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  • #55469
    The Hood
    Flatchatter

    The owners corporation is responsible for the management of the strata plan.
    Does the management of the strata plan extend to the OC raising money at AGMs, via the levy, to donate to (unconnected to the OC) third party organizations?
    Put another way does the management of the SP extend to who the owners will donate money to and how much?

Viewing 9 replies - 1 through 9 (of 9 total)
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  • #55477
    Jimmy-T
    Keymaster

    This is an interesting question and the strict interpretation of strata law might be that if donations aren’t in the annual budget, or a requirement of by-laws, then they shouldn’t be made.

    Section 73 (4) of the Act, says on Admin funds (my emphasis):

    (4) Amounts payable from fund

    An owners corporation may pay money from its administrative fund only for the following purposes—

    (a)  payments of the kind for which estimates have been made under section 79 (1),

    and

    (d)  other payments in connection with exercising its functions under this Act or the by-laws …

    My building recently made a contribution to a “fighting fund” which was part of a campaign to allow owners corporations to pass and enforce by-laws without them being overturned in court as being discriminatory because one person or a minority disagreed with them.

    The politics behind this are irrelevant (if widely publicised) except that it engendered strong opinions on both sides, with some people seeing the campaign as re-establishing our right to run our buildings as we see fit while others saw it as an attempt to by-pass the checks and balances that the law provides.
    As far as I know, this was not in the budget, and neither was there a provision for such payments to be made generally, nor a by-law that allowed the committee to make these contributions.  So was it part of the scheme ‘exercising its functions’?
    I think this is something that all schemes should consider and establish protocols for its management.  Would it be OK for a committee to provide election funding for a specific candidate or party in a local election? Is installing solar power which would not pay for itself for several years, if ever, be a valid function because it’s contributing to efforts to curb emmissions?
    Personally, I think contributions should be allowed, as and when required,  but the strata committee should poll owners first, even informally, to see if they were happy that their money was being spent this way.  Surely keeping the community engaged and happy is one of the functions of the strata scheme.

    • This reply was modified 2 months, 3 weeks ago by .
    #55485
    webman
    Flatchatter

    Personally, I think contributions should be allowed, as and when required, but the strata committee should poll owners first, even informally, to see if they were happy that their money was being spent this way. Surely keeping the community engaged and happy is one of the functions of the strata scheme.

    Actually, surely the OC should not be “donating” funds to anyone, for any reason. If ALL the owners are in agreement with some fundrasing campaign, then they should all individually donate. If even *one* owner does not approve the donation, then it should (must) not happen.
    BTW, who (if anyone) gets the tax deduction benefit of the OC making the donation? AFAIK, the OC doesn’t pay tax, so no benefit there, perhaps all OC members might get a statement on their levies notice advising them of their portion of the donation, and could claim that individually, though I doubt the ATO would be impressed with that.

    So, simple solution, the OC should never make a donation, it should only pay for goods or services that are required for the maintenance of the SP (building and related services).

    Just my opinion.

    #55510
    The Hood
    Flatchatter
    Chat-starter

    I get the impression the following case law is a big no to donations.

    The donation motions I refer to are on the agenda for AGMs, have been for over 10 years, always passed close to unanimously by the 33% of owners who attend such meetings and the interesting part is because the donation is to be paid from a trust fund the money is often never expended because the organizations involved will (rightly) not invoice the OC for a donation.

    Anyway the Courts and Tribunal have said the following:

    In Humphries v Proprietors Surfers Palms North Group Titles Plan 1955 (1994) 179 CLR 597 at 613 (McHugh J):
    “Section 32 authorizes the body corporate to levy contributions from the proprietors. They are to be paid into an administrative fund and a sinking fund (s. 38). Moneys are not to be disbursed from those funds except to meet the liabilities incurred by the body corporate in performing its duties and functions or exercising its powers and authorities under the Act (ss. 38, 38A).”
    A Qld matter but the sections are equivalent to those found in NSW’s SSM Act.

    In Lawson & Clarke v Owners Corporation SP 61788 (Strata & Community Schemes) [2011] NSWCTTT 270 (27 June 2011):
    “77. The payment of money by the Owners Corporation to a third party in circumstances where the Owners Corporation has not received any benefit in return cannot be regarded as being in the interests of all of the lot owners.
    80. I am not satisfied that the Owners Corporation in general meeting had any power to agree to pay a very large sum of money to a third party in respect of a matter that was not of the making nor for the benefit of the Owners Corporation. Resolution 3 passed at general meeting on 12 March 2010 is therefore ultra vires the powers of the Owners Corporation.”

    In APX Projects Pty Limited v The Owners – Strata Plan No. 64025 [2015] NSWSC 1250, (Slattery J):
    16. “
    Part 3 of the Management Act requires that owners corporations generally must establish two types of funds: an administrative fund: s 66; and a sinking fund: s 69. The purpose of the administrative fund is for the owners corporation to make certain payments that are administrative and recurrent in nature. Examples of such payments are those made for recurrent expenditure as insurance, water charges and electricity charges; payments to members of the corporation’s executive committee in accordance with the Management Act; and payments in connection with carrying out the owners corporation’s functions under this Act or the by-laws: ss 66, 75(1). In contrast the purpose of the sinking fund is for the owners corporation to make payment of expenses that are capital in nature. For example, for painting or repairing the common property, to acquire personal property, or to renew or replace fixtures that are part of the common property: s 75(2).”

    Does the management of the OC extend to levying money for donations? An NCAT application has been lodged so we will see what they say.

    Personally I think who people donate money to and how much has nothing to do with the management of a strata scheme. It is not a function or duty of the OC to control and when there is no direct, or even indirect benefit, then the concept really struggles to have validity.
    I will post the outcome once the matter is decided.

    #55725
    Jimmy-T
    Keymaster

    Just a thought.  Working on the basis that any payment that isn’t of direct benefit to the owners corp, albeit made in misguided good faith, what do you do?  Ask the committee to ask for the money back or just ask those who voted in favour of the contribution to refund the money?  Or just tell them to let it go and don’t do it again?

    #55726
    webman
    Flatchatter

    Just a thought. Working on the basis that any payment that isn’t of direct benefit to the owners corp, albeit made in misguided good faith, what do you do? Ask the committee to ask for the money back or just ask those who voted in favour of the contribution to refund the money? Or just tell them to let it go and don’t do it again?

    I would think that similar to any other illegal or improper payment, it should be reversed. Though I’m not sure how the recipient would handle refunding a donation.

    Perhaps it would be easier to have those units who voted for the donation to re-imburse the OC, which would solve both problems (avoid the OC making a donation, and those people who wanted to donate money would be suitably out of pocket).

    If the amount was small enough (and this amount would vary for each person involved), then it could be “ignored” and some commitment that it would not recur.

    #55727
    Richard dApice
    Flatchatter

    Ultimately, the donation must have been made by the Managing Agent (if there is one) and he can be presumed to know that he was paying it wrongfully, unless he can prove otherwise.

    Similarly a Managing Agent who pays for legal services in breach of section 103 can be presumed to know that he was paying it illegally, unless he can prove otherwise.

    In each case the Managing Agent should repay monies he has paid out of the trust account without authority whoever else may be liable.

    #55730
    Jimmy-T
    Keymaster

    I guess the answer is, if the committee or chair or whoever believes the owners might want to contribute, the legal way to do so is to invite them to add to a special fund individually.  Nothing wrong with using the offices of the owners corporation to contact owners for these purposes.  At least that way people would have the choice not to support  a movement with which they disagreed.

    #57161
    The Hood
    Flatchatter
    Chat-starter

    Just to wrap this topic up.
    The OC in question got taken to NCAT over the motions and now there is an order from Member Vrabac that says the donation motions are what is termed ultra vires, i.e. beyond the capacity of the OC to make.

    The order says:
    That pursuant to s 24 of the Strata Schemes Management Act 2015 the resolution of motions 16, 17 and 18 of the AGM of 30th of January 2021 are invalidated as the motions are ultra vires.

    Motions 16, 17 and 18 were all to raise money to donate to various organisations.

    Over the last 10 years the OC in question had raised over $8000 to donate.
    If you want to donate money, pass a hat around.
    It is not for a general meeting to ‘dictate’ to owners who the owners will donate money to or how much.

    • This reply was modified 2 weeks ago by .
    #57168
    TrulEConcerned
    Flatchatter

    As most of us know, NCAT members can rule differently on the same matter. You mention Member Vrabac.

    For what it’s worth, I have been to NCAT a few times (mostly about consumer issues but also strata) and remember some of the Members who presided over my cases.

    I recall two in a favourable light inasmuch as they were very fair, extremely attentive to details and were – from the point of view of a layman like me – as Americans are fond of saying, as honest as the day is long (i.e. they were very honest). I remember in the case which I won, my opponent at the time (a corporation) did not appeal the Member’s decision, presumably because they could not find he made any errors. (Others may  argue that they did not appeal because the time and money spent appealing exceeded the sum for which they were found liable).

    Member Vrabac is one that I recall favourably, so I would hold his judgement in high regard.

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