In strata living, building defect claims against developers are already complex and costly. When the developer retains significant voting power in the owners corporation, the situation can become even more challenging. A recent NSW Civil and Administrative Tribunal (NCAT) decision has provided important clarity on how such conflicts should be managed and when intervention via a compulsory strata manager may be justified.
The Birns Decision: A Landmark on Developer Conflicts
In Birns v The Owners – Strata Plan No. 95983 [2026] NSWCATCD 33 (Birns), the developer owned seven (7) of the sixteen (16) lots and, with support from one additional lot, held a slim voting majority of 51.1%. The Owners – Strata Plan No. 95983 (Owners Corporation) was pursuing the developer in the Supreme Court for building defects arising from the original construction of the property. Critically, because of the date of the building contract, the developer was not barred from voting on any matters relating to building defects under clause 15 of Schedule 1 of the Strata Schemes Management Act 2015 (NSW) (SSMA).
At an Extraordinary General Meeting in April 2025, the developer used its majority voting power to defeat motions that would have advanced the Owners Corporation’s defects claim in the Supreme Court against the developer, including raising a special levy for legal advice and expert witnesses. This occurred despite strong legal advice warning that such actions by the Developer would severely prejudice the Owners Corporation’s s case.
In Birns, the Tribunal made several key findings:
Inherent Conflict of Interest
In any defects case, a developer’s interest is to minimise liability, while an owners corporation’s duty is to maximise recovery for the benefit of all lot owners.
In Birns, the Tribunal determined that, when a developer also controls an owners corporation, this creates a clear conflict. Costs for defects not attributed solely to the developer would ultimately fall back on lot owners, “[i]n any building defects case brought against a builder or developer, it is in the best interests of the builder or developer to minimise the responsibility of the builder or developer, and in the best interests of the applicant OC to maximise the responsibility of the builder or developer … Therefore, there is a conflict of interests for the developer holding the role of the respondent developer and the controlling interest in the applicant OC.” (Birns [52]).
Breach of Section 9 of the SSMA
Section 9 of the SSMA states that an owners corporation has the principle responsibility for the management of the scheme. It is well recognised that the responsibility under section 9 of the SSMA requires Owners Corporations to act in the best interests of lot owners as a whole. In Birns, the Tribunal determined that the developer’s actions in voting against the motions at the EGM was voting against strong legal advice.
The Tribunal held that, absent any reasonable explanation addressing why it would be acting in the best interests of the lot owners as a whole to disregard strong legal advice, the developer was not acting in the best interests of the OC or lot owners as a whole (Birns at [64]). The Tribunal added further, “[i]t is also clear that there is interference with voting in the OC being a democratic process. In this case the developers, with the support of lot 11 (with no noted conditions on this support) hold a voting majority of 51.1%, no other lot owners vote could possibly have any impact on any vote in the OC. So, compliance with section 9 of the SSMA, solely relies on the voting actions of the developers. For the reasons above, I find that the OC is in breach of section 9 of the SSMA” (Birns at [71]).
Dysfunction Established
The Tribunal held that the ongoing conflict and risk of further prejudice to the defects proceedings arising from the developer’s majority voting powers in the Owners Corporation justified the appointment of a compulsory strata managing agent under section 237 of the SSMA. The appointment was made for 18 months to allow the Supreme Court proceedings to run without interference by the Developer.
Why This Decision Matters for Other Schemes
Birns expands the circumstances in which NCAT may find a strata scheme dysfunctional and appoint a compulsory manager. It confirms that majority developer control in active defects litigation can breach an owners corporation’s statutory duties, even if the scheme functions adequately in other areas.
For lot owners in similar positions, this decision offers a stronger basis to:
From a Lawyer’s Perspective: Practical Steps if Your Scheme Faces Similar Issues
From a legal perspective, if a developer or related parties try to put forward motions that go against legal advice or slow down progress in building defects proceedings, the owners corporation should consider taking the following steps:
Schemes currently in legal proceedings against their developer should act promptly. The conflict identified in Birns is likely to persist for the duration of the litigation unless addressed.
Protecting Lot Owners’ Interests
The Birns decision reinforces a core principle of strata law: an owners corporation exists to serve all lot owners, not the commercial interests of any single stakeholder. Where developer control undermines this duty, NCAT has shown willingness to intervene.
