Sectional title corner – Can trustees indemnify themselves from liability?
Hi, I recently received a notice of a Special General Meeting from the trustees in a sectional title scheme where I own a unit. They plan on changing the conduct rules by adding an Annexure to it.
After going through it some points seems unfair that they want to state in the conduct rules that the trustees cannot be sued or held accountable for negligence, fault, mistakes etc.
Below is the snippet.
Do you think it is fair and should this be in the conduct rules? Doesn’t the Sectional Title Schemes Management Act deal with this? – Idris
Hi Idris, it is not uncommon for trustees to put a clause like this in the rules and, in light of the fact that these rules must go to the Community Schemes Ombudsman, they will not get approved if the Ombudsman finds any part thereof to be unfair or unreasonable.
Sadly, many trustees take time and effort out of their own lives to assist with the sectional title scheme only to find that the very owners who appointed them, then try and hold them liable for matters pertaining to third parties which may consult with or carry out work on the scheme.
In some instances trustees can appoint a very reputable contracting company, and something does go wrong. The owners then hold the trustees personally liable for something deemed to be wrong, despite it being an unforeseeable circumstance.
For example: Contractors employed for a large project start the project, and then the owner passes away and the company ceases to exist. The deposit of the body corporate becomes part of a legal battle and settlement of a deceased estate. The large deposit is then not paid out in full, the paint project is put on hold pending legal outcome, and only one third of the building is painted; not to mention the body corporate loses money! Owners may think the trustees are at fault, but they are not.
In the clause provided they have allowed for the body corporate to take action against trustees who have been grossly negligent; this is fair and correct. Trustees should have cover for this within the insurance policy that insures the complex.
Trustees can make mistakes and/or take an agent’s or consultant’s word to be correct. Therefore, it is always wise to budget for the appointed trustees to ensure that they make themselves available for at least two training sessions on sectional title and/or budget matters, and to consult with sectional title lawyers on matters on which they are unsure.
Trustees can subscribe to newsletters and forums on sectional title matters or purchase UPDATED books on the topic.
If a body corporate wants to ensure it is protected it must make clear the directions and restrictions placed on trustees at an AGM, and ensure that it is all noted in the AGM minutes.
Got a burning question? Email email@example.com and we’ll be sure to assist you
Answered by Petra Lewis, portfolio manager at Belmont Property Management