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Conflicts of interest – where and when they apply

By Frank Higginson20 Sep 2012

Those that own lots in a community titles scheme are all driven by different things.

The reality is that almost every committee decision can attract criticism from those who are affected by it.  If money is spent it has to be funded by all owners.  Some owners might or might not like what it is being spent on, the manner in which it is spent or the fact that it is even being spent at all.

Some committee members can notionally benefit from spending decisions.  Take the example where a committee member is trying to sell their lot.  They may well want the foyer upgraded and repainted to impress purchasers.  The investor from Perth who has no such desire, simply wants the levies kept down.  She doesn’t care about how the building looks.

Is that a conflict on the part of the committee member?

The answer is more than likely not, but it can be a very subjective decision.

What is a conflict of interest is set out in the Regulation Modules.  A committee member has a conflict of interest if they have an interest in a matter before the committee that could conflict with the appropriate performance of their duties to the body corporate in considering it.

If a conflict exists the committee member must disclose to a committee meeting that interest and then cannot vote on the issue.

That is the extent of the legislation. 

The nature of a body corporate is that any committee decision will affect all owners.  Just because a committee member might be a in a group of owners that benefit from a decision does not necessarily disqualify them from taking part in the consideration of it.

It is a question of fact and degree.  This is the phrase us lawyers use when we cannot give a ‘yes’ or ‘no’ answer to a question.

In the foyer example above, the committee has an obligation to maintain and repair common property.  If the foyer is dilapidated, there is no conflict because the committee is doing what has to be done.  If it was refurbished last month and the committee member simply didn’t like the colour it was painted because it is repellent to a class of buyers he is trying to sell to, then it might be a different story.  

Engaging a builder to do the work is not a conflict.  Engaging a builder who is your brother is a conflict.  Engaging a builder the committee member has worked with previously on a one off job is probably not a conflict.  Engaging a builder who the committee member’s employer has a long term, and ongoing relationship with, probably could be a conflict.

There are myriad variations on the same theme. 

The key takeaway is always to be aware of what is before the committee and what involvement you have with the matter (in any way) that might be different to that of all other lot owners. 

We see some astonishing situations where self-interest (driving a conflict of interest) have ridden roughshod over the best interests of a body corporate.  It is only a matter of time before someone ends up being sued over taking part in a decision despite a conflict of interest. 

If you need guidance on whether a conflict exists we can help.