Who Pays the Costs to Defend a Defamation Claim Involving a Committee Member?

Who Pays the Costs to Defend a Defamation Claim Involving Committee Members?

 

Committee members naturally think that any claim made by or against them while performing their duties should be defended, at the cost of the body corporate (or its insurer). 

However, this is not necessarily the case.

Insurance

Insurance policies for community titles scheme will generally include cover for office bearer’s liability. This policy is designed to provide protection to committee members against losses arising from their conduct performed (or not performed, as the case may be) during the course of carrying out their committee duties. 

However, this policy will generally contain an exclusion from protection for defamation. This means that if a defamation claim is made against a committee member, the insurer will generally not provide cover for any costs incurred in defending that claim. 

Body Corporate 

There are statutory restraints regarding how a body corporate may apply its funds. 

The primary functions of a body corporate include administering the common property, enforcing the community management statement and carrying out other functions – as required by the body corporate legislation. 

Body corporate funds may only be used to undertake these statutory purposes, and cannot be used for other purposes, no matter how worthwhile those other purposes may be. 

Adjudicators have previously determined that paying for costs incurred by a committee member defending (or initiating) a defamation claim, are not usually considered costs that fall within the functions of a body corporate. 

A body corporate’s duty to act reasonably also applies to the way that the body corporate chooses to spend its money and the circumstances where it might be reasonable for a body corporate to pay the legal costs of a committee member arising from a defamation claim are limited.

In the event that a body corporate was to pay the costs of a committee member arising from a defamation claim, it is likely that an adjudicator would order a body corporate to recover those costs, should an adjudication application be made. 

What to do? 

Before a body corporate makes any payment for costs incurred by a committee member in a defamation claim, it should obtain legal advice, otherwise the body corporate may be embroiled in a dispute in the Commissioner’s Office, despite any good intentions. 

If you are a committee member (including a non-voting building manager) and you are not protected from liability for a defamation claim by the body corporate legislation, it is unlikely that a body corporate will be allowed to pay for costs incurred by you to defend that claim. 

However, if a committee member is required to defend a defamation claim, the circumstances surrounding the claim may make it appropriate for the body corporate to pay for any costs incurred, and legal advice should be obtained about the committee member’s position about the recoverability of costs.

Article Written by Col Myers (August 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

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Resolutions Without Dissent

THE POWER OF ONE

 

The Queensland strata legislation, like other States’ legislation, includes varying motion types which necessitate different levels of voting support in order to become resolutions. Each State has unique categories of motions and different threshold voting requirements for such motions to be approved. Whilst there is some overlap, a special resolution in one jurisdiction may have a different meaning in another (at least in terms of the way votes are calculated).

In Queensland, the Body Corporate and Community Management Act 1997 prescribes the following resolution types (for general meetings):

  • Ordinary resolution
  • Majority resolution
  • Special resolution
  • Resolution without dissent

The most common resolution type is an ordinary resolution. Such a resolution is calculated quite simply in terms of a majority of those voting. The motion passes if there are more votes in favour than against. The qualifying aspect to this is if somebody (anybody entitled to vote) requests a ‘poll’. In such circumstances, the motion is passed if the total contribution lot entitlements in favour of the motion are more than the total contribution lot entitlements against the motion. An ordinary resolution is the only resolution type where a poll can be requested.

One infrequently used resolution type is a majority resolution. Because they are rarely required, there seems to be a tendency to assume (incorrectly) that a majority resolution is the same as an ordinary resolution – after all, it talks about a ‘majority’ doesn’t it? However, they are quite different things. A majority resolution is calculated based on the total number of lots in the scheme. The resolution carries only if the votes in favour of the motion are more than half of the lots entitled to vote on the motion. Given the general apathy and low voting turnout at general meetings, obtaining the required support for a majority resolution can be quite difficult.

Another misconception that owners and others in the strata sector frequently seem to have is the voting requirements for a special resolution. There appears to be a common assumption that such a resolution requires a simple 75% majority. Whilst perhaps that might be useful as a ‘rule of thumb’, the counting of votes for a special resolution is quite different. The test is a three-tier one, and requires all of the following requirements to be satisfied:

  • At least two-thirds of the votes cast are in favour of the motion.
  • The votes counted against the motion are not more than 25% of the number of lots in the scheme.
  • The contribution lot entitlements for lots voting against the motion are not more than 25% of the total contribution lot entitlements for the scheme.

That brings us to the final resolution type and the purpose of my commentary in this newsletter – the resolution without dissent. Such a resolution quite simply requires that no vote is cast against the motion. What’s more, this resolution type does not prohibit owners who owe a body corporate debt at the time of the meeting from voting on the motion. Accordingly, a single owner (financial or unfinancial) can ensure that such a motion does not carry – and this frequently occurs. 

It holds true that there will be very serious decisions that a body corporate will need to make from time to time that should require strong majority support – even beyond the requirements of a majority or special resolution. However, the question arises as to whether a unanimous voting requirement is a step too far? 

Of course, there will be those that point out that any failure of a resolution without dissent to pass can be the subject of challenge in the Commissioner’s Office – the relevant test being whether it failed to pass ‘because of opposition that in the circumstances is unreasonable’ – a test for which we have High Court authority (Ainsworth v Albrecht [2016] HCA 40).

However, that still means that valuable time and resources are consumed in seeking to have an unreasonable vote overturned in the Commissioner’s Office. Conversely, if one or two votes were insufficient to prevent the passing of the motion, it would be up to those ‘aggrieved’ owners to take the initiative and commence dispute resolution proceedings to challenge the passing of the motion. Without good cause and reasons for their dissent, most owners will probably not take up this option – particularly as frivolous or vexatious applications can be dismissed with costs. 

That brings us to another question about whether the current statutory maximum of $2,000.00 is sufficient to discourage the lodging of frivolous or vexatious applications. Certainly not in my opinion. However, that is a debate for a different day – and a different newsletter!

Article Written by Jarad Maher (26 May 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

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When Should A Body Corporate Allow A Discount for an Overdue Payment?

WHEN SHOULD A BODY CORPORATE ALLOW A DISCOUNT FOR AN OVERDUE PAYMENT?

 

The legislation has created a significant incentive for owners to pay their contributions by allowing a body corporate to fix a discount of up to 20% to be given to owners if a contribution is paid on time. 

But … 

The issue lies in the scenario where the contribution is received by the body corporate after the due date but the owner still wants the benefit of the discount. 

The blunt response is that the owner is not entitled to the discount. But, in certain circumstances, that seems overly harsh. 

That is why the legislation also gives a body corporate the power to allow part or all of a discount even if the amount was not received by the due date, if the body corporate is satisfied there are ‘special reasons’.

Special reasons 

What constitutes ‘special reasons’, is not defined. 

It depends on the circumstances of the situation and a body corporate should consider the merits of the particular case before making its decision. 

Take the following scenarios:

  1. an owner paid the contribution on the due date but it was received by the body corporate the next day, the owner had no history of late payments, the owner did not know the payment would be received the next day;
  2. an owner paid the contribution 12 days late because the owner unexpectedly went to hospital for emergency surgery just before the due date for the contribution and made payment the day after returning from the hospital;
  3. an owner had a direct debit set up with Stratapay (a recognised payment platform) to pay contributions, however a computer error resulted in Stratapay not paying the contribution amount to the body corporate by the due date;
  4. an owner did not receive the notice of contribution before the due date for payment.

In each of these scenarios, an adjudicator has found that the body corporate acted unreasonably in deciding to not allow a discount. 

Consequences 

If a body corporate refuses to allow a discount, it can have the following consequences:

  1. the owner may not be entitled to vote at a general meeting because they owe a body corporate debt;
  2. the owner may accrue up to 30% interest per annum on the unpaid amount;
  3. the owner may be required to pay reasonable recovery costs in recovering the unpaid amount.

That is not to say that a body corporate should always allow a discount, but rather emphasises that a body corporate must act reasonably in deciding whether to allow a discount. 

What should you do? 

A body corporate should treat requests by lot owners to reinstate a discount carefully. 

That is because:

  1. if a body corporate does not consider the specific circumstances of the request and adopts a blanket approach, an adjudicator will likely find that the body corporate acted unreasonably and order the body corporate to refund the amount of the discount;
  2. if a body corporate allows a discount without there being ‘special reasons’, it is arguable that that the body corporate exceeded its powers and other owners may apply to the Commissioner’s Office for relief. 

If a body corporate is unsure of its ability to allow a discount for an overdue payment, or simply wants to try and avoid a potential dispute, legal advice should be obtained as soon as possible.

 

Article Written by Brendan Pitman -10 May 2021
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

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Part 1: When Are Committee Members Liable for Defamation Claims?

PART 1: WHEN ARE COMMITTEE MEMBERS LIABLE FOR DEFAMATION CLAIMS?

 

Sections 101A and 111A of the Body Corporate and Community Management Act (Qld) 1997 are the two most important sections about avoiding liability for claims made against committee members in Queensland.

Those sections have the following headings: “Protection of committee members from liability” and “Protection of body corporate and committee from liability for defamation”.

The ‘protection’ from claims given by those sections is however very limited and committee members must tread carefully to avoid exposure to potentially expensive legal action.

General ‘protection’

Section 101A gives committee members general protection from civil liability for claims made. Importantly, this section does not extend to protect a committee member from criminal liability.

If you are a committee member and a claim is made against you, the answers to the following questions determine whether you are protected:

  1. Did you act (or fail to act) in good faith?
  2. Did you act (or fail to act) without negligence?
  3. Were you performing your role as a committee member at the time of the act (or at the time of the failure to act)?

These questions are not simple and require an intimate understanding of the law, but if you answered ‘no’ to any of those questions, you may not be protected from a civil claim.

Even if you answered ‘yes’ to all of those questions, the general protection does not apply to claims regarding the publication of defamatory matter by a committee member.

So, if a claim is made against a committee member about the publication of defamatory matter, section 111A is the only section that may give protection to a committee member from that claim (in addition to any defences the member may have under defamation legislation or the general law, addressed further below).

Specific ‘protection’

Section 111A gives committee members protection from liability for defamation, but only in specific circumstances.

Those circumstances are where the committee publishes required material for a general meeting of the body corporate and that required material contains defamatory matter.

‘Required material’ is defined to include:

  1. a motion (including the substance of a motion) submitted other than by or for the committee for the general meeting;
  2. an explanatory note for such a motion that is prepared by the submitter of that motion.

Some important limitations to the protection that can be observed at this point include:

  1. the protection does not apply to committee meeting material;
  2. the protection does not apply to general meeting motions submitted by the committee;
  3. the protection does not apply to all material that may be published by a committee, such as an explanatory schedule prepared by the committee and published with the general meeting material.

A possible scenario is where a committee member submits a motion for a general meeting in their capacity as lot owner and that motion contains defamatory matter. That person may seek to rely on the protection from a defamation claim they enjoy in their capacity as committee member, however the legislation has closed that loophole by excluding that person from benefitting from the protection ordinarily given by section 111A.

Defamation Act

Section 24 of the Defamation Act provides that a defence under that Act (including under the general law) is additional to any defence or exclusion of liability available to a person under other law.

This means that, if defamatory matter is published outside of the limited protections offered by s111A of the body corporate legislation, the Defamation Act (Qld) 2005 and the general law may provide a committee member with a valid defence to a defamation claim.

What should I do?

There are less protections available to committee members from defamation under the Body Corporate and Community Management Act (Qld) 1997 than may be first thought.

Additionally, many people are surprised to learn how broad the concept of a defamatory statement is, and when a Court will consider material contains defamatory matter. Anything that lowers the standing of a person in the eyes of others, or might cause people to shun or avoid the person, will be considered defamatory. Accordingly, great care must be exercised before publishing material (whether verbal or in writing) which paints somebody in a negative light.

Whether you are a committee member or not, it is important that you seek legal advice before publishing any material that may contain defamatory matter as the risk of doing so may result in you facing a possible expensive defamation claim with limited protections under the legislation to defend the claim.

 

Article Written by Brendan Pitman (January 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

OFFICE HOURS

Open:        8:30am – 5:00pm Monday to Friday

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