Viridian in the High Court of Australia – what role does an Adjudicator play in resolving a dispute about reasonableness?

In December 2015 and August 2016 we gave updates on the Queensland Court of Appeal’s decision in Albrecht v Ainsworth [2015] QCA 220 and the appeal made to the High Court of Australia. You may view the summary we gave of the Court of Appeal’s decision here. 

Background

This involved a dispute over the reasonableness of opposition to an owner’s attempt to acquire exclusive use of 5m2 of common property air space so they could join a small external deck to a daybed to create a larger external deck. The air space was valued at no more than $20,000.

The grant of exclusive use had to be authorised by resolution without dissent. 50% of the voters opposed it, including on the grounds that:

• it was inconsistent with the architectural design and intent of the villas to limit external use; 
• the creation of a larger desk is likely to generate more noise and interfere with the privacy of neighbouring villas; 
• it would set an undesirable precedent and open the floodgates for other owners to seek the same privilege; and 
• despite the benefit the owner would receive by the exclusive use grant, they had not offered to pay anything for it. 

The dispute was first determined by an Adjudicator in the Office of the Commissioner for Body Corporate and Community Management, who relevantly found that:

• her role was to “determine the balance between the need to protect the genuine interest of owners and their voting entitlements, and upholding the justifiable position of proponents the face of unfounded or vexatious opposition”¹;
• it is not reasonable to seek to prevent any deviation from the original design intent², that she “simply cannot see the claimed change to the architectural integrity of the scheme” and, in the face of numerous competing architectural expert reports, she considered the opinions of one set of architects to be “more supportable” than the other³. 

Appeals The opposing owners appealed to the Queensland Civil and Administrative Tribunal (QCATA). The presiding member allowed the appeal and relevantly found that there was nothing in the argument of those opposing the exclusive use grant that was “inherently implausible or unreasonable if one gives any respect to the notion of architectural intent and architectural integrity.”⁴

The matter then went before the Queensland Court of Appeal, where the President relevantly found that:

• “...the Adjudicator is not limited to determining whether the ... opposition to the motion could have been reasonably held. She was required to reach her own conclusion after considering all relevant matters.”⁵
• "As the reasons of both the Adjudicator and QCATA demonstrate, views as to what was reasonable or unreasonable involved value judgments on which there was room for reasonable differences of opinion, with no opinion being uniquely right. Had QCATA’s views as to unreasonableness been the views of the Adjudicator, and had the Adjudicator made no errors of law, that finding would have been unassailable...”⁶

So in other words, while the views of the Adjudicator and QCATA were different, they were both reasonable. But as the Adjudicator gave her views first, they could not be appealed as there was no legal error to them.

The significance of this case

Our update in December 2015 noted that the approach of the Adjudicator and the Court of Appeal may cause concerns for bodies corporate and committees across the industry. That approach would permit an Adjudicator to impose their own judgment on what is reasonable in the circumstances of a particular scheme, as opposed to simply determining whether the grounds for the body corporate’s decision were reasonable held and allowing the stakeholders involved to form their own value judgments on what is appropriate for their scheme.

This dispute involved many owners opposing an external change to the scheme on architectural grounds that the change was inconsistent with the original design intent. We noted that architecture is in many respects as art. People will appreciate it in different ways and to varying degrees based on their unique tastes, preferences and values.

An implication of the Queensland Court of Appeal’s decision was that the values of an Adjudicator can be substituted for the values of lot owners who have invested and live in a community titles scheme, and the Adjudicator’s value judgment is “unassailable”.

The High Court’s decision

It is not surprising that the opening remark of His Honour Chief Justice French at the hearing before the High Court was: “Ultimately, I think there has been a lot of ink spilt in this matter on the way to his Court.”

The Justices of the High Court unanimously allowed the appeal of the opposing lot owners and sharply criticised the approach taken by the Adjudicator and the Queensland Court of Appeal.

Her Honour Justice Nettle found that the Adjudicator had erred “by exercising her own subjective judgment in what she conceived of as a balancing exercise aimed at assessing the appropriateness of allowing the improvements”⁷ and that the dispute over whether the opposition was unreasonable could not be resolved “upon the subjective and unexaminable opinion of an adjudicator.”⁸

When resolving a dispute about opposition to a motion that required a resolution without dissent, the Adjudicator’s role was limited to considering the reasonableness of the opposition. So “opposition prompted by spite, or ill-will, or desire for attention, may be seen to be unreasonable in the circumstances of a particular case”⁹, but it is not the role of an Adjudicator to reach his or her own conclusion as to whether it would be reasonable to approve the motion.¹⁰

Why the decision matters

While this case involved the reasonableness of opposition to a resolution without dissent, the sharp criticism given to the approach the Adjudicator took in forming and imposing her own subjective view is likely to translate across to how Adjudicators resolve other disputes about the reasonableness of body corporate decisions or by-laws.

In our respectful view, this decision of the High Court reaffirms one of the fundamental purposes of the Body Corporate and Community Management Act 1997 (Qld) – to balance the rights of individuals with the responsibility for self management as an inherent aspect of community titles schemes.¹¹ A body corporate cannot be responsible for self management if any decision it makes is tentative until such time as an Adjudicator gives their subjective views on what is reasonable and appropriate in the circumstances.