Undirected Proxies to “the Chair” – Just Because You Can Vote, Does It Mean You Should?

Proxies are a normal and important part of strata meetings. They allow owners who cannot attend to still participate in the decision-making process.

But there is one type of proxy that deserves a little more thought: an undirected proxy appointing “the Chair”.

An undirected proxy gives the proxy holder discretion about how the vote is exercised. But where the strata manager ultimately chairs the meeting, having been appointed by those present, should that discretion simply be treated as a licence to vote however the strata manager chooses?

In my view, no.

There is a difference between having the legal ability to exercise a vote and considering whether it is appropriate to do so.

First things first: the strata manager isn't automatically the Chair

This is an important distinction.

At the AGMs I manage, the role of Chair is always offered to the elected Chair of the Council of Owners in the first instance.

It should never simply be assumed that the strata manager will chair the meeting.

If the strata manager is to chair the AGM, they should be properly appointed to do so at the meeting.

That becomes particularly relevant where an owner has completed a proxy form appointing “the Chair” rather than naming a particular person.

What happens to an undirected proxy to “the Chair”?

An undirected proxy is exactly that, undirected.

The owner has not instructed the proxy holder to vote YES or NO on individual motions. Instead, they have entrusted the proxy holder with discretion.

That discretion needs to be exercised responsibly.

Our approach is that a valid proxy appointing “the Chair” can be taken into account when establishing whether the meeting has a quorum, where the statutory requirements are otherwise satisfied.

The more interesting question arises when we get to the individual motions.

How should the Chair exercise those votes?

Where the votes cast by owners participating in the meeting, together with directed proxies, demonstrate an overwhelming or unanimous position, I would generally be comfortable exercising undirected proxies consistently with that position.

For example, if every owner voting supports an uncontroversial administrative motion, exercising an undirected proxy in the same way is unlikely to change or distort the owners' clear position.

But what happens when the vote is 8–7?

Or 10–10?

Or there is significant debate in the room and owners are clearly divided?

That is where I think strata managers need to exercise considerable caution.

Just because you have discretion doesn't mean you have to use it

Where a motion is closely contested, my preferred approach is generally to abstain from exercising an undirected proxy held as Chair.

Why?

Because I don't believe the strata manager should unnecessarily become the person who determines the outcome of a contentious owners' decision.

Let the owners participating in the meeting, together with owners who have provided directed proxies, determine the result.

Yes, an undirected proxy provides discretion.

But discretion should be exercised appropriately, impartially and with proper regard to the role the strata manager is performing.

A strata manager is there to facilitate good governance — not to manufacture a particular voting outcome.

🐘 And then there's the elephant in the room…

What happens when the motion directly affects the strata manager?

At XO Strata, we don't include a standard motion on our AGM Notices and Agendas seeking our appointment or reappointment as strata manager.

However, I know this is a practice adopted by some strata management companies in WA.

I've even heard of meetings where the strata manager's reappointment motion appears high on the agenda and, if the owners don't vote to reappoint the strata manager, the manager simply ends the meeting.

Anyway, I digress… 😬

The proxy issue becomes particularly interesting in this situation.

Imagine:

👉 The strata manager has been appointed to chair the AGM.

👉 Several owners have given undirected proxies to “the Chair”.

👉 A motion comes before the meeting to appoint or reappoint that strata manager.

👉 The strata manager then uses those undirected proxies to vote YES to their own appointment.

Houston, we have a problem. 🚨

⚖️ Enter section 146 of the Strata Titles Act 1985 (WA)

There isn't a section of the Strata Titles Act 1985 (WA) that simply says:

“A strata manager cannot exercise an undirected proxy to vote for their own reappointment.”

But that doesn't mean the issue is free from legislative considerations.

Section 146 – General duties and conflict of interest is highly relevant.

Section 146 imposes duties on strata managers concerning how they perform their functions, including requirements relating to honesty, good faith, proper use of their position and conflicts of interest.

Importantly, a strata manager must not make improper use of their position to gain, directly or indirectly, an advantage for themselves or another person.

Section 146 also deals with disclosure where a strata manager has a direct or indirect pecuniary or other interest that conflicts, or may conflict, with the performance of their functions.

💰 And let's be clear: being appointed or reappointed under a strata management contract plainly has a financial consequence for the strata manager.

So while the Act does not appear to expressly prohibit the exercise of an undirected proxy in these circumstances, using discretionary votes held because you happen to be chairing the meeting to help secure your own management contract creates an obvious conflict-of-interest issue.

It also raises the question of whether doing so could amount to an improper use of the strata manager's position to obtain an advantage.

🚫 Disclosure doesn't make the conflict disappear

It's also important to distinguish between disclosing a conflict and acting appropriately once that conflict exists.

Simply saying:

"Just so everyone knows, I have an interest in this motion…"

doesn't necessarily resolve the underlying governance issue.

If I am the person whose contract is being voted upon, I don't believe I should then use a bundle of discretionary proxies entrusted to “the Chair” to influence whether I keep that contract.

For me, the appropriate approach is simple:

Don't exercise those undirected proxies on that motion.

Let the owners participating in the meeting, together with any directed proxies, decide whether they want to appoint or reappoint the strata manager.

After all, whose decision should that be?

The owners'. 👥

📝 An undirected proxy isn't a blank cheque

When an owner appoints “the Chair” as their proxy without giving voting directions, they are placing considerable trust in whoever ultimately occupies that position.

That trust shouldn't be taken lightly.

An undirected proxy should not become a convenient bundle of votes that can be deployed by the Chair to influence contentious decisions.

And it certainly shouldn't become a mechanism by which a strata manager helps secure their own management contract.

Good strata governance isn't simply about asking:

“Can I do this?”

Sometimes the more important question is:

“Should I do this?” 🤔

Transparency, impartiality and proper management of conflicts of interest are fundamental to maintaining owners' confidence in the integrity of their meetings.

Sometimes the most appropriate exercise of discretion is deciding not to exercise it at all.