Question: Can owners ask the strata committee to sign a statutory declaration if there are concerns about a conflict of interest?
We are holding our strata meeting by telephone. Our last meeting was in 2018, and we have contracts to be signed off, ranging from $1.9 million to $2.5 million, plus $150,000 for an engineer to oversee rectification for water ingress.
Lot owners would like to know if it is legal to ask the strata committee to sign a statutory declaration regarding their relationship with the contractors, given that one committee member hand-picked the three tender companies.
Answer: Lot owners can require the strata committee to disclose any pecuniary interests, but cannot compel committee members to sign statutory declarations.
This question raises two related but separate issues: conflict-of-interest disclosure and whether the owners corporation has followed a proper governance process before approving very significant expenditure.
For contracts in the range of $1.9 million to $2.5 million, plus a further $150,000 for an engineer, owners are entitled to expect a high level of transparency. That does not necessarily mean every strata committee member can automatically be forced to sign a statutory declaration. Still, it does mean the owners corporation should ensure any conflict, relationship, or pecuniary interest is properly disclosed, recorded, and managed.
Under Schedule 2, clause 18 of the Strata Schemes Management Act 2015 (NSW) (the Act), a strata committee member who has a direct or indirect pecuniary interest in a matter being considered by the committee, and where that interest appears to raise a conflict with the proper performance of their duties, must disclose the nature of that interest at a committee meeting. The disclosure must be recorded in the minutes, and the committee member must not be present during deliberation or vote on the matter unless the committee otherwise determines.
A pecuniary interest is not limited to an obvious direct payment. It may include an indirect financial interest, such as a business relationship, employment connection, referral arrangement, family connection involving a financial benefit, or another arrangement where the committee member may gain financially from the decision. However, merely suggesting contractors or obtaining tenders does not, by itself, prove a conflict of interest. The concern becomes more serious when the process is not transparent, when tenderers appear connected, or when a committee member has an undisclosed relationship with a contractor.
In my view, lot owners may reasonably ask the strata committee to confirm whether any committee member has any direct or indirect pecuniary interest, personal relationship, business relationship, referral arrangement or other relevant connection with the contractors, tenderers, consultant or related entities. That request should be put clearly and, where possible, included as a motion or question for the meeting.
However, there is an important distinction between asking for disclosure and compelling a statutory declaration. The Act specifically requires disclosure of relevant pecuniary interests; it does not appear to give lot owners a general automatic right to force all committee members to sign statutory declarations merely because owners are concerned about the tender process.
For contracts of this size, the owners corporation may resolve to require additional probity measures, such as written conflict-of-interest declarations, an independent review of the tenders, or legal advice before contracts are signed. A statutory declaration may be requested as part of a higher governance standard, but owners should be careful not to treat it as an automatic statutory entitlement unless supported by a resolution or legal advice.
The fact that one committee member “hand-picked” the three tender companies is not necessarily unlawful. In practice, someone often must source contractors or commence the tender process. The governance question is whether the tender process was fair, independent, properly documented and ultimately decided by the appropriate body.
For major remedial works, the owners corporation should ideally have a clear scope of works, comparable tenders, consultant recommendations, funding information, contract advice, and a properly minuted decision-making process.
If this is a large strata scheme, section 102 of the Act is also relevant. An owners corporation for a large strata scheme must obtain at least two independent quotations for proposed expenditure above the prescribed amount. Independent quotations must be from persons not connected with each other. Even where the scheme is not a large strata scheme, obtaining independent and comparable tenders for multi-million-dollar works is basic good governance.
There is also another point in the question that should be clarified. The question says the “last meeting” was in 2018. If this refers to the last AGM or general meeting, the owners corporation should urgently review its compliance position, as an AGM must be held once in each financial year.
If it refers instead to an ordinary strata committee meeting, separate from the committee meeting that would usually follow an AGM, the concern is different but still relevant. A prolonged absence of ordinary committee meetings may indicate that the tender process and major contract decisions have not been subject to regular, properly minuted committee oversight.
The safest course would be for the owners corporation to pause before signing the contracts and ensure they address the following matters:
- Whether all required AGMs and general meetings have been properly held.
- Whether the strata committee has been validly elected and has the authority to act.
- Whether the owners corporation has properly approved the proposed expenditure.
- Whether the tenderers are genuinely independent and assessed against the same scope.
- Whether any committee member has disclosed any direct or indirect pecuniary interest.
- Whether any conflicted person has been excluded from deliberation and voting where required.
- Whether owners have been given access to sufficient information before approval.
- Whether independent legal, technical or probity advice should be obtained before signing.
In short, lot owners may not automatically be able to compel statutory declarations from committee members. However, they are entitled to insist on lawful disclosure, proper minutes, transparent decision-making and a defensible procurement process. With contracts of this magnitude, the real question is not only whether a statutory declaration can be requested, but whether the owners corporation can demonstrate that the process is fair, independent, properly authorised and in the best interests of all owners.
This post appears in Strata News #793.
Abe Ayoubi
W: Senior Strata Manager (NSW)
E: abe.strata@gmail.com
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