On October 7, 2011, just prior to the November 19, 2011 election, a Petition was filed by 16 Petitioners from Salt Spring Island against one Capital Regional District (“CRD”) Director who was the electoral area Director for Salt Spring Island, and against two Trustees of the Islands Trust (the “Trustees”). The Petitioners sought declarations that the Director and the Trustees were disqualified from holding office as a result of conflicts of interest. Only the CRD Director was seeking re-election at the time.
The Petition was heard on November 16 and 17, 2011. On November 18, 2011 a decision was rendered by the BC Supreme Court regarding the CRD Director (Schlenker et al. v. Torgrimson, Ehring and Hendren, Victoria Registry No. VIC-S-S-114036). A decision was later rendered by the Court January 18, 2012 regarding the two Island Trustees (Schlenker v. Torgrimson 2012 BCSC 41).
The allegations against the CRD Director were that he had a direct or indirect pecuniary interest when he voted as CRD Director to approve a grant-in-aid to the Salt Spring Island Water Council Society (“Water Council Society”). The allegations against the Trustees were that they also had a direct or indirect pecuniary interest when they voted to provide money to two non-profit societies (the Water Council Society and the Climate Action Society) of which they were directors and members. The Petitioners argued that disqualification from office could result from a direct or indirect pecuniary conflict of interest pursuant to Division 6 of the Community Charter, and also from a non-pecuniary conflict of interest arising from the common law.
The Water Council Society was incorporated in July of 2011. The Climate Action Society was incorporated in April of 2011. The CRD Director and the Trustees were founding members and Directors of the Water Council Society and the Trustees were founding members and Directors of the Climate Action Society. The Bylaws of both societies provided that directors may be remunerated for services provided in a professional capacity. Neither the CRD Director nor the Trustees had received any funds from either society before or after their incorporation.
The CRD Director had no particular professional experience that he might offer to the Society. His evidence was that his role was limited to acting as liaison between the Water Council Society and the six CRD Water District Commissions on Salt Spring Island. The Trustees were actively involved in the common goals and objectives of the two groups, later societies, from their inception.
The content of the constitution and bylaws of the Water Council Society and Climate Action Society reflected that these were important issues in the community of Salt Spring Island and these issues were also reflected in the Official Community Plan.
The Trustees had voted to fund the Water Council Society to organize and run a workshop to raise awareness of water issues on Salt Sprint Island and also to provide money to the Climate Action Society for the purpose of providing a progress report on greenhouse gases.
Neither the CRD Director nor the Trustees declared that they were Directors of these societies prior to voting.
The test applied by the Courts to determine whether a conflict of interest of either a pecuniary or non-pecuniary nature exists is 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 that duty” (Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170 and applied in many BC cases).
The BC Supreme Court rendered an oral decision on November 18, 2011 on the eve of the recent local government elections relating to the CRD Director. The CRD Director was found not to have had an indirect or direct pecuniary conflict of interest when he voted as CRD Director to award the grant-in-aid.
On January 18, 2012 the BC Supreme Court rendered its decision regarding the Trustees. The Court also found that the Trustees had neither a direct nor indirect pecuniary interest.
The Court found that there was no evidence of any direct or indirect pecuniary interest as none of the elected officials involved received any funds. There was also not an indirect pecuniary interest as there was no personal economic self-interest that was in conflict with the official’s public duty. There was no evidence to establish that the grants had the potential to personally affect the personal financial interests of the CRD Director or the Trustees. The Court stated that it was satisfied that “an indirect pecuniary interest requires evidence sufficient that there can be “a readily recognizable pecuniary incentive to vote other than for planning reasons”. (Schlenker v. Torgrimson 2012 BCSC 41 at 52).
The Petitioners also alleged that the elected officials were in a non-pecuniary conflict of interest at common law, as directors of the societies, commonly referred to as the ‘wearing of two hats’. Their obligations as directors of societies were to act honestly, in good faith and in the best interests of their societies. The directors of a Society cannot be relieved of these duties by contract, the constitution or the bylaws of the Society. The Petitioners argued that a person could not act in the best interests of both entities at the same time and that the mere fact that they were directors of these societies was a conflict in interest.
The Court determined even if a non-pecuniary conflict of interest was found, the Director could not be disqualified from holding office. The remedy of disqualifying a person from holding office was only available in the particular circumstances outlined in the Community Charter, following the BC Court of Appeal case of Fairbrass v. Hansma ((2010 BCCA 319). A common law conflict of interest cannot disqualify an elected official from office in BC it can only affect whether or not the voting was valid.
The argument then turned to whether or not the CRD Director and Trustees were in a common law non-pecuniary conflict of interest so as to disqualify them from voting to provide the funds to the two societies. Previous cases have determined the non-pecuniary interest must be a “substantial interest” to warrant disqualification from voting. The interest must also go beyond that which the elected official has in common with other members of the community; it must be an interest which is peculiar to the elected official, in effect something that will serve his or her own personal ends. (Watson v. Burnaby (1994) 22 M.P.L.R. (2d) 136 (BCSC) citing L’Abbe v. Blind River (Village)(1904) 7 O.L.R. 230 (Div.Ct.) and St. Boniface, supra)
The Court determined that given the totality of the circumstances a reasonably well-informed person appraised of these particular circumstances would conclude that the CRD Director had no personal interest in the matter, and that at all times he was voting in the best interests of the community. Further, a reasonably well-informed person would find that the nature of his role as a director of the Water Council was to act as a representative of the six CRD Water District Commissions. There was no evidence to establish that he voted for any reason other than for the best interests of the community. Therefore the Director did not have a non-pecuniary conflict of interest when he voted as a CRD Director. The Petition relating to the CRD Director was dismissed.
In the judgement involving the Trustees the Court elaborated further on the test for a common law conflict of interest and reiterated that there must be personal ends to be gained by the elected official for a conflict to arise. The Court further stated:
“…a common law conflict of interest (as opposed to common law bias or prejudgment) arises where the interests are particular to the official, where they are not shared by or would not benefit others in the community, and, where –if the interest is particular to the official – a reasonably well-informed person would find that the elected official might be influenced in the exercise of public duty by his or her personal interests” (at 59).
The Court then found that when the Trustees voted they also were not voting to advance their own personal ends but to advance community interests.
It is important to understand that this case is particular to these circumstances and the fact that the constitution and bylaws of these two societies reflected broad community interests. Although this case suggests that the wearing of two hats will not always give rise to a disqualifying conflict of interest, each case is determined on its own unique facts.
Elected officials who are directors of a non-profit society or members of other organizations should carefully consider whether or not they ought to be discussing and voting on matters related to their particular society. They should consider whether or not their interest in the society or other organization “is so related to the exercise of public duty that a reasonably well-informed person would conclude that the interest might influence that duty” or whether they have the opportunity for personal gain above that of the interests of the community. If there is concern that there may be a conflict of interest the elected officially should seriously consider absenting themselves from any discussion or voting in relation to that organization.
