What does it take for the ACAT to use its merits review power to split a budget following a failed motion?

Senior Member Elizabeth Morrison of the ACAT recently decided UT 5/2025: Edwin Tjhin & Ors v The Owners - Unit Plan No 15667. The case concerned an application by dissatisfied townhouse owners against a failed resolution from the annual general meeting (AGM) of the owners corporation. The motion proposed splitting the budget - that is, agreeing on the basis of a levy otherwise than on the basis of the tried and tested (and statutory default position) of unit entitlements — and owners had not voted in sufficient numbers to give effect to the change.

The case is interesting because, as the decision makes clear, the basis (or rationale) for the change was not inherently inequitable. It was prefaced on the concept that certain costs and expenses related to certain unit owners and others did not. It proposed, basically, that those who were not benefitting from the costs (or who had no need to incur those expenses) should not pay for them.

The development at the centre of the dispute

Unit Plan 15667 (the UP) is not a mixed-use development in the way we would normally use that term — there is no mix of residential and commercial units. It is a residential complex. Regrettably, at least for some of its owners, it is a development for which approval was granted by the ACT Government whereby both units in a multi-storey apartment block and, separately, a number of townhouses, were all built on one units plan and all the habitable structures were designated as ‘Class A’ units (despite building townhouses, those townhouses were treated as Class A units when the units plan was registered).

For buyers, at the time of purchase, this was probably largely uncontroversial. However, over time it seemed inevitable that not only was the amenity between all owners not equally shared, but the common property across the units plan was not equally shared nor equally accessible to all owners - and the expenses required to maintain these two quite different building types varied considerably.

For the UP, which was built in two stages, these underlying and fundamental differences were likely treated as simply ‘planning matters’ - or worse, technical or legal matters - to which no one was required to pay considerable mind. That was true until the time came to consider whether the structures had been built in accordance with the Building Act 2004 (ACT) and to consider the issue of defects: their type, nature and location, and who should be burdened by the unavoidable costs of dealing with these issues where they did not affect all owners equally.

The motion, and what happened at the AGM

The UP comprised 20 townhouses and 33 apartments. The applicants were all townhouse owners and members of the Executive Committee (EC), who sought an order under s 129(1)(g) of the Unit Titles (Management) Act 2011 (ACT) (UTMA) to give effect to a ‘split budget’ motion (Motion 5) that narrowly failed at the AGM.

Motion 5, as drafted, proposed reallocating the general fund contributions so that certain costs - mainly affecting apartments, such as cleaning, fire protection, and legal fees for an apartment-specific defect claim - would be paid only by apartment owners, instead of all owners by unit entitlement. At the AGM, Motion 5 was defeated, with most opposition from apartment owners (who would have borne an increased share of costs as a result of the budget being split). The applicants then filed proceedings seeking to have Motion 5 implemented on the basis that opposition was ‘unreasonable’.

How the ACAT approaches a challenge of this kind

In order for the ACAT to effectively ‘change’ the outcome decided on at an owners meeting, the following steps must be followed:

1. An application for merits review must be lodged with the ACAT.
2. That application must seek relief under section 129(1)(g) of the UTMA.
3. The Tribunal must then undertake a two-step process: first, conduct a merits review according to established principles of administrative law to determine the correct and/or preferable decision based on the evidence and submissions; and second, consider and determine whether opposition to the motion was unreasonable.

Key issues considered

The Senior Member identified three central questions:

• Was opposition to Motion 5 at the AGM ‘unreasonable’ under s 129(1)(g) UTMA, such that the Tribunal should override the vote and implement the motion?
• Did the proposed split budget comply with s 78(2)(b) UTMA - that is, was it fair, having regard to structure, benefit, and any burden imposed?
• Would shifting certain costs to apartment owners alone, as described, be an appropriate and equitable outcome for this development?

The legal test for ‘unreasonableness’

The High Court’s decision in Ainsworth v Albrecht [2016] HCA 40 (Ainsworth) is one of the leading authorities on what constitutes unreasonable opposition (or refusal). The High Court confirmed it is not unreasonable for an owner to oppose a motion that would materially affect her (or his) rights or interests, even if those rights or interests may have less ‘value’ than the owners in favour of the motion.

The Senior Member noted that the Tribunal had applied Ainsworth in the context of section 129(1)(g) of the UTMA in several cases. In Uren & Anor v The Owners - Units Plan No 396 (Uren), the Tribunal set out the general principles for applying section 129(1)(g) of the UTMA and stated, in relation to unreasonableness:

What the Senior Member decided

In reliance on the reasoning in Uren and Ainsworth, the Senior Member held that opposition to the motion was not unreasonable. Apartment owners had a legitimate interest in protecting their financial interests, especially given the incomplete and high-level nature of Motion 5 and associated documents. Because the opposition was not unreasonable, the Tribunal did not go on to examine the administrative law question of what was the correct and preferable decision.

Beyond that core finding, three observations from the decision are worth highlighting:

• The proposal did not fully address how future or ambiguous costs - particularly insurance - would be allocated, nor how retrospective changes would apply (since some expenditure had already been approved under the old model).
• The user-pays approach was not rejected as a concept, but many owners felt that the detail and mechanism of Motion 5 were insufficiently clear.
• Owners voting along self-interest was not inherently unreasonable, and the law did not require ‘altruism’. The test for unreasonableness is objective, and not based solely on the proponents’ sense of fairness.

What this means for the industry

This decision confirms that the ACAT will be careful in applying the two-stage test when determining whether a decision of a general meeting should be overturned. Unless opposition is considered unreasonable in a legal sense, the owners’ decision is likely to hold.