WA: The Supreme Court of WA decides “unfinancial” doesn’t mean powerless: owners fight back

Owning the majority of the unit entitlement in a small strata scheme does not, by itself, authorise a co-owner to sign contracts for the strata company — and unpaid levies don’t make an owner “unfinancial” if the fund they were levied for was never validly established.

In Zhao v The Owners of 5 Wimbledon Street Beckenham Strata Scheme 40695 [2026] WASC 328, the Supreme Court of WA allowed an appeal from the State Administrative Tribunal (SAT), overturning findings that had validated strata management contracts, a legal costs agreement, and an administrative fund in a two-lot strata scheme.

The scheme in question comprises just two lots. The appellants own Lot 2 (46% unit entitlement); the respondent owns Lot 1 (54%). From about July 2020 the appellants stopped paying strata levies and disputed the strata company’s management, including strata management contracts and a legal costs agreement signed only by the respondent. In August 2025 the Tribunal found against the appellants on every issue, validating those contracts and authorising the establishment of an administrative fund with retrospective effect.

The appellants, unrepresented, appealed. Despite filing the appeal 24 days late, the Supreme Court granted an extension of time, finding no prejudice to the respondent. The appellants argued that the respondent had no authority to sign the contracts, that unpaid levies did not make them “unfinancial” absent a validly established administrative fund, and that the Tribunal had no power to establish such a fund. The Supreme Court largely agreed.

The Court found that:

the respondent’s signature alone was not valid execution of the strata management contracts or the legal costs agreement, and their larger unit entitlement made no difference — the AGM resolution only authorised the council (that comprised both owners) to act jointly, and no vote by unit entitlement was ever demanded;

even where an owner is genuinely “unfinancial”, that only removes their right to vote on an ordinary resolution — it doesn’t affect council membership or their authority to execute documents; and because the by-laws didn’t require an administrative fund, the levies said to be owed were never validly raised, so the appellants were never actually “unfinancial”;

the Tribunal had no power to order the strata company to operate an administrative fund when resolving a general dispute — that requires a specific application under s 140(3) of the Strata Titles Act 1985 (WA), which was never made.

The Court granted the extension of time and leave to appeal, allowed the appeal, set aside the Tribunal’s declarations and orders, and remitted the matter to a differently constituted Tribunal for reconsideration — declining to substitute its own orders.

The key takeaway: majority unit entitlement is not a substitute for proper authorisation, and a strata company cannot treat an owner as “unfinancial” — with the voting consequences that follow — on the strength of levies that were never validly raised. Small (two-lot) schemes should ensure administrative funds, contracts and costs agreements are all put in place strictly in accordance with the Strata Titles Act 1985 (WA).

If you need advice or assistance in respect of strata company governance, contract execution, or Tribunal or Supreme Court proceedings, please do not hesitate to contact the team at our Perth office.

This post appears in Strata News #815.

Ray Santos
Bugden Allen
E: ray@bagl.com.au