Body Corporate Decision Reasonableness Tests

Last year, we published an article about tips for making reasonable Body Corporate decisions. The leading case in the area was the Queensland Civil and Administrative Tribunal (QCAT) decision of Re Body Corporate for Viridian; Kjerulf Ainsworth & Ors v Martin Albrecht & Anor [2014] QCATA 294.

However, the lot owner in that matter appealed the QCAT decision to the Supreme Court (Albrecht v Ainsworth & Ors [2015] QCA 220 (Viridian)) and the Supreme Court recently handed down its appeal decision. The appeal reversed the earlier QCAT decision and clarified the law in this area.

Bodies Corporate and Committees make decisions on countless different matters relating to the administration of their scheme, including:

Providing or denying consents or approvals for matters prescribed in the by-laws, such as pet applications or renovation requests;
Considering payment plans or requests for discounts or the waiver of penalties from lot owners in respect of body corporate levies;
Enforcing breaches of by-laws; and
Considering proposals contemplated by the Body Corporate and Community Management Act 1997 (Qld) (BCCMA), such as a request by a lot owner that the Body Corporate grant that owner a right to exclusively use a particular area of common property.

Naturally, not all parties affected by the decision of a Body Corporate agree with the decision. For example, if an owner seeks Committee approval to keep a pet in the owner’s lot, and the Committee denies the request, one might expect the owner to be unhappy with that decision. Similarly, if an owner seeks from a Body Corporate a grant of exclusive use over a particular area, and the Body Corporate says “no”, then that owner would similarly be unhappy.

This article will consider the requirement of Bodies Corporate and Committees to act reasonably in making decisions, and provide some practical guidance to Committees and owners in relation to this issue, in light of the clarification to the law contemplated by the Viridian decision.

This article is not intended to be a substitute for proper legal advice and, if you have any questions, we encourage you to contact us to discuss the matters raised in the article.

Statutory Provisions

Section 94 of the BCCMA requires a Body Corporate to “act reasonably” in anything it does in administering the common property and Body Corporate assets, enforcing the community management statement, and carrying out the other functions given to the Body Corporate.

Section 100 of the BCCMA requires a Committee to “act reasonably” in making a decision.

If a Body Corporate or a Committee fails to “act reasonably” in making a decision, the burden falls upon the disappointed owner to demonstrate to an Adjudicator appointed by the Office of the Commissioner of Body Corporate and Community Management that in all the circumstances, the Body Corporate and/or the Committee failed to “act reasonably”.

What does it mean to “act reasonably”?

The leading case in the area is the Viridian decision, as appealed to the Supreme Court.

Viridian concerned the Body Corporate’s decision to reject a proposal by the lot owner to expand an elevated deck area, and receive an exclusive use right to the corresponding ground area under the deck expansion.

At first instance, an Adjudicator held that the decision was unreasonable and made an order allowing the expansion to proceed. However, the Body Corporate appealed the matter to QCAT, which disagreed with the Adjudicator and overturned the Adjudicator’s decision.

The lot owner then appealed the QCAT decision to the Supreme Court, which overturned the QCAT decision, thus reinstating the Adjudicator’s first instance decision.

The Supreme Court appeal clarified what it means to “act reasonably” in a Body Corporate context, and can be summarised as follows:

The question of reasonableness is not whether the decision was correct but whether the decision is objectively reasonable.
What is reasonable is a question of fact, based upon a consideration of all relevant circumstances.
The determination of whether a decision is reasonable requires consideration in an objective and fair manner of all the relevant facts and circumstances.
The onus is on the party challenging the decision to show that the Body Corporate has not acted reasonably.

Practical Steps For Committees

Committee members need to familiarise themselves with the updated reasonableness test, as set out above. If Committees make a decision but that decision is not objectively reasonable, based on all relevant circumstances, that decision is liable to be challenged by an owner unhappy with that decision. Speak to an experienced Body Corporate Lawyer for more information.

If the Committee is making a decision in relation to a controversial or contested matter that the affected owner will not like, the Committee needs to ensure that, in making the decision:

It has as much information before it as possible in considering the decision.
The Committee considers all relevant matters in light of the specific circumstances.
If the Committee has concerns about a particular matter, then those concerns are put to the affected owner, and the affected owner is given an opportunity to respond.
Its consideration of the matter, and the basis on which the decision was based, is properly and comprehensively minuted.

Update On Viridian Case

After this article was published, the High Court of Australia handed down its decision in the matter of the decision of Ainsworth & Ors v Albrecht & Ors (also known as the Viridian case) on 12 October 2016, with very significant implications in relation to how bodies corporate make decisions.

Read the most recent update on the Viridan High Court Decision.

Practical Steps for Affected Owners

Owners seeking to challenge a decision of a Body Corporate or Committee should, if possible, ascertain the reasons for the decision. If the decision is objectively unreasonable, then the owner may wish to seek to challenge that decision through the Office of the Commissioner of Body Corporate and Community Management.

If you have any questions regarding this article, please contact Andrew Kyle of ABKJ Lawyers on 07 5532 3199 or at AJK@ABKJ.com.au.