Strict v Substantial Legislative Compliance – Myth Busting!

Strict v Substantial Legislative Compliance – Myth Busting!

The unwieldy and often complex nature of the Queensland strata legislation provides plenty of stories, which can lead to the creation of a myth!
Following on from co-presenting with Commissioner Irons at the Southport Sharks last week, I thought it might be interesting to discuss one of the most prevailing myths – there must always be strict compliance with the strata legislation!

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 maybe best practice, there are several District Court and Adjudicator decisions that confirm substantial compliance with the extensive legislation is sufficient.

Commissioner Irons’ 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.

Strict v. Substantial compliance

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 or an irregularity with respect to a secret ballot.

In the recent decision of Cypress Apartments(1), an Adjudicator declared two (2) general meetings held by this Body Corporate to be void. The Body Corporate permitted its BCM to receive the completed voting papers(2) and then pass them onto the Secretary. The action invalided 12 out of 14 voting papers and subsequently, resulted in a lack of quorum for the meeting. At the AGM, two voters must be personally present at a general meeting to establish a quorum(3). This did not occur and consequently, this meeting was also void.

In contrast to this, we look at the circumstances of Ms Chen(4). Ms Chen was seeking to invalidate or void a resolution passed by the Body Corporate to terminate her services agreement. Ms Chen failed to obtain an order from the BCCM-Office and appealed to the District Court. This provided the District Court with an opportunity (through Justice Bolton) to consider the difference between strict compliance verses substantial compliance.

Justice Bolton heard that although there was non-compliance with the legislative requirements by the Body Corporate, it did not go so far as to be enough to invalidate the Body Corporate’s decision to terminate Ms Chen’s services agreement. Importantly, Justice Bolton said:

“The very detailed provisions of the standard module regulation … make it almost inevitable that from time to time there will be non-compliance. Equally though the provisions of the Act make it clear that non-compliance of an insubstantial nature will not be allowed to imperil the actions of bodies corporate or their committees, particularly in the instance of committees where actions are taken bona fide.”

The issue involving substantial compliance versus strict compliance was again 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.

Again, 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 – your myth has been busted!

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

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(1) Cypress Apartments [2019] QBCCMCmr (14 May 2019)
(2) S 84(2)(b) Accommodation Module – requires voting papers to be given to the secretary by hand, post, ect before the start of the meeting
(3) S 80(2)(a) of Accommodation Module
(4) Wei-Xin Chen v Body Corporate for Wishart Village CTS 19482, Appeal 4080 of 2000, District Court Brisbane, 29 May 2001
(5) One The Esplanade [2009] QBCC MC Mr 164 (27 April 2009).