Strict v Substantial Legislative Compliance

At the upcoming Smart Strata Community Education Seminars I am interested to delve into the depths of day to day strata operations to reach a conclusion on whether less or more regulation, by-laws and committee interference creates a more harmonious environment.

The unwieldy and often complex nature of the Queensland strata legislation provides plenty of stories, which I am sure will lead to interesting debate between our opposing teams.
As the adjudicator for the Gold Coast debate, I am interested to see the arguments put forward by our debaters and in preparation for this role, I am taken back to the topic of strict versus substantial legislative compliance that I have written about in the past.

As most are aware, members of bodies corporate (as well as the committee who serve the lot owners) are made up of ordinary members of the public. They are not solicitors, accountants, or experts in body corporate management. Consequently, I find it fascinating (specifically, when dealing with a piece of legislation that provides for self-management) that some individuals believe strict compliance with the BCCMA and associated modules is essential for the day to day operation of the strata scheme.

Although, strict compliance with the BCCMA and associated modules may be best practice, there are several District Court and Adjudicator decisions that confirm substantial compliance with the extensive legislation is sufficient.

The Commissioners office receives a staggering number of applications which argue that either a lot owner, committee member or the Body Corporate has failed to strictly comply with the strata legislation and, as a result, the applicant is seeking to invalidate a general meeting, or a resolution made at that meeting.

In fact, it is only in very specific circumstances where the Court or Adjudicator will invalidate a general meeting or resolutions passed at such a meeting based on a failure to strictly comply with the strata legislation. Some examples include:

• a lack of quorum
• a completed voting paper being given to another person to hand to the secretary, if prejudice is sustained by voting lot owners
• irregularity with respect to a secret ballot

The case of One The Esplanade [1]

The issue involving substantial compliance versus strict compliance was raised by the Body Corporate for One The Esplanade(5)

The owner of lots 45 and 46 within “One The Esplanade” raised the following non-compliance points:

• The owner only received one notice and agenda of the meeting in the mail. The owner did not receive a second notice of agenda for the AGM addressed to the owner of lot 46.
• The owner submitted that he was unable to vote regarding the recording of a new “set” of by-laws as a full copy of the by-laws were not posted in the mail with the notice and agenda of the AGM.

It is correct that the BCCMA requires written notice of the AGM to be given to “the owner of each lot”. Consequently, the strict compliance is that the owner of lots 45 and 46 ought to have received two copies of the notice and agenda for the AGM.

Unsurprisingly, this argument by the lot owner was unsuccessful. The lot owner had notice of the meeting, attended the meeting, cast his vote at the AGM and was not prejudiced in anyway due to the failure to receive two voting paper. Consequently, the Adjudicator determined that substantial compliance with the legislation was sufficient in that circumstances.

With respect to the lot owner’s second argument, it was not disputed that there was a proposal for a “new set” of by-laws to be adopted pursuant to a motion in the AGM. Prior to the holding of the meeting, the Body Corporate agreed that the there was a failure for it to circulate the “new set” of by-laws with the notice and agenda of the AGM. As soon as its failure was brought to the attention of the BCM, the Body Corporate rectified the issue by sending a full copy of the “new set” of by-laws to each and every lot owner as additional information.

The position of the Adjudicator was to dismiss the allegations by the lot owner because:

• The lot owner could not show that any of the lot owners (including himself) suffered any real prejudice at the AGM. A number of lot owners attended and voted at the meeting, the applicant voted at the meeting, the applicant was the sole person to raise a concern with the BCCM–Office by way of its application and no other lot owner (who were all invited to make submissions) raised any prejudice that they have suffered as a result of the “late notice” of receiving the “set” of by-laws separate to the notice and agenda of the AGM.
• The applicant lot owner also failed to raise the irregularity prior to the meeting and consequently, the Adjudicator considered there might have been a waiving of the right to strict compliance with respect to the notice provisions.

This situation simply highlights that a Body Corporate is not infallible but that it must act reasonably in the performance of its general functions and duties.

The code of conduct as contained in the modules do not demand administrative perfection, however, the committee does need to try and take all best practice steps towards complying with the legislative requirement of BCCMA and appropriate regulation modules.

Consequently, for all those lot owners who believe there must be perfection in every notice and agenda, meeting and decision made by a Body Corporate, time again this has been proven to be incorrect and the overarching impacts at play are far more significant when consideration is being given to a claim.

It will be interesting to see if our debaters agree or disagree on the need for strict versus substantial compliance.

(1) One The Esplanade [2009] QBCC MC Mr 164 (27 April 2009).

This article was contributed by Juliette Nairn – Partner, OMB Solicitors