Committees – Wait You Must… Sometimes!
As I always tell my children… good things come to those who wait.
For Committees where the scheme is governed by the Standard Module… Wait You Must!
Why am I telling Committees they must wait?
Surely, as the executive arm of the Body Corporate, Committees can put into effect lawful resolutions passed by the Committee.
Of course they can… BUT – don’t forget sections 56 and 57 of the Standard Module.
This article is intended to serve as a reminder to Committees that under the Standard Module (Section 57) the Committee may only give effect to a committee resolution if the time for giving a notice of opposition under section 56 in relation to the resolution ends without a notice being given to the secretary.
Section 56 provides that a notice opposing the giving of effect to a resolution of the Committee (a notice of opposition), signed by or for the Owners of at least one – half of the lots in the scheme, may be given to the secretary (unless the resolution is of a routine, administrative nature AND involves spending not more than the greater of $200 or $5 x the number of lots).
Any notice must be given to the secretary within 7 days after the secretary gives a copy of the minutes containing the resolution to each owner.
It is important to note the 7-day period in which an owner may give a notice commences not on the date of the resolution but after the minutes are sent.
The exceptions to a Committee having to wait to put a resolution into effect are:
- When the resolution is necessary to deal with an emergency AND any associated spending is within the Committee limit OR an adjudicator authorises the Committee to give effect to the resolution; or
- The resolution is ratified by ordinary resolution of the Body Corporate; or
- The resolution is not one where a notice of opposition may be served.
The combined effect of sections 56 and 57 raises some difficult issues in practice.
Let’s take a assignment of management rights as an example.
More often than not, the management rights sale contract will settle one day after the Committee resolves to consent to the assignment.
The committee resolution consenting to the assignment can only be challenged by owners giving a notice of opposition.
The exceptions to Section 56 operating would not apply in the context of an assignment of the management rights.
Why am I raising this now, I hear you ask?
The answer is simple.
Committees should be aware of their limits because a dissident lot owner maybe.
Recently a lot owner raised sections 56 and 57 as a basis for seeking to invalidate an entire EGM.
Will the argument succeed? We are of the view that any defect in convening the EGM (in regards offending Section 57) ought to be considered a minor technical defect and essentially overlooked (particularly where no notice of opposition was received).
There is also an argument that in circumstances it would not be just and equitable to invalidate the EGM.
The best way for Committee’s to manage the effect of Section 57 is to ensure minutes of Committee resolutions are sent to Owners promptly such that the clock on giving a notice of opposition starts ticking as soon as possible and of course to wait the 7-day period before putting the motion into effect.