NAT: Proper Authority to Commence Litigation – Authorising Strata Litigation

Commencing legal action and authorising strata litigation can be a daunting prospect for any body corporate or owners corporation. Beyond the stresses of the dispute itself, failing to adhere to the correct internal authorisation procedures can mean the fight is lost before it even begins. This essential webinar, presented by Michael Kleinschmidt, Partner & Legal Practitioner Director of Bugden Allen and a leading strata lawyer, delved into the critical steps required to properly authorise litigation, drawing on insights from recent case law. The focus was specifically on bodies corporate or owners corporations commencing litigation in New South Wales, Queensland, Victoria and Western Australia. Key questions addressed included the required level of approval, whether the venue dictates this level, and how to navigate urgent situations.

NAT: Proper Authority to Commence Litigation – how to avoid losing the fight before you even get started

Key requirements for authorising strata litigation by state

The requirements for authorising strata litigation and associated expenditure vary significantly between jurisdictions:

Western Australia (WA)

• For applications to the WA State Administrative Tribunal (SAT), which handles most strata disputes except debt recovery, evidence of authorisation from either the council of the strata company or a general meeting is required, usually in the form of meeting minutes stapled to the application.
• The WA Strata Titles Act 1985 has no specific provisions on the type of vote needed to authorise commencing or responding to legal proceedings.
• Authorisation of expenditure is a separate consideration. The council can authorise expenditure if it’s already budgeted. They can also authorise amounts above budget up to a certain limit depending on the scheme, but this requires specific advice. If legal expenses are not budgeted or exceed the council’s limit, an ordinary resolution of all lot owners at a general meeting (or a vote outside a general meeting) is required.
• The venue does not dictate the level of approval, but the evidential requirement for the SAT exists.
• Urgency: The council can authorise proceedings quickly. The main issue becomes authorising the necessary expenditure, which can be organised later, though timing is driven by fund availability. If the budget needs amendment or additional funds raised, the council must take steps to arrange this.

Victoria (VIC)

• Under Section 18 of the Owners Corporation Act 2006, an owners corporation must pass an ordinary resolution to commence civil proceedings for an amount not exceeding $100,000. This is common for debt recovery.
• For all other proceedings (civil over $100k, criminal/quasi-criminal), a special resolution (at least 75% of lot entitlements) is required, regardless of jurisdiction.
• If there is a failure to pass a resolution prior to commencing proceedings, there is an automatic stay of proceedings, but it doesn’t affect validity. Compliance with issuing a letter of demand prior to commencement is also required.
• To respond to litigation (as defendant/respondent), ordinary resolutions are usually required to engage solicitors and file defense documents.
• An owners corporation may delegate its authority to pass ordinary resolutions to its committee, manager, or chairperson via instrument or general meeting resolution. This delegation can be handy for urgent matters.
• Urgency: Commencing without the necessary resolution is a breach of the Act. VCAT will generally order the owners corporation to cure the breach and pay for consequential damage. If a committee or manager has appropriated delegated authority, they can make urgent decisions without needing later ratification.
• Owners corporations should take reasonable steps to cure errors or omissions promptly, adhering to obligations to act in good faith and exercise due skill and diligence.

New South Wales (NSW)

• The key requirement in NSW is authorising the expenditure on legal services under Section 103 of the Strata Schemes Management Act 2015, not necessarily authorising the commencement of litigation itself. This applies to all legal services, not just litigation.
• A resolution at a general meeting is generally required to approve legal services. A special resolution is not needed; a general meeting resolution suffices.
• There are exemptions from needing general meeting approval for spending:
  • Spending under $3,000 can be approved by the strata committee. Even below this, a committee resolution is suggested for a good paper trail.
  • Spending under $15,000 is permitted in urgent matters. Note the regulation increased the limit from $10k to $15k.
  • Obtaining advice before commencing legal action is exempt.
  • Recovering unpaid contributions (levies) is exempt.
• Crucially, Section 103(4) states that failure to obtain approval does not affect the validity of the proceedings. This provision specifically anticipates the need for urgent action without immediate spending approval.
• Venue does not affect these rules.
• Urgency: The $15,000 exemption and the non-invalidation provision allow urgent action. However, the strata corporation cannot sit on its hands; approval (even lower level) must be obtained and ratified promptly if the higher threshold was exceeded.

Queensland (QLD)

• The general rule under Section 312 of the Body Corporate and Community Management Act 1997 is that proceedings can only be started by special resolution passed at a general meeting. (Ignoring two-lot schemes where owner agreement suffices).
• The exception is for “prescribed proceedings,” which can be authorised by a committee resolution:
  • Recovery of a liquidated debt against an owner (e.g., unpaid levies).
  • Counterclaims, third-party proceedings, or other proceedings where the body corporate is already a party.
  • Proceedings for a bylaw contravention offense.
  • Chapter 6 proceedings (Commissioner’s office matters like adjudication, appeals, etc.).
• Authorisation of expenditure on legal costs is a separate stream of approvals and must be done according to normal spending rules.
• Venue generally makes no difference to the level of approval. However, settlement competency in ADR processes might require higher approval.
• Urgency: A committee resolution can authorise prescribed proceedings quickly. For proceedings requiring a special resolution, it’s common for the committee to pass a resolution to commence the proceedings subject to ratification at a later general meeting.
• The ratification must occur at a general meeting (unless unanimous consent is obtained in smaller schemes). This typically requires 30 days notice for a special meeting, though an application can be made to the Commissioner to shorten the notice period (e.g., to 7 days, resulting in a 14-day turnaround). The ratification meeting should be convened as soon as possible after the committee resolution.
• There can be significant consequences if the ratification fails. If the first court date falls before the ratification meeting, an adjournment may be needed. Judges often grant adjournments if processes are being followed promptly.
• It is vital to authorise the expenditure separately; passing a resolution to commence proceedings does not automatically authorise the funds needed.

Practical Takeaways and Tricks for Success When Authorising Strata Litigation

Several practical tips when approving strata legal action emerged from the discussion:

• Prior Preparation: It is strongly recommended that all strata companies include an amount for legal fees in their annual budget. This provides the council or committee flexibility to authorise expenditure without needing a general meeting, especially if issues arise unexpectedly. This is a case of “prior preparation and planning prevents poor performance”.
• Maintain Excellent Records: Committees should maintain detailed minutes of all resolutions related to legal proceedings. This creates a strong paper trail, making it difficult for opponents to attack the body corporate’s or owners corporation’s process.
• Be Aware of Procedural Attacks: Opposing lawyers may attack the body corporate’s or owners corporation’s processes rather than the merits of the case, especially in complex or novel litigation. Following the correct procedures is vital to prevent this.
• Increase Spending Limits (Where Possible): Consider seeking authorisation via ordinary resolution at a general meeting to increase the committee’s spending limit for legal matters, particularly if anticipating disputes.
• Act Quickly in Urgent Matters, But Follow Up: In genuinely urgent situations, the committee should make a decision to proceed as quickly as possible, engage lawyers, and immediately initiate the necessary ratification process (e.g., calling an EGM) where required by the state’s legislation. Judges understand urgency but expect the body corporate or owners corporation to show it acted in good faith and is promptly curing any procedural deficiencies.
• Get Legal Advice Early: Obtaining legal advice before commencing legal action is crucial. It helps ensure the body corporate or owners corporation acts appropriately and understands the potential outcomes and risks.
• Guard Legal Privilege: Be extremely careful not to circulate legal advice to lot owners who are the opposing party in legal proceedings. This is a common mistake that can be severely prejudicial.
• Litigation is a Tool: Litigation is described as a tool, like any other, that should not be overused or underused. While expensive and emotionally draining, it may be necessary. Be aware that some opponents may try to exploit the cost and difficulty of litigation.
• Authorise BOTH Commencement and Expenditure: Remember that in some states (like QLD), the authorisation to commence proceedings and the authorisation to spend money on those proceedings are separate requirements. Both must be properly obtained.
• Proactive Strategy: In some ongoing situations (like dealing with neighbouring developer impacts), a proactive approach involving early authorisation of potential litigation can actually help achieve a negotiated settlement on better terms and potentially avoid the need for court action altogether.

Conclusion

This webinar provided a comprehensive overview of the procedural hurdles involved in authorising strata litigation, emphasising that getting the authorisation process right is fundamental to successfully pursuing or defending a case. Committees are encouraged to use this information as a starting point and seek specific legal advice tailored to their scheme’s circumstances and location.

Michael Kleinschmidt
Bugden Allen
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280

Resources Mentioned

• Qld case: Body Corporate for Oceana on Broadbeach CTS 24163 v 21 Broadbeach Blvd Pty Ltd [2025] QSC 68
• NSW Case: 2 Elizabeth Bay Road Pty Ltd v The Owners – Strata Plan No 73943 [2014] NSWCA 409 (5 December 2014)
• Vic case: Burbank Australia Pty Ltd v Owners Corporation [2015] VSC 160 (29 April 2015)

Presentation slides

Download the slide pack: Proper Authority to Commence Litigation – how to avoid losing the fight before you even get started

This post appears in Strata News #742.

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