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Body corporate committees rely on fairness and transparency to function effectively. Every decision, from appointing contractors to approving improvements, must be made in the best interests of all owners.
But what happens when personal interests overlap with committee duties?
That’s where the concept of a conflict of interest becomes crucial.
Understanding the Boundaries
In a body corporate context, a conflict of interest occurs when a committee member’s personal interest – whether financial, familial, or professional, could influence, or appear to influence, how they perform their role.
Importantly, this rule applies only to committee decisions, not to general meetings where all owners vote based on lot entitlements.
For committee decisions, the law is clear: if a member’s interest could conflict with the appropriate performance of their duties, they must declare the conflict and abstain from voting.
This rule ensures decisions remain objective and transparent.
Everyday Examples of Potential Conflicts
Conflicts don’t always involve intentional wrongdoing. They often arise in everyday situations, such as:
- A committee member who’s a tradesperson quoting to do repair work.
- A member advocating for maintenance that increases the appeal of their lot before sale.
- A committee member voting on a by-law dispute that personally involves them.
- committee member voting on their own motion for example a pet or improvement application in a general meeting or VOCM
In each case, it’s not necessarily wrong to raise or discuss the issue, but once a personal interest is identified, the member must step aside from the final decision.
Managing Conflicts Transparently
Good governance is about process as much as outcome. To handle conflicts properly:
- Declare it early. If there’s even a perception of conflict, disclose it at the start of the meeting.
- Record it clearly. The declaration should appear in the minutes.
- Step back from the decision. The member should not participate in discussion or vote on the motion.
- Proceed fairly. The remaining committee members make the decision, ensuring it’s in the collective interest of all owners.
In smaller schemes (such as those under the Small Schemes Module), there’s some flexibility. The body corporate can authorise a conflicted member to vote, provided it’s reasonable and transparent.
Why It Matters
Declaring a conflict isn’t just a technical requirement, it’s a safeguard for everyone involved. It helps:
- Protect the integrity of committee decisions.
- Prevent disputes or challenges from owners.
- Build trust and confidence among the community.
Even if a conflict doesn’t change the outcome of a vote, the perception of bias can cause tension and erode trust. The best committees address potential conflicts openly and consistently.
Common Misconceptions
Everyone benefits, so there’s no conflict. Not necessarily. Even shared benefits can mask individual gain if the decision disproportionately advantages one person.
It’s only a minor issue, so it doesn’t count. The legislation doesn’t measure the size of a conflict, only whether it could affect impartial judgment.
I can just give my proxy to someone else. Not if the matter involves a conflict. A proxy can’t be used to sidestep disclosure or influence a decision indirectly.
The Risk of Ignoring a Conflict
If a committee member votes despite a conflict, it can lead to:
- The decision being disputed through the Commissioner’s Office.
- Breaches of the committee code of conduct.
- Loss of credibility for the committee as a whole.
While penalties are not automatically imposed, the reputational and operational fallout can be significant, particularly if owners lose confidence in how decisions are made.
The Risk of Ignoring a Conflict
If a committee member votes despite a conflict, it can lead to:
- The decision being disputed through the Commissioner’s Office.
- Breaches of the committee code of conduct.
- Loss of credibility for the committee as a whole.
While penalties are not automatically imposed, the reputational and operational fallout can be significant, particularly if owners lose confidence in how decisions are made.
Building a Culture of Integrity
Managing conflicts of interest is ultimately about culture – creating an environment where openness and accountability are the norm.
Committees can encourage this by:
- Including a standing agenda item for declarations of interest.
- Keeping detailed records of all disclosures and abstentions.
- Seeking independent advice when a potential conflict is unclear.
- Reinforcing that declaring an interest is a strength, not a weakness.
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