Stata Managers – what constitutes a valid appointment?

Author: Amit Kumar

The decision in Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2023] NSWCA 125 has raised questions about the legitimacy of strata manager appointments. In this case the NSW Court of Appeal demonstrates unequivocally the Court’s preference to protect the rights of lot owners to select their own strata administrators for their own strata scheme.

Facts

There were eight properties that made up the Wharf in Woolloomooloo’s Finger Wharf Development. Then, seven of these properties were involved in a subdivision which resulted in the formation of seven distinct strata schemes. The applicant in this case, Walker Corporation Pty Ltd, is the owner of properties in two of these strata plans. Effectively, a Strata Manager is responsible for the Building Management Committee and is essential in ensuring the development is properly managed.

Issue

The disagreement commenced when three owners’ corporations chose Strata Choice Pty Ltd to take over as their strata managing agent in place of McCormacks NSW Pty Ltd.

Clause 8.11 of the Strata Management Statement states that every owners corporation must designate and maintain the same strata management agent as the one designated by the Building Management Committee.

In particular, clause 8.11 of the Strata Management Statement reads:

Obligations of Owners Corporations

8.11 Members which are Owners Corporation must, after the expiry of the initial period for their Strata Schemes, appoint and retain under section 28 of the [Strata Schemes Management Act 1996 (NSW)] the same Strata Manager the Committee appoints under this clause.

Applicable legislation

Considering the fact the Strata Management Statement was outdated, the current piece of legislation which is equivalent to Section 28 of the Strata Schemes Management Act 1996 (NSW) is Section 52(1) of the Strata Schemes Management Act 2015 (NSW). This provision is also contained in the strata schemes bylaws, mandating that the strata schemes name the same strata manager as the one designated by the Building Management Committee.

Decision

On appeal the applicant was unsuccessful. The judgement provided that without express authorisation from the Strata Schemes Management Act 2015, the Owners Corporation is not permitted to assign its responsibilities. Only resolutions passed at general meetings authorise delegation. These clauses make it clear that the Owners Corporation is ultimately in charge of overseeing the strata plan, including the right to assign duties for the benefit of lot owners.

Section 105(5) of the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015 are conflicting with Clause 8.11 of the Strata Management Statement. According to Section 105(5), a strata management statement is inapplicable if it conflicts with orders issued under the Strata Schemes Management Act 2015, conditions of the building site's planning approval, or other relevant laws.

Conclusion

The Court of Appeal determined that the Strata Schemes Development Act 2015 does not authorise Clause 8.11. The functions of the Building Management Committee and the statutory concept of a Strata Management Statement as a management statement ‘for the building and its site’ does not include a takeover of management and all the functions that an owners corporation may assign to a strata managing agent.

This case emphasises how crucial it is to ensure that strata management statements comply with the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015. The management of the strata plan is primarily the responsibility of the owners corporations, and the lot owners stand to gain from the use of their delegation powers. Therefore any clause in a Strata Management Statement that eliminates the owners corporation's ability to select a strata management agent and, if required, to terminate that agent's services is likely to be in conflict with the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought seperately before taking any action based on this publication.