Booklet: Company Title Essentials (Chapter 7 – Dispute resolution)

Company Title Essentials booklet

Below is Chapter 7 of our ‘Company Title Essentials’ booklet. To read the other chapters of our booklet, click the links below:

Dispute resolution

Informal dispute resolution

Many disputes between shareholders in company title buildings can be resolved amicably without the need to engage lawyers.  Disputes about company expenditure or its policies in relation to leasing or renovations can often be solved at informal meetings between directors and the shareholders, or through the election of directors at general meetings.  

Mediation  

In our experience, company title directors and shareholders who are involved in disputes which cannot be resolved informally or through normal meeting procedures benefit from the free, informal mediation service offered by Community Justice Centres. During these mediations, an independent third party will help the parties to the dispute to reach an amiable settlement without the involvement of lawyers and all the costs that can entail.  

To get the most benefit from a Community Justice Centre mediation, each party should bring to the mediation a brief summary of their position, together with any supporting documents.  They should have considered in advance the things that they want the other person to do, and the things that they would be prepared to do, to resolve the dispute and settle the matter.  It is important to remember that dispute resolution requires compromise on both sides.

Local Court  

Section 34A of the Local Court Act 2007 (NSW) provides the Local Court with jurisdiction to make a variety of orders in relation to certain forms of company title disputes.  

An application for an order under s 34A can be made by the company, a shareholder, a resident, or a former resident.

The jurisdiction of the Local Court is broad, and encompasses the following types of disputes:  

  • The health and safety of occupiers and visitors: for example, the company may seek an order requiring an occupier to grant its representative access to a residential flat to carry out a fire safety inspection.  Conversely, a shareholder may seek an order requiring the company to install child safety devices on unsafe windows in common property hallways;
  • Common property: for example, the company may seek an order against a shareholder to prevent the shareholder from carrying out unauthorised landscaping works on a common property garden area.;
  • The use of residential flats: for example, the company may seek an order preventing a shareholder from keeping a pet in a residential flat in breach of the house rules;
  • The behaviour of people occupying residential flats: for example, a shareholder may seek an order against a tenant requiring the tenant to cease playing a loud musical instrument during the night; and
  • Administrative: for example, the company may seek an order against a shareholder requiring the shareholder to pay an overdue levy and any interest that has accrued on that levy.  

It is worth noting that many constitutions provide that the company can recover reasonable legal costs from a shareholder who they are required to take to court.  If such a provision is included in the constitution, a shareholder who is successfully taken to court over a failure to pay a levy will have to pay both the levy and any reasonable legal costs that the company incurred in taking the  necessary court action to recover the amount.  

Dispute Resolution Clauses  

Modern constitutions will typically make provision for the resolution of some disputes by way of mediation or arbitration as a pre-requisite to any court applications.  This can be a cost-effective way of resolving many disputes.  Moreover, if proceedings are commenced in the Local Court, the magistrate may enquire into the steps that the parties have taken in an attempt to resolve the dispute outside court. This may be relevant for determining costs orders.  

Boards should consider including a dispute resolution clause in the house rules that refers minor disputes to mediation at the Community Justice Centre   

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The information contained in this post is current at the date of editing – 3 April 2024.