High Court to determine unreasonableness test

18 July 2016

Mahoneys are again at the forefront of judicial decision making in a body corporate dispute soon to be determined by the High Court of Australia.

Our client, the owner of an apartment in a complex at Noosa, wanted to extend the deck area of his apartment. Doing so meant using part of common property airspace, something he could do only if the body corporate approved at general meeting the relevant motion by a resolution without dissent.

At the EGM, 7 of the 23 owners voted for the motion, 7 voted against, one abstained and the remainder did not vote, so the motion was defeated. We successfully appealed to the Commissioner’s Office where an adjudicator gave effect to the motion on the basis that the opposition to it was unreasonable.

Some opposing owners then successfully appealed to the Queensland Civil and Administrative Tribunal Appeals. Our client’s subsequent appeal to the Court of Appeal resulted in a 3 nil decision in our client’s favour but some of the opposing owners sought and were granted leave to appeal to the High Court to have the matter determined. The appeal will be heard in the coming months.

At issue is the test to apply when determining reasonableness or unreasonableness. Under the Body Corporate and Community Management Act, a body corporate is required to act reasonably in anything it does. However the relevant provision of the Act in play in this matter is the one which gives an adjudicator power to give effect to a failed without dissent motion if satisfied it was not passed because of opposition that in the circumstances was unreasonable.

But what test do you apply to determine if the opposition to the motion was unreasonable? Do you adopt the subjective test and look just at the individual circumstances of the no voter/s and the impact the motion, if passed, would have on them?

Or do you adopt what is known as the objective test? The Court of Appeal ruled that the true test is an objective one – a question of fact to be determined by objectively considering all relevant circumstances. As the Court pointed out, what is relevant in determining reasonableness or unreasonableness will vary from case to case, depending on the issues raised and the relevant material. It is not a matter of determining whether the opposition of the no voters could have been reasonably held. It was a matter for the adjudicator to reach her own conclusion after considering all relevant matters.

In finding that the adjudicator had acted entirely consistently with the Act and had applied the correct test the Court of Appeal also determined that QCATA had erred in finding errors of law in the adjudicator’s findings as there were none. As such it followed that QCATA was not entitled to set aside the adjudicator’s decision and to exercise the jurisdiction and powers of the adjudicator and to substitute its own decision.

We await the High Court’s decision with keen interest as it will confirm once and for all the appropriate test to apply when asserting whether or not a body corporate has acted reasonably in arriving at a decision including for example whether to grant consent to the assignment of management rights agreements.