What price do we put on risk?

In current conversations about strata management fees, there is an issue being ignored. The sleeper is this: what price do we put on the compliance risk of being a strata manager? With a strata manager awaiting sentence for the death of a worker on common property, and widespread concern about unfunded repairs and maintenance, this is an issue we need to face.  

Jose Martins, aged 64, died on 12 June 2020 at an 8-lot light industrial strata in the Sydney suburb of Berkeley when an 8.5-metre-long x 2 m high sliding gate to the complex fell and crushed him. 

Eight days earlier, a car hit and broke the gate. The owners working onsite undertook makeshift repairs to the gate and Mr Martins was assigned the job by his employer, one of the owners, to open the gate manually each morning until it could be repaired. 

The morning after the car hit the gate, the strata manager was advised and promptly issued a work order to have the gate fixed but did not assign the work order any urgency. No steps were taken to assess the risk of the situation, tag the gate as being out of service, or to issue work statements or warnings about operating it manually in its damaged state. No one it seems were aware of Safe Work NSW practice guides or a safety alert concerning a similar case in WA. 

Some four years on the Safe Work NSW prosecutions are coming to their conclusion. 

Mr Martin’s employer has been convicted and fined $375,000 and ordered to pay costs of $44,000. 

Earlier this month, the owners corporation, as the controller of the common property, was convicted and fined $225,000 and ordered to pay costs of $40,000. 

The strata manager has pleaded guilty to similar charges, and it remains only for it to be sentenced. By law, you can’t take out insurance to cover WHS fines. The fine for the strata manager is likely to be high. The judges’ comments in sentencing the OC give us some insight into the strata managers culpability. According to the judge, the strata manager, ‘made a significant contribution to the creation of the risk and the death of Mr Martins’. The judge noted that- 

• Under the strata management agreement, the owners corporation had delegated the manager ‘full authority with no limitation for effecting repairs to and maintaining common property or engaging appropriately qualified tradespersons to undertake standard work orders’. Repairing the damaged gate was a standard work order as it was construction work with no requirement to work above three metres

• Prior to the incident, the owners corporation ‘relied heavily’ on the strata manager to meet its obligations under the strata laws and to attend to any repair and maintenance issues.

• Before the incident, the strata manager had not provided the owners corporation with any guidance or information about their responsibilities under the WHS Act in relation to the common property. The owners gave evidence that before the accident, they did not know that as commercial property owners they had duties under WHS laws.   

Any accidental death at a workplace is tragic, and all parties in this case have expressed their remorse and sympathy for the family of the victim. I respectfully offer mine to the family. 

At the same time, I feel for the members of the owners corporation and the strata manager. The reality is that this could have been anyone of us. This happened at a small scheme, without on-site management, with limited resources and appetite for expensive risk management assessments and operating procedures. In these cases, it is easy to be judged harshly with hindsight. The standards to which strata owners and managers are held as property owners and controllers are high, and sadly, not well understood. 

Putting aside for the moment the large fine likely to be imposed on the strata manager, living with a death on common property of a scheme you manage and being found by a judge to have personally made a ‘significant contribution’ to a person’s death is a horrendous price to pay for taking on this business. The management fee in this case was probably less than $5,000 p.a. 

But as a profession we assume these risks routinely. The risk we take in doing so must be acknowledged. It must be taught in our professional training programs and educational curriculums. It must be reflected in the quality of the service we deliver and the information we provide to owners at every opportunity. It must be factored into the professional fees we charge.