WHAT IS A CONFLICT OF INTEREST FOR ELECTED OFFICIALS?

Conflict of Interest

Elected officials of local governments are subject to conflict of interest rules. These rules are typically codified in municipal government enabling legislation, but they may also be subject to common law (judge made) rules. British Columbia’s conflict of interest rules are set out in ss. 100-109 of the Community Charter and they are typical of the rules for elected municipal officials across Canada. In general terms, if a council member attending a council meeting or a council committee meeting considers that they have a direct or indirect pecuniary interest in the matter, or another interest in the matter that constitutes a conflict of interest, they must declare it and state in general terms why they consider this to be the case. They must then remove themselves from the meeting and refrain from any discussions or voting on the matter.

Conflict of interest rules generally are based on the moral principle “that no man (sic) can serve two masters” (Schlenker v Torgrimson, 2013 BCCA 9 [Schlenker], at para 38, quoting Re Moll and Fisher et al., 1979 CanLII 2020. The Court stated that the Community Charter’s goal in this regard is to “prevent elected officials from having divided loyalties in deciding how to spend the public’s money,” and that its restrictions must be construed broadly in a manner consistent with that goal (Schlenker at para 34).

There are two types of conflicts of interest, pecuniary and common law conflicts. A pecuniary interest is a financial or monetary interest, whereby there is a recognizable incentive to vote for pecuniary rather than policy reasons. Pecuniary interest has also been defined as something that could monetarily affect land, in the sense of an advantageous or disadvantageous financial impact. Non-pecuniary interests (or “common law” conflicts) are based on perception and do not require evidence of wrongdoing. A non-pecuniary conflict is based on the notion that persons in public office must not use their positions to their personal advantage (Old St. Boniface Residents Assn. Inc. v Winnipeg (City), [1990] 3 SCR 1170 [Old St. Boniface]).

Section 100(2) and (3) of the Community Charter provide that if an elected official attending a meeting considers that he or she has a pecuniary interest in the matter that is before council or another interest in the matter that constitutes a conflict of interest, the official must declare this and state in general terms the reason why the official considers this to be the case. After making the declaration, s. 101 of the Community Charter provides that the official must not remain in the meeting, participate in any discussion on the matter, vote on the matter, or attempt to influence voting on the matter.

Exceptions to the conflict of interest rules in ss. 100 and 101 are provided in s. 104 of the Community Charter in the following circumstances:

(a)    the pecuniary interest of the council member is a pecuniary interest in common with electors of the municipality generally;

(b)    in the case of a matter that relates to a local service, the pecuniary interest of the council member is in common with other persons who are or would be liable for the local service tax;

(c)     the matter relates to remuneration, expenses or benefits payable to one or more council members in relation to their duties as council members;

(d)    the pecuniary interest is so remote or insignificant that it cannot reasonably be regarded as likely to influence the member in relation to the matter; or

(e)    the pecuniary interest is of a nature prescribed by regulation.

If a council member contravenes the conflict of interest rules in ss. 100 and 101 with respect to a direct or indirect pecuniary interest, the councillor is disqualified from holding office until the next general election unless the contravention was done inadvertently or because of an error in judgment made in good faith. The councillor may also be ordered to give up any financial gain arising from the conflict under s. 109. An application to the BC Supreme Court declaring the disqualification of a councillor can be made by the District by council resolution adopted by at least two-thirds of all council members, or by 10 or more electors in the municipality. The application must be made within 45 days after the alleged basis of the disqualification comes to the attention of applicants.

Indirect or Direct Pecuniary Interests

In Redmond v Wiebe, 2022 BCCA 244 (“Wiebe”) the Court of Appeal developed a two-stage test to determine whether a locally elected official has violated the conflict-of-interest restrictions in the Vancouver Charter, 1953 (“Charter”) (at para 45). The conflict-of-interest provisions in the Charter are identical to those in the Community Charter, so the same test would likely apply to interpret the conflict-of-interest provisions in the Community Charter. At the first stage of the test, (1) the petitioners have the burden of showing that the council member in fact had a conflict of interest due to a direct or indirect pecuniary interest, and that the council member improperly participated in a council or committee meeting despite the conflict of interest. If the petitioner is successful, the test moves to the second stage, and (2) the council member has the burden of proving that their pecuniary interest constitutes one of the exceptions listed in section 104 of the Community Charter (Wiebe at para 45).

As noted above, indirect or direct pecuniary interests are interests which may have money-related consequences for the council member. Courts have interpreted what may amount to a pecuniary interest broadly (Grand Forks (City) v Butler, 2016 BCSC 349). The interest does not have to mean actual money in hand. It is sufficient if a matter may affect (positively or negatively) a pecuniary interest of the councillor (Tuchinhagen v Mondoux, 2011 ONSC 5398 (appeal dismissed 2012 ONCA 567).

If a pecuniary interest is found to exist, the second stage of the test is to determine whether the pecuniary interest constitutes one of the exceptions in s. 104(1) of the Community Charter (Wiebe). Wiebe considered the “interest in common” exception under s. 104(1)(a) and reiterated the notion that the interest in common exemption applies if the pecuniary or personal interest is “not different than the community in general.” In Wiebe, the respondent councillor, the owner and investor of a restaurant and bar, participated in and voted on a resolution to expedite patio permitting without declaring a pecuniary interest in the matter. His restaurant was one of the first 14 businesses in the municipality to be granted a licence. The Court of Appeal held that the council member’s interest was not in common with the electors of the municipality. The comparator group realistically sharing a common pecuniary interest is that segment of the 3,127 licensees who were ready and able to take advantage of the patio licensing program during its initial limited availability. Given that only 452 applications for the patio licensing program were received by the City by September 2020, the Court inferred that the proper comparator group is much smaller than 3,217 licensees. This was too small of a segment of the community to justify the application of the interest-in-common exception. Further, even if the class of hundreds of permit holders were large enough to support this exception, Councillor Wiebe distinguished himself from that class and put his pecuniary interest in common with an even smaller group: those who could immediately enjoy the benefits of the patio licencing program.

Non-Pecuniary Interest (or “Common Law” Conflicts)

Non-pecuniary interests (or “common law” conflicts) are based on perception and do not require evidence of wrongdoing. A non-pecuniary conflict is based on the notion that persons in public office must not use their positions to their personal advantage (Old St. Boniface Residents Assn. Inc. v Winnipeg (City), [1990] 3 SCR 1170 [Old St. Boniface]).

The Court in Old St. Boniface briefly distinguished between two types of non-pecuniary interest. The first is “partiality by reason of pre-judgment”, and the second is partiality “by reason of personal interest” (Old St. Boniface at 1196). As such, there are two tests that the courts will apply in situations where a Council member may have a non-pecuniary conflict of interest. The first test deals with circumstances when a council member has associations or connections within the community, and the second test deals with bias.

Personal Interest

When the council member has associations or connections within the community that may override the public interest in making a decision, the test first asks whether the interest is particular to the Council member or if it is an interest in common with other citizens. If it is an interest particular to the Council member, then the court asks whether “the interest is so related to the exercise of public duty that a reasonably well-informed person would conclude that the interest might influence the exercise of that duty” (Old St. Boniface at 1196).

In Watson v Burnaby (City), 1994 CanLII 1027 [Watson], the Court referenced Re L'Abbé and The Corporation of Blind River (1904), 7 O.L.R. 230 [L'Abbé], and Old St. Boniface, for the key criteria to evaluate whether a non-pecuniary conflict of interest is present. The Court in Watson referenced L'Abbé for the proposition that the non-pecuniary interest required to warrant disqualification from voting must be a "substantial interest". From L'Abbé and Old St. Boniface, the Court drew that the council member’s interest in the matter “must go beyond that which he or she may have in common with other members of the community; it must be an interest which is peculiar to the councillor, in effect, something that will serve his or her own personal ends” (Watson). Finally, the Court said, where there is such an interest, it must be so related to the subject matter of the vote that a reasonably well-informed person would conclude that the interest may well influence the councillor’s vote.

The consequences of an elected official having a common law conflict of interest in respect of a resolution or bylaw are as follows:

(a)    Prior to the voting on the matter, a party who is adverse in interest may obtain an injunction to prevent the official from voting, if the court is persuaded that there is a common law conflict of interest;

(b)    The bylaw or resolution could be set aside if the official’s vote would have been necessary to form the majority, unless the disqualification from voting arises from a disqualification from office, in which case s. 261 of the Local Government Act would likely save the bylaw or resolution;

(c)     In some cases, where the interest of the official relates to certain “quasi-judicial” decisions, such as the issuance of a permit, the resolution could be set aside as a result of the tainted vote.

In British Columbia, disqualification from office is not a potential consequence of a common law conflict of interest.

Reasonable Apprehension of Bias

Reasonable apprehension of bias is a closely related doctrine to conflict of interest, but it is also somewhat distinct. The central focus of the bias cases is whether the elected official has pre-judged the matter such that he or she ought to be disqualified from participating in the vote. In Old St. Boniface, the Supreme Court of Canada formulated a more relaxed test for disqualifying bias in some circumstances.

In Old St. Boniface, Winnipeg City Council approved a proposed land development. One of the municipal councillors who voted on the matter had been personally involved in the planning of the proposed development and appeared as an advocate in support of the application at a finance committee meeting. The councillor did not disclose his earlier involvement with the application at the public meetings. The residents’ association argued that the councillor was biased and should not have participated in the decision to approve the land development.

The Majority of the Court held that unless a municipal councillor has an interest in the outcome – either pecuniary or because of a special relationship (in other words, a conflict of interest as discussed above), there was a new test for disqualifying bias. The new test applied in that case because there was no evidence to suggest that the councillor was motivated by some relationship with or interest in the developer, rather than with the development itself. However, the Majority also said, in circumstances when such a relationship is found to exist, the test is that which applies to all public officials: would a reasonably well-informed person consider that the interest might have an influence on the exercise of the official's public duty? If that duty is to hear and decide, the test is expressed in terms of a reasonable apprehension of bias.

The test for reasonable apprehension of bias that applies to all public officials is not whether the decision maker was biased in fact, rather it is whether “an informed person viewing the matter realistically and practically ... [w]ould think that it is more likely than not that [the decisionmaker], whether consciously or unconsciously, would not decide fairly” (Committee for Justice and Liberty v National Energy Board, [1978] 1 S.C.R. 369 [Committee for Justice and Liberty], at 394).