This article is about a VCAT case clarifying that owners corporations generally need a special resolution to commence legal proceedings unless the matter involves monetary claims under $100,000.
So what is the case?
The case is Owners Corporation 1 PS723350Q v Owners Corporation 2 PS723350Q (Owners Corporations) [2025] VCAT 592
What is it about?
The proceeding was instituted by an owners corporation seeking orders for the appointment of an administrator and an order regarding the meaning and effect of the information statements lodged with the plan of subdivision.
The decision relates to an application contesting whether or not the owners corporation was duly authorised to issue the legal proceedings pursuant to Section 18 of the Owners Corporations Act 2006.
So what does section 18 provide?
Power to commence legal proceeding
- Subject to subsection (2), an owners corporation must not commence any legal proceeding unless it is authorised by special resolution to do so.
- If a matter is within the civil jurisdictional limit of the Magistrates’ Court and an owners corporation is authorised to do so by ordinary resolution, the owners corporation may commence any legal proceeding in—
- the Magistrates’ Court; or
- VCAT or any other tribunal; or
- a court of another State or a Territory that corresponds to the Magistrates’ Court.
So what was argued by the parties?
OC1 submitted that it did not seek monetary relief in its application and that its proceeding falls within the description in s 18(2) of the OC Act for the following three reasons:
- ‘civil jurisdiction limit’ does not mean ‘civil jurisdiction’;
- Section 18(2) is not limited to proceedings in which monetary relief is sought; and
- Section 18(1) is intended to capture matters which would need to be commenced in superior courts.
Therefore, an ordinary resolution is sufficient to authorise the issue of the proceedings.
OC3 argued that as monetary relief was not sought, a special resolution is required in order to commence the proceeding.
OC1 also argued that OC3 did not have standing to question the authority of OC1 as it was not a member of OC1, it was a separate legal entity.
OC1 submitted ‘the upshot is that jurisdictional limit and jurisdiction are two different concepts’. In relation to s 18(2) of the OC Act, OC1 says the question is whether any amount claimed is within or exceeds the jurisdiction of the MCV. If so, a special resolution is required.
OC1 says that it does not seek any monetary relief thus, the relief claimed is within the jurisdictional limits of s 18(2) of the OC Act.
OC3 submitted that 18(1) is the rule and 18(2) is the exception. OC3 submitted that the use of the term jurisdictional limit is referable to monetary claims for damages, debt, liquidated demands or in equity of not more than $100,000.
So what was decided?
Section 18(1) was not amended in December 2021 (when the Act substantially changed). It is still couched in general terms in that an owners corporation must not commence any legal proceeding unless a special resolution authorising it do to so. However, that subsection is subject to the operation of s 18(2).
Section 18(2) has been amended significantly (in December 2021) such that the new subsection has replaced the old subsection (which allowed an OC by ordinary resolution issue proceedings for levy recovery matters and breach of rules) and what is now stated is that an owners corporation does not need a special resolution to issue any legal proceedings (whether or not they relate to the recovery of fees and other money) if the amount that is sought is within the jurisdictional limit of the Magistrates’ Court (being $100,000.00) and an ordinary resolution has been passed authorising the owners corporation to do so.
The Tribunal applied the principles of statutory construction in determining what the relevant section means.
The Tribunal found that the ‘civil jurisdictional limit’ referred to in s 18(2) of the MC Act must mean the ‘jurisdictional limit’ and thus, is limited to $100,000. If s 18(2) of the OC Act was meant to include any matter in which the civil jurisdiction may be invoked, it would not include the phrase ‘jurisdictional limit’ it would have simply referred to the ‘civil jurisdiction’. By specifically including ‘jurisdictional limit’, a phrase that is defined at s 3 of the MC Act, the legislature intended to capture disputes or matters relating to money including damages and debts.
The Tribunal determined that:
- The legislature has provided a less onerous regime on owners corporation for actions involving debt, damages or equitable relief where the amount is $100,000 or less; and
- The legislature has required a more onerous regime for relief that is not related to money or for a sum that exceeds the threshold that could be awarded in the Magistrates’ Court.
The Tribunal stayed the proceeding to allow OC1 to obtain a special resolution.
In respect to the question as to whether or not OC3 had standing to challenge the issue, the Tribunal considered that the issue was not relevant to the Tribunal’s ability to make a determination as to the application of Section 18.
Summing up
It is unclear whether or not the Tribunal was given the explanatory memorandum from 2021 as it is not mentioned in the decision. What is curious about the intention of parliament in replacing section 18(2) of the Act is that in the explanatory memorandum it provides:
“Clause 8 amends the heading to Division 4 of Part 2 of the Act, substituting the words “commence legal proceeding” for “bring legal proceedings”. This ensures the language used in the Act reflects the standard terminology used in Victoria in relation to any legal proceeding. Clause 9 substitutes section 18 of the Act, which details the power of owners corporation to commence any legal proceeding. The new subsection (1) provides that, subject to subsection (2), an owners corporation must not commence any legal proceeding unless authorised to do so by special resolution. This requirement will apply to actions in the County Court and above. The new subsection (2) provides that where a matter is within the civil jurisdictional limit of the Magistrates’ Court and an owners corporation is authorised to do so by ordinary resolution, an owners corporation can commence any legal proceeding in the Magistrates’ Court; or VCAT or any other tribunal; or another State or Territory court that corresponds to the Magistrates’ Court.”
It seemed that maybe the intention of Parliament was to allow any application in VCAT or the Magistrates Court to be undertaken by an ordinary resolution and anything in the County Court of Victoria, Supreme Court of Victoria or High Court of Australia to be by special resolution.
However, according to the above case, Parliament just has not got the drafting right (as interpreted by the Tribunal in the above case).
What is curious about the decision is that the way the Tribunal has determined the operation of section 18(2), only those actions involving debt, damages or equitable relief where the amount is $100,000 or less can be subject to an ordinary resolution. Arguably, every other action must be pursuant to a special resolution.
When one considers the now many decisions of the Magistrates’ Court of Victoria that have stated that the Magistrates’ Court does not have jurisdiction to hear levy recovery matters, the Act is in dire need of repair by Parliament to allow owners corporations to properly govern and enforce its rights without the need of continually going to a special resolution for each proceeding. See our previous blog about the Buckley case to find out more about that.
So what should owners corporations do?
To avoid any argument, obtain a special resolution before issuing legal proceedings in any jurisdiction unless the whole of the proceeding involves a debt, damages claim or equitable relief where the amount is $100,00 or less.
Phillip Leaman Tisher Liner FC Law E: ocenquiry@tlfc.com.au P: 03 8600 9370
This post appears in Strata News #761.
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This article has been republished with permission from the author and first appeared on the Tisher Liner FC Law website.
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