What is section 80D and why is it so important?
In simple terms, section 80D of the Strata Schemes Management Act 1996 (NSW) requires an Owners Corporation to pass, at general meeting, a resolution authorising the seeking of legal advice or the initiation of legal proceedings. If a section 80D resolution has not been passed, a defendant may argue that the proceedings are either invalid or null and void as they were not properly authorised.
In Home Building Act 1987 (NSW) matters this often means that if this argument was successful the current proceedings would be dismissed and the Owners Corporation may be out of time to commence new proceedings.
However, sometimes statutory time limits (including the strict time limits under the Home Building Act 1987) or the urgent nature of the matter may require the urgent commencement of proceedings to preserve rights.
This is not just a NSW problem. Section 80D’s Queensland equivalent is section 312 of the Body Corporate and Community Management Act 1997 (QLD). Recently, in both NSW and QLD, the Courts have allowed an Owners Corporation to ratify its decision to commence proceedings by later resolving to approve the commencement of the proceedings at a general meeting.
What should your Owners Corporation do if urgent legal action or advice is required?
If an urgent general meeting is not possible and legal must be urgently commenced to preserve the rights of the Owners Corporation the executive committee should:
- Ensure that before proceedings are commenced legal advice is sought on how to commence the proceedings and also on which entity is the appropriate party to commence the proceedings;
- Call a general meeting within a reasonable time after commencing the legal action (that is, if possible, before substantial steps have been undertaken in the proceedings);
- Fully disclose the details of the legal action, any steps undertaken and the cost disclosure; and
- Seek approval from the Owners Corporation through a ratification motion under s80D approving a) the commencement of the legal action, b) the steps taken to date and c) the legal costs incurred to date.
Some of these may seem simple, for instance the requirement of full and frank disclosure. However, this particular requirement tripped up one Executive Committee and contributed to why the Owners Corporation’s purported section 80D ratification was found to be unsuccessful. As a result, the proceedings were dismissed leaving the Owners Corporation out of time to sue the developer and with substantial legal fees.
The moral of this story: If you are on an executive committee of an Owners Corporation or a Community Association, commence proceedings if there is no other viable alternative but then act quickly to get your (section 80D) ducks in a row.
If in doubt, seek advice.