Conflicting opinions

Toronto Mayor Rob Ford’s highly charged fight to save his seat has thrust municipal conflict of interest issues into the spotlight across Canada.

In light of that and other examples, municipal in-house lawyers are advised to acquaint themselves with conflicts of interest legislation despite the fact they serve municipalities, not individuals. Not only can controversial conflicts of interest cases have a significant impact on the climate in which they operate, the publicity they generate is fuelling other developments, such as lobbyist registers, and in some cases leading to an increase in queries from council members seeking informal advice on conflicts.“

Until the media got hold of the Ford stuff in Ontario, I don’t know if the risks were fully understood,” says Jamie Johnson, a lawyer in the City of Edmonton’s legal department and Canadian Bar Association municipal law section chairman for Alberta. “It’s led to more questions being asked.” Questions mainly relate to members’ pecuniary interests, an area that has attracted lively debate thanks to Magder v. Ford.

Ford’s court battle was sparked when, in May 2010 — two months after declaring he was running for mayor — he wrote to lobbyists seeking donations to his
personal football foundation, using paper printed with the City of Toronto letterhead. A member of the public complained there was an “implied suggestion” that donors would be served well should Ford be elected as mayor.

Toronto’s integrity commissioner Janet Leiper found Ford had violated the city’s code of conduct and said he should reimburse the lobbyists to the tune of $3,150.
Council adopted the recommendation, but Ford ignored six written requests from Leiper for confirmation he had repaid the money.

Leiper then asked council members to give Ford a deadline by which to prove he had paid back the lobbyists. When this was brought to council, Ford didn’t
declare a pecuniary interest, and debated the issue before voting to rescind the council’s earlier decision requiring him to repay the money.

This prompted Toronto resident Paul Magder to file an application at the Ontario Superior Court, under the Municipal Conflict of Interest Act. Justice Charles Hackland found Ford had contravened the act by voting on a matter in which he had a pecuniary interest; the strict provisions of the legislation meant his seat would have to be declared vacant.

However, this was overturned by the Divisional Court in a controversial decision that found city council lacked the power to require Ford to repay the money. Ford had therefore not contravened the act because the financial sanction had been “a nullity,” the court ruled.

This decision is “very dangerous,” says John Mascarin, a municipal lawyer at Aird & Berlis LLP in Toronto. The spectre of councils having to retrospectively
invalidate decisions could “lead to administrative chaos,” he warns.

He adds: “Strictly through a municipal law lens, the presumption of validity doctrine applies. When Ford went to council, it [the financial sanction] was presumed to be valid at that point, so he clearly had a pecuniary interest.”

Administrative lawyers would argue the nullity argument trumps the presumption of validity doctrine. “You’re going to see a real clash if this ever gets heard at the Supreme Court of Canada,” Mascarin predicts (Magder’s lawyer Clayton Ruby has asked the Supreme Court for leave to appeal).

Bill White, corporate legal counsel for the City of Waterloo, is equally concerned about the Divisional Court ruling. “The decision established a situation where, if a person can find a technicality like [the council] not having enough authority to go with a decision, even though they may have had a conflict of interest under the act, they can get away with it. It’s almost like a new law,” he says. “It seems to be turning the legislation around to focus on the actions of the municipality, as opposed to the actions of the individual councillor, which is what the legislation was intended to [focus on].”

The Divisional Court did not quibble over the fact the solicited money went to Ford’s football foundation and not into his own bank account. But in Schlenker v. Torgrimson, the Court of Appeal for British Columbia considered whether elected officials had a pecuniary interest when the sums involved didn’t directly fatten their own wallets. The court held that two local government officials possessed an interest when the body they served on awarded two service contracts to a non-profit corporation where they served as directors.

Justice Ian Donald wrote on Jan. 13, 2013: “The public is disadvantaged by the conflict, whether the respondents derived any personal gain or not, because the public did not have the undivided loyalty of their elected officials.”

Or how about an elected representative who doesn’t benefit from the contested money, but whose relative does? This cropped up in the case of 92-year-old Mississauga, Ont., Mayor Hazel McCallion who allegedly pushed for a bylaw change that would have benefited a hotel project involving her son by up to $11 million.

In the city’s submission to a 2011 judicial inquiry into the matter, lawyer Clifford Lax said McCallion’s actions were “unbecoming of a city official.” The inquiry report, written by Justice Douglas Cunningham, also criticized her actions but stopped short of finding her in breach of the Municipal Conflict of Interest Act, because she declared an interest at a city council meeting, even though she failed to do so on other occasions.

Cunningham recommended the act be amended to cover “all meetings attended by members of council in their official capacities.” He also wanted the act to clarify that members must disclose pecuniary interests affecting their “spouses, parents, children, siblings, and other relatives.” His recommendations are yet to be implemented but the Ontario government is reviewing the act, which contains similar provisions to conflicts of interest legislation in other provinces.

In April, McCallion appeared in Ontario’s Superior Court facing claims she should have declared a conflict of interest when voting at a 2007 Peel Region council meeting. Part of her defence is the claim that any breach of the act was done through an error in judgment.

But ignorance of the act is not to be relied upon as a defence, as Magder v. Ford demonstrated. Ford admitted he had not read the act, did not know what was in the statute, had not attended the legal department’s awareness session, or read his councillor’s handbook. Hackland argued this was not a bona fide error in judgment but a lack of diligence amounting to “willful blindness.”

Will Hackland’s words encourage a greater awareness of the act among councillors? White doubts it. “There’s a lot of material to read. But still, it seems to me that members should be more concerned than they are. It’s ‘there but for the grace of God go I.’”

However, sometimes councillors scramble to declare a conflict. The Council for the Regional Municipality of Waterloo faced an unlikely situation in June 2011, when 40 per cent of members eligible to vote on an $818-million light rail transit system declared a conflict because they had properties near the proposed rail line, or worked nearby.  This rendered them unable to vote on the largest public works project ever undertaken in the area.

Eric Davis, a municipal and planning lawyer at Miller Thomson LLP, says the case highlights another legislative grey area. One exemption to the act covers those who have “an interest in common with electors generally.”

School trustees with children attending one of the school board’s institutions must consider this when deciding whether to offer student services that, if absent, would create an expense for the trustee, he says. Indeed, proving that officials in smaller municipalities do not have a pecuniary interest can be troublesome, because there is a smaller pool of volunteers willing to run for posts, he suggests.

The need to avoid deterring strong candidates from standing for civic roles is one reason behind a widespread desire to address the fact that the Municipal Conflict of Interest Act allows for just one penalty: declaring the post vacant. Creating a range of sanctions was another of Cunningham’s recommendations in the Ford case.

Sometimes council members can be placed in a position of conflict through the actions of others, namely lobbyists. Toronto has responded to this risk by
introducing a lobbyist registery, an idea that has also been raised in other Ontario cities including Brampton, Markham, and London.

In Toronto, where the size of the register tripled between 2010 and 2012, the lobbying rules are currently being tested. For example, councillor Janet Davis complained after receiving a cookie from a lobbyist in celebration of International Women’s Day. Does this amount to an attempt to exert influence?

Johnson says this is probably going too far. “I don’t think a cookie is creating a conflict. NHL hockey tickets, maybe,” he says.

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.

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