Juristic Mayhem in Yarraville Apartments

Some time ago, I put out a post dealing with the immunity that managers of subdivisions sought to achieve in their contracts with the owners corporation – with the full backing of their representative business body, the SCA. In it, I said:

Yet when you mention the term ‘body corporate’ or ‘managing agent’ to a lawyer or someone in real estate, you get a roll of the eyes, an intake of breath, and a sigh. It is not hard to see why.

There you have the indicia of lawyers’ nightmares. People living together and needing tolerance, restraint, and co-operation – all in short supply in our public life. The old law feels out of place; the new law is worse, and written by people who have never set foot in a court or been humiliated there; the bureaucracy, if you find one, does not know or want to know. The room for bush lawyers – at either end – is scary, and any talk of a common fund looks like a honey pot to people of low calibre – and it is forever remarkable the way that they find each other out at the same level. Law dissolves into lore, and as Yeats remarked, the best lack all conviction and the worst are full of passionate intensity.

And that’s before you get to ethnic and class differences in the owners, and the cleavage in ages – between those who are unsafe unless they are looking at themselves in their cell-phone, and the aged, like me, who regard the makers of Facebook and Twitter as on a par with Hitler and Stalin, and hopefully destined to meet the same fate.

And it’s before you get to the role of the manager, who is there to make money, and the role of the committee, who are not there for the money, and who don’t want or need to get sucked into the hands-on management any more than is entirely necessary.

There is room there for buck-passing and blame-dodging of the order of our national past-time that we have all just watched so horrifyingly in the Robodebt Royal Commission.

Now, after a dispute about arrears of levy owed by the previous owner, I have had a glimpse of just how tangled the relations can be – plenty of robots and denials of responsibility. It is infuriating, but not worth litigating. (What is?) It did however lead me to write to the relevant minister as follows.

The Hon Danny Pearson, MP,

Minister for Consumer Affairs,

Level 3, I Treasury Place,

East Melbourne, 3002

By registered mail and by

danny.pearson@parliament.vic.gov.au

Dear Minister,

Rightless in Yarraville

I am 77 years of age, a former lawyer, living at [street address] Yarraville, 3013. I bought my apartment here last year and became the registered proprietor on 10 June, 2022.

I am currently in a dispute about alleged arrears of levy with the owners corporation and the manager. I contend that the only accounting available to the corporation is inadequate, but we can put that to one side for the moment.

In anticipation of such a dispute, I looked at the act (Owners Corporation, Act, 2006) and the relevant general law. I also looked at the current Management Agreement dated 12 December, 2022 between the corporation and the manager, The Body Corporate Collective, Pty Ltd. I wrote and put on my website a memorandum on 26 March, 2023. [That is the post to the website referred to above.]

I attach a copy of each document. (The agreement comes with the letter in the first attachment.)

I draw your attention, Minister, to the following.

The contract says it is ‘recommended’ by SCA (Strata Community Association) and ‘approved’ by CAV.
If a court or tribunal were to give effect to that document in its terms, the owners corporation would not be able to claim damages from the manager for negligence or breach of contract. That would negate or frustrate the whole purpose of the act requiring mangers to be properly insured. There would be no risk to insure against.
Regardless of how a court or tribunal may interpret the agreement, the document is grossly unprofessional and unfair. But the juristic issues could be very tricky. That is not the way the law should protect consumers from business overreach.

I have three questions for your department.

Has your department approved the terms of this agreement? If so, how, when, and why? If not, what will you do about it?
Will the department take steps to prevent SCA and its members from engaging in this or similar unfair conduct? Or do we all just wait to see what happens when an affected owner goes to a court or tribunal?
Is the waiting time for these disputes at VCAT currently 18 months to two years?

Here is some background.

SCA says many Australians live in strata title apartments: one in four. The managing agents have great power over those people. They have a very bad reputation. I have known three since returning to live in Melbourne. Their mode of operation is the same. It is that of Centrelink. People outside engage with the robots of the agent. The robots ignore what they don’t want to hear, and just wear people down.

I have experienced them as both landlord and tenant. The agent at my previous address succeeded in being disliked by both. If the SCA is right about those whose lives are affected by owners’ corporations, about one quarter of Victorians are becoming acquainted with the feudal structure of medieval England.

The current manager here in Yarraville, The Body Corporate Collective Pty Ltd, took over last December….

….The current dispute has been running for months, including the time that the current manger declined to deal with queries about accounting – in a letter of mine that it could not find.

So far as I can see, the owners corporation keeps no relevant accounts itself. It relies on the manager – under an agreement that has the defects I have referred to above. The responsibility for keeping proper accounts does of course remain with that corporation under the act.

When I recently referred the dispute to that corporation, the manager said ‘Please note, this is a private matter for your lot, and not a matter for the committee to engage in discussion on.’ It is in my experience unusual for an agent to tell its principal what it might do in the agency, or the people it may talk to. But the corporation said: ‘The OC won’t be getting involved with this as this is a private matter (i.e., it is not an issue involving common property, and it is within BCS’s purview to collect funds.)’

Subsequently, Mr Wellavize told me I had no business in speaking to the corporation, and the chair of the committee now says that the committee does not want to be involved. I had previously had a very affable discussion with the chair of the committee, during which I suggested a compromise, but Mr Wellavize advised her to stop those discussions.

If the matter goes to a court or a tribunal, it will ask the parties why the issue has not been resolved. The answer presumably will be that the agent purported to tell the creditor and alleged debtor not to talk to each other. This could be a first for our jurisprudence.

I have no contract with the manager. The owners corporation does. But the fiduciary duties of the manager (in s 122) are, in my view, not limited to the owners corporation. They are owed to me. That means the agent must act honestly and in good faith and show due care and diligence to me. The agent does not do that by telling me not to talk to the owners corporation about an alleged debt and giving advice to it to the same effect. For that matter, in so acting, it breaches its obligations to the owners corporation.

According to ASIC, The Body Corporate Collective Pty Ltd has one director, Austin Wellavize, and a paid-up capital of $12. The real party, Mr Wellavize, therefore seeks immunity, and the company claims that it cannot be sued for the kind of liability that the law says it must insure against.

If the law is there to protect consumers, this corporate agent mocks it.

That may not be surprising. On Linked In, Mr Wellavize says:

Prior to becoming The Body Corporate Collective’s founder, I worked in the banking and finance industry for a number of years. Banking gave me a strong respect for systems and processes, backed up by responsive communication. This approach is providing the foundation for the rapid growth of my business, particularly through the south eastern and northern regions of Melbourne. During this time I’ve gained experience in a wide range of matters gaining experience in resolving complex matters and developing an extensive knowledge of the Owners Corporation Act and Regulations. Uncompromising in my approach to delivering quality process and full accountability, my focus is on establishing and maintaining the trust of his clients to simplify decision-making and reduce waiting times for work to be completed. I’m a member of the Strata Community Association Australia (SCA) and I frequently attend seminars recognised by SCA. I have have completed a Certificate IV in Strata Community Management at RMIT. “My clients’ trust is at the forefront of my mind, that’s why I focus on my core values of being committed, being consistent, communicating effectively and being confident in my ability”.

If it matters, of my thirty years presiding over statutory tribunals, eighteen were spent as the Presiding Member of the Taxation Division of the AAT, later VCAT. We promised and delivered decisions on our cases, some of which were difficult enough to reach the High Court, within six weeks of their being commenced.

I would be glad if your staff could acknowledge receipt of this letter.

I am very happy to talk to your staff about this. There is widespread concern in a large part of our community.

Yours truly

It is really that bad for people in subdivisions with agents as managers. In a future post, I will provide a draft of a fictitious reference to a tribunal. That kind of litigation could break people – even the ‘winner’ if any – and not many judges would be happy to have to wade through such a Serbonian bog.

And that is before you get to the Management Agreement. The one provided to me – the SCA special – is 22 pages – all in favour of the Manager, the SCA member (with the possible exception of clause 2.1 which includes in the functions and duties of the Manager : ‘Generally implement the decisions and instructions of the Owners Corporation with respect to its duties and functions as set out in this clause.’)

I may say that there may well be an issue about the legal validity of that document. The act (s. 11) says an owners corporation is to be managed ‘by or under the direction of’ the lot owners. By a resolution at a general meeting, the corporation can delegate powers and functions to the committee. But that provision follows the general law that the delegate cannot delegate that power of delegation. It would appear to follow that the delegation to the manager can only be effected by the corporation, and not just the committee. That would be consistent with the wording of s 11 (1), which is utterly inconsistent with any suggestion that the manager can tell the corporation what it must do’.

The notion that an agent can dictate to its principal how it should deal with a third party – to which it owes a fiduciary obligation – is close to being juristic heresy. But if that is what the current regime permits, we are even worse off. You have only to ask what would be the response if someone tried this out on with a public company like BHP or Wesfarmers. The difference in bargaining power is a symptom of our current malaise.

Just imagine the Chair of BHP telling a shareholder who holds more than 2% of its issued shares that a conveyancer has told the Chair to stop those discussion and to deal only with the conveyancer. But, I suppose, getting an audience with the members of a committee at some owners’ corporations might be a bout as easy as getting an audience with the king.

It is all a dreadful mess – and one in which about one in four Victorians find themselves. It is a matter of some wonderment that ordinary people volunteer to wade into such a minefield.

This is a continuing story – that keeps getting worse. The ACCC does not answer correspondence, the Committee refuses to speak to me, and the robots at the agent keep returning my payments.

Mayhem in Yarraville.

Juristic Mayhem in Yarraville Apartments