Legal Versus “Personal” Conflicts of Interest

In May, 2013, I wrote my thoughts about Ontario’s Municipal Conflict of Interest Act and the effect it had on the governance and procedural behaviour of municipal councillors. Back then, I wrote,

The Act allows no grey areas: there are no “perceived” conflicts in law, only clearly defined legal ones. This is obviously intended by the stringent wording that lays out what construes a conflict of interest.

This clarity absolves everyone of trying to second guess the intention of the Act, or trying to interpret degrees of conflict.

For the MCOI Act, only pecuniary – i.e. financial – conflicts matter: only they have to be declared; only they affect procedure and governance. And only the person and his or her direct family – parents and/or children – are involved. Siblings or other relatives, friends and coworkers are not considered to present a conflict:

Indirect pecuniary interest
2. For the purposes of this Act, a member has an indirect pecuniary interest in any matter in which the council or local board, as the case may be, is concerned, if,
(a) the member or his or her nominee,
(i) is a shareholder in, or a director or senior officer of, a corporation that does not offer its securities to the public,
(ii) has a controlling interest in or is a director or senior officer of, a corporation that offers its securities to the public, or
(iii) is a member of a body,
that has a pecuniary interest in the matter; or
(b) the member is a partner of a person or is in the employment of a person or body that has a pecuniary interest in the matter. R.S.O. 1990, c. M.50, s. 2.
Interest of certain persons deemed that of member
3. For the purposes of this Act, the pecuniary interest, direct or indirect, of a parent or the spouse or any child of the member shall, if known to the member, be deemed to be also the pecuniary interest of the member. R.S.O. 1990, c. M.50, s. 3; 1999, c. 6, s. 41 (2); 2005, c. 5, s. 45 (3).

Last week at our Feb. 10 council meeting, in his report to council, Collingwood’s Integrity Commissioner, Robert Swayze, proposed changes to two sections of the town’s Procedural Bylaw. The proposed change to section 13.7 would add a clause for “personal conflict” to the bylaw, and I address that below. I’ll deal with the changes to section 13.8 in a subsequent post.

In his report, Mr. Swayze said,

In my opinion, all members of Council should be encouraged to declare a conflict, whether pecuniary or not, if the member feels that he or she cannot be impartial in voting on a matter. If for example, a member sits on the board of directors of a charity and awarding grants to the charity is before Council, the Councillor should declare a conflict, refrain from voting and such a declaration should not be deemed to be a vote against the charity. I have recommended in Appendix “D” that personal conflicts be added to section 13.7 and that 13.8 be deleted from the Procedural By-law.

In his oral presentation, he said that other municipalities had included similar “personal conflict” conditions in their own governance regulations. I did some research into those regulations this past week.

Mississauga has the term in its procedural bylaw, I found, but it lacks a firm definition of the term, leaving it open to individual interpretation. The other references I’ve found are in codes of conduct or policy statements.

I’m troubled by the potential pitfalls of implementation as presented, rather than the intent, and argue below that the appropriate place for such terms is in the town’s Code of Conduct.

My first concern about this statement is perceptual. We are not elected to be impartial. Quite the contrary: we are elected specifically for our biases, our beliefs, what we stand for, what we champion, and what we oppose. We are not and cannot be impartial. We are very partial and every issue, every vote is a vote of partiality and bias. That’s the whole point of representational democracy: you elect those who you believe are on your side, who will best represent your own interests and biases.

Instead, we should be disinterested – i.e. “unbiased by personal interest or advantage; not influenced by selfish motives.” Sometimes these words are treated synonymously, but they are (at least technically) different.

I think the public wants to see there is no evident personal advantage in our deliberations and votes, but they expect (and rightfully so) for us to be biased towards the goals, the intents and the issues we spoke out about in our election campaigns.

In a slide presentation, the AMCTO (AMCTO (Association of Municipal Managers, Clerks and Treasurers of Ontario) defines the “common meaning of conflict of interest” as:

“…a situation in which a person has a private or personal interest sufficient to appear to influence the objective exercise of his or her official duties as, say, a public official, an employee, or a professional…”

In my experience, both as a councillor and a reporter covering councils in the region (including Collingwood on CBC’s Ontario Morning for a decade), most councillors have erred on the side of discretion; declaring conflicts that are not legal or pecuniary (thus not legally necessary), but rather perceived. This would, as I understand it, align with Mr. Swayze’s concept of “personal conflict.”

We do so voluntarily because we believe we are doing the right thing, making the ethical choice; not because of a requirement of law or to ensure impartiality. These have been individual decisions based on conscience. Once we enshrine the requirement in law or policy, we need to make it clear and precise as to what is expected.

Another AMCTO document has this quote:

“The obvious purpose of the Act is to prohibit members of council and local boards from engaging in the decision-making process in respect to matters in which they have a personal economic interest.” Mr. Justice Robins, Moll v. Fisher (1979)

And this one:

“…if there is a reasonable interpretation which will avoid a penalty in any particular case, we must adopt that construction.” Ontario Divisional Court, Sharp v. McGregor (1988)

My subsequent concerns are procedural. Personal conflicts are not defined anywhere, so it becomes left to the individual to interpret what they mean. Since none of us at the table are lawyers, the individual interpretations will likely vary wildly. This can become a source of contention and ill will, reducing council’s ability to function.

What I might consider a personal conflict – say the employment of a member of council during discussion of certain property-related issues – another may not. Lacking a firm guideline as to what constitutes a “personal” conflict, should I complain to the Integrity Commissioner over a perceived violation? Any investigation will cost taxpayers.

What if the Commissioner agrees and applies a fine or judgment against that member, but council does not agree with it, and does not implement that decision? It’s happened in other municipalities. A Commissioner’s reports are recommendations that a council has to approve. And an accused councillor who disagrees with the judgement has the right to taxpayer-funded legal council, so the costs can mount.

Aside from the confusion and confrontation it presents, any complaint and investigation costs taxpayers money – and one of my duties to the electorate is fiscal responsibility. As Evelyn Buck – a former Aurora councillor – noted on her blog, implementing decisions like this can be very expensive to the municipality:

A couple of terms ago, a Mayor of East Gwillimbury was charged with a Conflict. Lawyers no doubt argued the case from both sides. The Judge found he did the deed. He also found it was not deliberately intended. No penalty was imposed. The mayor was no longer in office. It would be hard to estimate the damage to his personal reputation… Only lawyers benefited from the exercise…

Last week, the Integrity Commissioner informed us of the failed status of the Code of Ethics in a municipality which shall be nameless. Three separate Commissioners have been appointed since the Code was adopted a couple of years ago. Councillors routinely fail to enact punitive decisions of the Commissioner. They are entitled to legal counsel when a complaint is filed against them Costs average between $20. and $40 thousand dollars. The Municipality shoulders legal cost of the Commissioner and the Councillor who has been complained about. The financial burden is substantial and who but the taxpayer pays that penalty.

In light of such comments, I cannot support incorporating something vague and undefined into any form of policy or bylaw. We need solid guidelines to be effective – and fiscally responsible.

The City of Windsor has a comprehensive section on conflicts in its Code of Conduct, but its definition of “personal conflict: is fairly narrow, and leaves the “perceived” conflict undefined:

6. CONFLICTS OF INTEREST

6.1 Conflicts of interest arise when an Employee or Volunteer has a personal interest in the outcome of an action or decision that may influence the Employee or Volunteer’s judgement.
Conflicts of interest may be real or perceived. This policy applies to both real and perceived conflicts of interest and where the term “conflict of interest” is used, it is deemed to include both real or perceived conflicts of interest.

6.2 Conflicts of interest are categorized (without limitation) as follows:

6.2.1 Monetary conflicts: where an Employee or Volunteer may benefit financially from an action or decision including, without limitation, receipt of money, gifts or benefits, use of corporate property, professional advancement or an increase in the value of property or investments owned by an Employee or Volunteer or a person with whom the Employee or Volunteer is in a personal relationship.

6.2.2 Personal conflicts: where an Employee or Volunteer may be in a position to give differential treatment to a colleague or member of the public by virtue of being in a personal relationship with that person. Personal relationships are defined in the Family Relationships Hiring Policy and specifically, for the purposes of this policy include sexual, dating and romantic relationships that are not equivalent to spousal relationships.

6.2.3 Fiduciary conflicts: where an Employee or Volunteer may be in a position to take advantage of a vulnerable person due to a relationship of trust or power. A vulnerable person includes a child, person with impaired capacity, or person with whom an Employee or Volunteer is in a relationship of trust as defined by law.

6.2.4 Professional conflicts: where an Employee or Volunteer is in a conflict between the obligations of a Professional Code of Conduct or Ethics and an action requested or required in the context of their employment.

6.2.5 Political conflicts: where an Employee or Volunteer may be in a position to challenge a decision of Council or represent an agency, group or business (whether for-profit or not-for-profit) before Council in a personal capacity.

6.2.5.1 It is not a breach of this policy for a union or association member or a member of a professional body to support a position taken by their union, association or professional body.

6.2.6 Other conflicts: where another person, acting reasonably, has reason to believe that an Employee or Volunteer may be in a conflict of interest not otherwise described in this policy.

This is in a policy document, not a bylaw, which is where I believe it belongs. I have yet to find a legally-supported definition of “personal conflict” in a bylaw online, although that may be the fault of my own searches, or simply that the document is not online, not the lack of such a definition.

The City of Vaughan has a similar Code of Ethics document that says:

Members of Council shall avoid the improper use of the influence of their office, and conflicts of interest, both apparent and real. Members of Council shall not extend, in their discharge of their official duties, preferential treatment to family members, organizations or groups in which they or their family member have a pecuniary interest.

The Vaughan document also notes:

As a result, Members of Council will have a common understanding that they will not participate in activities that grant, or appear to grant, any special consideration, treatment, or advantage to an individual which is not available to every other individual;

Members of Council recognize that their actions are governed by the Municipal Conflict of Interest Act (MCI), and that, by virtue of the provisions of that statute, the Integrity Commissioner of the City of Vaughan has no authority to receive or investigate complaints regarding alleged contraventions under the MCI.

Toronto has a code of conduct that mentions perceived conflicts and stresses a councillor’s ethical behaviour, but goes on to define conflicts according to the confines of the Act:

• Members of Council shall serve and be seen to serve their constituents in a conscientious and diligent manner;
• Members of Council should be committed to performing their functions with integrity and to avoiding the improper use of the influence of their office, and conflicts of interest, both apparent and real;
• Members of Council are expected to perform their duties in office and arrange their private affairs in a manner that promotes public confidence and will bear close public scrutiny; and
• Members of Council shall seek to serve the public interest by upholding both the letter and the spirit of the laws of the Federal Parliament and Ontario Legislature, and the laws and policies adopted by City Council.

However, while the city’s Integrity Commissioner has a large website portal with specific advice and conditions regarding councillor/volunteer/employee behaviour and activities, there does not seem a specific definition or examples of  “apparent” or “personal” conflicts.

Public perception of what a conflict is may not fit either the rather stringent legal definition supplied in the Act or an individual councillor’s interpretation. This seems true Canada-wide, because most provincial acts deal with pecuniary interest alone. Many municipalities have chosen to add their own definition or interpretation to their policies or bylaws. For example, the website of the municipality of Bifrost, Manitoba, says:

A conflict of interest is when a person in public life is in a position where a personal interest may, or may appear to, conflict with their role as a municipal councillor.

They also have a definition of potential situations where conflicts may occur:

Types of Conflict of Interest
Council members are in conflict if they:

• Participate in a matter before Council where they, or their spouse, or dependent children, have a direct or indirect pecuniary (financial) interest. Council members are required to disclose the interest, withdraw from the meeting without voting and not participate in the discussion.
• Use ‘insider’ information that they have acquired in the performance of their official duties. Members of council cannot use information that is not available to the public for personal gain or the gain of any other person (e.g. passing on information obtained through internal discussions).
• Receive compensation from any person, business organization for the services they provide as a council member, or receive compensation to influence another council member.
• Use their influence as a council member to influence the municipality to enter into a contract or transaction where they or their immediate family member have a direct or indirect pecuniary (financial) interest.

A guide about conflict for municipal councillors in Nova Scotia offers this advice:

A useful question for a member to ask is: “What could I possibly stand to gain or lose from the outcome of this matter?” Unless the answer is “Absolutely nothing” the member has an interest which, unless it is exempted elsewhere in the legislation, requires the member to adhere to the course of conduct set out in the Act. Generally, if you have to ask yourself whether the Act applies, it probably does, and you should declare an interest, or, at a minimum, obtain independent legal advice and follow it.

My argument is that we also need such definitions in our own Code, if we choose to implement this recommendation, and not leave the term undefined for individuals to interpret.

Second, the Procedural Bylaw is a law, and we should not put anything into law which we cannot enforce through legal means. But how do you enforce something that is essentially a recommendation for personal behaviour? Can we charge anyone if we perceive a violation?

No, because the MCIA, mentioned above, has precedence over any local bylaws. And it is very clear on the nature and scope of conflicts.

The Procedural Bylaw is about how we conduct meetings; the Code of Conduct is about how we conduct ourselves.

The bylaw is paired with our Code of Conduct, which all members agree to when they are elected. It is not legally enforceable as a law is, but rather morally so. And, of course, we can apply judgments recommended by the Integrity Commissioner over a breach of the Code.

I believe any recommendation about “personal conflicts” should be in that Code, not in a bylaw, because it is essentially a request for compliance, not a legal requirement for same. The Code lays out for councillors the ethical standards, and that, I feel, is where this reference belongs.

Further, the Code also applies to all members of boards and committees, so it affects volunteers as well. We do not have a code for employees, but should consider incorporating similar rules for them, in a separate policy.

Conflict of interest is a thorny issue because there’s a gap between legal requirements and general perception. What the Act lays out is not what some people believe a “conflict” consists of. But as councillors, we are bound by law, not perception. But when the electorate thinks we are in conflict – should we respond to that perception or to the legal requirements? It becomes a political decision that may not be in parallel with the more strictly defined law.

The legal cases I’ve read suggest to me that courts have a mixed reaction to the law, but tend to be lenient because of its rather limited scope and the reality of human frailty – our inadvertent mistakes and misinterpretations (which does not lower the legal costs involved of both prosecution and defence).

It came to the forefront recently in cases involving the Mayors of Mississauga and Toronto, but in both cases, the resolution was not satisfactory to everyone, including the media.

In Canadian Lawyer Magazine, I read:

(John) Mascarin also warns against an “over-regulation” of conflicts. He questions how a recent, failed attempt to ban evening meetings between Toronto city councillors and lobbyists could ever have been policed.

Conflict of interest cases are relatively rare. This is probably largely due to the costs and time involved in bringing them to court. When Aurora, Ont., mayor Phyllis Morris won a conflict of interest case in March, the losing party was ordered to pay costs of $50,850. In April, the resident who unsuccessfully claimed Winnipeg mayor Sam Katz breached the act was told to stump up $10,000.

But, rare as they are, the rash of recent allegations has led to a heightened awareness of conflicts of interest. In-house counsel are under no obligation to provide advice to council members but, if they do, in an evolving municipal landscape they would do well to stay one step ahead.

To conclude: my concerns are not with the intent of the recommendation, but rather with its implementation as proposed.

I’ll deal with the recommendation for deleting section 13.8 in a later post.