Hot seat part 2 - Vexatious litigants and embedded networks

In this second part of Lawyer in the Hot Seat, recorded last week, strata legal eagle David Bannerman fields questions from Flat Chat's Jimmy Thomson about a range of issues, starting with what is vexatious litigant and how do you deal with them?

Then there's the matter of disputes between neighbours and whether or not the strata committee should get involved - and what they can and should do if they go down that road.

We look at embedded networks, how they are used to rip off apartment buyers, who should be warning strata newbies about them, and the very simple way purchasers can make sure it doesn't happen to them.

And finally there are webinar viewers attendees' questions. That's all (only without the pictures) in this week's Flat Chat Wrap.

____________________________________________________


Flat Chat is all about apartment living, especially in Australia.
Find us on Facebook and Twitter and the Flat Chat website.
Send comments and questions to mail@flatchat.com.au.
Register to ask and answer questions about apartment living anonymously on the website.
Recorded by Jimmy Thomson & Sue Williams; Transcribed by Otter.ai.
Find out more about Sue Williams and Jimmy Thomson on their websites.

Transcript

Jimmy

Around about this time of year, every year, I go online with David Bannerman, a leading strata lawyer and one of our sponsors for a long, long time now, and I ask him questions. You heard the first part of this Lawyer in the Hot Seat last week, and it's still obviously available online if you want to catch up with that. And this week we bring you the second part, which includes vexatious litigation, whether owners' corporations or strata committees should get involved in personal disputes, embedded networks, and listeners' questions. I’m Jimmy Thomson and I’ write about strata across the media – and this is the Flat Chat Wrap.

[MUSIC]

Jimmy

Vexatious litigants. Well, I'm going to ask you to define what vexatious means.

DAVID

Well, it's somebody who just conducts too much litigation and they do it on the basis that they're trying to wear somebody out. So they don't care about, they're happy to start litigation and withdraw it, start it, withdraw it, let it run on and enjoy it. They're trying to really wear people down.

And they might do this over a period of 10 years or something, right? And they might 10 different applications. And none of those applications have been successful, right?

And so you have these people who are using litigation for wrongful purpose. And we'll go you through some examples of that. And there are many people like this that we deal with, and they continue to run litigation even though they think that, I don't know why they think they're going to succeed.

I think that a lot of the people who do this litigation, they're just trying to wear people down over time. So they break and just give up, right? And so because they've got an ulterior motive, then what's behind the litigation, okay?

Right. And sometimes they succeed in their multiple applications to be a vexatious litigant. And so it can be quite a clever strategy for getting ulterior motives that people want to succeed.

Is that one of the grounds that the tribunal can use to award costs? Because it's quite narrow, isn't it? The tribunal, normally it's supposed to be both sides pay their own costs.

Well, it was in theory once upon a time. I mean, is that one of the grounds where the successful defending owner can claim costs and say, well, this is just number 123 of all the actions this guy's taken against me? No, each separate application will have its own particular cost order.

And then that could be appealed or not. But  , each action will have its own cost consequence. So you can't just like then go and throw in a whole new claim and start again and try and think that you're, unless you're appealing that out of the first action and you run a second action, a third action, a four action.

Each one will have its own cost consequences. I mean, I do know that one of the grounds for awarding costs is if the plaintiff knows or should know that they've got very little chance of success and that would come into this territory to some extent, wouldn't it? Oh,  

Well, that's under normal special circumstances, but that's not necessarily a vexatious litigant. So we're talking about somebody who's run multiple sets of litigation against a particular party. 

Jimmy

And what about the other side where the innocent owner says to the owner's corporation, look, you're not doing the right thing here.

I'm taking you to the tribunal. And the owner's corporation says, well, if you're going to do that, we're going to get lawyers and cases and expert witnesses and we're going to charge you for all of those things. If you lose this case, we're going to come after you for the entire cost.

I mean, isn't that almost the same as vexatious litigation in terms of it's... 

DAVID

No, I mean, that's just people playing a strong position to say, well, if you sue us, we're going to go all the way and we're going to seek all of our costs and we're going to be fully armed when you take us to court. But that's not vexatious.

So you might think that when you look across a particular dispute that someone appears to have perhaps a mental health issue and they seem to be raising the same thing or something extremely different, sorry, moderately the same in another proceeding of the same issue or the same issue they've been doing for 10 years and you go, they haven't won once. What is the objective there? If you don't think they've got an ulterior motive, they might well have a mental health issue as well.

So it's hard to know. You're talking about mental health. Isn't there also an argument to say to people who feel aggrieved and want a result to say to them, you know, you've got to think of the emotional cost of pursuing this.

Is it worth it? Some people like a fight and some people like litigation and some people like to think that they're making somebody suffer by bringing litigation, by distracting them and doing all that sort of thing. So there can be some joy that comes to that person's mind when they think that they are bringing this action.

Looking at section eight of the Vexatious Litigants Act. And so the important thing here is that it's someone who's conducted various vexatious proceedings and that can be in the court of the tribunal. So this includes NCAT.

So if people are wondering, oh, it's not a court, they're bringing in all these applications in NCAT, then that's fine. And, you know, quite often someone will bring an application and withdraw it, bring in one and withdraw it, you know, and sometimes they'll run one and lose it and whatever else. So they'll consider all the applications that somebody has, you know, commenced.

And then there's an extract here from the Supreme Court Register about there's some vexatious litigant findings here in respect of a community scheme and somebody was restricted from bringing certain applications against a particular enabled association or bringing issues related to that litigation. And you can sort of see there's, you know, numerous pieces of litigation there that follow separate proceedings over many years in relation to that litigation. And so they decided to say you can't bring any more litigation about that litigation.

Jimmy

Does that make sense?   You've run out of your points on that one.

This also takes us into the area of owners fighting other owners and what should executive committees, strata committees, get involved in a fight between two owners and what can they do if they do choose to get involved? 

David
Look, the number one dispute that we see that owners' corporations decline to get involved in are flooring disputes. So somebody's done a bathroom renovation and someone's complaining about the noise transmission as a result of that.

Now, the owners' corporation could get involved. We typically find that the owners' corporation will get involved if the person below is like a committee member of the owners' corporation and they're saying, oh, well, we can run this litigation. We've got good prospects.

You've heard the noise. Come and listen in here while all this goes on. And the other, they decide, well, we should go to bat for that and we should see what happens with the tribunal orders.

But quite often where the committee member is not the unit below, then they'll just say, look, we'll let these owners sort out the dispute themselves under the bylaws because then only can bring an application against another owner in relation to those works there and then they'll ventilate that themselves. 

But equally, in relation to like the number one problem apart from noise would be parking. And the owners' corporations will typically bring an application for a parking dispute because they think, well, this affects everybody.

Therefore, we don't have to get involved. Then another owner, if they really wanted to, could bring another application against this person for a parking dispute. But we will bring the application.

So I think noise and parking are very common problems. You've got short-term letting as well because that creates a lot of angst in the building sometimes when there's occupants there and they have all these people coming through who they don't know who they are and they're creating noise and rubbish and whatever else. And so that creates some issues there as well.

But as far as whether the owners' corporation has the ability to say no to bringing the litigation, they typically will take that. They have been ordered a couple of times. It's pretty rare, but it is possible for the owners' corporation to be ordered to enforce the bylaws against another owner even when it was refusing to do that.

Jimmy

Is it reasonable for the owners' corporation to organise mediation? And I'm not talking about fair trading mediation. There are other places, areas you can go to. 

David

Look, we have drafted bylaws for people which they've registered, which deals with an informal mediation solution. Mediation is merely a situation where people start in a room, they ventilate what the issues are, and they break up into different rooms.

And they have a mediator who tries to take some points that can be resolved potentially to the other room and they try and formulate an agreement which can be signed and resolve the agreement that way. And certainly, that is a good solution to resolve that internally before it goes to Fairtrade in New South Wales or before it goes to NCAT if it doesn't resolve with Fairtrade in New South Wales. So I think quite often a lot of disputes will arise at a general meeting where someone's put up an agenda item which not everybody agrees with.

And then from that, the angst grows and the decision goes against what the person wanted. And then they bring the application in NCAT. That might be some works that they were looking at doing to the common property or some other activity that they were looking at doing.

And that's where the owner brings on the dispute against the owners' corporation or the owners if they refused the terms of the bylaw that was being proposed for renovations or whatnot, whatever they were proposing. 

Jimmy

One of the things I noticed, I think it was when you were doing vexatious litigants, the naming and shaming issue, which is something that actually bothers me. I used to be a believer in naming people who had allegedly done something wrong or even people who were behind in their levies.

And I've recently put up in, recently, a couple of years ago, probably the last time I went to an AGM at our building, that we shouldn't even identify them by their unit number. We should identify them only by their lot number, because nobody knows who their lot number is. I don't even know what my lot number is and I've lived here for 20 years.

And I was absolutely hounded out of the meeting for, and I remember the chairman saying very definitely that people will have them, because part of the problem was I seemed to find my name popping up in minutes a little bit too frequently, strata committee minutes. And he said, no, we're going to do this. We're always going to name people, always.

That is the way. And everybody agreed with him. And then funnily enough, in the next committee meeting, they said, oh, we've chosen not to name this person because of the difficult circumstances, which is fair for that person.

But how do you feel about, is it actually better not to name people who might be behind in the levies or who have raised an issue that's quite contentious? 

David

I would think that there's nothing wrong with the truth and that's a defence against defamation. The problem about that is that the accounts might not be accurate.

So one of the things that's going to come up for the strata industry very soon is if our officers had a view that, say, for instance, with a lot owner ledger, and this review has been supported by local court cases and a tribunal decision as well, that unless the court says that you've got to pay that legal cost, like the reminder letter or the letter of demand costs or the statutory notice cost, unless the court says you've got to pay that amount, it's not payable by that owner.

So you can have a lot owner's ledger who's full of late payments and have lots of reminded letters and warning letters and statutory notices, and then that could create a problem for saying that person's not financial. And the reason I mention it now is that come the 1st of October, which is when the second round of the strata legislation is due to kick off, they're going to be clarifying that that's the correct position. All these people are going to have to go back through all their ledgers and fix it all up.

And get all those names out. And then that could mean that they actually are in credit and they're not in debit. So the truth is fine if it's accurate.

Jimmy

Right. Well, that's, that's a kind of strange conundrum. I notice we're looking at embedded networks, which is one of my favourite topic.  Do you want to stop and do this?  Sure, sure. I'll just jump over to that now.

David

Oh, sorry, I had some, oh, just on some owner disputes before we do. So we've got as a four lot scheme here, the appellate voted against a motion for a bylaw. That's a very common type of application that's put forward for renovations and the vote against the bylaw and the motion was defeated.

And then the owner sought orders in the tribunal at first instance for the making of bylaw pursuant to section 149, which is where the owner's corporation would make the bylaw. And then the law that had taken the bylaw was successful and the appellate sought to appeal the decision, but was unsuccessful. So this would be a case, you've got four apartments and in a lot of older apartments, everybody has the same unit entitlement.

You know, they just say divide everything by four. And so under the rules of bylaws, all it takes is one person to block a bylaw.  

And that does seem unfair. Another case where the lot owner commences proceedings to take the owner of the unit above hers, seeking orders for them to reduce the noise. So they've changed the flooring and perhaps they're doing something different there.

The unit above had a tenant in it and orders were sought for them to stop certain activities during certain hours and install floor coverings to reduce the transmission of noise. And the application was dismissed on the basis that it wasn't an unreasonable noise level. So that's one of the tricks with Strata is that, you know, it's not going to be peaceful like you're living in the countryside.

You're going to expect some level of noise because it's living under you to the side or below you, right? So there's always this level of what's the acceptable noise that you need to consider as well. But it's number one. It's one of the most popular problems there. 

Jimmy

So coming to embedded networks. Are they all ripoffs? 

David

Not all of them, but there's certainly many in the marketplace.  There's some people who certainly felt like they were getting ripped off. They'd signed an agreement at the, or they hadn't signed the agreement, but the managing agent had allegedly signed an agreement that was in the papers and, you know, they weren't even enjoying the benefit of the infrastructure. That's right.

Jimmy

I've got an investment apartment where solar panels were put on the roof because they needed it to fulfill the DA. The council wouldn't give them a DA for the apartment block if they didn't have a solar panel on the roof. So there's one little solar panel on the roof.

The executive committee said to the electricity company, we want to use that solar power to light the garage, underground garage. And the electricity company said, sure. And we'll only charge you the normal rate for your electricity … you don't own that solar power panel, we do. And we put it in for free for the developer so they could get their DA passed. Now that is a typical embedded network rort, I would think.

David

Well, the thing about embedded networks, it's only sort of a recent commercial play. And it sort of followed on from the commercial play of getting building managers in there with long contracts that were, you know, 50 years long.

And it's, you know, the embedded network providers will frequently, not always, but frequently meet with a developer prior to the completion of the work and say, you know, before you complete all the construction work, we'll put this network in. You'd have to provide it anyway, but we'll put it in and you won't have pay for it if the owners corporation sign at the first annual general meeting, our long-term contract for the supply of this energy. And then we'll capture the cost of the supply infrastructure costs in the sale price for the energy.

And so the owners corporation find itself paying for infrastructure, which it should never have paid for. 

Jimmy

Absolutely. And I was in a same building, actually, the stormwater drain, which is another classic. The maintenance cost per year was not outrageous, but in the contract, it said that they had the option to increase it by 10% per year for 15 years. So we managed to get that knocked back, but then that was before we discovered all the other stuff that was hidden in the contracts. But here's my question for you.

The strata manager in that case went along with everything that was in the agenda and didn't say a peep until a certain noisy Scotsman started complaining about things.   

If you're going to stop embedded networks, somebody at the first AGM, because that's when all the contracts become valid, who should be telling the owners do not sign that contract? Is it the strata manager?

David

Well, it depends on who's chairing the meeting. 

Jimmy

Well, they've just elected a chair who doesn't know anybody else in the room. 

David

That elected chair doesn't commence that appointment until the commencement of the next meeting, or until the end of that meeting, sorry.

So they're elected and they don't start until that meeting ends. So if the meeting is chaired by the strata manager, they should be the ones telling people there's a couple of dodgy contracts in here. I mean, we know that I'm talking about fantasy here.

That's never going to happen. Well, the thing about the chairperson is that you've got the secretary, they're the ones who have to put the agenda together. And it goes out to the owners and the chairperson is conducting the meeting.

And they're putting forward the motions to the owners. Now, we've always said, and we've got fact sheets about it, that the embedded network contract should not be signed at the first AGM. Because one reason, you know, they're not going to turn the power off just because you didn't sign it.

And you should get some opportunity to get some advice about what the other alternatives are, and what you should be negotiating in relation to the terms of that contract, right? If you're going to go ahead with the door. Now, the big trap that we see in a lot of contracts is a clause like this, right?

Let's say it costs $300,000 to install it. And they'll say, Oh, if you want to get rid of it, you got to pay 300,000. Now, the developer should have paid the 300,000.

And then all of a sudden, they sign at the first AGM, then the owners corporation, they want to try and get out of it, right? Then all of a sudden, they've signed a contract and they're paying the 300,000. So they should never sign a contract with a clause like that in it, because the developer should have paid for it.

Jimmy

Are there any contracts that will come up at your first AGM in a new building that you must sign? Do you have to employ the strata manager who's turned up at the meeting? The whole meeting agenda is an agenda where people get to make a decision, yes or no.

David

So there's nothing that they need to say yes to. Probably the one thing that they should be saying yes to is, well, we got to get a committee, at least work out who's going to be on the committee, because we need to get these office bearers functions filled. But everything else can be voted differently, like amended.

So it's not substantially different, can be voted down, it can be voted up. It just needs to be voted upon. There are obligations, and this could be done in the adjourn meeting, where they've got to consider the insurance and levies and all sorts of things that they're going to need to do, because they're unable to get a substantial agreement.

So you could defer a lot of the, until the new committee, brand new committee has had a chance to look at the contracts, you could defer most decisions to a later date. You could. And should possibly.

Now, you just need to think, well, what services do we need to have fulfilled, right? So, there's a lot of contracts which will expire at that meeting where they might want those services fulfilled. Strata agent, building manager, they might just want to go with a shorter term contract just so that they can get those services performed while they're getting on top of things.

Jimmy

I have heard of Strata managers at these first AGMs telling the owners, you have to sign all these contracts [because] it's the law. It is the law that they have to sign them for them to be valid, but they don't have to sign them.

Now, you've had a lot of messages coming in. Do you want to? 

David

I'll let you choose through them there. 

Jimmy

We'll jump to them shortly. As of March 30th, 28 individuals were listed as vexatious litigants under the Vexatious Proceedings Act. There you go.

It is happening. Sorry. Somebody told me, I saw one, the problem with some owners' corporations is that they refuse to obtain legal advice for embedded network contracts and other contracts for Strata.

Is that just blind? I don't want to know. It can't be that bad.

David

Look, if the owners want to sign something that they don't understand, they certainly can make that decision. I just wouldn't recommend it. No.

Jimmy

Oh … this is very complicated. A tenant cracked a bathroom tile after dropping their phone when a contractor attended to replace the tile, not the phone. They discovered black mould under the tile.

The issue is the lot owner only has one bathroom, so the tenant still needs to use it. What are the owners' corporation's legal obligations with this situation under the WHS and DBP Act, given that the mould is hidden and the bathroom remains in use? Okay.

David

Well, as far as work health and safety goes, you need to work out if the scheme is a PCBU. On our website, we've got a quiz for that, and you can do that. Then if they do, they've got to have a policy, then they've got to have an inspection assessment, and they've got to undertake the repairs in accordance with their policy.

That's something that they can certainly look to do, and they should be doing. We'll just jump out of that. As to the general repair obligations, though, that's a different story in relation to the property.

They need to get a report. They need to identify the risks. They need to address the risks.

They need to get the item rectified. You've also got occupier's liability as well, which is where the personal injury comes in. Then they might make a claim against the public liability insurer because they've got ongoing permanent disability with their lungs or their bowels and things like that.

They're the two recurring injuries that I frequently see. 

Jimmy

Here's a juicy one to finish with. Is it a conflict of interest when a Strata Committee member who's a builder has put forward a contract for $1.1 million? 

David

Sorry, if you could repeat that again. 

Jimmy

What is a conflict of interest in a Strata Committee member, a builder, who is putting forward a contract for $1.1 million?

David

Well, that's clearly what they call a pecuniary interest, and you've got to have a pecuniary disclosure book as part of being a Strata Committee, and he'd have to disclose that I've got an interest in the contract. Then when that contract got voted upon, if it wildly was going to be voted upon at the committee level, which they could do if they didn't have a restriction on them, then he'd have to leave the meeting while they decided whether they were going to enter into that contract or not. But there would be circumstances where a builder could say, I know this building.

Jimmy

I've lived here for 10, 15 years. I know how everything works. I know how much it's going to cost for you to get an outside company to come in. And it might actually be reasonable. You shouldn't necessarily throw something like that out because it appears to be a conflict. 

David

No, what I mean is because it's got a pecuniary interest, and that's the wording in the legislation, because there's an inherent conflict in the relationship, and it's a financial one, he's not allowed to vote at a committee level on that.

But he can vote for that at a general meeting decision. 

Jimmy

And the committee? He shouldn't even be in the room for the decision. 

David

That's right. He has to have left the room while they voted upon it. 

Jimmy

Another one here from Bart. There should have been two quotes because if it's over $30,000. Thanks, Bart, for putting us back online. So we are over time.

David

Okay. Well, thank you, Jimmy. Pleasure again. As ever. Thanks, everybody, for attending. I hope you found the information was helpful.

For those people that we didn't get answers to, in the next week or so, we'll try and get those answers to you if we've got your details to get back to you. That's through the responses that we received prior to the session and for the ones that we received during the session as well. But thank you.

Jimmy

And I'll be running something about this on flatchat.com.au, which is where I live. 

 [MUSIC] 

Jimmy

Very interesting stuff. You can go on to the Bannermans website, bannermans.com.au, and see all that in fabulous video. Well, Zoom video, which probably explains the slightly dodgy sound. Next week, Sue Williams will be back talking about all things Strata in New South Wales and across Australia.

Thanks for listening. Talk to you next week. Bye.

Thanks for listening to the Flat Chat Wrap podcast. You'll find links to the stories and other references on our website, flatchat.com.au. And if you haven't already done so, you can subscribe to this podcast completely free on Apple Podcasts, Google Podcasts, Spotify, or your favorite podcatcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you'll get this podcast every week without even trying.

Thanks again. Talk to you again next week.

 Transcribed by TurboScribe.ai. Go Unlimited to remove this message.