Guidelines on the Duties of committee members for Associations

Purpose of the Guideline

This Guideline assists the public to understand the circumstances where the Department of Energy, Mines, Industry Regulation and Safety - Consumer Protection Division (Consumer Protection) may intervene in concerns related to an alleged breach of the duty provisions under the Associations Incorporation Act 2015 (the Act) by a committee member or officer of an incorporated association.

Background

The Act commenced on 1 July 2016 (superseding the Associations Incorporation Act 1987) and provides for the incorporation of not-for-profit associations in Western Australia. The Act includes a number of obligations relating to the corporate governance, financial accountability and matters relating to the rules and membership of incorporated associations.

There are almost 20,000 incorporated associations and clubs registered in Western Australia. The majority of these organisations are locally based community, cultural and sporting organisations managed by volunteer committees.

Duties of officers

The Act sets out the duties of ‘officers’ of an incorporated association, who under the Act include members of management committee, employees, and persons capable of influencing the decisions or the financial standing of the association.

An officer must exercise their powers and discharge their duties with care and diligence when making business judgements (i.e. decisions related to the operations of the incorporated association).

An officer fulfils this duty where they:
- make the judgement in good faith for a proper purpose;
- do not have any material personal interests in the subject matter of the judgement;
- have reasonably informed themselves about the subject matter of the judgement; and
- rationally believe that the judgement is in the best interests of the association.
The officer’s belief that the judgement was in the best interests of the association is taken to be rational unless no reasonable person in the position of the officer would hold such a judgement. For example, an officer may not be considered to have breached their duty if the judgement was due to a reliance on professional or expert advice which was done independently and in good faith.
An officer must exercise their powers and discharge their duties:
- in good faith in the best interests of the association; and
- for a proper purpose.
Note: If the outcome of a decision is unfavourable or results in a detriment to the association, this does not automatically mean that a committee member has failed in their duties under the Act.

Committee members and officers

The duty provisions of the Act apply to ‘officers’ which as explained above include the management committee members of an incorporated association.

The management committee are those persons who have the power under the rules (also known as the constitution) to manage the affairs of the incorporated association. The association’s managing body may be known by a different name such as the board or council.

An officer includes a person who has the ability to influence the management committee but does not hold a formal committee position. For example this could include senior employees (Chief Executive Officer, Manager etc) or past committee members who are still actively involved in the association and influencing the decisions of the committee.

Role of Consumer Protection

The Commissioner for Consumer Protection (the Commissioner) is responsible for administering the Act. One of the Commissioner’s functions is to receive complaints and information concerning non-compliance with the Act by incorporated associations and, where appropriate, investigate the complaints and take appropriate action.

It is acknowledged that the duty requirements of the Act are broad obligations that can potentially apply to all aspects of running an incorporated association. However, the bulk of the governance practices for incorporated associations are contained in the rules (also known as the constitution) and it is the role of members to ensure that their association is run in a manner that it is acceptable to them.

When Consumer Protection may intervene

Consumer Protection may only intervene in concerns involving the duties requirements of the Act where there is evidence to support that the conduct of a committee member or officer had been inappropriate and had significantly impacted the proper functioning of the association.

The following are examples of circumstances where the Commissioner may intervene:

Serious financial mismanagement where the association’s financial position is significantly impacted or its assets and/or property interests are at risk.
The activities being undertaken by the association have no similarity to the scope of its objects and purposes and place the association at risk of losing significant funding or any relevant licences or registrations required to operate.
Systematic and oppressive conduct towards a significant proportion of the association’s members. For example, the denial of general members’ voting rights, mass suspension of members without justification.

Prior to making enquiries into an alleged breach of duties Consumer Protection must first be satisfied that the person in question was an officer of the association at the time of the decision and was directly involved in the conduct that resulted in the risk or damage to the association.

It is important to understand that Consumer Protection’s assessment of an alleged breach of the duty provisions will primarily focus on the process undertaken by the officer to make a decision rather than the merits of the final decision.

Consumer Protection must first identify the particular decision (or series of decisions) made and then consider:
1. the process used to reach the decision(s);
2. the role of the particular committee member/officer in the decision(s); and
3. whether any reasonable person would have reached the same decision(s) based on the information available to them at the relevant time.
The Act sets out a number of requirements to be met by an incorporated association, for example holding Annual General Meetings, preparing financial reports and maintaining a register of members.

It is increasingly common for concerns to be raised with Consumer Protection that a management committee has breached the duty requirements under the Act because other specific requirements of the Act have not been met. For example, the Association failed to hold an Annual General Meeting therefore the committee have also breached their duties.

Failures to comply with these discrete requirements of the Act do not necessarily lead to a conclusion that a breach of duties has occurred and Consumer Protection will not generally investigate alleged breaches of the duty provisions based solely on this line of reasoning.

Where multiple instances of non-compliance with the Act are identified through the course of an enquiry and the breaches can be attributed to a particular management committee (or an individual member), Consumer Protection will consider the circumstances of the case and form a view whether a breach of duties may also have occurred.

Matters to be resolved by members

Disagreements may arise between members of an association as to how the objects should be pursued or whether the actions and decisions of a committee member are appropriate or in the best interests of the organisation.

Consumer Protection will not generally investigate allegations that a committee member has breached the duty provisions under the Act where:

the concerns relate to a personal dispute between members or groups of members within the association;
the concerns relate to non-compliance with the association’s rules; or
there is no information to suggest that the situation or dispute:
- had a significant impact on the operations of the association;
- has prevented (or is preventing) the association from pursuing its objects and purposes; or
- has resulted in significant financial detriment or loss to the association.

In these circumstances, the issues will need to be resolved by the members using the association’s internal dispute resolution processes. If these processes are exhausted and the concerns remain unresolved, the Act empowers a member or the association to apply to the State Administrative Tribunal for orders.

Consumer Protection’s INC Guide for Incorporated Association includes useful information about the various options that may assist members in the resolution of their concerns.