🏢 When a Strata Contract Isn’t Properly Signed: What a New WA Supreme Court Decision Teaches Us

A recent Supreme Court of Western Australia decision provides some important reminders about strata governance — particularly when it comes to who can sign contracts, the rights of owners who owe money, and the very different rules that can apply to two-lot strata schemes. ⚖️

The case is Zhao v The Owners of 5 Wimbledon Street Beckenham Strata Scheme 40695 [2026] WASC 328, delivered by Justice Bydder on 17 August 2026.

The case came to the Supreme Court as an appeal from a decision of the State Administrative Tribunal (SAT). The Supreme Court ultimately allowed the appeal, set aside SAT's declarations and orders and sent the matter back to SAT, differently constituted, for reconsideration.

So, what happened — and what can strata owners and managers learn from it?

🏠 First, this was a two-lot strata scheme

That detail is really important.

The scheme consisted of just two lots. Lot 1 had a unit entitlement of 54 and Lot 2 had a unit entitlement of 46.

The dispute had a long history and eventually involved questions about the strata management contract, levies, the scheme's accounts, its administrative fund and the appointment of lawyers.

SAT had previously found against the Lot 2 owners on the issues before it and made orders including declarations that the strata manager had been validly appointed, the strata company was authorised to operate an administrative fund and the lawyers had been validly appointed.

The Supreme Court took a different view on several important legal questions.

✍️ Lesson 1: A resolution authorising “the Council” to sign documents doesn't necessarily authorise ONE council member to sign

This is probably one of the most useful takeaways from the decision.

At the scheme's 2020 AGM, the owners had passed a resolution stating:

“That the Strata Council is authorised to enter and execute contracts, agreements, undertakings or other legally binding arrangements…”

The strata management contract was subsequently signed by the owner of Lot 1 alone.

The problem? The Supreme Court found that the resolution did not authorise that individual council member to execute the contract alone.

Justice Bydder considered section 118 of the Strata Titles Act 1985 (WA) and found that, if the resolution authorised anyone, it authorised the members of the council acting jointly. It did not give one individual council member authority to sign on behalf of the strata company.

The Court concluded that the Lot 1 owner was not authorised by that resolution — or simply because she owned the lot with the majority of the scheme's unit entitlements — to execute the strata management contracts on behalf of the strata company.

💡 The practical lesson

The wording of an execution-of-documents resolution matters.

If the intention is to authorise a particular council member to execute documents on behalf of the strata company, the resolution needs to actually provide that authority in accordance with section 118.

Simply resolving that “the council” can execute documents may not be enough to allow one council member acting alone to sign them.

🗳️ Lesson 2: Having the greater unit entitlement doesn't automatically give someone authority to sign

Lot 1 held 54 of the scheme's 100 unit entitlements.

But that did not mean its owner could simply sign a contract on behalf of the strata company.

The Court made an important distinction between voting power and authority to execute a document.

Justice Bydder explained that the greater unit entitlement was potentially relevant in the context of voting on a properly proposed resolution. It did not, by itself, give the Lot 1 owner authority to execute the strata management contract.

Interestingly, the Court noted that it would have been open to the Lot 1 owner to propose an ordinary resolution specifically authorising her to sign the strata management contract and to demand that the vote be counted by unit entitlement.

But that didn't happen.

That's an important distinction:

Winning the vote and having authority to sign the resulting document are not necessarily the same thing. 📝

💰 Lesson 3: Being “unfinancial” doesn't remove all of an owner's strata rights

This is another particularly useful clarification.

We often use the term “unfinancial owner” to describe an owner who owes amounts to the strata company.

But the consequences of being unfinancial are much narrower than some people might assume.

The Court found that, if the owners of Lot 2 had been unfinancial, that would be relevant to their ability to vote on an ordinary resolution.

It would not, however, prevent them from serving as a council member or from being authorised to execute documents on behalf of the strata company.

So:

💰 Owing money does not automatically remove someone from the council.

💰 It does not automatically remove their ability to participate in council decision-making.

💰 And it does not automatically prevent them from being authorised to execute documents.

The specific provisions of the Act need to be considered.

🤯 And in this case — the owners weren't actually “unfinancial” for voting purposes

This is where the case becomes particularly interesting.

The Lot 2 owners had not paid strata levies since around July 2020.

At first glance, you might assume that meant they were unfinancial.

But this was a two-lot scheme, and special provisions apply.

Under section 140, a two-lot strata company cannot establish an administrative fund unless its scheme by-laws require it to do so.

In this case, the scheme's by-laws did not.

The Court found that the strata company therefore could not establish the administrative fund. The contribution and recovery provisions relied upon for those administrative levies were consequently not engaged.

That led to a significant conclusion.

For the purposes of determining their eligibility to vote on ordinary resolutions, the Court found there was no outstanding amount recoverable under the Act owed by the Lot 2 owners.

Therefore, despite not having paid the purported strata levies, they were not “unfinancial” for that purpose and remained eligible to vote on ordinary resolutions.

That is a really important reminder that:

An unpaid amount isn't necessarily the same thing as an “outstanding amount recoverable under the Act”.

The legal basis on which the amount was raised matters.

🏦 Lesson 4: Two-lot schemes really are different

For most strata schemes, having an administrative fund is completely ordinary.

But section 140 creates special rules for small schemes.

For a two-lot scheme, the strata company cannot establish an administrative fund unless the scheme by-laws require it to do so.

There is another pathway: a member of the strata company can apply to SAT under section 140(3) seeking an order requiring the strata company to perform a designated function.

But the Supreme Court found that SAT couldn't simply bypass that specific process by using its broader scheme-dispute powers under Part 13.

The Court concluded that SAT could only prospectively require the scheme to establish an administrative fund in the context of an application made by a member under section 140(3).

Again, the lesson is simple:

Don't assume the rules applying to a larger strata scheme operate in exactly the same way for a two-lot scheme.

⚖️ The lawyers' appointment had the same execution problem

The strata company's cost agreement with its lawyers had also been signed only by the owner of Lot 1.

The Court applied essentially the same reasoning.

The earlier resolution did not authorise that owner acting alone to execute documents on behalf of the strata company, and owning the lot with the majority of unit entitlement did not independently provide that authority.

Accordingly, the Court found she was not authorised on those bases to execute the cost agreement on behalf of the strata company.

📋 What should strata managers and councils take from this?

There are some very practical governance lessons here:

🔹 Check your section 118 authority. Don't assume a general resolution authorising “the council” to execute documents allows any one council member to sign.

🔹 Be precise when drafting resolutions. If an individual council member or strata manager is intended to have authority to execute documents, make sure the resolution clearly reflects that intention and complies with the Act.

🔹 Don't confuse voting power with signing authority. A majority of unit entitlement may determine the outcome of a vote in certain circumstances, but it doesn't automatically give the owner holding that majority authority to execute contracts.

🔹 Be careful with the word “unfinancial”. An owner's inability to vote on certain ordinary resolutions does not mean they lose all their other rights as an owner or council member.

🔹 Make sure levies have a proper legal foundation. Before treating an owner as unable to vote because money is outstanding, there needs to actually be an amount recoverable under the Act.

🔹 Know the small-scheme provisions. Two-lot schemes in particular operate differently in some very important respects.

🧠 The bigger takeaway

This case is a great example of why good strata governance isn't just about reaching what seems like a practical outcome.

The process matters.

A strata company might genuinely need a strata manager. It might genuinely need legal representation. It might genuinely need money collected from owners to meet its expenses.

But necessity doesn't remove the requirement to follow the legislation.

Justice Bydder specifically observed that although it was plainly necessary for a written strata management contract to exist if the strata manager was to continue performing strata management functions, that necessity did not provide a basis for departing from the requirements of the Act.

That is probably the line I would take away from this decision:

⚖️ A practical solution still needs a proper legal foundation.

For strata managers and councils, that means getting the resolutions right, getting the authority right, keeping good records and understanding exactly what the legislation requires — particularly when dealing with small schemes.

This article is general information only and is not legal advice. Strata companies and owners should obtain independent legal advice about their individual circumstances.

2026WASC328.pdf

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