Looking behind an Owners Corporation’s ‘special resolution’ to authorise legal proceedings
A property developer, sued by the Owners Corporations that it created, has unsuccessfully applied for summary dismissal of the Owners Corporations’ legal proceedings against it in the Victorian Civil and Administrative Tribunal (“VCAT”).
At an interlocutory hearing, the developer asked VCAT to dismiss the Owners Corporations’ proceedings on the basis that they had not passed valid or effective special resolution authorising the legal proceedings against the developer, as section 18(1) of the Owners Corporations Act 2006 requires.
It is understood from the VCAT decision in that the Owners Corporations’ claims against the developer alleged that the developer breached its duty as the ‘initial owner’ by causing the Owners Corporations to pass various resolutions appointing a property maintenance company to provide services to the Owners Corporations for a 10 year term, thereby causing the Owners Corporations to suffer loss and damage.
The developer’s solicitors inspected the ballot voting forms returned by the lot owners in response to ballots conducted by the Owners Corporation to pass the special resolutions authorising the legal proceedings, and alleged some of the voting forms were invalid. Some of the developer’s challenges to the validity of voting forms included that:-
a. the voting form had not been signed by the registered owner of the lot;
b. the lot owner who completed the voting form had not put their correct lot number on the voting form;
c. the voting form had only been signed by one co-owner when the lot was owned by two owners;
d. the voting form had been signed by a proxy for a lot owner, and where there was no evidence of the proxy form being completed by the lot owner in favour of the proxy;
e. owner completing the voting form had not properly ‘ticked’ whether their vote was ‘for’ or ‘against’ the special resolution;
f. the person completing the voting form did not provide proof of their authorisation to sign the form, where the lot owner was a company;
g. a lot owner was not allowed to ‘re-submit’ their voting form before the ballot closing date.
Other challenges by the developer to the special resolutions included that there was insufficient notice of the ballot given to lot owners and a foreshadowed argument that the actual text of one of the special resolutions was not adequately expressed to authorise a legal proceeding against the developer.
Ultimately VCAT dismissed the developer’s summary dismissal application, but the decision provides a sound reminder about the importance of properly completing voting forms to avoid challenges to the validity of important Owners Corporation resolutions.
If you have any further questions please contact Phillip Leaman or a member of the Owners Corporation Law Team.
Read the decision in full here: