Conflicts of interest can make body corporate decisions difficult. They may lead to unsuitable providers, excessive costs or outcomes that benefit an individual rather than the body corporate. This article explains when committee members must disclose an interest, whether they can vote and what you can do if you have concerns.
What is a conflict of interest in a body corporate committee?
For a community titles scheme under the Body Corporate and Community Management Act 1997, the Body Corporate and Community Management (Standard Module) Regulation 2020 sets the rules for committee conflicts of interest.
A committee member has a conflict when they have an interest in an issue being considered, or about to be considered, by the committee and that interest could conflict with properly performing their duties about the issue.
The interest may be direct or indirect. It could involve a professional, financial or family link to an outside provider. The legal question is whether the interest could affect the member’s proper performance of their duties, rather than whether the linked provider is automatically unsuitable.
A conflict does not necessarily mean the provider should be rejected. The committee can still assess the provider’s value, suitability, experience and service objectively. The conflict should be managed openly and the required process followed.
You can read more about good committee conduct in our article on the committee code of conduct.
When must a committee member disclose a conflict of interest?
A committee member must disclose their direct or indirect interest at a committee meeting when the interest could conflict with the proper performance of their duties in considering the issue. This applies whether the issue is already being considered or is about to be considered.
The obligation is not limited to matters put forward by the committee member. For example, if another member proposes engaging a company connected to a committee member, the connected member should still disclose the interest before the committee considers the matter.
A practical disclosure should give the other committee members enough information to understand the connection. It may be useful to record:
- the name of the provider or person connected to the matter
- the nature of the professional, financial or family connection
- whether the committee member, their family member or associated business could benefit
- the committee member’s decision not to participate in the vote.
The committee should also keep an accurate record of the disclosure and how the matter was handled. Committee minutes and motion records help owners understand how a decision was made. The committee must keep full and accurate minutes and records of motions, and provide copies to owners within the applicable timeframe.
Being open about an interest does not necessarily prevent a committee member from explaining a proposal. The committee should ensure the discussion remains fair and that the conflicted member does not take part in the decision-making process beyond what is appropriate.
Can a conflicted committee member vote on the decision?
No. A voting committee member who is required to disclose an interest is not entitled to vote on a motion involving that issue.
The same rule applies where a proxy is involved. A proxy holder must disclose their own direct or indirect interest if it could conflict with their duties, and must not vote as proxy on the affected motion. A proxy holder must also disclose the committee member’s interest if they know the member would have been required to disclose it, and must not vote on the member’s behalf.
This rule applies to committee decisions. It is not a general statement about every vote at a general meeting, where the applicable resolution and regulation module may be different.
The meeting can continue with the remaining eligible voting members, provided the committee still meets the applicable requirements for making a decision. The conflicted member’s disclosure and non-participation should be recorded in the minutes.
Can a body corporate still consider a proposal linked to a committee member?
Yes. A conflict does not automatically prevent the committee from considering a proposal.
For example, a committee member may disclose that their sibling owns a cleaning business that has submitted a quote. The connection should be considered carefully, but the quote may still provide good value and service for the body corporate.
The committee should obtain and compare relevant quotes, consider the provider’s qualifications and experience, and assess the proposal against the body corporate’s needs. The conflicted member should not vote on the motion. The other members should make the decision objectively.
Depending on the proposal, the committee may not have authority to decide the matter. Some issues are restricted to the body corporate and must be decided by the required type of general meeting resolution.
If the committee is unsure whether it can decide a proposal, check the applicable regulation module and the scheme’s records before proceeding. A body corporate manager may also help with the meeting process, but the committee remains responsible for making a lawful decision within its authority.
What should you do if a committee member does not disclose a conflict?
Start by raising the concern calmly and in writing. Set out the issue, the connection you believe exists and the outcome you are seeking. Avoid speculation and personal accusations. Focus on information that can be checked, including documents, dates, quotes, meeting notices and minutes.
You may ask the committee to consider a motion about the issue. For example, the motion could ask the committee to record the interest, reconsider a decision or obtain independent quotes. Owners can submit motions to the committee, although the committee may not be able to decide matters reserved for a general meeting.
If the issue is not resolved, the body corporate dispute process may be available. You must generally attempt self-resolution first. This can include communicating in writing, presenting a motion to the committee or presenting a motion to a general meeting.
For a BCCM Act scheme, conciliation is usually the compulsory first step before an adjudication application. Conciliation involves an impartial conciliator helping the parties negotiate a resolution.
If conciliation does not resolve the matter, an owner may be able to apply for adjudication. The application must include information and supporting material, and applicants must show that they attempted self-resolution and, in most cases, conciliation.
Useful records may include:
- committee or general meeting minutes
- meeting agendas and notices
- quotes, invoices or contracts
- written disclosures or correspondence
- records of motions and voting
- documents showing the connection between a committee member and a provider.
The adjudicator considers the application, submissions, replies and any further information requested. An adjudicator may make an order that is just and equitable, including declaring a committee or meeting motion void.
For more information, see our guide to navigating the dispute resolution process.
Do conflict rules differ for older BUGTA schemes?
Yes. Not every Queensland body corporate is governed by the BCCM Act. Some older schemes may still be governed by the Building Units and Group Titles Act 1980, commonly called BUGTA. The applicable legislation can affect committee eligibility, voting and dispute resolution.
The BUGTA provisions include a similar conflict rule. A committee member must disclose a direct or indirect interest where it could conflict with the proper performance of their duties, and a voting member who must disclose the interest cannot vote on the affected motion.
The BUGTA provisions also contain specific eligibility rules for committee members, including rules about relevant body corporate debts, body corporate managers, service arrangements and letting arrangements.
The 2022 amendments to BUGTA also include restrictions on voting about certain offset arrangements. A proprietor or associate with the relevant interest is not entitled to vote on the resolution approving the arrangement.
If you are unsure which legislation applies to your scheme, check the scheme’s registration details and community management statement, or ask Titles Queensland. Do not assume that a rule applying to a BCCM Act scheme applies in the same way to a BUGTA scheme.
Clear disclosure, non-participation in the affected vote and objective consideration help committee decisions serve the body corporate rather than individual interests. If you need help understanding the process for your scheme, contact our team at reception@stratacare.com.au.
