Caught in the Crossfire: How Standard Agreements Turn Strata Delegation into a Professional Disgrace

To be or not to be – that’s the question for strata professionals this week. To be agents, and protected from liability (relatively), or to be independent decision makers and exposed to risk?

Strata management firms face risks when they accept delegated powers, a concept that has not received enough thought and attention. The SafeWork NSW v Chris Darby Strata Pty Ltd [2024] case made this point compellingly. A strata manager was found guilty of a work health and safety breach that led to the death of a worker. They had the authority to spend funds but failed to hire a contractor for an urgent safety assessment after a car park gate failed.

Up and down the east coast of Australia, strata entities can delegate their decision-making powers to their strata managers. In NSW, ACT, and Victoria, the power to delegate is clear. In Qld, it’s a little more obtuse. When a body corporate chooses not to elect a committee, a strata manager can run the show until the next AGM. Same result, a different way.

Delegations happen almost invariably in these places whenever a strata manager is appointed. The standard conditions of the strata management agreement from the strata management trade association, SCA, allow for delegations with full or limited authority.

So, what does a delegation of powers mean? Regis Towers (2002) distinguishes ‘assistance’ that a strata entity may get from a contractor or an employee from a ‘delegation’ where the strata manager acts independently and without the control of the strata. This interpretation is consistent with the sentencing remarks in the case against Chris Darby Strata Pty Ltd.

Can you serve two masters? Perhaps, but it’s always tricky. But if you choose to, then you should own it. With freedom comes responsibility. And this is where SCA (NSW) have, yet again, dropped the ball.

The latest version of the SCA (NSW) agreement used by about 60% of NSW strata managers, (that can’t be changed or adapted by their members) provides –

• A strata managing agent may, at any time, seek an oral or written instruction from an office bearer, strata committee, or owners corporation as to how to exercise (or not exercise) its delegated functions or powers,

• If the strata managing agent exercises their function in accordance with such an instruction, then the exercise (or non-exercise) will not be a breach. So, no claim can be made against them,

and, wait for it

• The strata managing agent doesn’t have to follow the instruction if, in good faith, they have a reasonable excuse.

There are several problems with this.

1.      By what authority can a chair, secretary, treasurer, or strata committee instruct a person with an independent duty to make important decisions, how they should make that decision? That power has been given to them by the strata entity in a general meeting.

2.      By what authority can a chair, secretary, treasurer, or strata committee relieve an agent, appointed by a general meeting, of the agent’s liability for getting it wrong because they have expressed an opinion, even an oral one?

3.      How is this a fair contract provision under the Contracts Review Act 1980 (NSW)?

The new version of the SCA (NSW) agreement was released with much fanfare. It was promoted as a step forward for strata professionalisation after some bad press. It appears we still have a long way to go. Their agreement remains unfair.

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