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I’m an EC member in the ACT in a Class B townhouse complex. Our normally smoothly running Executive Committee is currently getting bogged down by a disagreement over conflict-of-interest requirements for EC members in the ACT.
At a recent EC meeting(there’s 5 of us on the committee) two members grudgingly declared conflicts of interest over a matter directly affecting their own units. Despite declaring those conflicts both stayed in the meeting, joined in the discussion and voted on the matter. It didn’t stop there either — after the meeting one of them sent written correspondence to the EC taking a position on the same matter they’d just declared a conflict on, and the other responded in writing fully endorsing it. The member who participated is arguing that because the matter involves external appearance decisions that affect all owners generally, their interest isn’t material or specific enough to require them to stand aside — and that in general matters disclosure is sufficient with recusal only required where the benefit is specific and individual to one lot. The matter under discussion at the meeting was whether to take compliance action against their own unit, which seems pretty specific to me. That argument also leaves a massive loophole where EC members get rewarded for not seeking or gaining approval for alterations and changes that other owners would be issued PINs for. It seems like classic conflict of interest to me, but I’m no strata expert, so a few questions on this:
The UTMA clause 8 requires disclosure of any conflict but doesn’t say the member has to then sit out the discussion and vote. Should EC members recuse themselves from discussion and voting on the issue they’ve got a conflict on? The EC member in question has made it clear that they intend to participate and vote on the issue when it comes to issuing PINs or not.
This same member is running an argument that because the matter affects multiple owners generally their interest isn’t material or specific enough to require them to stand aside. The UTMA just says “any conflict” with no materiality distinction. Does anyone with any knowledge of conflict-of-interest know whether there’s any validity to their argument when it comes to strata?
Does continuing to participate in the matter in writing after the meeting — after already declaring a conflict — count as a continuing or separate breach?
Realistically what kind of orders can ACAT make where a COI breach is established?[A separate question about repainting the fronts of townhouses has been moved to HERE.]
I feel like things are deliberately being made very overcomplicated for those on the EC who want to make sure we’re working on behalf of all the owners.
Thanks for any help on this 🙂
A frustrated EC member
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This is what AI gives as the official definitions of conflicts of interest for the ACT (the numbers are links to the official sources):
- Actual (Real) Conflict: A direct conflict exists where a personal interest or competing duty is currently influencing the way an official duty is performed. [1, 2, 3]
- Perceived (Apparent) Conflict: No actual conflict exists, but a fair and reasonable person might perceive that a personal interest or relationship could improperly influence the decision-maker. [1, 2]
- Potential Conflict: An interest or relationship does not currently affect official duties but could reasonably do so in the future. [1, 2, 3]
If you want to be alerted when anyone replies to your posts or responds to this topic, please register and login, then you will be able to subscribe to the topic. The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers. NB: Longer threads may spill over to additional pages - look for the numbers on the bottom right, under the last post.
Having recently sold out of a unit block in NSW (at a considerable loss) where the chair and secretary refused to accept that the three representatives of the developers on the strata committee had a conflict of interest when it came to discussions about defects, I can safely say there are no StrataKops even in NSW,
I have also just learned that the committee has quietly withdrawn a defects claim without even telling owners it was doing so.
What it will take – and ALL it would take – is one owner to go to Fair Trading and NCAT and ask for a motion to be overturned or even for the committee to be replaced by a compulsorily appointed strata manager for clear breaches of the Act.
In this case, if anyone feels strongly enough, they should run a test case at ACAT where a decision has been potentially influenced by perceived conflict of interest – i.e. the conflicted members’ votes were the deciding factor – and see what the Tribunal members say.
It doesn’t have to be done in a combative way – just seeking a clarification through the only valid means available.
Meanwhile, I have turned again to AI (with all its flaws) to dig a little deeper and it came up with this:
There is at least one significant ACAT case directly on point, and it’s become something of a landmark for ACT strata governance.
Gracie v The Owners – Units Plan No 3411 & Ors [2016] ACAT 3
The catchwords for this case explicitly identify “conflict of interest” as a central issue, alongside annual general meeting procedure, merits review, and whether an administrator should be appointed. Casenote
The owners corporation involved two stages developed by Statehay Pty Ltd. Stage 1 (Lakeside) had 112 units completed around 2009, while Stage 2 (Central Park) had 128 units completed in April 2014 — all of which remained owned by Statehay, giving the developer a majority of votes at OC meetings. At the 2015 AGM, Statehay used that majority to block motions supported by the Stage 1 owners, and to pass motions the Stage 1 owners opposed. Kerinbensonlawyers
The applicant, a Lakeside unit owner, sought the appointment of an administrator under the Unit Titles (Management) Act.
The OCN ACT has described the key principle that came out of the case: it is not enough to merely confess to a conflict of interest — conflicts have to be actively addressed and managed. “The elephant cannot be silent in the room.” Ocnact
The OCN ACT has noted this case had significant implications for OC decision making in the ACT, with other owners now able to challenge decisions on the grounds that the continued participation of highly conflicted individuals led to “unreasonable influence” on decisions. Ocnact
There are also related cases worth knowing about. In Executive Committee Units Plan 930 v Capital Strata Management and Miliano and Others, ACAT affirmed that if an OC member owes any money to the OC, they are not entitled to vote on any resolution at an AGM or special general meeting — which touches on a related form of conflict (financial interest in the outcome). Ocnact
For Flat Chat purposes, Gracie v Units Plan 3411 is the key ACT authority: it establishes that a majority unithodler with an obvious conflict of interest (developer controlling the scheme) cannot simply acknowledge the conflict and then vote as they please — there must be active management of that conflict, or decisions can be challenged and overturned.
This doesn’t address the issue directly – should a committee member be able to vote on an issue affecting their own lot? But there is a clear advantage that other non-member owners don’t have and that should at least be grounds for raising the issue, asking the committee member to recuse themselves and potentially challenging the decision if their vote decided the issue.
If you want to be alerted when anyone replies to your posts or responds to this topic, please register and login, then you will be able to subscribe to the topic. The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers. NB: Longer threads may spill over to additional pages - look for the numbers on the bottom right, under the last post.
If you do a search then in late 2024 I asked a similar question in relation to another B-class development in the ACT. I think the end point was that there was a fairly obvious “interest” when an owner votes on their own proposal affecting their own unit, but it wasn’t clear that if was a conflict of interest. It seemed odd to me that an owner would be deprived of a vote as an owner on their own proposal.
My post was in relation to an AGM, and in that case my recollection was that the Act didn’t provide any guidance about how a conflict of interest was to be managed. My further recollection is that the Act didn’t provide any commentary at all about conflicts of interest at the EC level.
The ACAT case was about a genuine conflict of interest, where someone voting stood to profit in a monetary sense from the vote. As I think Jimmy said, that seems to be a completely different situation. The ACAT decision seems eminently sensible to me.
I wonder if there’s more in Guide to ACT Strata Law by Kerin Benson Laywers.