Units Plan No 346 consists of 16 Class B residential units and common property. The applicants are unit owners of three of the 16 units, collectively holding 17.88% of the total unit entitlement. At its reduced quorum annual general meeting on 14 January 2019 (the AGM), the owners corporation elected two persons to its executive committee as only two unit owners nominated themselves.
The applicants contend that the AGM failed to elect an executive committee because it could not elect an executive committee with at least three members. The applicants relied upon section 39(2) of schedule 3 of the UTMA which provides that a corporation with four or more members must have between three to seven members on its executive committee.
The Tribunal noted that while there was much merit to the argument that the requirement to have three members is phrased in “mandatory and absolute terms”, “the purpose of section 39 is to establish a governing body for an owners corporation. A minimum number of members on an executive committee ensures appropriate representation and diversity of views. The minimum number should always be filled where there are candidates available. However, it is impractical to impose upon all owners corporations an obligation to always select a minimum number of members at an AGM, lest they have no executive committee at all. Such a reading of section 39(2) has the potential to result in absurd or unreasonable outcomes that make some corporations unreasonable. Consequently, while the situation is not beyond doubt, I am satisfied that section 39(2) of the UTMA sets out the minimum number of members that may be elected at the AGM (in other words, the minimum number of positions open for election), but it does not necessarily require that minimum number actually be elected where there are insufficient candidates for the positions.”
Finally, the Tribunal noted that “I have some concern that this interpretation could, potentially, be manipulated in a way to keep a potential executive committee member from participating in the process. However, this risk seems to me to be of a lesser seriousness than the alternative, which is that no executive committee can be elected at an AGM unless there are sufficient candidates. I am satisfied that could not have been the intention of the legislation.”
Another separate issue in this case arose out of the following circumstances. On 25 February 2018 units belonging to two of the applicants, Mr Woolmer and Ms Walker, were flooded as a result of rain water flowing from the common property into their units. The owners corporation did not make a claim on its insurance policy, but the applicants separately made a claim on that insurance and paid the $500 excess directly to the insurer. Their damage was ultimately compensated by the insurer but the applicants claimed that the excess should be born by the owners corporation.
While recognizing that the approach may work an injustice to unit holders, the Tribunal was of the view that the Insurance Contracts Act 1984 (Cth) (ICA) applies to insurance contracts obtained pursuant to section 100 of the UTMA, and individual unit owners are considered to be “third-party beneficiaries” to the insurance policy held under the corporation’s name.
This means the applicants had the same obligations to the insurer as the corporation would have had, including the obligation to pay any excess. In other words, they processed their claims against the owners corporation insurance, subject to each of them paying the applicable excess required by the insurance contract.
In relation to the question as to whether the owners corporation should make the insurance claim in its own right rather than requiring that the owners make the claim on the insurance themselves, the Tribunal held that the UTMA only requires the owners corporation to obtain and maintain the relevant insurance. It does not compel the owners corporation to make an insurance claim. There is no means by which the owners can compel the corporation to make a claim on their behalf, other than perhaps where a motion has been put to a general meeting, in which case the proponent may seek an order giving effect to the resolution under section 129(1)(g) of the UTMA.