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Victoria - Conflicted Committee Members Permitted to Vote?
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SparkleMoppet
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03/11/2017 - 9:57 pm
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I live in a townhouse complex with in excess of 20 lots.  The section that I live in is around 2 years old.  It has come to light that 4 people have fenced off areas of common property for their private use.  It is not a small amount of common property - in total it is larger than the largest lot in the complex. Most of it is also attractive river front land.  On top of this, 3 of the owners are members of the 5 person Owners Corporation Committee.  The fourth lot of land has been acquired by the developer who does not own any of the lots.  He uses the common property that he has fenced off to store commercial building materials.

I, along with a number of other residence have submitted complaints in accordance with the Model Rules.  There will be a meeting in a little under two weeks between the complainants and the respondents.  Given the massive conflict of interest on the part of the committee members who have taken common property is it reasonable to ask (or insist) that they resign from the committee until such time as the issue of the common property is resolved?  The people who have taken the property insist that they are going to ask to buy or lease the land - they refuse to give it back.  They will not get the votes necessary to do this.  It is clear this issue will end up at VCAT.  I have read many of the VCAT decisions and it seems that every time somebody has taken common property VCAT makes them give it back.  Is there any chance VCAT would allow them to have it?

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scotlandx
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04/11/2017 - 3:15 pm
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Look at it this way - say you lived in a house and your neighbour decided to take part of your back garden for themselves.  They can’t, it doesn’t belong to them. You could decide to sell a portion of your land to them, but that is a different matter.

The relevant owners have taken land that doesn’t belong to them.  Land has a value. Unless the owner/s of that land agree to transfer title to them, they are obliged to give it back.  To say otherwise is to legitimise a form of theft.

In relation to the Committee issue, I would suggest that the relevant owners have a conflict of interest in relation to any consideration of a matters relating to the dispute and should be excluded from any discussion or vote on that maater.

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Sir Humphrey
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06/11/2017 - 9:09 am
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I agree with Scotty.

I expect there is a mechanism by which the OC could require a general meeting to be called. In the ACT, a petition by 25% of owners stating the matter to be decided can require the committee to call a general meeting. You could put a motion: 'that the fences enclosing the areas of common property be removed by the relevant unit owners by some date that gives them ample time and that if the fences are not removed by that date, the reasonable costs incurred by the OC for doing so be billed to the relevant unit owners.' 

If they comply, that's great and it cost you little. If they don't comply, then the committee is obliged to act in accordance with the resolution. If the committee does not comply due to its composition, then your hand is strengthened when you go to the Tribunal seeking an order that the committee be compelled to carry out the valid direction of the OC. 

I suggest that you demonstrate that you have the numbers with a petition for a general meeting having more than 50%. By showing you mean business and have a mechanism to compel compliance you might get compliance without having to go through with it. 

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SparkleMoppet
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22/11/2017 - 9:23 pm
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Thank you for your responses.

We had a dispute resolution meeting which did not go well. The committee members who have taken common property refuse to resign from the committee (they see no conflict of interest) and refuse to return the property. *sigh*

So the complainants will press on and it will most likely be resolved at VCAT.

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SparkleMoppet
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22/11/2017 - 11:07 pm
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Four out of our six Owners Corp Committee members are in breach of the OC Act (they have taken large parcels of common property for their own use) and they refuse to resign from the committee. 

If the issue goes to a vote for a special resolution at special general meeting, can they be prevented from voting on the issue has they are
a.) in breach and
b.) have an financial interest in the matter? 

I have read that this is the case in other states but I have read the Victorian OC Act from cover to cover and I can't find anything that prevents them from voting.

This seems bizzare to me, that they can potentially vote to allow themselves to keep breaking the law and "stealing" from other owners.  There is a clear conflict of interest.  Any advice?

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JimmyT
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23/11/2017 - 12:14 pm
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Contrary to what you may have read, the law in NSW (and I suspect elsewhere too) doesn't forbid anyone from voting because of a perceived conflict of interest, but rather that the conflict be declared.

Why? You could argue that every strata owner has a financial stake in decisions they make, so such a ban would be unfeasible.

Instead you have many avenues of recourse for decisions made unfairly or unjustly through VCAT, specifically through section 165 and 167 of the Owners Corporations Act 2006 (below).

In practice, I would go to your committee and tell them, in writing, that unless they return the common property to the owners (collectively) or immediately offer compensation at a commercial rate determined by an independent valuer, you will pursue them under section 165 (1a, 1b, and 1c).

You will also seek the removal of members who have knowingly acted wrongly, under the terms of Section 165 (h)(iii).

If they ignore or reject this fair warning, you can then proceed with the knowledge that their behaviour will be considered under the terms of Section 167 of the Act.

It's also worth noting that there is a legal precedent for pursuing this action, established under a High Court ruling, that agreement to unlawfully take possession of common property, albeit using valid instruments of strata law, is considered to be "fraud against the minority".

If you are feeling sufficiently emboldened, you might get a strata lawyer to write the letter outling your options, then charge the dodgy committee members for the cost of doing so.

 

165 What orders can VCAT make?

(1) In determining an owners corporation dispute, VCAT may make any order it considers fair including one or more of the following—

(a) an order requiring a party to do or refrain from doing something;

(b) an order requiring a party to comply with this Act or the regulations or the rules of the owners corporation;

(ba) an order authorising a lot owner to institute, prosecute, defend or discontinue specified proceedings on behalf of the owners corporation;

(c) an order for the payment of a sum of money—

(i) found to be owing by one party to another party;
(ii) by way of damages (including exemplary damages and damages in the nature of interest);
(iii) by way of restitution;

(d) an order varying any term of a contract or agreement;

(e) an order declaring that a term of a contract or agreement is, or is not, void;

(f) an order declaring—

(i) the terms of a delegation; or
(ii) the meaning of a rule of the owners corporation;

(g) if an owners corporation is required under this Act to have a committee and a committee has not been appointed at or immediately after the first annual general meeting, an order appointing a committee of the owners corporation;

(h) an order appointing (with the person's consent) or revoking the appointment of—

(i) the chairperson of the owners corporation;
(ii) the secretary of the owners corporation;
(iii) a member of a committee or sub-committee of the owners corporation;

(i) an order—

(i) appointing a person (with the person's consent) as manager of the owners corporation, on specified terms and conditions;
(ii) revoking the appointment of a manager of an owners corporation;
(iii) imposing conditions or restrictions on the management by a manager of the owners corporation;

(j) an order in relation to damaged or destroyed buildings or improvements;

(k) an order as to the payment of insurance money under any policy taken out by an owners corporation;

(l) an order requiring an order to be recorded in the owners corporation register, the register of managers or in the Register kept under the Transfer of Land Act 1958;

(m) an order requiring the Registrar to amend the Register.

(2) In awarding damages in the nature of interest, VCAT may base the amount awarded on the interest rate fixed from time to time under section 2 of the Penalty Interest Rates Act 1983 or on any lesser rate it thinks appropriate.

(3) VCAT may make any interim orders and ancillary orders it thinks fit in relation to an owners corporation dispute. Note Clause 51AD of Schedule 1 to the Victorian Civil and Administrative Tribunal Act 1998 provides that any member of VCAT can make a declaration in a proceeding under this Act.

 

167 What must VCAT consider?

VCAT in making an order must consider the following—

(a) the conduct of the parties;
(b) an act or omission or proposed act or omission by a party;
(c) the impact of a resolution or proposed resolution on the lot owners as a whole;
(d) whether a resolution or proposed resolution is oppressive to, unfairly prejudicial to or unfairly discriminates against, a lot owner or lot owners;
(e) any other matter VCAT thinks relevant.

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scotlandx
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23/11/2017 - 7:03 pm
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Re conflict of interest - there is a difference between having an interest by virtue of being an owner generally, and having a material personal interest in a matter.  This distinction is well recognised in a range of areas (particularly directors' duties), and in the latter case a person with a material personal interest is generally excluded from participating in the decision. I am not saying that this applies in strata, although it should.

In this case I agree with Jimmy, don't worry about the conflict of interest issue - just take them to the Tribunal, and resolve the matter.

Note that if you get legal advice on the matter, you can exclude them from seeing that legal advice on the basis that it is privileged.

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JimmyT
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28/11/2017 - 12:12 am
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I have just realised that SparkleMuppet has gone and raised this issue under another topic head and not even bothered to respond to the answers given here.

It was only last week that I rapped someone else over the knuckles for this.

Please use the thread you start, and don't waste everyone's time firing off different versions of the same questions in different areas of the Forum ... unless you want to get banned from the site.

Meanwhile I am shifting those posts over here ... because I can.

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SparkleMoppet
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28/11/2017 - 9:33 am
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Well well Jimmy.  I am not sure if you have limited vision, computer issues or if you are being overly officious.  I did indeed respond further up on 22/11/17. Yes I did raise two different threads because I believed that they were separate topics.  One related specifically to common property and the other related to the issue of voting rights of conflicted parties.  Perhaps you are confused about the order in which those threads occurred?  I most certainly went out of my way to report back and thank those that had answered prior to opening a new thread.

Just to be clear - I raised the first issue (theft of common property) on 3/11/17. I thanked everyone and gave and update on 22/11/17. I then raised the second issue (the one you responded to regarding voting) on 22/11/17.  I have not yet thanked people for the latest thread as today is the first time I have been back here with time to post.  I was also waiting for the outcome of some correspondence so I could update you all.

Sorry will suffice.

22/11/17

"Thank you for your responses.

We had a dispute resolution meeting which did not go well. The committee members who have taken common property refuse to resign from the committee (they see no conflict of interest) and refuse to return the property. *sigh*

So the complainants will press on and it will most likely be resolved at VCAT."

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