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09/02/2012 at 9:41 am #7898
Can an EC seek legal advice and/or commence legal action on its own authority or does it require the approval of a general meeting?
09/02/2012 at 11:50 am #14692
As with most things in Strata, the answer is never as simple as yes or no. You have to look at the Act, then the Regulations and what you get is that you don't need a General Meeting to approve legal action if the estimeted cost of the action is less than $1000 per lot or $12,500 in total – unless the legal action is to recover unpaid levies. There are other complications but that covers most possibilities.
The reason pursuing unpaid levies is exempt is that the defaulter becomes liable for all the costs associated with recovering the debt. The reason the limit is so low – $12,500 for any developments of over 13 lots – is depending on which side of the customer-developer divide you sit – either to prevent litigation mad ECs frittering away the life savings of poor unprotected retirees OR making it almost impossible to force bodgy developers to deliver to new home owners anything resembling what they paid for.
Anyway, this is what the Acts says (but remember, it's subject to the regulation):
80D Legal action to be approved by general meeting
(1) An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action.
(2) The regulations may make provision for or with respect to exempting any type of legal service or legal action from the operation of this section.
The Regulations (2010) say:
15 Exemptions from need for approval for certain legal action
(1) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed:
(a) an amount equal to the sum of $1,000 for each lot in the strata scheme concerned (excluding utility lots), or
(b) $12,500, whichever is the lesser.
(2) In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been:
(a) disclosed by the Australian legal practitioner concerned in
accordance with the Legal Profession Act 2004, or
(b) set out in a proposed costs agreement under that Act, the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out.
(3) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if its purpose is to recover unpaid contributions and interest under section 80 of the Act.09/02/2012 at 12:49 pm #14695
What about making an application by an EC to the CTTT under Section 183A of the SSMA to, in effect, overturn a decision of a previous EGM?
I have some advice that general meeting approval is required in such circumstances.09/02/2012 at 3:14 pm #14697
183A refers to “Orders relating to caretaker agreements”. Only the Owners Corporation can challenge a caretaker agreement BUT unless a general meeting of the Owners Corporation over-rules the Exec Committee, the EC's decisions are taken as being the OC's.
I may be wrong – and I hope someone corrects me if I am – but provided the cost of the legal action is less than $12,500 (or $1,000 per unit, whichever is less) the EC can get legal advice for a challenge on the Caretaker Contract. However, if a General Meeting is called that tells the EC not to take action, then it can't.
09/02/2012 at 10:10 pm #14708Sir HumphreyStrataguru
In the ACT the Act is very similar. The EC has a limit but latitude within that. Recently we have spent a very small amount to initiate an ACAT (CTTT equivalent) dispute because an owner has not complied with an 'Articles Infringement Notice' (they don't want to remove something they constructed on common property even after having it all explained nicely, then more formally).
We spent rather more (within the limit) on legal advice when it became clear that some owners were putting a motion to oppose the EC's decision to spend money on remedying a significant safety risk caused by a defect on the common property that had caused damage to private property. Having written answers from a lawyer to every question we could think one might ask about the matter made for a much more pleasant AGM than we might have had.
We also got legal advice when a different group of owners objected to an EC decision and took us to ACAT. We we genuinely unsure if certain parts of their argument were valid (some of it was, some was not). Again the legal advice was important and useful.
All this is rather new to us and we feel it is forced on us because we are trying to be competent and make a difference rather than muddling along and backing down at the first sign of resistance, the latter approach having caused many of the issues we are now dealing with.10/02/2012 at 10:33 am #14710
I have received some advice that when the NSW Parliament passed the amendment to the Act that is now Sect 183A, the Minister at the time made it clear in his speech to Parliament, recorded in Hansard apparently, that under no circumstances could action be taken by an OC under Sect 183A without general meeting approval.
Can anyone confirm this advice and if so, does that mean that unequivocally, general meeting approval must be first obtained by an EC prior to making an application to the CTTT?10/02/2012 at 2:13 pm #14711Anonymous
I hate myself for saying this JWBB and everyone who has posted on this topic but: You better get a lawyer, son. You better get a real good one. (As Tex Perkins might say.) And act now. In the final analysis free advice is worth what you pay for it in a scenario like this.10/02/2012 at 4:41 pm #14712
Sounds like good advice Unexpected … but isn't getting legal advice what the question was in the first place?
That would be one of them Catch-22s.11/02/2012 at 12:29 am #14715AustmanFlatchatter
So it comes to: Does the EC need to seek legal permission to find out if it can seek legal permission?
In Victoria, the Committee (EC) can represent the OC in all ways except where the OC Act says it can't.11/02/2012 at 8:04 am #14720Anonymous
Jimmy, I venture to suggest the initial phone call to one of Flat Chat's venerable expert strata lawyer contributors would elicit the advice, free, as to whether an EC could “seek legal advice and/or commence legal action on its own authority or does it require the approval of a general meeting”, wouldn't you think?11/02/2012 at 11:34 pm #14728Sir HumphreyStrataguru
Yes, phone a lawyer and say, “we are interested in engaging you for some advice but we first need to know if you are allowed to do so”. I'd be surprised if you did not get the answer to the question for free!12/02/2012 at 11:41 am #14729scotlandxStrataguru
We (EC) have done this – the EC resolved to take legal advice when an owner threatened to take legal action against us. We were within the scope of the Regulations so that is/was fine, you need to get a costs agreement from the solicitor at the outset. Preliminary legal advice should cost well under the amounts set out in the Regs and then the solicitor can advise you from there as to what steps you need to take to ensure you comply with the legislation.
In our case we monitored the costs being incurred and put a motion to the next AGM in relation to the legal services that was passed, as the matter is ongoing.
It would be ridiculous if the EC couldn't do this as otherwise it would be in a position where it would not be able to respond to a legal letter or any threatened legal action. Note that there is a difference between getting legal advice and taking legal action. Taking legal action is pretty serious and can cost a lot of money, and an EC would be ill-advised to resolve to do that at EC level.
In this case it seems you want to overturn a resolution approved at a GM and that is different. I believe that you should go back to a GM, as the EC can't override that decision. Query whether it would be appropriate for the EC to seek legal advice in those circumstances. Another option is for specific owners to make an application to the CTTT, as distinct from the EC, the members of the EC can do that in their capacity as owners. You don't need GM approval for that.12/02/2012 at 1:18 pm #14730
Unexpected Leigh said:
Jimmy, I venture to suggest the initial phone call to one of Flat Chat’s venerable expert strata lawyer contributors would elicit the advice, free, as to whether an EC could “seek legal advice and/or commence legal action on its own authority or does it require the approval of a general meeting”, wouldn’t you think?
Hey, Leigh, didn’t you also say: “In the final analysis free advice is worth what you pay for it in a scenario like this.”
Just kidding. In any case, you probably don't need to make that call – as I said before, the Act and Regulations are quite clear, there is a limit of $1000 a lot or $12,500 per strata plan, whichever is less, before the EC has to ask a general meeting for approval.
Section 15 of the regulations also waives the need for a General Meeting approval if the estimated costs of legal action are provided under the terms of the Legal Professions Act 2004.13/02/2012 at 2:48 pm #14741Anonymous
Well I'd be phonin' a lawyer first before spending' the OC's twelve grand, laddie, and I'd hope my EC wold be doin' the same. You said, yourself, “As with most things in Strata, the answer is never as simple as yes or no” Etc.14/02/2012 at 6:58 pm #14758scotlandxStrataguru
There are two separate issues here:
1. as a general rule can the EC seek legal advice without the approval of a general meeting – yes, provided it comes within the ambit of the regulations, e.g. the costs are under a certain amount.
2. can an EC seek legal advice/take legal action to overturn a caretaker agreement under section 183A which has been approved by the OC at a GM? No it can't, because the agreement has been approved by the OC. If an EC tried to take legal action it would be seeking to circumvent that resolution and would be spending that money for an improper purpose. If the EC could do that they could interfere with all decisions made by the OC at a GM.
You need to go back to a GM or individual owners should make an application to the CTTT.
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