Powers of Attorney – Law Changes Explained

October 28, 2019

If you have been in strata long enough you may recall that once upon a time a single owner which was often the resident manager, would hold all the voting rights from the proxies they hold for most owners, usually from their letting pool. This practice was stopped when the BCCM act came into affect in 1997 but, did you know that the same practice previously called “proxy farming” has been applied to powers of attorney? In this article we will cover why this is an issue, adjudicators decisions that have been made on this issue and proposed changes because of it.

Why are Powers of Attorney an issue?

In 2016, the adjudication decisions in the Willahra Tower case[1] highlighted a significant loophole in the body corporate legislation in relation to representatives of lot owners voting under powers of attorney. This decision solidified the legal position in relation to this loophole and served as a roadmap for others to use the same loophole to benefit their particular agenda and increase the likelihood of their motions passing at a general meeting of their bodies corporate.

The Willahra Tower case

The issue at the heart of the case was the result of a motion with alternatives for the appointment of one of three proposed body corporate managers. The motion was decided in favour of one of the body corporate managers, largely due to one of the lot owners exercised the votes of 27 other lot owners, via separate powers of attorney. One of the body corporate managers who was not selected, challenged the validity of this decision of the body corporate by making an adjudication application, which the body corporate contested.

The Applicant, argued that the decision was invalid because the lot owner in question should not be considered to be a “voter” for each of the 27 lots by reason that the powers of attorney ought to be limited in the same way that proxies are limited. An individual is limited to holding proxies of not more than 10% of the number of lots in the scheme and additionally, there are particular motions which prohibit voting by proxy (such as the appointment of a body corporate manager or service contractor).

However, the Adjudicator agreed with the Respondent’s submission that there was no such limitation of powers of attorney in the Regulation Module and that this represented a loophole in the legislation, meaning that there was no limit on:

  • the amount of powers of attorney that any one individual could hold; or
  • the subject matter of the motions that would permit voting by powers of attorney.

The Adjudicator’s reasoning was that it was up to parliament to decide whether or not this gap in the legislation should be closed and it was not for an Adjudicator to read something into the legislation which was not there. The Adjudicator stated at paragraph 59 of the decision, “I have found the application to be entirely without merit and have dismissed it in its entirety.”

The effect of the decision

Since this case, there has been a flurry of activity around the “farming” of powers of attorney as motivated individuals have attempted to gain the ability to “stack the vote” in their favour. Not only does this practice have the potential to undermine the democratic process of body corporate decision making, there have also been questions raised about whether the persons giving the powers of attorney were fully aware of the legal nature and effect of the document they were signing.

The Government response

For the reasons outlined above, the Queensland Government has now decided to close the loophole on powers of attorney and to eradicate the practice of proxy farming.

Under the proposed changes, a person may only hold one power of attorney, unless that person has a direct family relationship with the giver of the power of attorney. Therefore, it will be possible for direct family members (mother, father, son, daughter, brother and sister) to hold multiple powers of attorney on behalf of their family members. Otherwise, a person will be limited to holding one power of attorney and will not have the ability to “stack the vote” in their favour.

This particular proposed amendment is an excellent example of the Government appropriately responding to a significant issue that was identified via adjudication by recommending legislative change.

How to have your say

The proposed changes to the Regulations are currently open for public consultation until 30 October 2019. Therefore, if you wish to have your say about the proposed changes to powers of attorney, or anything else in the draft regulations, please contact Smart Strata or follow the below link to find out how to have your opinion heard.

This article was contributed by James Nickless, General Counsel – Maxsoft Group

[1] Willahra Tower [2016] QBCCMCmr 177 (interim Orders), Willahra Tower [2016] QBCCMCmr 368 (Final Orders)

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