Overcoming the hurdles to bring proceedings on behalf of owners corporations: Sciuto v TNSKBMC Pty Ltd [2021] VCAT 862

By Alicia Hill, Principal and Matthew Deetlefs, Law Clerk

The case of Sciuto v TNSKBMC Pty Ltd [2021] VCAT 862 involved the chairperson of owners corporations, Ms Sciuto, bringing proceedings against the owners corporations’ manager on behalf of the owners corporations.

To successfully bring proceedings, Ms Sciuto had to convince the Tribunal that she should be allowed to bypass the requirement under section 18 of the Owners Corporation Act 2006 that the owners corporations must have a special resolution to bring proceedings.

Background:

Ms Sciuto was an owner of a lot described in a plan for subdivision and was a member of the three owners corporations (the OCs) described in that plan. Ms Sciuto was also a committee member and current chairperson of the OCs.

The manager of the OCs, TNSKBMC Pty Ltd, was appointed in October 2018 and was re-appointed by resolution for a further term of two years at the OCs’ annual general meeting on 24 August 2020.

On 4 November 2020, the committee of the OCs resolved to terminate the manager’s services. This decision was affirmed at three later committee meetings.

Ms Sciuto claimed that the manager had failed to accept the termination and brought proceedings seeking that the Tribunal declare that the manager was lawfully terminated and order that the manager return the records and registers of the OCs.

Rather than seeking a special resolution as required by section 18 of the Owners Corporation Act 2006 (the Act), Ms Sciuto applied to bring the proceedings herself under section 165(1)(ba) of the Act. Ms Sciuto applied on the basis that there was a lack of interest amongst the lot owners in relation to the management of the OCs.

Conclusion:

The Tribunal held that Ms Sciuto should not be authorised to bring the proceedings on behalf of the OCs.

Under section 18 of the Act, legal proceedings may only be brought if they are authorised by special resolution of the OCs, except to recover fees and other money or to enforce the rules of the owners corporation.

Section 165(1)(ba) provides the other exception. Someone can bring proceedings without special resolution if the Tribunal is persuaded that an order should be made and the order is not being sought merely to avoid the responsibility of attaining a special resolution.

The Tribunal will consider amongst other things:

• The reason why no special resolution has been obtained or attempted;
• The degree of support amongst other members of the owners corporation;
• What benefits there would be for the owners corporation as a whole if the order were made and what the disadvantages would be for the owners corporation if the order were not made; and
• Whether the proceeding has a prospect of success or, at the very least, is not bound to fail.

Ms Sciuto had not attempted a special resolution, demonstrated that she had tested the level of interest amongst the lot owners, or provided evidence that the majority of lot owners would support the proceedings. In fact, it was open on the evidence presented that only 4 of the 78 lot owners supported Ms Sciuto, with the remaining lot owners being unaware of the resolution to terminate the manager.

Take-aways:

Committee members of owners corporations must ensure that they seek the required resolutions before bringing proceedings. Lot owners must be made aware of proceedings and attempts should be made to obtain a special resolution.

If you have any queries about any of the matters raised by this case, then please contact Alicia Hill on (03) 8540 0292 or alicia.hill@mst.com.au