All Commonwealth officials are familiar with the obligation to take reasonable steps to avoid a conflict of interest with their employment under either the Public Service Act 1999 or the Parliamentary Service Act 1999, as well as being familiar with obligations to declare conflicts of interest when involved in conducting procurement or grant processes.

However, there are now additional obligations on Commonwealth officials to disclose material personal interests that have been imposed by the Public Governance, Performance and Accountability Act 2013 (PGPA Act), the Public Service Act 1999 and the Parliamentary Service Act 1999.

Obligation to disclose material personal interests

Previously, the Commonwealth Authorities and Companies Act 1997 required all directors of a Commonwealth authority to disclose any 'material personal interest in a matter that relate[d] to the affairs of the authority'. This replicated the obligation for disclosure of material personal interests in the affairs of the company that is imposed on directors of Commonwealth companies by the Corporations Act 2001 (Cth).

However, the PGPA Act has now imposed an obligation on all officials of a Commonwealth entity to disclose a 'material personal interest that relates to the affairs of the entity' (s29(1)).

The obligation has been extended under the PGPA Act to all officers, employees, ADF members, accountable authorities, and members of an accountable authority of every Commonwealth entity (including Departments, Parliamentary Departments and bodies corporate established by a law of the Commonwealth).

The PGPA Rule sets out how and when to disclose a material persona interest. The disclosure process differs slightly depending on the type of Commonwealth official that is disclosing. For example, officials who are the accountable authority must disclose the interest in writing to the entity's responsible Minister. However, officials who are members of the accountable authority must disclose the interest to other members of the accountable authority, absent themselves from a meeting of the members of the accountable authority where the matter to which the interest relates is being considered, and not vote on the matter.

In a separate obligation, the APS Code of Conduct now requires all APS employees to disclose 'details of any material personal interest of the employee in connection with the employee's APS employment' (Public Service Act, s13(7)). This is in addition to the previous obligation on APS employees to take reasonable steps to avoid any conflict of interest (real or apparent) with the employee's APS employment.

There is a similar disclosure obligation in s13(7) of the Parliamentary Service Act 1999 for material personal interests arising in connection with an employee's Parliamentary Service employment.

What is a 'material personal interest'?

The concept of 'material personal interest' comes from corporations law.

This is because specific obligations to disclose material personal interests and to refrain from attending meetings or voting on matters in which an individual has the material personal interest are generally imposed where the individual holds a position of trust (such as a director of a company).

This is because, underpinning the obligation to disclose material personal interests is the concept that individuals who are in a position of trust must not profit from that position, or place themselves in a position where duty and interest might conflict. A person in this position must not promote their personal interest where there is a real and substantial conflict between that personal interest and the interests of those who the person is bound to protect.

The PGPA Act requirement that Commonwealth officials disclose material personal interests recognises that the public has entrusted public resources to the Commonwealth entity and, as such, the public expects that decisions about how those resources are being used will be made in the public interest, and not for other reasons, such as personal gain. The Explanatory Memorandum to the PGPA Bill also indicated more generally an intention to align the duties of Commonwealth officials with the fiduciary duties contained in the Corporations Act, so that there was consistency across the public, private and not-for-profit sectors.

There is no legislative definition of the term 'material personal interest'.

Under the general law, a material personal interest exists if the relevant interest is:

• Material – the interest needs to be of some substance or value, rather than merely a slight or low value interest: Grand Enterprises Pty Ltd v Aurium Resources Ltd (2009) 256 ALR 1. Any interest that has the capacity to influence the vote of an official is material, regardless of how it arises.
• Personal – the interest must be an interest of the official themselves. It will not be personal if it is an interest of someone else only. The interest may not be personal if it affects the official as a member of a wide group or class and in the same manner and to the same degree that it affects the other members of the group or class (such as ordinary shareholders in a company).

The interest need not be pecuniary: The Bell Group (in liq) v Westpac Banking Corporation (No. 9) (2008) 70 ACSR 1.

What needs to be disclosed?

Disclosure is required for material personal interests:

• that relate to the affairs of the entity need to be disclosed under the PGPA Act
• that arise with the employee's APS employment, need to be disclosed under the Public Service Act.

Both are very broad. The PGPA Act obligation would likely require disclosure in circumstances where the official with the interest was not necessarily directly involved in an activity being undertaken by the Commonwealth entity. The Explanatory Memorandum also states that 'relates to the affairs of the entity' should be read broadly to include, for example, activities of the entity that involve collaboration by the entity with other entities inside or outside of government.

What happens if the material personal interest is not disclosed?

If the obligation to disclose a material personal interest imposed by the PGPA Act is breached by:

• Members of accountable authority – their appointment can be terminated (PGPA Act, s30(1))
• Officials employed under Public Service Act or Parliamentary Service Act – sanctions may be imposed under s15 of the applicable Act. This is because the PGPA Act is an 'Australian law' for the purposes of s13(4) of each Act.

Failure to disclose does not affect the validity of any act, transaction, agreement, instrument or resolution on which the person who failed to disclose the material personal interest voted, or was involved in preparing.

Breach of the similar but separate requirement to disclose material personal interests set out in s13(7) of the Public Service Act and the Parliamentary Service Act can result in employment sanctions being imposed under those Acts.