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At the recent AGM (ACT) there was an alterations and additions motion (presumably seeking to change common property attached to a lot – JT). The strata manager declared a conflict of interest for the owner making the proposal, but they were allowed to vote. As it turns out, another owner had an interest in the company that would have done the building work, but that was not declared.
My questions are:
(i) Did the owner making the proposal really have a conflict of interest? It was pretty self-evident that they had an interest, but it’s hardly a conflict. I can’t see that they had one.
(ii) If they did, should they have been allowed to vote? It would surely be bizarre of an owner couldn’t vote on their own proposal.
(iii) Did the owner with an interest in the construction have a conflict? On this count I’d have said yes.
(iv) If so should they have been able to vote? I’m unsure, as there nothing in the ACT Act that seems to preclude them from having a vote.
I can’t see anything in the ACT Act about conflicts of interest at OC meetings and how to deal with them, only at Executive (Strata) Committee meetings. What is the situation in other States?
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Conflicts of interest can be confusing, people often toss the idea around without clearly identifying whether there is an issue, they just think there is. The key issue is usually in respect of a Committee member, where a personal interest may compromise their discharge of duties as a Committee member – the classic example being where the Committee is voting on engaging a provider and a member may have an interest in one of the candidates, or even be one of the candidates.
Anyway.
(i) Answer – NO. Yes they have an interest in the proposed renovation, but if you extend that you can say any owner has an interest in most stuff to do with the scheme?
(ii) Answer – YES they should be able to vote. Note in a lot of conflict of interest scenarios the relevant person is allowed to vote when they declare their interest.
(iii) Answer – NO this is not a conflict. This is different from the owner with an interest voting on the selection of a candidate to be engaged – they may benefit from the renovation going ahead, but that doesn’t mean it is a conflict, the key issue here is the actual renovation, not the party doing it, i.e. the owners are not voting on who is to do the renovations?
(iv) Why shouldn’t they be allowed to vote?
Good response.
I used to work as a government auditor, and I have a lot of experience in auditing whether particular staff have a conflict of interest and whether it was handled correctly if they do.
There is nothing inherently “bad” in a conflict of interest – no one should ever be afraid or declaring one. What is “bad” is if someone has a conflict and doesn’t declare it because that means others involved in voting don’t know the full situation so they are voting based on partial information.
The extra information doesn’t change my response, but note I am not familiar with ACT requirements.
In relation to (iv), the owner might benefit from the decision, but the key element of the decision is the actual renovation, not who is doing the renovation, so there is no reason why that party shouldn’t participate in the decision. The financial benefit is a consequence of the primary decision, it is not the primary decision. Note the scheme is not paying for the works to be done.
To the extent that there’s nothing in the Act about this situation it clearly is.
Nothing in the Act in the ACT, to be fair. In NSW committee members must decare a COI then recuse themselves from discussing, being present during a discussion or voting on the conflicted issue.
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.
Good response.
I used to work as a government auditor, and I have a lot of experience in auditing whether particular staff have a conflict of interest and whether it was handled correctly if they do.
There is nothing inherently “bad” in a conflict of interest – no one should ever be afraid or declaring one. What is “bad” is if someone has a conflict and doesn’t declare it because that means others involved in voting don’t know the full situation so they are voting based on partial information.
I’ve been reflecting on this and wondering when it’s sufficient to simply declare an interest and when it’s necessary to not participate in decision making. In government circles something like (iv) would require the individual to exclude themselves, despite their connection with the proposal being indirect, as scotlandx points out. Perhaps the private sector is different. To the extent that there’s nothing in the Act about this situation it clearly is.
If someone declares a conflict of interest, it should really be up to the others in the meeting to determine whether the conflicted person leaves the discussion. The conflicted person may not want to, but if others feel that “something is wrong” then they should be able to ask the conflicted person to step outside.
In the case of a renovation, I would want all owners to participate in the discussion so that everyone could ask questions and get answers. The plans put forward may impact other owners too. The timing of renovations might impact some else’s plans to sell their own apartment. Do all these people need to step outside? My view is that all those voices are needed in the room contributing to problem-solving in order to achieve the best possible outcome.
I think the intent of the legislation was to prevent someone using their strata scheme to advance their own business interests (a painting business, a strata management business, an insurance brokerage business) but the wording in the legislation is too broad.If someone declares a conflict of interest, it should really be up to the others in the meeting to determine whether the conflicted person leaves the discussion.
That’s not what the law says – and for very good reason. If the person concerned has a forceful nature and the committee chair and strata manager are either in their pocket or just wishy-washy or easy-going, then the conflicted person can easily stay and sway the discussions to suit themselves, to the point of objectors staying silent.
Of course, this depends on what kind of meeting you are talking about Section 18 of Schedule 2 of the Act only applies to committee meetings and doesn’t use the term “conflict of interest” but “pecuniary interest”.
The online legal dictionary definition of “pecuniary” is that it refers to something paid or given in money, or a monetary interest in something. “For example, a person who owns stock in a company is said to have a pecuniary interest in the company, because his investment, loss, and gains can be measured in dollars,” it says. It goes on to define pecuniary as:
- relating to, or in the form of, money
- consisting of, given, or exacted in money, or in monetary payments.
So the question of whether or not someone voting in favour of their own proposed renovations is a conflict of interest is irrelevant in terms of NSW strata law (and probably a rabbit hole down which we should not have strayed).
However, if you have someone on the committee who will benefit financially from a decision, they must declare it or face a potential fine of $2200, and then they should leave the meeting and take no further part in those discussions. One example would be a builder who is pitching for the job or, dare I say it, an owner who wants a ban or Airbnbs lifted so they can rent out their flat.
This is what schedule S, Section 18 of the NSW Act says:
18 Disclosure of pecuniary interests(1) If—
(a) a member of a strata committee has a direct or indirect pecuniary interest in a matter being considered or about to be considered at a meeting, and
(b) the interest appears to raise a conflict with the proper performance of the member’s duties in relation to the consideration of the matter,
the member must, as soon as possible after the relevant facts have come to the member’s knowledge, disclose the nature of the interest at a meeting of the strata committee.
Maximum penalty—10 penalty units.(2) A disclosure by a member at a meeting of the strata committee that the member—
(a) is a member, or is in the employment, of a specified corporation or other body, or
(b) is a partner, or is in the employment, of a specified person, or
(c) has some other specified interest relating to a specified corporation or other body or to a specified person,
is a sufficient disclosure of the nature of the interest in any matter relating to that corporation or other body or to that person which may arise after the date of the disclosure and which is required to be disclosed under subclause (1).
(3) Particulars of any disclosure made under this clause must be recorded by the strata committee in a book kept for the purpose and that book must be open at all reasonable hours to inspection by any person on payment of the fee determined by the strata committee.
(4) After a member has disclosed the nature of an interest in any matter, the member must not—
(a) be present during any deliberation of the strata committee with respect to the matter, or
(b) take part in any decision of the strata committee with respect to the matter.
(5) (Repealed)
(6) A contravention of this clause does not invalidate any decision of the strata committee.
(7) Without limiting subclause (1), a person has an indirect pecuniary interest in a matter if a person connected with the person has a direct interest in the matter.
and
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.
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