You read out the unfinancial owners at the start of the meeting, the same as you do every time. It takes a few seconds and nobody usually blinks. Then a couple of weeks later a letter arrives. One of those owners says that being called unfinancial in front of the room has damaged their reputation, and they want compensation, from you personally.
It sounds far-fetched, and in practice it almost always is. But the threat gets raised often enough that managers and Committees deserve a straight answer on where the line actually sits, and on just how little the law leaves for a claim like this to stand on.
Key takeaways:
- Calling a lot owner unfinancial is rarely defamatory. It describes what the records show on a given date, not the person, and an ordinary listener does not read a ledger balance as a sign of insolvency.
- Since 1 July 2021 anyone suing must prove serious harm to their reputation, and the old triviality defence has been abolished. A passing remark about arrears at a meeting struggles to meet that bar.
- A manager reporting arrears is usually protected by truth and by qualified privilege, provided they act without malice and stick to the records.
- Defamation is a court matter, not a VCAT one. Reconciling payments before a meeting prevents most of these disputes from ever starting.
What does it actually mean when a lot owner is declared unfinancial?
Unfinancial is a procedural status, not a comment on someone’s wealth or character. A lot owner becomes unfinancial when the owners corporation’s records show an unpaid amount, whether that is annual fees, a special levy or another charge properly raised against the lot. Arrears are an ordinary part of running a scheme, and there are practical ways to keep levy arrears low, but the label itself is only a snapshot of the ledger on a given day.
The consequence sits in the voting rules. Under section 89B of the Owners Corporations Act 2006, an owner in arrears cannot vote, in person, by ballot or by proxy, unless the arrears are paid in full. There are two carve-outs to keep in mind:
- An owner in arrears can always vote where a special or unanimous resolution is required.
- For non-cash payments, the money must reach the owners corporation at least four business days before the vote to count.
So declaring someone unfinancial just confirms that, on the records and as at that date, the lot has a balance owing and the owner cannot vote on ordinary business. Recovering those fees is a separate process, and a different question again from rule enforcement and whether an owners corporation can issue fines.
Why is this question coming up more often?
The friction rarely involves anyone refusing to pay. It comes from timing and from money that does not match the ledger.
The common version: an owner pays a levy online the day before a meeting, but the amount or reference does not match, so the system never allocates it. The manager, reading the records, declares the owner unfinancial and it goes into the minutes. Nobody did anything wrong. The owner paid, the manager reported what the ledger showed, and the gap is a reconciliation issue. But seeing the word unfinancial beside their name can lead an owner to read far more into it than the records ever said.
Can calling a lot owner unfinancial be defamatory?
To succeed in defamation, a person has to establish all of the following:
- The statement was published to someone other than them.
- It identified them.
- It carried a defamatory meaning.
- The publication caused, or was likely to cause, serious harm to their reputation.
The usual argument is that unfinancial implies the owner is a delinquent payer, cannot afford their levies or is insolvent. The flaw is the meaning step, which is judged through the eyes of an ordinary reasonable person rather than the most sensitive reading available. Most people have paid a bill late for mundane reasons: an oversight, a payment that did not clear, a wrong reference. An ordinary listener hears “the records show an amount outstanding,” not “this person is insolvent.” A statement that simply reflects the financial records on a given date struggles to carry any meaning genuinely damaging to reputation.
How does the serious harm threshold change the picture?
This is where the modern law does most of the work, and where older commentary misleads. Since 1 July 2021, section 10A of the Defamation Act 2005 (Vic) makes serious harm an element of the claim itself. The person suing must prove the publication has caused, or is likely to cause, serious harm to their reputation. At the same time the standalone triviality defence was abolished, so the old idea that a statement was “too trivial to sue over” as a defence no longer fits. That burden now sits with the claimant from the outset.
For a claim about being called unfinancial, that is close to decisive. A judicial officer, not a jury, decides the serious harm question and can dismiss a weak claim early. A remark to a room of fellow owners, about a ledger entry, mundane in meaning and often corrected within days, is just about the worst possible candidate for clearing that bar. Courts applying section 10A have already dismissed claims early where publication was limited or harm was minimal. Wounded pride is not serious harm.
Getting the wording right at a meeting, and reconciling the ledger before owners vote, is the quiet detail that stops a dispute before it starts. If your meeting procedures or arrears records would benefit from a second set of eyes, it can help to talk the process through with someone who handles these situations regularly.
Is an owners corporation manager personally protected when making this declaration?
Owners sometimes sue the manager personally. Even apart from the serious harm hurdle, the protection is strong.
Truth comes first. If the records genuinely showed an amount outstanding as at the date, the statement was substantially accurate when it was made, even if a payment later surfaces and explains the gap.
Qualified privilege comes next. It protects a person with a duty or interest in communicating information to recipients who share that interest. Fellow owners have a real interest in who can vote, because it affects quorum, the validity of resolutions and the scheme’s finances, and the manager has a corresponding duty to report it. Privilege is lost only where the speaker acted with malice. A manager reporting the ledger in the ordinary course of a meeting, with no ill will, is simply doing the job.
The picture is consistent: an innocuous meaning, a serious harm element that is hard to meet, a statement true on the records and a privileged occasion.
How can a manager or Committee declare someone unfinancial without inviting a dispute?
The exposure is low, but a little discipline keeps things tidy and fair:
- State the fact narrowly. “The records show $X outstanding on this lot as at today, so the owner cannot vote on ordinary resolutions” describes the ledger, not the person. Avoid editorialising about anyone’s finances or character, and keep the minutes equally neutral.
- Reconcile before the meeting. Most flashpoints come from unallocated payments, so a quick check for recent online transfers that have not been matched catches the awkward cases early. Keep the payment cut-off in mind, since a last-minute non-cash payment may not change the position on the day even once it clears.
- Give the owner a path to fix it. If they produce evidence of payment, allocate it and correct the record promptly. Acting reasonably reinforces the privilege and removes any suggestion of malice.
Where would a dispute like this actually be heard?
A lot of people get the forum wrong, and it matters. Defamation is not a VCAT matter. VCAT handles owners corporation disputes such as fee recovery and rule breaches, while a defamation claim is a court proceeding in the Magistrates’ Court, County Court or Supreme Court. Before it can even start, the person complaining must serve a concerns notice and wait out a set period, and damages for non-economic loss are capped and reserved for the most serious cases. A passing reference to a ledger balance, made to a meeting and corrected soon after, sits at the opposite end of that scale, which is why claims like this so rarely get anywhere.
Most of that protection is earned long before any letter could arrive, in how meetings are run and records are kept, and we are happy to help managers and Committees get that side right.
