Question: What’s best practice for a committee member who declares a conflict of interest? What happens if they vote anyway?
Schedule 1, Clause 8 of the Unit Titles (Management) Act 2011 (UTMA) requires an executive committee member to disclose any conflict of interest they may have in a matter before the committee, but doesn’t specify what should happen after disclosure.
Where the UTMA only requires disclosure without specifying further action, what is the recommended best practice for an executive committee (EC) member who has declared a conflict of interest? Should they stand aside from discussion and voting as a matter of course, and does that obligation extend beyond formal EC meetings to written correspondence and other exercises of EC functions?
Where an EC member has declared a conflict of interest and then participated anyway, including in written correspondence, what avenues are available to other EC members or owners? Could the decision be challenged at the ACT Civil and Administrative Tribunal (ACAT)?
Also, if the issue is being discussed across several EC meetings, do they need to declare their conflict again after they have done so at the first meeting in which it was discussed?
Answer: ACAT can void a decision or order a merits review if a conflicted committee member’s participation caused an irregularity.
It is correct that the UTMA does not specify what is to happen after an executive committee (EC) member discloses any conflict of interest they may have in a matter before the EC. This is generally because the extent of the conflict and its impact on the matter before the EC will always depend on the circumstances. The UTMA therefore leaves it to the EC to manage how the conflict is to be dealt with.
The EC may reasonably decide that a disclosed conflict is immaterial and permit the member to participate in discussions and voting. Conversely, where the conflict is significant (for example, when the member is a director of a company under consideration for a contract), the EC may decide that the member should not participate.
Whilst the potential consequences of actions and decisions in these situations will depend on the specific circumstances, ACAT can (upon application by a unit owner) make orders:
- declaring that certain EC meetings or specific motions are void for irregularity (UTMA section 129(1)(e)(i) and (ii)); or
- repeal/amend a successful resolution of the EC following a merits review (UTMA section 129(1)(f)).
Given the wide range of circumstances in which conflicts of interest may arise, the only universal requirement is that the conflict be disclosed. If the issue spans multiple meetings, the conflict should be declared at each meeting and recorded in the minutes.
Where there is any doubt as to how a specific potential conflict should be dealt with, we recommend that legal advice be sought.
This post appears in Strata News #801.
John Park
Clayton Utz
E: jpark@claytonutz.com
Leave a Reply