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Unauthorised spend on legal advice
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Ruffs
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13/02/2018 - 12:59 pm
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Hi,

I am an owner and have a question about a committee member’s actions. A lawyer has been engaged by the strata committee, voted on successfully at an EGM by all owners who is to act on our behalf for specific services related to a development. There is a cost agreement in place detailing the steps and related costs. 

A member of the committee took it upon themselves to meet with this lawyer, on their own, without discussion or approval from the Strata Committee. This person had a discussion on aspects of the development along with by-laws and insurance (we have another lawyer who has been engaged to write up and manage the by-laws). Additional documentation has also been sent to this lawyer to review. 

I have an issue with this, as this person has been aggressive to some owners and has caused a lot of friction within the Owners Corp. At no time were they asked in their capacity as a office bearer, let alone a stand alone owner to independently engage with this lawyer on the development issue, let alone by-laws that had already been voted on in previous meetings. The Strata Committee were shocked to receive an email outlining details of this meeting and proposed outcomes. Of course, the bill for the meeting ($1500) has been paid for out of the strata funds. 

What is the course of action for someone not complying with their duty as an office bearer? I am extremely unhappy that my funds have paid for a private, not-authorised meeting. If it weren’t for the long history of discourse I would let it go. However, I want to ensure this does not happen again to me or to any other owners.

I appreciate any advice. 

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Lady Penelope
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13/02/2018 - 1:59 pm
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Ruffs – From my understanding of your issue there has been an initial unauthorised meeting with a solicitor where a plan of action was mapped out for some sort of development. The plan of action, the schedule of ongoing costs, and the initial meeting cost were approved in a single Motion at your scheme’s last General Meeting.

Any owner within a scheme (including a Committee member) may obtain their own quotes at their own cost and submit their own Motions to the OC to be voted on at a General Meeting. 

It is important to note that the owner was not authorised by the OC to initially meet with the Solicitor and has therefore acted independently of the OC.

In my opinion the correct procedure would have been for the independent Committee member to have submitted 3 separate Motions for OC approval. 

One Motion should have sought OC approval for reimbursement for his own costs for the initial unauthorised meeting with the solicitor (i.e. $1500.00).

The other two Motions should have sought separate approvals for (1) the authorisation of the proposed plan, and (2) the proposed schedule of legal costs that occurred after the initial independent action.

In my opinion the 3 Motions should not have been combined together. The reason being that an owner, should they wish to do so, is not being provided the opportunity to vote differently on each of the 3 elements.  

The outcome may end up being the same as the majority of owners may have approved all 3 Motions but at least transparency and separation would have been achieved. 

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Ruffs
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13/02/2018 - 2:17 pm
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Thank you for your reply. Just for clarity, there were initial authorised meetings with the solicitor which involved a number of owners (always 3-5 and most included this office bearer), then the appointment of the solicitor (selection between 3) went to a SC Meeting and said solicitor was appointed, following this the costs proposal went to an EGM and was voted on and agreed to. This cost proposal did not include any private meetings between an owner and the solicitor. At this EGM the solicitor gave an overview of the proposed development process. Post the EGM the person concerned engaged and met with the solicitor independently to ask further questions about the development process and also seek ways to overturn by-laws that had been voted in at previous meetings. This person was an office bearer and subsequently had the treasurer pay the bill for the meeting even though they had never been directed to meet with the lawyer nor was this authorised/approved by the SC. 

Following the meeting an email was sent to all owners detailing the meeting. If a meeting was to be held with the lawyer, it should have been set up by the SC and all owners invited to attend. 

My question is what is the law around a SC Office bearer spending money from the OC funds on an independent unauthorised meeting for their own purposes? How can we retrieve the money – is there a section in the legislation to quote? How can we prevent this happening again? I suspect the treasurer is also at fault by paying the invoice out of OC funds without SC approval. Is this correct? 

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Lady Penelope
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13/02/2018 - 4:18 pm
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The amount of money reimbursed to the Committee member (who held the unauthorised meeting), by the Treasurer, falls within the limit that the Committee is permitted to approve. 

“If legal services:

  • will not cost more than $3,000, or
  • are urgent and will not cost more than $15,000, or
  • relate to obtaining legal advice before taking legal action, or
  • concern the collection of overdue levies,

the strata committee is able to approve those legal services: see section 103 Strata Schemes Management Act 2015 and cl 26 Strata Schemes Management Regulation 2016.”

(https://www.lookupstrata.com.au/new-rules-legal-services-nsw/)

The next question is: Did the Committee approve the reimbursement of the money via a Motion at a Committee Meeting, or did the Treasurer approve the re-reimbursement without seeking approval at a Committee meeting?

If the Committee approved the reimbursement then the member who was to benefit from the reimbursement should not have voted on the Motion, as they have a direct Pecuniary interest in the outcome. Schedule 2 – Section 18 

https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/ssma2015242/sch2.html

Check to see whether the Treasurer has been delegated the function of spending money by the OC. If he/she hasn’t been delegated this function then the Committee should retain this function – minus the voting input from the member with the pecuniary interest (as mentioned above).

Depending upon the number of people on the Committee who are attending the Committee meeting, if you vote NO and the member with the pecuniary interest is not permitted to vote then this may cause the Motion to fail.

Only the Committee or the OC are permitted to authorise the spending of money, unless this function has been delegated to a Committee member or a Strata Management Agent under SSMA 2015 [s13(1)(d)].

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Ruffs
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13/02/2018 - 6:13 pm
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Thank you. To answer your questions, no the committee did not approve the reimbursement, there was not motion nor voting on this. The treasurer paid the bill without seeking approval from the SC. The Treasurer has not been delegated to authorise spending without the SC approval. None of this was approved or authorised by the SC. Can I raise a motion at the next AGM to ask that this money be reimbursed as the meeting with the lawyer was not on behalf of the OC, not approved by the SC and the payment was not approved by the SC?

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Lady Penelope
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13/02/2018 - 8:03 pm
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Do you have a Strata Manager or is your scheme self managed?

In my opinion if you are on the Committee you can raise a Motion at the Committee Meeting as this problem does not really require an OC meeting to resolve it. You could also have it noted for the record that no decisions are to be made on any matter by any committee member without the authority of the committee.

If you are not on the Committee and are not confident that the Committee would Pass your Motion then you can raise a Motion and submit it to the Strata Manager and/or Committee for inclusion at the next General Meeting.

You may find that the Treasurer recognises his/her error and submits his/her own Motion in an endeavour to seek to have the reimbursement retrospectively approved.

The person who organised the unauthorised meeting may still get to retain the cost of the meeting if this problem is corrected by either a Committee vote or an OC vote.

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scotlandx
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13/02/2018 - 9:48 pm
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You should contact the lawyer and ask them on what basis they believed the meeting was chargeable to the OC – that is why you have a costs agreement.

And advise the lawyer in writing that they are not to meet with individual Committee members unless it is authorised by a resolution of the Committee.

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14/02/2018 - 9:37 am
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