Body Corporates are entitled to indemnify members …

The owners of a leaky apartment took their Body Corporate, and two Body Corporate Committee members, to Court, accusing them all of suppressing reports about the weathertightness of the building, and failing to adequately remedy a leak.

The Body Corporate held a general meeting and passed a resolution that the Body Corporate would indemnify the Committee members by covering their legal fees for the defence.

The owners of the leaky unit argued in Court that a Body Corporate should not be able to provide an indemnity to Committee members because there was nothing in the Unit Titles Act authorising a Body Corporate to do so.

The Court disagreed. It held that under the Act a Body Corporate is given the powers of a natural person with full age and capacity, and is capable of entering into a myriad of arrangements, which can include an indemnity.

As long as the terms of the indemnity are reasonable, a Body Corporate is not prevented from providing cover for legal fees or purchasing liability insurance for individuals who participate in the Body Corporate’s governance.

The Court went on further to say that the purpose of the Act is to encourage volunteers from among unit owners to undertake the governance and management of the unit title, and that it would be surprising if a Body Corporate could not provide insurance to its members, who are not legally trained professionals or who have limited governance experience.

The nature of the ownership and the governance of Body Corporates depends on the goodwill and willingness of the owners to step up and take on Body Corporate responsibilities which will inevitably involve disputes and criticism from time to time. Therefore, Committee members should be able to look to the Body Corporate to provide such insurance or indemnity.

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Claire Tyler and Hanifa Kodirova

Body Corporate Lawyer and Law Clerk
Wellington