Question: Despite the Management Agency Agreement limiting a Strata Manager’s liability, can they still be found liable?
In reading many Strata Service Management Agreements (The Contract), I noticed most have a clause that says “The Agent is not liable to the Owner, including without limitation for breach by the Agent of this Agreement, (except as otherwise required by law..”
It all sounds like Strata Managers can do whatever they like and get away with it.
In reading this, I cannot think of any way the Agent can “breach” the contract.
Are there cases where Strata Management Agency breach the contract?
Answer: Fiduciary obligations are strict obligations which cannot be avoided.
Despite there being provisions in the contract which seek to limit the Strata Manager’s liability, the Strata Manager may still be found liable to the owners corporation, or a lot owner, in some circumstances.
As an agent, a Strata Manager has fiduciary obligations to the owners corporation. For example, as an agent, the Strata Manager must:
- only act within their delegated authority;
- not act in a manner which conflicts with the interests of the owners corporation;
- not obtain an undisclosed benefit as a result of the agency.
Fiduciary obligations are strict obligations which cannot be avoided.
The Fiduciary obligations are imposed on the Strata Manager under the Property and Stock Agents Act 2002. This law is administered by NSW Fair Trading.
The Strata Manager owes the owners corporation a duty of care. The delegation of functions and authority to the Strata Manager creates responsibilities and a duty of care which may result in liability.
The more functions and authority a Strata Manager has, the greater its duty of care. The owners corporation should consider any limitation of liability in the context of the duties being delegated and the representations made by the Strata Manager in relation to its experience and knowledge and how the duties will be fulfilled.
For example, a Strata Manager could be liable if someone is injured on the common property if the Strata Manager did not take reasonable steps to address the issue causing the injury. Some Strata Managers provide assistance in resolving building defects, in such circumstances, there is a duty of care to ensure the owners corporation is correctly informed of its recovery rights.
In 2017 the NSW Court of Appeal found a Strata Manager partly liable for the collapse of a balcony. In the case of Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196, Libra Collaroy Pty Ltd was the Strata Manager, Bhide was an owner of a lot which had its balcony collapse due to a lack of maintenance. The Strata Manager provided quotes to the owners corporation to repair the balcony but the quotes were rejected. The Court found that the Strata Manager should have specifically recommended expert advice be obtained from a building consultant. The Strata Manager was found to be 50% liable.
Division 2 and Division 3 of Part 4 of the Strata Schemes Management Act 2015 sets out the functions and accountability of Strata Managers.
The case referred to above does not concern a breach of contract however in summary, taking into consideration all of the above, it is not quite the case that the Strata Manager can do whatever they want and get away with it.
This post appears in the October 2022 edition of The NSW Strata Magazine.
Shane Williamson
Williamson Lawyers Pty Ltd
E: shane@williamsonlawyers.com.au
P: 0404 045 605
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