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This year has undoubtedly seen 2 interesting and important decisions handed down by the Supreme Court of New South Wales in relation to the appointment of compulsory strata managing agents.

Here is a summary of the 2 decisions.

Tan v The Owners – Strata Plan 22014 [2014] NSWSC 1660 (19 November 2014)

The main issues before the Supreme Court of NSW were whether:

(a) orders of the NSW Civil and Administrative Tribunal appointing a compulsory strata managing agent displaced the power of the executive committee to appoint a solicitor to act for the owners corporation; and

(b) a resolution of the executive committee of the owners corporation purporting to authorise the retainer of the solicitor, (who entered an appearance for the owners corporation, and who, as solicitor for the owners corporation, signed the consent orders that day) was void and of no effect.

The fourth defendant in the Supreme Court proceedings contended that the solicitor had no authority to agree to the orders, and that the orders were made “against good faith” or “in the absence of” the owners corporation.

In this case, the Tribunal made an order appointing a compulsory strata managing agent to exercise all of the functions of the Chairperson, Secretary, Treasurer and Executive Committee for 24 months. However, 2 lots owners subsequently attempted to challenge the appointment of the compulsory strata managing agent and commenced Supreme Court proceedings seeking orders that they (the plaintiffs) be authorised to use the name of the owners corporation in filing and prosecuting an application for leave to appeal and appeal with and in the Supreme Court against the decision of NCAT.

Subsequently, the Tribunal Member that determined the compulsory appointment either amended his earlier order, or made a further order in lieu of that order which was in the same terms as the previous order save that the reference to section 162(2)(a) of the Act was changed to s 162(1)(b). The problem was the Tribunal Member did not “specify” any functions as required by s162(1)(b). The compulsory strata managing agent took the view that the effect of this omission was that the Tribunal Member’s orders no longer had any effect. The 2 lot owners referred to above also took the same view.

Next, the executive committee purported to resolve to appoint a solicitor “to represent the Owners Corporation in the Supreme Court proceeding in trying [sic] to settle the matter if possible”. After all this, the Tribunal Member made a further order which did “specify functions” and which was evidently intended to cure such problems as may existed with the previous order.

The Supreme Court of NSW made a number of orders which included an order that that the owners corporation and third defendant be restrained from making any payments to the plaintiffs.

It will be interesting to see whether or not the Supreme Court of NSW will declare the executive committee’s resolution to be void and of no effect.

Xabregas v The Owners – Strata Plan No 79205; Moallem v Consumer Trader & Tenancy Tribunal (No 2) [2014] NSWSC 1027 (31 July 2014)

In that case, the compulsory strata managing agent instructed the lawyer to commence legal proceedings in the owners corporation’s name against the lot owners. The owners corporation lost. Remarkably, the Supreme Court decided that the compulsory strata managing agent should bear the legal costs of both the owners corporation’s lawyer and the lot owners who won the case.

The Supreme Court of NSW decision has the following implications for compulsory strata managing agents:

1. Compulsory strata managing agents should exercise care when commencing proceedings in the name of the owners corporation against lot owners.  It’s best to seek legal advice sooner rather than later.

2. Compulsory strata managing agents should ensure that they have adequate insurance cover for any personal costs order that may be made against them.

Please note that the information contained in this article is for information purposes only. It is not legal advice and should not be relied upon. You should obtain legal advice before you take any action or otherwise rely upon the contents of this article.