A strata manager that pays itself out of owners corporation funds without authority is acting unlawfully, and the people behind that company can be made personally liable for the loss. That is the lesson from this Victorian Civil and Administrative Tribunal decision, and it applies to every owners corporation in the state. The money an owners corporation collects is held in trust. A manager cannot decide it is owed a payment and simply take it, and a corporate structure will not always shield the individuals who authorise it.
Key Takeaways:
- A strata manager cannot pay itself from owners corporation funds without authority. In Wyndham Harbour A2 a $192,465 self-payment was found unlawful because there was no entitlement, authority or consent.
- Owners corporation money is held on trust. Section 122 of the OC Act 2006 requires a manager to hold those funds on trust and account separately for each owners corporation.
- Liability can reach the individuals behind the company. Under section 236 of the Australian Consumer Law, the director and the registered manager were found personally liable as the controlling minds of the unlawful conduct.
- Financial mismanagement is grounds to terminate. The owners corporation lawfully ended the contract over unrecorded payments, depleted funds and accounts that had to be rebuilt, even before it knew its money had been removed.
What happened in Wyndham Harbour A2 v Your Body Corporate?
Your Body Corporate Pty Ltd (YBC) managed an owners corporation at the Wyndham Harbour development. During its management it paid itself $192,465 from the owners corporation’s funds, made up of $100,187.26 for claimed additional services and $92,277.74 described as loss of profit.
The owners corporation terminated the management contract for poor financial management. The Tribunal accepted that YBC had:
- not recorded the $192,465 payment to itself
- depleted the owners corporation’s funds during its management
- reduced fees while the owners corporation’s expenses were rising
- failed to advise the owners corporation of the true state of its finances
- kept accounts so poor they had to be reconstructed from the bank statements
One detail matters most. When the owners corporation moved to terminate, it did not yet know its funds had been taken. The mismanagement was visible. The missing money was not.
Why VCAT found the payment unlawful
The Tribunal found there was no legal entitlement, authority or consent for the payment.
The invoice for the claimed additional services did not hold up:
- it was created to justify keeping money already removed, not in the ordinary course of business
- it was raised outside the time limit set by the management contract
- the hours claimed were not proven
- some services were already covered by the annual fee, and some were not payable at all, such as charges for calls and emails after the contract ended
The loss of profit claim also failed. The owners corporation had not breached the contract and YBC’s appointment had not been terminated when it paid itself. It was YBC that repudiated the agreement, and the owners corporation was entitled to accept that and end it. Even if the termination had been wrongful, the manager would have had only a right to bring a claim. Nothing allowed it to calculate its own payout and pay that sum to itself.
The source of the money mattered too. It came from the maintenance fund, which is tightly controlled under sections 40 to 45 of the OC Act 2006. There was no maintenance plan and no special resolution authorising the payment, so it was contrary to the Act.
The duties every owners corporation manager owes you
Under section 122 of the OC Act 2006, a registered manager must act honestly and in good faith, exercise due care and diligence and not use its position to gain an improper advantage. The same section makes clear that money a manager holds for an owners corporation is held on trust, and the manager must account separately for each owners corporation’s money. It is not the manager’s money to borrow, mix or apply to a dispute it expects to win.
These statutory duties sit alongside the contractual duties in the management agreement, and the unlawful payment breached both. The Tribunal also found the conduct unconscionable under sections 20 and 21 of the Australian Consumer Law. Having found that, it did not need to decide whether the conduct was also misleading or deceptive under section 18.
When managers and directors can be held personally liable
This is the finding with the longest reach. The owners corporation did not only pursue the company. It pursued the people behind it.
Section 236 of the Australian Consumer Law allows a damages claim against any person knowingly involved in a contravention, not just the business itself. The Tribunal found YBC’s director, Stephanie Veneziano, and the registered manager appointed to run the owners corporation, Giovanni Veneziano, were the controlling minds and intentional participants. They prepared the unlawful invoice and removed the funds, which ended up in an account held by the director for the benefit of both. The corporate structure did not protect them.
For Committees, the takeaway is simple. A manager doing the right thing keeps clean, separate and reconciled records and never moves money without authority. If you are unsure whether your own books would meet that standard, an independent review is a low-cost way to find out, and it is exactly the kind of question our team is happy to talk through.
What this means for your owners corporation and Committee
Most managers do careful, honest work. The point is that financial oversight should be active, not assumed. Watch for:
- accounts that do not reconcile, or arrive late and incomplete
- fees being cut while the building’s costs are clearly rising
- payments to the manager the Committee cannot trace to a clear authority
- vague invoices for additional services that do not match the management contract
Any one of these may be innocent. Together they are the picture the Tribunal saw in this case. Good governance looks like regular, readable reporting to the Committee and funds that are held and reconciled correctly. Where something does not add up, getting independent eyes across the accounts early is far cheaper than reconstructing them later.
What transparent management looks like
At Strata Management Consultants, transparency is the point of good management, not an extra. Clear reporting, properly held funds and a Committee that always knows where things stand are the job. If your owners corporation is reviewing its current arrangement, or you want a second opinion on how your funds are handled, we would be glad to help.
Case discussed: Wyndham Harbour A2 Pty Ltd v Your Body Corporate Pty Ltd (Owners Corporations) [2019] VCAT 1710 (12 November 2019)
