Question: An AGM approved a painting quote, but the committee signed a contract for more work that exceeds its spending limit. Can it do that?
At our AGM, a motion was passed to accept a quote to paint specific units in our complex.
Can the committee lawfully enter into an agreement or contract that goes beyond the approved scope of work and quote, and also exceeds the committee spending limit?
We sent a Form 12 to the body corporate manager requesting a copy of the contract, but they advised there was no record of it. We then sent a Form 12 to the committee secretary, without success.
What could the consequences be?
Answer: A committee must put into effect the lawful decisions of the body corporate, so going beyond an AGM-approved quote or exceeding its spending limit may be a contravention of the legislation.
Section 101(2) of the Body Corporate and Community Management Act 1997 provides that ‘the committee must put into effect the lawful decisions of the body corporate.’
So, if the committee are going beyond the decisions made by the body corporate, then on the face of it, they’re in contravention of this section of the legislation.
If the committee spending limit has been exceeded, then that too is a contravention of the legislation.
If there’s no record of the contract, again, that may be a contravention of the responsibility of the body corporate to maintain certain records.
What are the consequences? Well, any works that may have been commenced, or about to commence, may be stopped (e.g., on order of an adjudicator). This in turn might cost the body corporate additional expense. For the committee, they are only protected from individual liability if they act in ‘good faith’. While we’re not able to provide a legal opinion, we struggle to see how committee members, exceeding their spending limit and acting outside what the body corporate lawfully decided, could be seen to be acting in good faith. Another consequence is that owners, once they learn of these apparent contraventions and their consequences, may lose confidence in the committee’s ability to perform its role. In our experience, that leads to the 3 ‘Dis’-es: distrust, disharmony and dispute. None of these is ever good for a scheme.
We think the committee ought to be made aware of these risks, and be given a chance to rectify them. If they decline, you may need to consider an application to the Commissioner’s Office, and potentially a motion at a general meeting to remove some or all of the committee. We also recommend seeking qualified legal advice, given we’re discussing contractual matters.
This is general information only and (obviously) not legal advice.
This post appears in Strata News #815.
Chris Irons
Strata Solve
E: chris@stratasolve.com.au
P: 0419 805 898
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