Published: 18 May 2010.

Contributed by Frank Higginson of Hynes Lawyers

The position a committee takes on a matter can hold a fair degree of sway with owners. This comes by virtue of the nature of the title of their office. The reality (and danger) is that the appointment to that office can quite often come about without actual mandates from owners, election competition or any real qualifications.
When a committee and a resident manager begin a dispute, it is quite common for a fair proportion of owners to side with the committee based on the assumption that the committee simply must be right. If a committee alleges that a caretaker is in breach of their contract, then lot owners can sometimes take the committee’s side without giving a second, or any independent thought, to the matter.

Owners sometimes believe that as committee members are elected representatives that voluntarily give up their time to help administer the body corporate, why wouldn’t they be doing the right and proper thing? The unfortunate reality is that good decisions are not always made by those that hold positions motivated by non-financial gains (such as voluntary service on a committee).

We frequently see cases where a committee’s dispute with a resident manager is fuelled by a misunderstanding of the scope of the duties and the standard of maintenance expected of the resident manager under their management rights agreement. While these misunderstandings can usually be resolved by open dialogue and negotiations, some committees and their advisors think that the best option in these disputes is to simply go as hard as possible as early as possible and issue breach notices. In the management rights legal sector, the issue of a formal breach notice is about as serious a step as can be taken, as it can lead to the termination of the management rights agreement.

This matter was recently brought to our attention when we acted for a resident manager that was in dispute with a committee for just over a year and a half.  During this period our client was:

• issued with eight breach notices in the space of six months;
• the subject of numerous ‘information nights’ during which the committee would lecture lot owners on our client’s failings; and
• victimised by the committee and lot owners over most problems that arose with the scheme’s administration, irrespective of whether or not they fell within the scope of our client’s duties.

With your back to the wall and faced with such intense opposition, it would be easy to simply give up, which would lead to the termination of the management rights agreement. It could also lead to being pressured into unfair or uncommercial variations to the caretaking duties or the caretaking remuneration to resolve the issues.

The alternative is to fight back. Together with our client, we created a comprehensive litigation strategy to counter the committee’s aggressive position and to improve our client’s standing in the eyes of the lot owners.
At the recent conclusion of the matter, the end results were:

• all breach notices issued against our client were withdrawn;
• the attempt to terminate our client’s management rights agreements have been abandoned;
• an extension to the our client’s management rights agreement was passed by a huge majority of owners; and
• the committee and caretaker now enjoy a healthy working relationship. Incredibly, most of the same committee members still retain their positions on the committee, but have completely changed their views.

The moral of the story? Never ever give up! …and of course, make sure you get the right advice.

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