculous”. The statutory words are to be given their ordinary meaning. It will seldom be helpful, and it will often be misleading, to adopt some paraphrase of them.
[61] In Cockcroft the Full Court of the Federal Court considered the operation of s.43(1)(c)(ii) of the Act — a provision which contained the words “could reasonably be expected to prejudice the future supply of information”. In their joint reasons, Bowen CJ and Beaumont J rightly pointed out that it was undesirable to attempt any paraphrase of these words. Thus when their Honours said, as they did, that the words required a “judgment to be made by the decision-maker as to whether it is reasonable, as distinct from something that is irrational, absurd or ridiculous”, to expect certain consequences, they are not to be understood as having used the latter expression as a paraphrase of the former. Rather, they are to be understood, and have since been understood, as doing no more than drawing an emphatic comparison. To do more would have been, as their Honours correctly said, “to place an unwarranted gloss upon the relatively plain words of the Act”. And the same approach should be taken to the expression “reasonable grounds” when it is used in s.58(5) of the Act.
[62] It follows that the appellant was right to say that the characterisation of any one reason favouring non-disclosure of documents as “non-absurd” does not of itself require an affirmative answer to the statutory question posed in s.58(5). That is, it would be an error to treat the statutory question as requiring an affirmative answer wherever there is any “non-absurd” reason favouring non-disclosure of the documents in question.
[63] In deciding whether reasonable grounds exist for a claim, the tribunal must take account of any relevant evidence that has been adduced and of any relevant arguments that have been advanced. It must consider the particular claim that has been made and that will require consideration (and commonly the examination) of the particular documents that are in question.
In reviewing the findings of the Tribunal, Callinan and Heydon JJ said at 229 ALR 187 at 221;
[120] It is appropriate to make some observations at this point about the specific grounds taken of conclusiveness. The reference to “ongoing sensitivity” in the first is not entirely clear. We would be inclined ourselves to think that the fact that documents have continuing sensitivity, are controversial and affect a minister’s portfolio would not alone provide a reasonable ground for continuing confidentiality. The use of the word “ongoing” strongly suggests currency, and the use of the word “controversial” might well at least imply public interest.
[121] The second ground, which speaks of jeopardy to candour, and the desirability of written communications, obviously cannot readily be dismissed, and it seems to us that this is a matter upon which a minister’s opinion and experience are likely to be as well informed and valuable as those of anyone else, including senior officials.
[122] The third ground raises an issue of tentativeness; that is to say, that the documents were concerned with matters that were not settled and recommendations that were not adopted. This too, on its face, is a cogent ground. It is difficult to see how it would not be reasonable for a minister to take the view that the release of material of that kind would not make a valuable contribution to public debate.
[123] The fourth ground has so much in common with the third that nothing further need be said about it.
[124] The fifth ground is far less persuasive. It claims that the difficulty of putting financial data into context provides reason for the non-disclosure of otherwise relevant documents. It is, we think, unrealistic for any minister to believe that he or she can control or dictate the context in which matters of public interest are debated. All that a minister can do is seek to explain the data and to provide as accurate a context for it as possible.
[125] The sixth ground takes the point that such documents as are prepared for possible responses to questions in parliament should remain confidential because their exposure would threaten the Westminster system of government; that is to say, responsible government, to which we have earlier referred. This cannot be said to be an unreasonable view. The minister is the one who is responsible for an answer given in parliament, within the practical modern limits to which we have referred. It is his or her answer itself which is a, or the, matter of public interest, and not the various documents which may have canvassed that answer, or other possible answers. It will be in respect of the answer that the minister actually gives that any political price will have to be paid, just as there may well be a political price to be paid for any claim of conclusiveness, whether it is well-based or not.
[126] The seventh ground is at least arguably not reasonable; in effect, that the public may not be trusted to understand the technicalities of, and the jargon used in otherwise revealable documents. It is not as if the public is unaided by experts and others who can, including, for example, an informed journalist such as Mr Harris.
What is evident from this analysis is that the Court is not itself forming a judgment about the extent of relevance of specific grounds or reconciling competing arguments as to the extent to which those grounds had validity. It is focused upon whether there are reasonable grounds for the claim or argument or state of mind based upon a consideration of all relevant matters and an assessment of the reasonableness of the claims or arguments or states of mind having regard to all of those relevant considerations. The Court did not substitute itself in any way for the decision maker, and was prepared to uphold grounds as not demonstrating the absence of reasonableness where:
a) grounds which cannot readily be dismissed;
b) grounds where the opinion holder’s opinion and experience was likely to be well informed and valuable;
c) grounds which were cogent, if not conclusively correct;
d) grounds which had any realistic basis;
e) grounds which were based upon the individual decision makers’ personal responsibilities and the possibility that there might be, for example, a political price or adverse consequence for the decision maker.
In some administrative law cases, it has been said that a decision is liable to be quashed for jurisdictional error if a finding of jurisdictional fact is not supported on logical grounds or ‘not supported by reason’.[8]
[8]WAIJ v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 80 ALD 568; [2004] FCAFC 74 at [22]; SZLGP v Minister for Immigration and Citizenship [2008] FCA 1198 at [15]-[16] (Gordon J).
In the corporate environment, the High Court in Peters’ American Delicacy Co Ltd v Heath (1039) 61 CLR 457 looked at the validity of an alteration to a company’s articles of association. Latham CJ, with whom McTiernan J agreed, said:
It is not for the Court to impose upon a company the ideas of the court as to what is for the benefit of the company. It is for the shareholders to determine whether an alteration of the articles is or is not for the benefit of the company, subject to the proviso that the decision is not such as no reasonable man could have reached (Shuttleworth v Cox Brothers & Co (Maidenhead) Ltd [1927] 2 KB 9).
That formulation of the text as to when an alteration would not be in the best interests of the company had its genesis in the judgment of Bankes LJ in Shuttleworth (at 18), a formulation which Dixon J does not seem to have preferred.
In Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 832 the Privy Council said that:
Such a matter as raising of finance is one of management, within the responsibility of the directors ... it would be wrong for the court to substitute its opinion for that of the management’s decision, on such a question, if bona fide arrived at. There is no appeal on the merits from management decisions to courts of law.
And in Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483 at 493, the High Court stated in a similar vein as follows:
Directors in whom are vested the right and the duty of deciding where the company’s interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment, if exercised in good faith and not for irrelevant purposes, is not open to review in the courts.
The context of an attempt by a lot owner to seek to compel a Body Corporate with proprietary interests in common property to divest itself of that common property for the owner’s benefit, is in some but not all respects analogous to these corporate cases where the question which will arise as to what is in the best interests of the Body Corporate, with no inherent reason to think it must consider the interests of the lot owner.
Further, there are places within the reasons in which impression might be gained that the Adjudicator has stood in the shoes of the Body Corporate and engaged in the exercise of deciding what is “just and equitable” before deciding whether the conduct is unreasonable. Hence, she expressed the view that in relation to the topic under discussion, namely the effect on original design intent, these were not relevant to the Body Corporate ‘to have regard to in balancing the competing interests and acting reasonably’ because for some reason or another Bodies Corporate could not reasonably and objectively see an interest in preserving original architectural design intent.
The exercise of deciding whether a Body Corporate has acted unreasonably does not in my view necessarily or even ordinarily require any “balancing of competing interests”. To act reasonably in the sense contemplated by s 94 does not imply even-handedness, a conciliatory approach to a dispute or a recognition of the interests or wishes of others.
Likewise, when dealing with the topic of architectural integrity, the Adjudicator expressed the conclusion:
Having assessed the material submitted and the competing architectural opinions, I am not satisfied that the opponents of the proposal have demonstrated that the proposed modification materially offends the integrity of the architectural design of the scheme.
She then went on to decide, by looking at photographs, whether she believed it was possible to discern a difference between the before and after images and whether this amounted to a depreciable change to the appearance, character or openness of the scheme and therefore effected the architectural integrity of the scheme. She proceeded to prefer the opinions of the architects relied upon by the Applicant, notwithstanding that there were opinions by other eminent architects to the contrary. It is not evident from the reasons how she resolved this conflict of views or what the basis was for her preference of the views of the lot holder’s architectural advisers. Again, one sees this reference to the Adjudicator posing the question as whether she had been satisfied that the opponents of the proposal had demonstrated that the modification offended the integrity of the scheme.
I have already mentioned briefly the design of Viridian Noosa Residences The architect, Mr John Mainwaring explained the history and design intentions for the project for three stages to the Viridian project. As I have said, the project was a mixed-use condominium with an aspect facing Laguna Bay. This followed in the tradition of European or alpine hillside villages. Stage 1 consisted of six houses sitting amongst the trees higher up on the ridge, with Stage 2, this stage, consisting of 22 permanent residential villas. Stage 3 was constructed more recently and included a resort hotel.
The fundamental strategy of the design was what he called the compatibility of permanent and temporary residential use of the development as it limited the number of people, size of parties, and noise externally. Hence, he did away with ideas such as large decks or party decks which would radically alter the hybrid concept. Hence the design employed a variety of smaller balconies (six in total) which incorporated a stepping pattern that tapered into landscaped breezeways and connectivity spaces. There were privacy screens associated with the “hierarchy of deck sizes”. Avoiding large decks was intentional to avoid appealing to certain segments of the holiday market.
He described in detail the basis for stepping the footprint plans as intentionally designed to avoid a large indoor/outdoor space or veranda in order to reduce external noise and activity. Hence the large living space inside the villa or upper level was conceived as an outdoor/indoor space and the decks were designed to be simply edges to that space. He allowed for privacy screens with little visual permeability to allow for integrated landscaping and privacy considerations. He wished to create what he described as an outward vista or field of view from each villa giving a sense of being in a secluded retreat, even though part of a medium density development.
He described the owner of Lot 11 interest in constructing a deck extension of the kind now sought during the final construction stage, that is, towards the conclusion of the first two stages of the project in 2005. Mr Mainwaring’s view, allowing the deck there had the potential to undermine the basic principles of the Stage 2 master plan.
It is fair to say that the architectural design has been the subject of significant recognition by the architectural and design establishment, including in 2006 the Royal Institute of Architects Queensland Medium Density Residential Award for Best Building of the Year. There were other awards as well to which specific reference is unnecessary.
From as early as November 2005, Mr Mainwaring had been putting his argument forward to the Body Corporate that, as he put it, the construction of the proposed balcony ‘confirms that the large cantilevered deck creates a forward, predominantly horizontal plane which changes the rhythmical verse verticality of the architectural elevation of the building’ at that particular location.
In August 2011 he was continuing to contend that the proposed balcony would compromise the architectural integrity of the project for various reasons which he detailed at length in that letter.
He put forward a detailed argument as to why the construction of these decks would interfere with the privacy and amenity for all residences, particularly if they were expanded into other dwellings.
Nothing in his arguments seems to me to be inherently implausible or unreasonable if one gives any respect to the notion of architectural intent and architectural integrity.
There was evidence in support of his approach in respect of some of those issues from other eminent architects, including from Mr Kerry Clare who contended that the proposal:
a) was contrary to an original design principle to contain activity of the balconies to reduce impacts on the privacy and amenity of other occupiers;
b) would affect the scale, proportion and detail of the scheme’s architecture;
c) would jeopardise the sense of spaciousness of the scheme;
d) would impact on the privacy of the adjoining lot.
The lot owner obtained opinions from two others, Mr Andrew Gutteridge and Mr Noel Robinson.
Essentially, Mr Gutteridge’s perspective was that should the extension be sympathetically detailed in keeping with the language of the current form of the architectural aesthetic, that aesthetic could be respected. So his view appeared to have some tentative elements in that it had contemplated sympathetic detailing, and only the prospect of it giving respect to the aesthetic.
Mr Noel Robinson, another prominent architect, expressed the view that the visual design of the proposal was sympathetic to the existing design and it would not detract from its overall architectural excellence. He did not regard the project as so rich in architectural detail that this deviation would be noticeable to the passer-by and considered it would not detract from the typical detailing used elsewhere in the resort.
There was evidence before the Adjudicator that these residences had involved purchasers spending some millions of dollars in purchasing them, and as I have said elsewhere, a number of owners placed as a high priority in their decision to purchase, the architecture and design principles which they say would be or they were afraid would be diminished were the proposal allowed.
Privacy and noise issues
Since this particular proposal was still just that, and had not been given effect to, by necessity most of the expressed concerns by other lot owners about such matters as noise, privacy and views were simply that. It was difficult to say with any certainty what the effect of expanding and joining these decks was in terms of the likelihood of increased parties, or accumulations of individuals on them that might have caused noise, or increased privacy or view interference. But again, notwithstanding what might well have been thought to have been legitimate concerns about the prospects of that kind of interference, the Adjudicator concluded that ‘no submitter has demonstrated that the expansion of the deck will inherently increase the disturbance to other occupiers or users of common property compared with the potential use of the current deck configurations’. Again, the question that ought to have been asked is whether it was reasonable for any of those lot owners who dissented to have held those concerns, and whether they were reasonably held and commensurately, had the owners of Lot 11 proved that there were no reasonable bases for any of those concerns.
The Adjudicator appears to have accepted that there was some impact on the privacy and views from Lot 10, but held that they would be ‘minimal’. She then decided she was ‘not satisfied that the comparably slight increase in vision between Lot 10 and Lot 11 resulting from the proposal will unreasonably interfere with the amenity of Lot 10’. She suggested the possibility of addressing the problem by putting up privacy screening. She then concluded, ‘Accordingly, I do not consider that privacy and view issues amount to sufficient basis for the Body Corporate to refuse approval for the proposal entirely’.
Again, this reference to whether something is a sufficient basis invites the conclusion that the Adjudicator is exercising her own judgment as to the appropriateness of allowing the improvements, and engaging in the balancing act that she described earlier.
The floodgates concern
A significant concern expressed by a number of opponents of the proposal, was that it would potentially open the floodgates for other owners to make similar applications and that this ultimately, collectively, would cause a multiplication of the problems that might arise in a smaller way out of the improvement to Lot 11. These included effects on the design and architectural intent, the character of the development, its propensity to attract a certain type of occupant, privacy, noise and such like.
Intuitively, it may be reasonably expected that if the advantages that the owners of Lot 11 saw for this modification had any validity, they would also have validity and appeal to other lot owners. One of the unmentioned aspects of “opening the floodgates”, would be of course that there would be new construction activity going on at the site to at least one, if not numerous villas. My inspection of the site made clear that at present the development has long since become established, is well blended into the hillside of Noosa Hill, and it shows all the signs of having established gardens and a sympathetic presence on what is otherwise a forested hillside backing onto the Noosa National Park.
The Adjudicator rejected these concerns about setting a precedent, or at least sought to explain them away on the basis that these precedent concerns were in effect speculative. She acknowledged that in acting reasonably, one of the duties of a Body Corporate would be to make consistent and fair decisions but held that
If another lot owner proposed an identical alteration with identical impacts on the scheme and adjacent lots, it would be unreasonable to approve one and refuse the other unless there was some clear and reasonable basis for the distinction. However, if it were to be determined that one deck amalgam would have no adverse impact on other owners or the scheme as a whole, I find it difficult to see how the cumulative effect of multiple identical improvements would generate an adverse impact.
The fact is though that other lot holders could and in my view, did reasonably see that the possibility of such applications being made and succeeding would, if they occurred in “multiples”, generate an adverse impact. She then went on to deal with what might happen if a different alteration were proposed by other owners.
She then concluded
Of course it is possible, and all lot owners are entitled to apply for approval for improvements where such approval is required. However, the significant levels of interrogation that this proposal has been through is unlikely to lead other owners to believe that they have an automatic right to have any and all alterations approved.
She thus concluded that she did not consider that concerns about opening the floodgates by allowing these proposed changes to the scheme were ‘justified or are a reasonable basis for opposing the proposal’.
With respect, it is perhaps naïve to proceed on the basis that if this type of deck modification did have the genuine appeal for which the lot owner contended, that once one party was permitted to alter their deck and in effect appropriate common property for that purpose, that others would not seek to do likewise. That could quite reasonably lead to a multiplicity of applications to the Body Corporate to approve such modifications, and of course each would need to be dealt with by the Body Corporate and decisions made about whether there was any reasonable basis to refuse them.
The prospect of a Body Corporate needing to involve itself in a multiplicity of such applications would be disturbing, and would be likely to lead to yet more division and conflict between owners. That of itself is a reasonable basis to oppose the particular proposal. The Adjudicator appears to have accepted, in her reference to the duty of the Body Corporate to make consistent and fair decision, that similar applications to this one would inevitably need to be approved if they corresponded with the design proposed here. If they did, it is easy to how the ‘cumulative effect of multiple identical improvements would generate an adverse impact’.
Moreover in a letter of 13 April 2012, the owner of Lot 11 wrote to all the other owners in the development, stating that he made a ‘deep and abiding commitment to ensuring that other unit owners would not be subjected to similar campaigns to prevent improvements to their residences’. Whilst that position is not a matter of great significance in the larger picture, it makes clear that he sees himself as paving the way for other owners being permitted to make similar alterations.
In the face of that contention, the proposition stated at paragraph 51 of the Adjudicator’s reasons that refer to there being no evidence submitted ‘that a similar deck extension, or indeed any other external alterations, has been proposed’, and further the conclusion in paragraph 52 of her reasons that she did not consider concerns about opening the floodgates to be a reasonable basis for opposing the proposal again give the appearance of having reversed the onus and she failed to give proper consideration to the question of whether opposition on the basis that opening the floodgates or the setting of a precedent was a relevant and reasonable basis to oppose this proposal. In my view, the Applicant did not demonstrate that it was not reasonable.
The question of the absence of compensation for the acquisition of common property rights
The Adjudicator properly accepted that the proposal, if approved, would require granting the Applicant the right to exclusive use of common property. She identified the area affected as 5 square metres, although that probably reflects the area which would be taken up by the additional deck area. But it would overhang the common property below it and it would of course interfere with the airspace above it. To construct the deck would no doubt require access to the common property below for the period during which construction was undertaken.
Before the Adjudicator it had been submitted that a failure by the Applicant to offer compensation for the acquisition of the common property was a relevant basis to oppose the proposal.
The Adjudicator accepted that the right to use airspace was of value to the Applicant and might improve the value of Lot 11. There was evidence before her that that airspace had a value which might be the basis for a requirement for compensation to be paid reflecting that value. In particular, Herron Todd White provided a valuation of 28 May 2013. That valuation was conducted by a registered valuer and followed on from an inspection of the subject property. It placed a value on the common property airspace in question based on what would be paid by a willing buyer to a willing seller, of $10,000.00. The valuer accepted that there was no definitive sale evidence to pinpoint a value, but the valuer was aware of precedents whereby airspace was purchased. Hence, there was an acknowledged market for such airspace. The valuer also concluded that the value of the common property airspace must be at least commensurate with the added value to the deck extension to the owner. The added value component was held to be in the range of $10,000.00 to $20,000.00.
The only alternative evidence came from a real estate agent with no valuation qualifications. That was put forward as justifying the Applicant’s position in relation to non-payment of compensation at the time the motion was put to the Body Corporate in general meeting, and also at the time of the adjudication. Hence it reflected the Applicant’s position in relation to the payment of compensation at those times. That undated report, by Mr David Conolly of Century 21, followed on from an inspection in February 2012. He asserted that the airspace which would be acquired by Mr Albrecht as part of the proposed works had ‘no value whatsoever’ and that the acquisition of the airspace would not bring about any diminution in the value of the common property. He disputed whether it would bring about any increase in the potential sale price of the lot.
The Adjudicator did not seek to reconcile these two opinions. Even in the absence of a hearing of the sort which permitted a reconciliation based on credit it would have been entirely reasonable to proceed on the basis that the better qualified opinion was that of the qualified valuer, and that an unwillingness to pay any compensation whether in the amount of $10,000.00, or in the range of $10,000.00 to $20,000.00 provided a reasonable basis to reject the proposal by the Body Corporate.
There are precedents on this issue, and which of course depend upon their own facts, but nevertheless offer some guidance as to the way in which this problem has been resolved before. In Boston on Belgrave [2005] QBCCMCmr 556, an Adjudicator, when dealing with the granting of exclusive use of common property to increase a patio area, considered that an offer of nominal compensation only for the acquisition of what was common property owned by all owners as tenants in common provided a reasonable basis to oppose a motion, and found that it was reasonable to expect that the Body Corporate should receive reasonable compensation for granting exclusive use of valuable property. The Adjudicator held as follows:
The term unreasonable has been the subject of much judicial comment including the recent decision Dubler Group Pty Ltd v Ku- Ring-Gai Municipal Council [2004] NSWLC 305 at para 47 where the Land and Environment Court of NSW relied upon the following meanings which have been given to the term:
• “whether the opinion held was so unreasonable that no reasonable Minister could have ever formed that opinion: Associated Provincial Picture Houses Pty Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223;
• “whether the opinion held was so devoid of any plausible justification that no reasonable person could ever have reached” it: Bromley London Borough Council v Greater London Council [1983] 1 AC 768;
• “whether it was a decision which is so outrageous that its defence of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it” : Council of Civil Service Unions v Minister for the Civil Service [1985] 1 AC 374 AT 410.”
Based on the above I am of the view that in considering whether the body corporate Committee has acted reasonably in the circumstances, I should have regard to the following considerations:
•whether the decision of the lot owner to oppose the motion was so unreasonable that no reasonable person could ever have reached that decision;
•whether the opposition of the lot owner has no plausible basis; and
•whether the opposition of the lot owner was so outrageous that no sensible person could have logically reached it.
In the present case I do not believe that the opposition to Motion 3 by the owners of lot 19 was unreasonable.
The Adjudicator concluded;
Finally, and most importantly, the effect of granting the exclusive use of common property to lot 1, is to increase the patio area of lot 1 from 74 square metres to 140 square metres which, when added to the internal area of 82 square metres, gives lot 1 a total entitlement to 222 square metres. I note from the minutes of the EGM that the question of compensation was raised by members of the body corporate. However the original owner declined to offer compensation other than a nominal $1,000.
Given that the owners of lot 19 are also owners of the common property as a tenant in common with other lot owners, it would not seem unreasonable that they should expect that the body corporate should receive reasonable compensation for granting exclusive use of valuable property.
In One Park Road [2008] QBCCMCmr 3, an Adjudicator held that even though those opposing a motion had not shown that their use and enjoyment of their lot and/or common property was adversely affected and by a proposed allocation of common property, that where there was a commercial benefit to the Applicant (see also See also Zenith [2007] QBCCMCmr 115):
An owner could reasonably weigh up whether their interest in common property is appropriately recognised and/or compensated. Further, given the location of the proposed allocations, it would be reasonable for an owner to consider the effect of the proposed use of these areas may have on the rights and obligations of the Body Corporate and that owner.
In Katsikalis v Body Corporate for “The Centre” [2009] QCA 77, the Court of Appeal was dealing with circumstances in which one lot owner had constructed a bulkhead infringing on the common property and sought special resolution approval for that extension. 46 votes were cast in favour of the resolution but only four against. It was held per Douglas J (McMurdo P and Chesterman JA agreeing), that:
In this case, the approvals given retrospectively show that the extensions to the bulkheads over the common property will be enjoyed exclusively and indefinitely by the lot owner. That, in my view, amounts to a disposition of that property at least by the grant of an exclusive licence to it for some indefinite period. It may also amount to a gift of the property unless it is a mere licence that would normally be revocable.
And later, at [32], in the context of deciding that the resolution was not passed without dissent and was therefore invalid that:
It is important that the rights to common property of Bodies Corporate are not removed unheedingly or inadvertently and to the detriment of their members. That is why the rules require such resolutions to be passed without dissent. That the infringement on those rights is relatively trivial in this case does not excuse what occurred. The principal is significant.
In my view, it follows that not only did the Adjudicator err in her approach to deciding how to treat the evidence of value of the airspace, but she erred in failing to conclude that the fact that there was no compensation offered for the rights which were approved, was a reasonable basis to oppose its approval.
In argument before me, Mr Kidston for the Respondent lot owner contended that if I concluded that the absence of compensation was a reasonable basis to reject the proposal, that I ought either determine as a condition of upholding the motion that such compensation be paid, or alternatively remit it to an Adjudicator to make that assessment.
Had that been the only basis upon which this decision was successfully challenged, I would have acceded in that approach and ordered that it be a precondition to the validation of the Adjudicator’s orders that compensation of $15,000.00 be paid to the Body Corporate by way of compensation. It has not, however, been the only basis upon which the appeal has been upheld.
Conclusion
It follows that for the reasons I have expressed, the Adjudicator erred in law in a number of material respects. She conducted the adjudication on the papers, and the same material, and more, is before me. On the material before her, applying the legal approach that in my view is the correct one, she ought to have held that the Respondent Lot owner had not established that the Body Corporate acted unreasonably.
I therefore order that the Appeal be allowed. The orders of the Adjudicator dated 2 September 2013 are set aside.
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