NSW: Q&A When are Pecuniary Interest Disclosures Required?

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This Q&A about pecuniary interest disclosures has been provided by Leanne Habib, Premium Strata and Emma Smythies, Bugden Allen Lawyers.

Table of Contents:

• QUESTION: If a committee member submits a motion they have a vested interest in, shouldn’t they abstain from voting? Should the strata manager enforce this?
• QUESTION: We have large contracts to be signed off at our next meeting. In NSW, can we ask the strata committee to declare their interest as one committee member hand picked the tender companies?

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Question: If a committee member submits a motion they have a vested interest in, shouldn’t they abstain from voting? Should the strata manager enforce this?

Regarding the issue of a Strata Committee Member proposing a motion to the Strata Committee that they have a vested interest in, which constitutes a breach of conflict of interest: The legislation mentions that there is a maximum penalty of 10 units which as I understand it to be $1,100.00. ($110.00 per penalty unit).

The article is quite interesting but it doesn’t mention how a Lot Owner can instigate this action when a Strata Committee member has breached part 15 of Schedule 2 of the said legislation? Could someone provide the steps required in implementing this course of action?

Also, shouldn’t the Strata Manager have mentioned to the Strata Committee and in particular to the member that they abstain from voting on their motion? What happens if the Strata Manager fails to do so? Are they in breach of their statutory obligations? If so, what would these breaches be under which legislation?

Answer: The strata manager should have raised the conflict but the duty of disclosure lies with the relevant committee member.

Unfortunately, you probably could not attempt to invalidate the resolution, due to the bolded section below:

Also, yes, ideally, the strata manager should have raised the conflict but the duty of disclosure lies with the relevant committee member.

18 Disclosure of pecuniary interests

1. If:
   
   1. 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
   2. 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:
   
   1. is a member, or is in the employment, of a specified corporation or other body, or
   2. is a partner, or is in the employment, of a specified person, or
   3. 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, unless the strata committee otherwise determines:
   
   1. be present during any deliberation of the strata committee with respect to the matter, or
   2. take part in any decision of the strata committee with respect to the matter.
5. For the purposes of the making of a determination by the strata committee under subclause (4), a member who has a direct or indirect pecuniary interest in a matter to which the disclosure relates must not:
   
   1. be present during any deliberation of the strata committee for the purpose of making the determination, or
      

   2. take part in the making by the strata committee of the determination.
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.

Leanne Habib
Premium Strata
P: 02 9281 6440
E: [email protected]

These articles are not intended to be personal advice and you should not rely on them as a substitute for any form of advice.

This post appears in Strata News #427

Question: We have large contracts to be signed off at our next meeting. In NSW, can we ask the strata committee to declare their interest as one committee member hand picked the tender companies?

We are having our strata meeting telephonic hosted. Our last meeting was in November 2018. We have contracts to be signed off. They range from $1.9 million to $2.5 million plus $150 thousand for an engineer to oversee the rectification for ingress.

Lot owners are wondering if it legal for to ask the strata committee to sign a stat dec regarding their relationship with the contractors as one of the strata committee members hand picked the 3 tender companies.

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Answer: Include as an item on the meeting agenda a requirement that prior to voting on the motion to appoint the contractors, each committee member give a declaration at the meeting that they do not have a direct or indirect pecuniary interest in the appointment of the contractor which would raise a conflict with the proper performance of the member’s duties.

Schedule 2 section 18 Disclosure of pecuniary interests of the Strata Schemes Management Act 2015 (SSMA) requires a strata committee member to disclose to the strata committee if it has a direct or indirect pecuniary interest about a matter being considered at the meeting and the interest appears to raise a conflict with the proper performance of the member’s duties. This would include the selection and appointment of contractors by the committee.

After a member has disclosed the nature of an interest in any matter it must not (unless the committee determines otherwise) be present during the deliberation or decision making on the matter. There is nothing in the SSMA which states the committee can require committee members to sign statutory declarations stating that they have no interest.

We recommend that you include as an item on the meeting agenda a requirement that prior to voting on the motion to appoint the contractors, each committee member give a declaration at the meeting that they do not have a direct or indirect pecuniary interest in the appointment of the contractor which would raise a conflict with the proper performance of the member’s duties pursuant to Schedule 2, section 18 of the SSMA.

Emma Smythies
Special Counsel
Bugden Allen Lawyers
M: 0412 046 966
E: [email protected]

This article does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

This post appears in Strata News #355.

Have a question about when pecuniary interest disclosures are required or something to add to the article? Leave a comment below.

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