In the 9 September 2024 Four Corners programme on the strata industry, The Strata Trap, owners corporation Chairperson Alison Parkes talks about her experiences with Strata Plan.
Why this question came up in The Four Corners Strata Trap program
One of the questions that arose was when Alison’s owners corporation tried to terminate Strata Plan was whether Committee Members could be held personally liable?
The owners corporation Committee made the decision to terminate Strata Plan. Strata Plan reacted to the termination notice of the contract by threatening litigation and demanding more than $50,000 compensation.
Key Takeaways:
- Strata management companies may threaten legal action, but committee members are protected if they act in good faith.
- Section 118 of the Owners Corporations Act 2006 offers legal immunity for reasonable decisions.
- Honest, informed action by committees is not only lawful, it’s essential to good governance.
Can Committee members be personally liable in Victoria?
Alison proceeds to read out an OC document which stated that:
“Each Committee Member may held personally liable for damages and costs.”
Alison adds that the experience for her building was “...certainly Committee Members did feel intimidated – and you would.”
Can strata management companies threaten Committee members?
It probably happens more often than you think. The strata management company works for and is paid by the Owners Corporation but when it comes time to terminate them, the relationship can quickly turn sour.
At Strata Management Consultants, we help Committees with terminating and changing strata management companies. We work with Committees to guide through this process every step along the way, and we’ve seen our fair share of bumps that Committees encounter.
Committee Members – what does a typical threat look like?
Dear: [REDACTED]
Subject: Illegal termination of Owners Corporation Management agreementI write in relation to your recent decision to cast a vote to illegally terminate the contractual agreement between Owners Corporations No. [REDACTED] and [REDACTED] Pty. Ltd. trading as [REDACTED].
The Owners Corporations have engaged [REDACTED] P/L trading as [REDACTED] to provide a management service until the [REDACTED] This has been formalised by the execution of a Contract of Appointment by both parties.
This correspondence is to notify you that should the decision to illegally terminate the contract become a binding resolution of the Owners Corporation then [REDACTED] Pty. Ltd. will be initiating legal proceedings to obtain compensation for damages and loss against you and those Lot owners who appointed you as their proxy to allow you to vote on their behalf.
Please be advised that this correspondence will be presented to the court of competent jurisdiction to verify that notice of the above was provided to you.
What does Victorian law say about Committee member liability?
Owners corporations Committees should firstly note and read Section 118 of the Owners Corporations Act 2006:
Immunity of committee members
- A member of a committee or a sub-committee is not personally liable for anything done or omitted to be done in good faith—
- in the exercise of a power or the carrying out of a function under this Act or the regulations; or
- in the reasonable belief that the act or omission was in the exercise of a power or the carrying out of a function under this Act or the regulations.
- Any liability resulting from an act or omission that, but for subsection (1), would attach to a person, attaches instead to the owners corporation.
What this means for owners corporation Committees in practice
Furthermore, we’re obligated to say:
1. We’re not lawyers and can’t be providing legal advice.
2. It’s common knowledge that contracts cannot override legislation where there is a conflict.
3. Be mindful of the wording there.
Legal commentary on Committee member protection in Victoria
For more information about this important strata topic for Committee Members, we’re joined by Fabienne Loncar, Partner at Moray Agnew Lawyers:
Failure to comply with these duties can expose a Committee Member to legal action, particularly if their breach causes loss or damage. However, the Act does not specify penalties for such breaches. A common consequence is the removal of the offending member from the committee by order of VCAT.
Conversely – what is perhaps more applicable here – is that section 118 of the Act provides protection for Committee Members acting in good faith in carrying out their functions under the Act or the Regulations, or when they reasonably believe their actions or omissions are in accordance with their powers or duties.
It is therefore section 118 of the Act that shields Committee Members from liability, provided they have acted with honesty and reasonable judgement.
Fabienne specialises in commercial litigation and dispute resolution in the areas of building defects and flammable cladding claims, strata law and domestic building insurance. Fabienne’s clients range from leading private and government insurers, through to property developers, owners corporations and homeowners. She provides accurate advice to facilitate solutions and effect results.
