CHANGES TO THE CODE OF CONDUCT: A SLEEPER ISSUE TO AWAKEN THE COMMISSIONER’S OFFICE?

Back in November 2023, we wrote about the passing of the Body Corporate and Community Management Act 2023 (Amending Act), which you can read about here.

The Amending Act makes certain changes to the Body Corporate and Community Management Act 1997 (BCCM Act), and recent public focus has been around the amendments to towing, smoking, pets, layered arrangements and scheme termination.

However, less seems to have been made about another amendment which, on face value, would seem to carry some quite serious implications about motion lobbying in community titles schemes.

What is changing?

The Amending Act inserts a new clause into the code of conduct for body corporate managers and caretaking service contractors in Schedule 2 of the BCCM Act (Code), which states:

‘(3) A body corporate manager or caretaking service contractor must not unfairly influence, or attempt to unfairly influence, the outcome of a motion to be decided by the body corporate.’

One can immediately see the potential scope and application of this new provision, given the extent of lobbying and campaigning undertaken by management rights operators (particularly for their own motions – for example, extensions or ‘top-ups’ of their agreements).

What is meant by ‘unfairly influence’?

Are the days of a caretaker contacting owners and encouraging support for their top-up gone? Will body corporate managers seeking a renewal of their contract be prevented from putting their case to owners?

What does it all mean?

The Code, which was introduced into the BCCM Act in 2003, already contains the following provision (which, incidentally, the Amending Act also changes to capture caretaking service contractors – in addition to body corporate managers):

‘(2) A body corporate manager must not attempt to unfairly influence the outcome of an election for the body corporate committee.’

There are those words again – ‘unfairly influence’. So, what has been said about the meaning of this phrase?

Unfortunately, the case law is somewhat limited in this area (for reasons discussed below) but, in the matter of Festival Towers [2010] QBCCMCmr 128 (Festival Towers), the adjudicator stated:

‘In my view, that does not mean that anyone other than a body corporate manager, may act unfairly in attempting to influence an election. Since the caretaker is generally also a lot owner, as such he or she might lawfully try to persuade others to vote for preferred candidates, with a certain amount of licence on the truth of the attributes or capabilities of the candidate, such is understood by voters to be possibly an exaggeration, or wishful thinking; whereas such canvassing would not be appropriate on the part of the body corporate manager who has no interest in the scheme other than solely a professional one.’

Although the observation was a passing one, and not relevant to a determination in the case, the adjudicator’s comments suggest that the phrase ‘unfairly influence’ could have a very broad and wide-encompassing meaning, capturing any form of lobbying for a particular motion outcome.

An influx of applications?

Given all that, on face value, it appears the amendment to the Code could lead to a flurry of new applications to the Commissioner’s Office, disputing whether particular conduct of a caretaker or body corporate manager unfairly influenced the outcome of voting on a particular motion.

However, one needs to understand the application and operation of the Code to make a proper assessment of the implications of the new provision. In particular, it needs to be understood that the provisions of the Code:

• are not enforceable in their own right by an owner;
• are deemed to form part of a caretaker’s or body corporate manager’s engagement; and
• only apply when a caretaker or body corporate manager are performing the functions under their engagement.

If there is a breach of the Code, the body corporate is the only party that can take any action to enforce its provisions against the caretaker or body corporate manager. In the case of either by issuing a remedial action notice and pursuing termination of the engagement in the event of non-compliance or, in the case of a caretaking service contractor, there is also an option (in some circumstances) to require a transfer of the management rights under the ‘forced-sale provisions’. Such actions ultimately require the passing of an ordinary or majority resolution at a general meeting of the body corporate.

There is nothing in the Amending Act which suggests the new Code provision will impact the law as regards to when the outcome of a motion can be overturned by an adjudicator, or that owners will be able to rely on an alleged breach of the Code in applications concerning the reasonableness of a body corporate decision. Such matters are the subject of separate, established law.

Questions might also arise as to whether the Code is breached in circumstances where a related party to a caretaker or body corporate manager engages in the relevant conduct – for example, where a director of a caretaker who owns a lot in the scheme engages in the influencing conduct. The provision of the Code is not drafted to capture ‘associates’ of a caretaker or body corporate manager (and could have easily done so if that was Parliament’s intention – given the existing definition in the BCCM Act).

Moreover, such disputes, constituting a ‘complex dispute’, fall within the original jurisdiction of the Queensland Civil & Administrative Tribunal (QCAT) under section 149B of the BCCM Act – a department adjudicator of the Commissioner’s Office has no jurisdiction in relation to such matters.

What’s the upshot?

Whilst first impressions of the new Code provision paint a pretty gloomy picture for caretakers and body corporate managers, a deeper analysis suggests the realisation of serious negative consequences to be less likely. Of course, that does not address the practical impact of the change, which is likely to:

• provide a further platform for accusations by persons aggrieved by a caretaker or body corporate manager to claim a contravention of the Code; and
• create additional work for the Commissioner’s Office dealing with applications alleging a contravention of the Code, and explaining to an applicant why a department adjudicator has no jurisdiction in relation to the dispute.

It would also be wise not to place too much emphasis on the adjudicator’s comments in Festival Towers. A strong argument could be mounted that the ‘unfairness’ element of the phrase ‘unfairly influence’ requires something more than mere lobbying (e.g. an element of misrepresentation, undue influence, or unfair pressure or tactics).

This article was contributed by Jarad Maher, Partner, Grace Lawyers