Honesty and Good Faith Changes the Strata Title Laws

My clients and other strata managers, Proprietors, developers and builders involved in the “strata space” and interested in the amendments previously proposed and now made (though not yet in force) to the Strata Titles Act 1985 (WA) (STA) endured my often excited commentary about the potential amendments.

However, unlike some commentators, I stopped closely following the process of amendment and largely refused to comment in public forums about the proposed changes because as the process appeared to drag on I realised I was speaking in ignorance or guessing.  To coin a phrase from the former United States Secretary of Defence, Donald Rumsfeld, the proposed amendments were “known unknowns” or, I knew there were some things I did not know.  In fact, nobody knew what the eventual amendments would be.

Now we do.

Therefore, we all now know, “some things”.

One of the things that I now know is that the Strata Titles Amendment Act 2018 (Act) introduces amendments to the STA that are “extensive and complex”.[1]

I also now know that the Act:

  • imposes statutory duties on “strata managers” to make them more accountable and to encourage higher standards of professional service;[2] and
  • imposes duties on strata managers to: “act honestly and in good faith and [to] exercise a reasonable degree of skill, care and diligence.”[3]

It might be an interesting exercise to trawl through the process of the drafting of the Act to understand why the Parliament of Western Australia found the need to legislate for strata managers to act “honestly”; section 146.

Perhaps that requirement will “guide” the application of section 151 of the Act relating to convictions for offences and the “suitability [of Strata Managers] to perform their functions”.

If so, any ensuing legal authority would limit the application of that section to instances of criminal offences based on the broad meaning of fraud or intentional dishonest acts or omissions.

Or, perhaps the word “honesty” will be given its ordinary meaning.

Any conundrum posed by the references in the Act to “honesty” or “suitability” will likely be far exceeded by the extensive and complex meaning and application of the “law of good faith”.

The application of the duty of good faith under the Act will likely cause the Tribunal or Court (depending on questions of jurisdiction) to need to grapple with both the meaning and effect of that term at law which has been the subject of judicial discussions since at least 1766.[4]

The test of good faith has been said to involve an assessment of whether the conduct complained of was commercially unacceptable as considered by “reasonable people”.[5]

Good faith has been described as including the obligations to:

  • act honestly [remember that term];
  • act reasonably [remember that term];
  • act with truth to the bargain;
  • act reasonably [again] and with fair dealing having regard to the interests of the parties; and
  • to co-operate in achieving the objects of the contracts.[6]

If the duty of good faith includes obligations of “honesty” and “reasonableness” and the Act separately imposes those obligations on Strata Managers, how will Strata Managers fulfil their duty of good faith under the Act considering the law requires all parts of the Act to have a meaning? The effect being that the duty of good faith will need to be given a meaning separate to “honesty” and “reasonableness” those things already part of the Act.

Because of our mix of broad and specialist knowledge and experience we are not trammelled by narrow over specialisation and have considerable experience dealing with the nuanced considerations of the “known and unknown knowns” associated with good faith and equitable and the changes to the STA.  The concepts might be new to the STA but they are not new to us.

We invite you to contact us for both specific and general advice in relation to the rights, obligations and duties under the STA and their application.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

[1] Strata Titles Amendment Bill 2018 Explanatory Memorandum at page 10.

[2] Strata Titles Amendment Bill 2018 Explanatory Memorandum at page 1.

[3] Strata Titles Amendment Bill 2018 Explanatory Memorandum at page 38.

[4] “Good Faith in Contractual Performance” the Hon Justice Susan Kiefel ACT High Court of Australia.

[5] As above, citing Yam Seng Pte Pty v International Trade Corporation Ltd [2013] 1 All ER (Comm) 1321.

[6] As above, citing Mason “Contract, Good Faith and Equitable Standards in Fair Dealing”, (2000) 116 Law Quarterly Review 66.