The recent decision of the Ontario Court of Appeal in Ferri v. Ontario, 2015 ONCA 683, has expanded on one of the statutory exceptions to conflict of interest rules for local government officials. Though the Ferri case addresses an exception found in s.4(k) of the Ontario Municipal Conflict of Interest Act, a near identical exception exists in s.104(1)(d) of the Community Charter. As such, it is likely that BC courts will consider the way Ontario courts have interpreted s.4(k) when conducting their own s.104(1)(d) analysis.
Municipal Conflict of Interest Act (“MCIA”)
4. Section 5 does not apply to a pecuniary interest in any matter that a member may have,
(k) by reason only of an interest of the member which is so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the member.
104(1) Sections 100 to 103 do not apply if one or more of the following circumstances applies:
(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;
When is a pecuniary interest too ‘remote or insignificant’?
In order to understand the effects of the decision in Ferri, it is important to point out one fundamental difference between BC’s Community Charter and Ontario’s MCIA when dealing with conflicts arising from family relationships. Under s.3 of the MCIA, the pecuniary interest of a parent, spouse, or child is deemed to be also the pecuniary interest of the member, even if there is no potential for personal gain on the part of the member. By comparison, the Community Charter does not create any deemed conflicts.
In Ferri, Mario Ferri, a municipal councillor for the City of Vaughan was deemed under s.3 of the MCIA to have a pecuniary conflict of interest with regards to an appeal of a portion of the City’s official community plan (“OCP”). Mario Ferri’s son, Steven Ferri, was an associate with the law firm Loopstra Nixon LLP, which was retained by a third party to appeal the OCP. In conjunction with other lawyers, Steven worked on this file, but there was no evidence suggesting that Mario Ferri would personally gain if the appeal were successful. The primary issue considered by the Ontario Court of Appeal was whether councillor Ferri’s deemed pecuniary interest was exempted from conflict of interest rules because of being too ‘remote or insignificant’ as per s.4(k) of the MCIA. The court ultimately reversed the trial decision and found that Mr. Ferri’s interest was sufficiently remote or insignificant, such that it could not reasonably be regarded as likely to influence his participation regarding the matter.
In coming to this conclusion, the court found that under the current version of the MCIA, “good faith and motive are relevant to the question of whether a pecuniary interest is likely to influence the councillor, which lies at the heart of the analysis of whether a pecuniary interest is remote or insignificant under s.4(k)”. Thus, the test requires a court to consider all of the circumstances put into evidence when determining whether the interest is likely to influence the member. The court found that the following had been established in evidence:
- He had many years of faithful community service;
- He acted in good faith and was not motivated by a potential to secure a pecuniary benefit;
- He had previously been extremely vigilant in declaring conflicts of interest, including 16 times where his son’s firm had been retained;
- The matters at issue were of major public interest to his constituents;
- He received no personal benefit from his son’s compensation
- The son’s compensation and employment did not depend on the outcome of the decision of council.
The court’s willingness to include such factors as years of service, good faith and motive, and the importance of the issue to constituents, signals a broadening of what is acceptable to consider when determining whether a pecuniary interest is likely to affect the decisions of a council member. The court did not differentiate between the factors that affected ‘remoteness’ and those that spoke to ‘insignificance’. Though the two terms clearly have different meanings, they were considered together in this case.
Relying on the fact that section 4(k) of the MCIA and section 104(1)(d) of the Community Charter are nearly identical, this approach may provide another line of defence for elected officials in BC. However until now, unlike s.4(k) in Ontario, s.104(1)(d) has rarely been invoked. In BC courts, the question of whether a pecuniary interest is likely to affect the council member’s decision has typically been asked as part of the analysis determining whether a pecuniary conflict of interest exists, not to determine whether a pecuniary interest is exempted under s.104(1)(d). Two BC cases exemplify this point well; Fairbrass v. Hansma and Schlenker v. Torgrimson.
In Fairbrass v Hansma, 2010 BCCA 319, the central question was whether the relationship between a mayor and his sons disqualified him from voting on a bylaw that would affect the value of his son’s real estate holdings. The court found that the bylaw amendment would allow the sons to more easily subdivide their property, therefore giving the sons a direct pecuniary interest in the matter. However, the court found that since there was no evidence suggesting that the mayor would personally benefit from his sons’ interest, the mayor did not have a pecuniary conflict of interest.
In this decision, both at the BC Supreme Court and at the Court of Appeal, s.104 was considered, but not relied on because a pecuniary conflict of interest was never found. Instead, the court employed a test very similar to what would occur under s.104 to determine that because the mayor had no potential for personal gain, his interest was too remote to be considered a pecuniary interest in the first place. The outcome of this and the Ferri case was very similar, but the process was different. In Ferri, a pecuniary conflict of interest existed, but it was exempted because of remoteness under s.4(k) of the MCIA. Comparatively, in Fairbrass, the court used what is functionally s.104(1)(d) analysis, without ever invoking s.104(1)(d), to conclude that no pecuniary conflict of interest existed.
Another example of how BC courts tend to view ‘remoteness or insignificance’ is the case of Schlenker v. Torgrimson, 2013 BCCA 9. In Schlenker, two members of a city council were found to have pecuniary conflicts of interest as a result of participating in decisions to allocate funds to societies on which each was a director. The primary concern of the court was that these councillors owed fiduciary duties to their societies to act in the best interests of the society, making an unbiased decision about where to allocate funds impossible. After finding that a pecuniary conflict of interest existed, the court didn’t even refer to s.104(1)(d) exceptions, probably because the court had already conducted a form of remoteness analysis in coming to the conclusion that there was a pecuniary conflict of interest. Though this decision is problematic (See Colin Stewart’s January 15, 2013 article), it depicts the tendency of BC courts to conduct remoteness analysis on the front end, without relying on s.104(1)(d).
As the cases of Fairbrass and Schlenker show, since BC rarely relies on s.104(1)(d) as an exception, the extent to which the decision in Ferri can be applied in BC is unclear. However, with the decision in Schlenker it appears that BC courts may be more inclined to find pecuniary interests where they previously wouldn’t have. If this is the case, we anticipate that reliance on s.104(1)(d) will become more important in BC and that the expanded criteria from Ferri could be a protection, particularly for well meaning, long standing, government officials who find themselves in pecuniary conflict of interest scenarios.