This article discusses strata Christmas party spending liability rules and the approval and insurance risks involved.
Question: Our Executive Committee held Christmas drinks without approval for the spending. A resident had too much alcohol and vomited on the common property. What can be done about the unapproved spending and any liability in these circumstances?
The Executive Committee in our NSW Strata Plan hosted Christmas drinks for all residents on the common property. This was funded by the Owners Corporation, however no permission to spend our funds was ever asked or given.
At the event, a resident had too much alcohol and vomited on the common property. What are the Responsible Service of Alcohol rules for Owners Corporations in NSW? What if this resident had fallen and needed, say, $20,000 worth of dental work? Would ALL owners be responsible for the costs and legal implications associated with this? Surely insurance wouldn’t cover this type of accident. Would we be best to have a bylaw that covers something like this?
Answer: If a majority of owners disagree about having a Christmas party they can call a general meeting and reverse the strata committee’s decision and they can impose restrictions on what decisions the strata committee can make and how it spends the owners corporation’s money.
This problem touches on various areas of the law: liquor licensing, strata law, public liability (also known as the law of negligence) and insurance.
The Liquor Act 2007 generally only requires premises to be licensed if liquor is for sale and does not require to be licensed premises where a private party is conducted and liquor is supplied to guests free of charge. So, a private Christmas party hosted by an owners corporation should not require a liquor license. However, the Liquor Act 2007 does create offences such as supplying liquor to minors regardless of whether this occurs on premises that must be licensed or not.
The Strata Schemes Management Act 2015 regulates what an owners corporation can and cannot do. It does not confer an express statutory power or function on an owners corporation to hold social functions such as Christmas parties. However, an owners corporation has the principal responsibility for the management of its strata scheme and this includes the management and control of the use of its common property and the administration of its strata scheme.
It is arguable that an owners corporation organising social activities such as a Christmas party is conducive to the owners corporation carrying out those functions and, in practice, many owners corporations engage in promoting social activities that enhance their communities. Should there be doubt about the ability to do so, it is also possible to pass an empowering by-law to authorise the owners corporation to organise those social activities. A decision to have a Christmas party, however, should be the subject of a properly worded resolution of either a strata committee meeting or general meeting. If there is no such resolution, then there is no authority to spend an owners corporation’s funds on a Christmas party.
If a majority of owners disagree about having a Christmas party then under the Strata Schemes Management Act 2015 they can call a general meeting and reverse the strata committee’s decision to hold a Christmas party and they can impose restrictions on what decisions the strata committee can make and how it spends the owners corporation’s money.
As the occupier of premises being the common property where the Christmas party is held, the owners corporation is under a common law duty to take reasonable case to ensure that guests are not injured and this probably extends to taking care that guests don’t injure themselves because they are drunk. To discharge the duty, the owners corporation should have something like a responsible service of alcohol policy and choose an area that it suitable for the party. If the owners corporation breaches that duty and a guest is injured because say they are drunk then the owners corporation may be liable to pay damages for the guest’s injuries.
The strata insurer would indemnify the owners corporation for any liability it has to pay such damages if the strata policy covers public liability for having a Christmas party. If the policy does not cover it or there is an exclusion in the policy that the insurer can rely on, then the owners corporation would have to pay damages itself and likely have to raise a levy on owners to do so. Even if the strata insurer picks up the bill, then the owners corporation can expect its premiums to increase significantly in following years.
This post appears in the March 2021 edition of The NSW Strata Magazine.
Carlo Fini Lawyer (NSW)