Who Can Sue in Strata Corporations?

In Victoria there's an interesting debate emerging about who can sue in a strata building to enforce the strata corporation's rights.


You see since an old Court decision in 1843 called Foss v Harbottle the common law position for companies and other member based organisations is that only the collective body can take legal action to enforce its rights and not its members.  That's even so if the collective body refuses to take action. So, in a company that means shareholders cannot sue on the company's behalf to protect their interests.  And, in a strata corporation owners cannot enforce the strata corporation's rights.


But it's not that simple anymore (if it ever was).


In Victoria the Owners Corporations Act 2006 gives owners (and other people) the right to bring actions in the Victorian Civil & Administrative Tribunal about strata issues and seek a wide range of orders.  So, if a strata corporation won't enforce a rule or by-law, or won't dispute a manager's actions or doesn't seek compensation for damage to common property an owner might be able to do so.


Recent VCAT decisions have highlighted the issue and included varying comments including the statement that "The fact that such a statutory response similar to that in the Corporations Law was not included in the OC Act leads me to the conclusion that this was no mere oversight and that the rule does apply to owners corporations".  But the Victorian government says that it always intended owners to have that standing and may clarify that in future law changes.


Strata Community Australia (Vic) disagrees and has issued a position paper on the issue (amongst other law changes) that you can read here.

And it raises interesting questions that are difficult to resolve like.

• Are strata owners really like company shareholders or do their interests and rights go further?
• Should a strata corporation's decision to take legal action (or not take it) bind all the owners regardless of their views and interests?
• Why shouldn't strata owners who want to take legal action to enforce strata corporation rights be allowed to do so at thier own risk?
• Does it matter if the legal action is internal (for matters between owners or between owners and the strata corporation) or external (between the strata corporation and external parties)?
• Is a universal rule about this (either way) appropriate or should the decision depend on the circumstances in each case (and so be discretionary)?

I'm interested in other views about such restrictions as the issue applies to strata corporations everywhere.  So, let me know what you think.


Francesco ...