ACAT Special Privilege Motions: Infringements on Other Unitholders Rights are Justified for Motion Opposition

Strata

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DATE PUBLISHED: May 6, 2022

key takeaways

  • Litigants wanting the ACAT to make orders for special privilege motions should be careful if that motion's basis is that its opposition is unreasonable.
  • In Lloyd v the Owners Corporation Units Plan 527 (Unit Titles) [2020] ACAT 75 and its appeal, the Tribunal gave useful reminders that most infringements on a unitholder's interest are sufficient justifications to opposing a motion.

The key terms we will be using for the purpose of this article are:

  • Lloyd v the Owners Corporation Units Plan 527 (Unit Titles) [2020] ACAT 75 (Primary Decision)
  • Lloyd V The Owners Corporation – Units Plan 527 (Appeal) [2021] ACAT 63 (Appeal)
  • ACT Civil and Administrative Tribunal (Tribunal)
  • Unit Titles (Management) Act 2011 (ACT) (UTM Act)


In both the Primary Decision and the Appeal, the Tribunal considered what constitutes ‘unreasonableness’ in relation to opposing a special privilege being granted by an owners corporation. The cases together set out the substantive test for determining unreasonableness in this context in the ACT.

The decisions in Lloyd pertain to sections of the UTM Act prior to recent amendments (and in particular to section 22, which now requires only a special resolution as opposed to an unopposed resolution).


background

Ms Lloyd was the owner of Unit 2 in a complex of sizeable units, each standing on its own lot of between 500 and 1000 sqm. A common driveway ran through the property. 

Ms Lloyd had put a motion at the 2020 Annual General Meeting (AGM) seeking a special privilege under s 22 of the UTM Act as it was then, to allow her to park her car on common property (Motion). The relevant section provided at that time that an owners corporation may if authorised by an unopposed resolution, grant a special privilege for the enjoyment of common property. By her Motion, Ms Lloyd sought a special privilege to park on the common property in front of her unit.

Nearly all of the unit owners voted in favour of the Motion. However, Ms Lloyd’s neighbour in unit 3, Mr Sanguitini, voted against the Motion. Mr Sanguitini’s opposition had two bases:

  1. A concern that the insurance premiums of the owners corporation would be adversely affected. 
  2. The fact that, if Ms Lloyd parked on the common property in front of her unit, his driveway would be partially obstructed.


primary decision

Ms Lloyd’s application in the Primary Decision was for an order under s 129(1)(g) of the UTM Act. That section empowers the Tribunal to make an order giving effect to an unsuccessful motion if it is satisfied after a motion's merits review that opposition to the motion was unreasonable.

The Tribunal in the Primary Decision began by considering whether Mr Sanguitini’s objections were unreasonable and cited the leading case on unreasonableness, Ainsworth v Albrecht [2016] HCA 40 (Ainsworth). Ainsworth concerned the decision by a QLD body corporate to refuse a unit owner permission to use common property airspace between the existing balconies of his unit. The Tribunal went on to quote from two ACAT cases that had applied Ainsworth

  • Clews v the Owners – Unit Plan 3069 [2019] ACAT 63 (Clews); and 
  • Bonansea v the Owners – Unit Plan no 421 [2019] ACAT 10 (Bonansea). 

In particular, the Tribunal quoted from Clews, which relied on Ainsworth, to set out the relevant considerations of unreasonableness as follows:

Unit owners at a general meeting are free to vote on motions however they see fit. They are equivalent to shareholders of a corporation, or voters in a democracy. However, the power in section 129(1)(g) of the UTM Act allows unreasonable votes in relation to unit titles management to be overridden. In my view, the concept of unreasonable means objectively unreasonable in the particular context.

In Ainsworth the High Court considered this type of provision in the context of proposed construction by Mr Albrecht on common property airspace between two balconies to a unit owned by him, but opposed by Mr Ainsworth and other unit owners, and stated at that it:

...is no light thing to conclude that opposition by a lot owner to a resolution is unreasonable where adoption of the resolution will have the effect of appropriating 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; ... and potentially creating a risk of interference with the tranquillity or privacy of an objecting lot owner.

The judgment at [57] noted that nothing in the relevant legislative scheme suggested that an opponent to a proposal acts unreasonably in failing to act sympathetically or altruistically towards a proponent who seeks to diminish the property rights of the opponent.

However, the High Court stated that while it was neither necessary nor desirable to attempt an exhaustive statement of when an order should be made, that “... opposition to a proposal that could not, on any rational view, adversely affect the material enjoyment of an opponent’s property rights may be seen to be unreasonable ”. Similarly, it noted that opposition “prompted by spite, or ill-will, or a desire for attention, may be seen to be unreasonable in all the circumstances”. In the case before the Court the proposal “was apt to create a reasonable apprehension that it would affect adversely the property rights of opponents of the proposal and the enjoyment of those rights.” The opposition could not therefore be said to be unreasonable.

The Tribunal went on to consider Bonansea, in which the following guidance was provided: 

The Tribunal must focus upon whether the opposition of the other unit owners to the motion was unreasonable, not upon whether the owners corporation acted reasonably in refusing to give approval or the reasonableness of the motion. Nor is it for the Tribunal to achieve what it thinks is a reasonable balance between competing viewpoints.[1]

The Tribunal next considered the application of Ainsworth to Mr Sanguitini’s objections. The first was a concern about  the insurance premiums regarding the complex. These concerns were dismissed out of hand due to the failure of the owners corporation to present proper evidence in relation to the matter. An email excerpt from an insurance agent was provided, without any of the underlying documents and instructions on which the agent had based his view, something that the Tribunal did not view as sufficient. 

In respect of Mr Sanguitini’ access to his driveway, the Tribunal held a different view. The Tribunal began by finding that access to the driveway was not seriously impeded by the parking of Ms Lloyd’s vehicles on the common property. It also found that the disadvantage to Ms Lloyd outweighed that to Mr Sanguitini. This consideration (and the apparent attempt to balance the interests) was contrary to the reasoning in Bonansea.

Notwithstanding these findings, the Tribunal found in favour of the owners corporation. It did so on the following basis:

  1. Despite the evidence making it difficult to assess how great the impediment to Mr Sanguitini’s driveway access was, it was of no import. The critical consideration was a finding that the ease of access to his driveways and garages was a matter capable of affecting his use and enjoyment of his property. 
  2. The disadvantage to Ms Lloyd was also an irrelevant consideration. In reaching this decision, the Tribunal quoted once more from Clews:

The Tribunal agrees that the detriments are disproportionate; the current adverse effects on Mr Clews are greater than the adverse effects on the objectors if the lease purpose is expanded. But I do not think that such a balancing exercise is involved here. The question is whether the objections are reasonable, not whether they are fair or proportionate.

appeal

The Appeal, by and large, confirmed the decision in the primary proceedings. 

As to the substantive matters on appeal, Ms Lloyd advanced the following arguments:

  1. The overwhelming majority of owners were not affected by Ms Lloyd parking on the common property in front of her garage and did not oppose her motion.
  2. The inconvenience and safety issues suffered by Ms Lloyd and her visitors as a result of being unable to park in front of her garage.
  3. To the extent that there is an access issue, Mr Sanguitini created it by making alterations within his lot to create “an artificial entrance” to Unit 3 not envisaged by the original design of the complex.
  4. That such alterations were either not, or possibly not, approved by the Owners Corporation.

The Tribunal considered each of these arguments. In respect of the first and the second, they found that these were not relevant considerations. The requirement set out by the UTM Act is not for a simple majority, nor does the fact than an objection comes from a minority, cause that objection to become unreasonable. Similarly, as contemplated in the initial decision, the Act called for by the Tribunal is not a consideration of the competing interests of Ms Lloyd and Mr Sanguitini.  

The third and fourth arguments were similarly found to be irrelevant to the question of whether Mr Sanguitini’s objections were unreasonable, and the Tribunal considered that they ought to be raised in separate proceedings, were they to be agitated. 

Accordingly, the appeal was dismissed. 

conclusion

Litigants seeking to have the ACAT make orders providing for their special privilege motions on the basis that opposition to the motion is unreasonable should proceed cautiously. In both decisions, the Tribunal provided useful reminders that nearly any infringement upon the interests of a unitholder will provide sufficient justification for his or her opposition to a motion. Are the benefits afforded by the special privilege apt to create a reasonable apprehension that it would adversely affect the property rights of opponents of the proposal and the enjoyment of those rights? If so, such a position is unlikely to be held to be unreasonable. 

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