Penalties for Municipal Conflict of Interest

August 12, 2022

By Mark Mikulasik

The appropriate penalty for a municipal conflict of interest has been controversial as long as there has been a Municipal Conflict of Interest Act in Ontario.

Prior to the 2017 amendments to the Act, if there was found to be a conflict of interest, the presiding judge had no option except to disqualify the member and declare the seat vacant except in cases of inadvertence or error. In those cases, no alternate penalties were made available. It was either capital punishment or nothing.

THE ISSUE

The 2017 amendments fixed that problem by empowering a judge to consider the range of penalties from reprimand to disqualification. But how does an integrity commissioner or judge determine the appropriate penalty?

RECENT CASES

Ontario’s intermediate appeals court, the Divisional Court, has now given judges, council members, and lawyers some guidance in the decision of Budarick v. the Corporation of the Townships of Brudenell, Lyndoch and Raglan (Integrity Commissioner). In that case, the council member was part time, as is common in many municipalities, even as large as Thunder Bay. She was accused of conflict of interest for participating in discussions about service charges levied against her son and attempting to influence counsel to the benefit of her son. The presiding Superior Court judge found several contraventions. He then considered the amended provisions of the Act, mitigating factors, and aggravating factors. Because the conduct was found to be intentional and deliberate, a reprimand was not appropriate. The penalty imposed was a declaration that the seat was vacant, but that the member was not disqualified from seeking re-election.

The appeal as to penalty raised six issues but primarily suggested that the judge had skipped from reprimand to vacancy, and effectively ignored the range of other penalties available under the 2017 amendments. The appeal also contested whether the breach was intentional as opposed to an error or act of inadvertence.

The Divisional Court agreed with the original judge that there was sufficient evidence that the violations were intentional. The judge had adequately considered all of the evidence and had not made an error of law or an error a fact sufficient for an appeal court to intervene.

The judge was well aware of the amendments to the Act and specifically referred to the existence of the new penalty provisions. The Divisional Court ruled that it is not necessary for the trial judge to review every available penalty in their reasons, as long as they focus on those penalties that are most appropriate to consider.

There was only one prior Divisional Court decision interpreting the new provisions to guide the trial judge and that case differed substantially from the Budarick case.

In City of Elliot Lake v. Pearce, the judge had found that:

  • Pearce did not act in his own or his family’s monetary self-interest;
  • Pearce’s split loyalties were between two entities that had, as their mandate, the best interest of Elliot Lake;
  • while he made an error, Pearce acted for the benefit of the community and not his own benefit; and
  • Councillor Pearce apologized for his conduct

It was found that a reprimand was an adequate penalty.

In Budarick, the member:

  •       acted intentionally;
  •       knew she had conflict of interest but chose to participate in the discussion regarding Fire Department practices and service charges;
  •       subordinated her public duties to her desire to achieve a financial benefit for her son; and
  •       did not apologize and maintained that she did not contravene the Act.

Though sentencing principles require that similar cases receive similar penalties, these cases simply were not similar.

The member also argued that the penalty was too severe because the invoice to her son was a small amount of money. The trial judge had recognized this as a mitigating factor. The Divisional Court agreed that it was not a sufficient factor to reduce the penalty. The aggravating factors, particularly the intentional nature of the violations, called for a severe penalty. The Divisional Court also recognized that in a small rural community, even a modest invoice may have far greater significance than it would in a larger community. The member’s general attack on the fire department and its management also called for a severe penalty.

The penalty was upheld.

At the time of writing, we are aware of one decision imposing a penalty for municipal conflict of interest in Ontario since the Budarick decision. Unfortunately, that case does not consider Budarick. In Espanola (Integrity Commissioner) v. Van Alstine, the member was found to have voted twice on a matter in which she had a pecuniary interest after having failed to disclose that interest. The integrity commissioner had recommended a reprimand, a declaration of vacancy, and a disqualification of the member. The member suggested an appropriate penalty ranged from a reprimand to a suspension of pay for up to 90 days.

During the time that the integrity commissioner was investigating the complaint, the member had engaged in a number of activities that appeared to violate the municipality’s code of conduct. The integrity commissioner viewed this as an aggravating factor. It did not appear that the member understood or appreciated the importance of the code of conduct. The member suggested that her conduct was mitigated because it was induced by conduct of the integrity commissioner and the mayor and that the mayor had called upon her to vote on both motions in issue. The member in this case also suggested a penalty similar to that in Pearce.

The judge rejected the member’s argument that there was an officially induced error. The obligation not to vote when in conflict of interest is absolute. The member had been previously warned not to vote but did so in any event. The member is responsible for their own actions.

The reprimand and declaration of vacancy were upheld, although the member was not disqualified from seeking re-election.

These decisions collectively indicate that the courts are taking seriously their duty to consider a range of penalties for municipal conflict of interest. However, judges recognize that a breach is an important matter, and a serious penalty is often appropriate. It may take several more cases to be able to define the scope and effect of mitigating and aggravating factors more fully.

TAKEAWAYS

If you are a member of council, the cases thus far tell us that:

  • the standard of integrity, transparency, and accountability for members of municipal councils is very high;
  • members must be alert and aware of the possibility of conflicts of interest;
  • if you have any dull doubt at all, you ought to consult the integrity commissioner;
  • failure to consult the integrity commissioner, or failure to follow their recommendations, maybe an aggravating factor as to penalty;
  • violations involving a monetary benefit will be treated most seriously, and in the typical northwestern Ontario municipality, even a modest amount of money involved will be treated very seriously;
  • an intentional violation will be treated more seriously then inadvertence;
  • recklessness may be treated as intent;
  • prior history is relevant;
  • you are responsible for your own decisions, and efforts to pass the blame will not be looked upon favorably;
  • apologizing for your actions is always better than attempting to justify them and may be relevant to penalty;
  • simply declaring it conflict of interest is not sufficient, your obligation extends to not attempting to influence the decision, or participating in the debate; and
  • if you declare a conflict, you want to leave the room to avoid any uncertainty whether you participated in or attempted to influence the decision making.[1]

HOW WEILERS LAW CAN HELP YOU

The proud tradition of Weilers Law in municipal law includes the incorporation of the Town of Geraldton by one of our founders, G.B. (Bernie) Weiler. We add a progressive approach which reflects current developments in the law. Whether your issue arises in Kenora, White River, Thunder Bay, or points in between, we have the expertise to advise you, and to represent you if a dispute arises.

If you need to know more about municipal law, please feel please give Weilers Law a call. We may be the right lawyers for you.

[1] See Leave the Room! – Natasha Danson – Steinecke Maciura LeBlanc https://canliiconnects.org/en/commentaries/87946