What does ‘acting reasonably’ mean?

Body corporate disputes can become very emotional things. This is the story of one of those. If there is one article you read this year from us, make it this one – because it is the most significant strata case in Queensland since the High Court’s decision on building defects.

If you’ve spent any longer than five minutes in strata land, you come to realise that the single most important aspect of any body corporate is its requirement to act reasonably. We have written repeatedly about that, with the most recent newsletter here.

In October last year, you may recall the story of a man who was denied exclusive use of a small area of common property airspace to join his two decks together. On Friday, the Queensland Court of Appeal decided that the owner wasn’t so far off the mark in asking the question in the first place. The Court of Appeal (the highest Court in Queensland) has overturned QCAT’s decision that the Body Corporate was acting reasonably in opposing the amalgamation of the decks.

So what does this mean, and how does it impact body corporate decision making?

A summary of the history of this matter (which is much shorter than those contained in the various judgements) is:

1. A lot owner wanted to join two decks together.
2. Those works required the approval of the body corporate at general meeting by a resolution without dissent (meaning that a single vote against the motion would defeat it).
3. Votes were cast against the motion so it was not approved.
4. The lot owner made an application to the Commissioner’s Office have the body corporate’s dissent set aside on the basis it was an unreasonable decision. That application was successful – and the order can be read here.
5. The dissenting owners appealed that decision to the QCAT. The dissenting owners were successful and that judgement can be found here.
6. The lot owner then appealed the QCAT decision and the Qld Court of Appeal pronounced judgement last Friday.

What did the Court of Appeal say?

The lead judgment was given by the President of the Queensland Court of Appeal, Justice Margaret McMurdo. Justice McMurdo, ostensibly recognising the importance of the question of reasonableness of body corporate decision making, gave a very methodical judgment which analysed in great detail the history of the dispute from the start of the adjudication right through to the arguments on appeal.

In short, the two competing arguments were as follows:

1. The lot owner argued that the QCAT appeal tribunal (QCATA) was wrong to disturb the approach of the adjudicator – that is, that the adjudicator was correct in concluding that the question of reasonableness is an objective question requiring a consideration of all relevant circumstances; and
2. The dissenting owners contended that the decision of QCATA was correct and that the various elements described by QCATA in paragraphs 84 to 85 of its decision should remain in force.

One can never accuse the President of leaving any part of her reasoning off the table. Her Honour, in the first 79 paragraphs of the decision, methodically summarised the arguments of the parties in the initial adjudication, on appeal to QCAT, and in the appeal to the Court of Appeal.

Thankfully (for those with a short attention span) there is a succinct summary at the end of the decision. At paragraph 90, President McMurdo found:

“The respondents contended that the adjudicator applied an incorrect test … [t]hat contention is not made out when the adjudicator’s reasons are considered as a whole.

…

[The adjudicator] rightly … accepted that the question of reasonableness was objective, requiring a consideration of all relevant circumstances; and that determination of whether opposition to the motion was unreasonable required a consideration in an objective and fair manner of all the relevant facts and circumstances.”

Her Honour then applied this reasoning to the actual findings of the adjudicator in paragraph 91:

“The adjudicator’s reasons make clear that she conscientiously considered all of the material and submissions relied upon by the applicant and the respondents, made findings of fact, all of which were open on that material, and was ultimately satisfied as a matter of fact that the applicant’s motion was not passed because of the respondents’ opposition to it that in the circumstances was unreasonable.”

There’s not much ambiguity in that.

What does that mean?

Surprisingly it is all rather simple.  The question of whether a body corporate has acted reasonably is:-

1. an objective test (i.e. what an ordinary person would consider reasonable); and
2. one which requires a consideration of all relevant facts and circumstances.

What does that mean practically?  For us it is:-

1. For a decision of a body corporate to be reasonable, all circumstances surrounding a decision must be considered.  That means both sides of any argument should be reviewed and issues that a body corporate has with any proposal should be ventilated with the proposer.
   So that would never mean a cursory look at the material and a decision based on what might be the immediate vibe.  After all – how can it be said that all of the circumstances were considered if the body corporate had questions but didn’t ask them?
2. Those matters must then be considered objectively – that is, not through the rose-coloured glasses of a naïve or self interested body corporate.  In our day to day personal dealings we can all be as unreasonable as we like.  Bodies corporate simply cannot.
3. For us, it follows that if a body corporate is going to reject a proposal it must set out why that decision was taken.  A body corporate must be able to explain its position rather than simply say ‘no’.

Failing to follow those rules is going to leave any body corporate decision open to review.

Bodies corporate should be open, transparent and honest in their decision making.  If not, they need to be ready to be able to explain any particular decision to affected lot owners via the Commissioner’s Office.

We are only an email away from helping anyone with guidance around decision making and the processes that should be followed when considering potentially contentious matters.

You can find the Court of Appeal decision here.