Casual Legal: When is a relationship a conflict of interest?
By Emma Banfield
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
In a recent decision of the Ontario Superior Court, London District Catholic School Board, Application, 2023 ONSC 1693, the Court considered the fiduciary duty of School Board Trustees to avoid conflicts of interest.
In this case, the rules governing an eight-member School Board recognized the importance of integrity, impartiality, independence, and accountability in local government decision-making. The purpose of these rules was to increase public confidence in local government.
The rules stated if a Trustee had either a direct or indirect financial or economic (“pecuniary”) interest in a matter up for discussion at a meeting, they had to disclose that interest. Further, if a parent, spouse, or child of a Trustee had a direct or indirect pecuniary interest, this had to be disclosed as well. Then the Trustee had to recuse themselves from discussing or voting on the matter, or from influencing the vote in any way.
The issue came to a head when the Board wanted to ratify a collective agreement and approve the School Board budget. Seven of the eight Trustees declared a conflict of interest for various reasons, including that their spouses, children, parents, or siblings taught for or were otherwise employed by the Board. This left only one Trustee, which did not meet quorum. The one remaining member of the Board applied to the Court for relief so the Board could move forward with its mandate to ratify collective agreements and approve the budget. The applicant also asked to be exempted from the general rules so the Board would not have to reapply every time it did not have quorum due to conflicts of interest.
The Court found the people who sit on School Boards are likely to be the types of people who are interested in education, and so the fact so many Trustees had family members who were educators was no surprise. Further, the Court found the goal of the rules was not to eliminate people like this, but rather these were “exactly the ‘type’ of person likely to sit on such boards and bring important perspectives to a school board of trustees.” The applicant argued if the requested relief was not granted, the Board might be hamstrung in its ability to carry out its duties.
The Court applauded the Trustees in disclosing their interests to ensure transparency, saying this was the right approach to take, even though it found the implications of the specific decisions at issue here were too remote to create a conflict of interest.
In Alberta, municipal councillors must comply with the pecuniary interest provisions in the Municipal Government Act, in addition to the common law rules governing conflicts of interest. This decision highlights some of the challenges councillors face in not only identifying situations giving rise to a pecuniary interest and/or a common law conflict of interest but also the steps required to be taken to avoid potentially serious repercussions.
Having said that, the application of the pecuniary interest and common law conflict of interest rules is very fact specific; this decision does not necessarily mean it is permissible for a councillor to participate in discussions and voting if a family member is employed by the municipality. If unsure, we would always recommend getting legal advice before participating.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.