Contesting the Refusal of a Body Corporate to Grant Exclusive Use: Lessons from Ainsworth v & Ors v Albrecht & Anor

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In the recent case of Ainsworth v & Ors v Albrecht & Anor [2016] HCA 40, the High Court of Australia has allowed an appeal against a decision of the Queensland Court of Appeal regarding the alteration of the rights of lot owners in a community titles scheme. The case highlights that it is well within a lot owner’s rights to oppose Body Corporate (or other lot owner’s) proposals to create exclusive use by-laws where this opposition is reasonable.

In this case, the Respondents incurred what has been estimated to be $1.3 million in legal costs in attempting to extend the balcony of their townhouse in a prestigious Noosa complex, against the wishes of the other lot owners. These attempts have now been denied by the High Court and the Respondents have been ordered to pay not only their own costs, but the Appellants’ legal costs as well.

Background

Martin Albrecht owned a lot in the community titles scheme of Viridian Noosa Residences, an architectural award-winning development created in 2005.

Dissatisfied with the size of his balcony, Mr Albrecht decided that he wished to increase the deck size of his unit. He sought to amalgamate two of his balconies by bridging the gap between them with additional deck. However, the airspace between the two balconies was common property, and thus belonged to all of the residents in the community title scheme as tenants in common. This area was 5m2.

In order to exclusively use the airspace Mr Albrecht required the consent of the Body Corporate of Viridian Noosa Residences. He applied to the Body Corporate to pass a motion to approve an exclusive use by-law in his favour for the airspace between his two balconies (pursuant to section 171 of the Body Corporate and Community Management Act 1997 (Qld) (the “BCCM Act”)). The Body Corporate rejected his application on numerous occasions.

Under the BCCM Act, approval of the motion required a resolution without dissent of the Body Corporate. This motion was not passed because multiple other lot owners in Viridian Noosa Residences voted against it. Those who voted against the by-law included Mr Albrecht’s neighbours (who believed that the extended balcony would adversely affect their privacy) and the architect of Viridian Noosa Residences.

The Appeals

On 24 September 2012, Mr Albrecht applied to have the matter referred to an adjudicator. Under the BCCM Act, an order can be sought to enforce a motion where opposition to that motion is unreasonable in the circumstances. Mr Albrecht proposed that the other lot owners had acted unreasonably when voting against the motion.

The adjudicator accepted that the other lot owners voted against the motion in good faith and in reliance on architectural advice, but still found in favour of Mr Albrecht on the basis that the other lot owners’ opposition was unreasonable. Among other observations, she noted that:

  • The proposed extension would have no noticeable detriment on the building’s architectural integrity;
  • The privacy concerns of the adjoining lot owner were not sufficient to warrant the refusal of the motion;
  • Other lot owners would not have use for the 5m2 airspace, and therefore it was irrelevant whether or not Mr Albrecht would increase the value of his house should he increase the size of his balcony. It was also irrelevant that Mr Albrecht did not intend to compensate the other lot owners for exclusively using the airspace.

Multiple lot owners at Viridian appealed the adjudicator’s decision by way of application to the Queensland Civil and Administrative Appeals Tribunal (“QCAT”). On 17 October 2014, QCAT found in favour of those lot owners.

Mr Albrecht then appealed the QCAT decision to the Queensland Court of Appeal, which supported the original decision of the adjudicator in favour of Mr Albrecht.

The lot owners then appealed to the High Court to determine whether or not the adjudicator had erred in her original decision, and to consider the test the adjudicator applied to reach her conclusion.

The Decision

The High Court unanimously held the appeal. That is, they found in favour of the other lot owners. It found that the adjudicator had taken the wrong approach in resolving the dispute. They stated that the adjudicator’s task under the BCCM Act was not to decide whether “the outcome of the vote … achieved a reasonable balancing of competing considerations, but whether the opposition to the proposal was unreasonable”. The High Court held that a lot owner would not act unreasonably in declining to enhance another lot owner’s interest, where that enhancement would cause detriment to the interests of the voting lot owner. Ultimately, Mr Albrecht was denied the right to exclusively use the airspace and was subsequently ordered to pay the Appellants’ costs.

Reasons

Some of the specific reasons outlined by the High Court included:

  • The adjudicator misunderstood her role

In a joint judgment, the High Court majority of French CJ, and Bell, Keane and Gordon JJ accepted the appellants’ submission that a balancing of Mr Albrecht’s rights against the other lot owners’ rights was not the task of the adjudicator under the relevant sections of the BCCM Act. That is, the adjudicator’s role was not to resolve the matter by subjectively assessing the reasonableness of the outcome of the vote at the general meeting, but rather the “quality of the grounds of opposition of each dissentient lot owner.” In this case, the dissentient lot owners’ grounds of dissent were not vexatious, unfounded or unreasonable. The quality being sufficient, the adjudicator was prevented from overriding the outcome of the proposal of the by-law at the extraordinary general meeting.

By balancing the rights of each party, the adjudicator appeared to confuse her role with that under a separate provision (section 94(2) of the BCCM Act) which concerned a judgment as to whether the Body Corporate had failed to achieve a reasonable balance of the competing interests affected by a proposal.

  • There was no unreasonable opposition

The High Court emphasised that it was “no light thing” to deem the grounds for the appellants’ dissent in the general meeting as unreasonable.

In this case, the adoption of the resolution would have had the effect of:

“[A]ppropriating part of the common property to the exclusive use of the owner of another lot, for no return to the body corporate or the other lot owners; altering the features of the common property which it exhibited at the time an objecting lot owner acquired his or her lot; and potentially creating a risk of interference with the tranquillity or privacy of an objecting lot owner.”

These were considered to be reasonable grounds of dissent.

Their Honours held that it was within the other lot owners’ rights to enforce the outcome of the general meeting as the grounds for their dissent were not unreasonable. That is, not vexatious, out of spite or unfounded.

What Could be Considered Unreasonable?

While their Honours did not specify a specific situation where dissent would be unreasonable, they did note that:

“[O]pposition to a proposal that could not … adversely affect the material enjoyment of an opponent’s property rights may be seen to be unreasonable. Opposition prompted by spite, or ill-will, or a desire for attention, may be seen to be unreasonable in the circumstances of a particular case.”

Lessons

The case highlights that it is well within lot owner’s rights to oppose the creation of exclusive use by-laws in community title schemes where such opposition is reasonable.

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This article is written by Nina Brewer (Associate)