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Topic
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I read somewhere, I can’t recall where, that strata committees must act in “good faith”. If anyone can indicate where in the legislation this is mentioned, I would be appreciative.
Also, I know that insurances (paid for by the OC) covering the actions of SC members do not cover them in the event that they did not act in “good faith”.
My question is: how can a SC be shown to have not acted in “good faith”, as opposed to have acted “incompetently” (but presumably still acting in “good faith”).
Case in point: in one strata with which I am involved, I recently discovered the strata’s insurance (building) premium has escalated dramatically. At no time did the SC divulge the much higher cost nor that a new insurer was used. I found this by seeking access to the records.
I made some calls and learned from the former insurer (the one whose policy expired recently) what their premium would have been had the SC renewed with them. Further prodding by me revealed that the insurer declined renewing the policy because the SC (or OC as far as the insurer is concerned) did not address several fire order related matters that the insurer understood would have been addressed by this time.
The insurer where the policy was eventually placed charged about 45% more than the hitherto insurer.
I asked the managing agent and SC for copies of emails to/from insurers relating to the renewal, but these have not been provided to me.
Should all owners have to pay for what seems to be the SC acting in bad faith?
(Note, the SC in my experience is self-serving and tight lipped, but to date have not found it to be “incompetent”).
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The NSW Act requires committee members to act with “due care and diligence” and “good faith” is assumed or implied – see sections 36, 37 and 260 below).
According to the ACCC, “in good faith” means acting honestly, including when that is against your own personal best interests.
Gibbs Wright Lawyers go into it in greater detail, regarding contract law, stating that it encompasses notions of fairness, reasonableness, standards of decency; and fair dealing.
The thing is, it’s not a defined legal principle (although it does have legal implications). Just Google the term and you’ll get a dozen slightly different definitions.
In any case, the critical factor for strata committees is that they act with “due care and diligence”. So the scenario you have raised above is not about “good faith” and you could conceivably argue that, by paying higher insurance premiums so as to avoid the expense of improving fire safety measures, the strata committee has breached one of its fundamental duties.
Isn’t failing to to meet the prescribed levels of fire safety a failure of due care and diligence? If so, committee members can’t say they acted in good faith if they knew fire safety measures weren’t up to scratch.
However, if different fire inspectors reached different conclusions from the initial insurers, then it’s hard to say the committee did anything worse than save money by taking a riskier option.
37 Duty of members of strata committee
It is the duty of each member of a strata committee of an owners corporation to carry out his or her functions for the benefit, so far as practicable, of the owners corporation and with due care and diligence.
Note—
Section 260 provides protection from personal liability for members of strata committees who act in good faith.
38 Acts and proceedings of strata committee valid despite vacancies or defects
(1) This section applies if, when any act or proceeding of a strata committee was done, taken or commenced there was—
(a) a vacancy in the office of an officer of the owners corporation or any other member of the strata committee, or
(b) any defect in the appointment, or any disqualification, of any such officer or member.
(2) Any act or proceeding of a strata committee done in good faith is as valid as if the vacancy, defect or disqualification did not exist and the strata committee were fully and properly constituted.
260 Personal liability of officers of owners corporations and others
(1) A matter or thing done or omitted to be done by any of the following persons, or a person acting under the direction of any of those persons, does not, if the matter or thing was done or omitted to be done in good faith for the purpose of executing functions as such a person under this or any other Act, subject any of the following persons or person so acting personally to any action, liability, claim or demand—
(a) an officer of an owners corporation,
(b) a member of a strata committee.
(2) Any such liability of an officer of an owners corporation or a member of a strata committee attaches instead to the owners corporation.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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