Finger Wharf Rebels
Walker Corporation Pty Ltd v The Owners - Strata Plan No 61618 [2022] NSWSC 1246
In short
A provision in an SMS requiring member owners corporations to engage the same managing agent as the BMC’s agent, is void for uncertainty.
A by-law purporting to bind the owners corporation to engage the same managing agent as the BMC’s agent, is void for uncertainty.
Background
The case concerns a dispute in the Woolloomooloo ‘Finger Wharf’ about the appointment of a strata managing agent and a building management committee agent. The procedural facts are complex but can be simplified for immediate purposes.
The Finger Wharf is comprised of 8 lots in the form of 7 strata plans and a stratum lot, under leasehold. Each of the strata schemes has an owners corporation and consists of common property and lot property. A hotel operates from the stratum lot.
The registered Strata Management Statement governs the management of the Finger Wharf. The Building Management Committee members are the 7 owners corporations, the leaseholder of the hotel stratum lot and TfNSW as the registered proprietor of the fee simple lot.
An article (clause) in the SMS provides that each owners corporation is to appoint as its strata managing agent the same managing agent appointed as the BMC’s managing agent. That position had existed without issue for two decades and the BMC and owners corporations were previously each represented by Manager A.
In 2022, three of the owners corporations, at general meeting, each voted to appoint Manager B as their strata managing agent. Those owners corporations are referred to in the judgment as the Rebel schemes.
The SMS requires the owners corporation members’ by-laws to ensure that those by-laws conform to the SMS. Two of the Rebels had by-laws requiring the owners corporation to appoint the BMC’s managing agent as its agent.
The plaintiff owns lots in each of the Rebel schemes.
Issues
The plaintiff sought to maintain the validity of the SMS article and challenged by-laws, essentially seeking Manager A as the one common agent. In a cross claim, the Rebels sought relief that would find the SMS article not binding, or if binding, invalid. The two Rebels with by-laws in similar terms sought to invalidate those by-laws.
The issues for determination were essentially:
Whether a Strata Management Statement can validly require the Building Management Committee owners corporation members to appoint, as their strata managing agent, the BMC’s appointed agent.
Whether a by-law can validly require the owners corporation to appoint the BMC’s agent as its strata managing agent.
By-law
Uncertainty: The by-law requiring the two Rebel schemes to appoint the BMC’s managing agent was held to be void for uncertainty, largely in reliance on the terms of any such contractual arrangement being unknown, in particular to matters of remuneration, the agent’s consent to enter into the agreement, and the scope of the functions (if any) to be delegated to the agent.
The Court nonetheless addressed the second and third points.
Ultra Vires: The by-law was suggested to be ultra vires (beyond power) because the appointment of a strata managing agent was not a matter of management or administration of the common property or lots for the purposes of section 136(1) of the Act. That reasoning, in reliance on Cooper in the Court of Appeal, rested on the lots and common property being considered as property.
Inconsistency with statute: It was suggested that the obligation on the owners to vote in a particular manner (to appoint the BMC’s agent) was inconsistent with other provisions of the Act.
SMS article
The provision in question reads:
8.11 Members which are Owners Corporations must, after the expiry of the initial period for their Strata Schemes, appoint and retain under section 28 of the [1996] Management Act the same Strata Manager the Committee appoints under this clause.
Uncertainty: The Court found that the reasoning on uncertainty equally applies to the SMS. The SMS article was held void for uncertainty.
The Court continued for completeness with the remaining points.
Ultra Vires: The Court suggested that the limitations in Schedule 4 of the Development Act required the scope of an SMS to be in respect of the management of the building and its site (such as its shared facilities) and other “particulars” (such as an architectural code and a managing agent).
Inconsistency with statute: Article 8.11 was found to be inconsistent with a number of provisions of the Management Act: ss 10(2), 49, 72, 237 and owners’ voting rights secured by the Act.
Miscellaneous
Section 260 of the Act did not render a chairperson immune from joinder.
Postscript
The decision was appealed to the NSW Court of Appeal and subsequently dismissed: see appeal case note.