Terminating an Owners Corporation Manager’s Contract of Appointment
There are a variety of reasons which may motivate the revocation of an owners corporation manager’s appointment, including poor performance, a more competitive quote or merely exploring other options. Regardless of the motivation, when the time comes, it is vital that the owners corporation has taken the right steps to effectively remove the outgoing manager and appoint a new incoming manager.
Terminating a Contract of Appointment
Revocation by an owners corporation of a manager’s contract is authorised under section 119(6) of the Owners Corporations Act 2006 (Vic) (“OC Act”). It must be remembered that the decision to terminate is a decision of the Owners Corporation, and neither a decision of an individual member nor, generally, a decision of the committee. In order to effectively remove a manager, a resolution should be properly circulated to all members, generally by the Secretary, following which an ordinary resolution must be passed. Whilst this process may appear quite straightforward, there are often other significant obstacles to overcome.
The first difficulty in terminating a manager is the document underpinning the contractual relationship, the contract of appointment. The contract of appointment is a legally binding document entered into between the owners corporation and the manager at the time of appointment and governs how and when the contract can be revoked. Of particular importance is timing: many such contracts of appointment in Victoria contain automatic “roll-over” provisions which mean that, if the owners corporation fails to give the manager the required period of notice of termination, the owners corporation could be “stuck” with an underperforming manager for perhaps another twelve months. Furthermore, if the owners corporation wants to dismiss the manager during the initial contractual term, it should seek advice regarding the termination conditions and any payments which may need to be made in satisfaction of the contract.
Depending on whether the members of the owners corporation are in agreement with each other about the need to end a manager’s contract, there might also be some difficulties in gathering the votes required to pass an ordinary resolution revoking the manager’s appointment. It is often the case that, at the same time that revoking a manager’s appointment is being considered, the owners corporation want to vote on a resolution engaging a new, incoming manager. It is advisable that the owners corporation take the time to seek legal advice regarding the entering into and drafting of a new contract of appointment for the incoming manager. Owners corporations can expect considerable disruption during this period and making the transition smooth is essential to ensuring the services of the owners corporation continue.
Where the passing of an ordinary resolution is unsuccessful, or further difficulties arise, owners corporations - and often individual lot owners - can turn to VCAT for assistance by seeking an order to revoke the manager’s appointment.
VCAT Orders
Section 165(1)(i)(ii) of the Owners Corporations Act 2006 gives authority to VCAT to make an order revoking the appointment of a manager of an owners corporation. VCAT will only make such an order where it considers doing so is fair in the circumstances. There have been numerous occasions where VCAT has ordered the removal of an owners corporation, and similarly, occasions where such an application has been dismissed.
In Tourtchine v Tygfal trading as Campbell Corporate Services (Owners Corporation) [2014] VCAT 537 the Tribunal dismissed an application for an order revoking the appointment of a manager. The applicant, an individual lot owner, sought to remove the manager on the basis of the manager’s failure to adhere to meeting protocols in the removal of the applicant from an annual general meeting of the owners corporation. The relationship between the applicant and the manager had very much deteriorated and previous grievances had been expressed and culminated in an annual general meeting, during which the applicant was removed from the meeting for “irate” behaviour. Whilst the Tribunal dismissed the application it decided that, although the manager’s behaviour was not warranted, this was not an example of the manager preventing a member from exercising their rights due to unreasonable hostility or impartiality.
On the other end of the spectrum where VCAT has ordered the removal of a manager are cases such as Owners Corporation No. 1579 v Giurina (Owners Corporation) [2012] VCAT 643, in which the manager had committed various breaches of duties, including keeping secret the existence of litigation against both himself and the owners corporation.
In conclusion, if you are an owners corporation or lot owner exploring the options available to revoke the appointment of a manager, it is vital to carefully consider the owners corporation’s obligations under the contract of appointment and any practical issues involved in appointing a new manager. This is a time in which the Owners Corporation can benefit by seeking advice so that the transition between managers can run smoothly and the operations of the owners corporation can continue.
The above article should not be taken as legal advice but if you have any comments in relation to this article or require assistance with any owners corporations questions, please do not hesitate to contact Jenny Wang or Lindsay Crofton of Berrigan Doube Lawyers on (03) 9600 2577.
