Special resolution required to terminate managing agent’s contract
By Anton Kelly
Can the managing agent contract contain the term that a special resolution is required to authorise notice of the termination of the contract? This interesting question came up recently when a scheme notified the managing agent that the contract would not automatically renew on its anniversary date. The decision was made by the trustees and the managing agent challenged the decision because the contract, signed by two trustees, required the decision not to renew the contract to be made by a special resolution of the body corporate.
The Sectional Titles Act and the prescribed rules specify that certain decisions be made by special or unanimous resolution or by all the owners in writing. All other decisions are made either by the trustees or by the body corporate by ordinary resolution. It’s important to remember that both the trustees and the body corporate can only make a certain class of decision, specifically, a decision that is within the power of the body corporate to make! The decisions that the body corporate can make relate only to the control, management and administration of the common property for the benefit of all owners.
Prescribed management rules (PMRs) 46 and 47, which deal with the managing agent’s employment, make a distinction between different types of endings to the agent’s employment:
- Natural termination, with notice, at the end of an annual renewal cycle;
- Cancellation for breach of contract or conduct that would result in dismissal of an employee; and
- Revocation due to the managing agent going into liquidation or being sequestrated, being convicted of a crime involving dishonesty, or by the decision, by special resolution, of the body corporate.
The special resolution in point 3 is necessary because the rule specifically points out that the resolution does not deprive the managing agent of the right to sue for damages or compensation – which would obviously come out of the body corporate’s funds. Perhaps this is the source of the idea that the contract can specify that it can only be terminated by special resolution of the body corporate.
However PMR 46(1)(b) specifies that the decision not to renew the contract, that is, the natural termination at the end of an annual renewal cycle, can be made by the trustees or by the ordinary resolution of the body corporate.
While the prescribed rules do not bind the managing agent, they certainly bind the body corporate and the activities of the trustees, and consequently a term in the managing agent contract that requires a special resolution to authorise the non-renewal would be invalid.
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