PETER D. LAUWERS JANUARY 16, 2015 A Primer on the Municipal Conflict of Interest Act (“MCIA”) For School Board Trustees

He that is entrusted with the interest of others, cannot be allowed to make the business an object of interest to himself; because from the frailty of nature, one who has the power, will be too readily seized with the inclination to use the opportunity for serving his own interest at the expense of those for whom he is entrusted. York Building Co. v. Mackenzie, (1705) 3 E.R

A Mantra Do the right thing For the right reason In the right way At the right time With the right words 3

Presentation Overview 1. Purpose of the MCIA 2. Detailed Overview of the MCIA 3. The Prosecution 4. Some Common Questions 4

Purpose of the MCIA “The obvious purpose of the Act is to prohibit members of councils and local boards from engaging in matters in which they have a personal economic interest.” (Re Moll and Fisher). “Legislation of this nature must be construed broadly and in a manner consistent with its purpose” (Re Moll and Fisher) 5

Six Propositions 1. Elected members are to be held to the highest standard of conduct in their activities as board members 2. The mere existence of a member’s pecuniary/financial interest in a matter triggers the trustee’s obligations under the MCIA (no matter how small the financial interest) 3. If a financial interest exists, the court does not consider the outcome of a vote of the board in determining whether the MCIA has been breached 4. If a financial interest exists, the member must observe the restrictions in the MCIA on participating in discussions and voting 6

Six Propositions 5. The standard for assessing whether the member has contravened the MCIA is objective – the member’s subjective belief in his/her impartiality is not good enough 6. Motivation is only relevant in determining whether the penalty should be reduced based on the member’s good faith inadvertence or error in judgment 7

Overview of MCIA: The Obligation Section 5 s. 5(1) Where a member, either on his or her own behalf or while acting for, by, with or through another, has any pecuniary interest, direct or indirect, in any matter and is present at a meeting of the council or local board at which the matter is the subject of consideration, the member, (a)shall, prior to any consideration of the matter at the meeting, disclose the interest and the general nature thereof; (b)shall not take part in the discussion of, or vote on any question in respect of the matter; and (c)shall not attempt in any way whether before, during or after the meeting to influence the voting on any such question. 8

Overview of MCIA: What is a “Pecuniary Interest, Direct or Indirect”? “Pecuniary interest”  Monetary, economic or financial interest  Applies if overall wealth is increased  Avoiding losses as influential as making gains “What constitutes a pecuniary interest is not to be narrowly confined or limited to clear and very significant pecuniary interests” (Orangeville [Town] v. Dufferin [County]). 9

Overview of MCIA: What is a “Pecuniary Interest, Direct or Indirect”? Direct vs. indirect interest S. 2 For the purposes of this Act, a member has an indirect pecuniary interest in any matter in which the council or local board, as the case may be, is concerned, if, (a)the member or his or her nominee, (i) is a shareholder in, or a director or senior officer of, a corporation that does not offer its securities to the public, (ii) has a controlling interest in or is a director or senior officer of, a corporation that offers its securities to the public, or (iii) is a member of a body that has a pecuniary interest in the matter; or (b)the member is a partner of a person or is in the employment of a person or body that has a pecuniary interest in the matter. 10

Overview of MCIA: What is a “Pecuniary Interest, Direct or Indirect”? S. 3 For the purposes of this Act, the pecuniary interest, direct or indirect, of a parent or the spouse or any child of the member shall, if known to the member, be deemed to be also the pecuniary interest of the member. 11

Overview of MCIA: The Obligation 1. The trustee must disclose  The existence of an interest  What that interest is in a general way 2. Trustee is not entitled to  Vote  Take part, influence, speak to anyone about the matter before, during or after the meeting  “Taking part” interpreted broadly  Prudent to disclose interest at committee meetings as well as board meetings (Jaffary v. Greaves)  Exclusion applies even when meeting is about fining the excluded member for misconduct (Madger v. Ford) 12

Overview of MCIA: The Obligation 13 s. 5(2) Where the meeting referred to in subsection (1) is not open to the public, in addition to complying with the requirements of that subsection, the member shall forthwith leave the meeting or the part of the meeting during which the matter is under consideration Private in-camera meetings: trustee must leave because she/he is not entitled to the private information revealed there

Overview of MCIA: Procedural Requirements s. 6(1) Every declaration of interest and the general nature thereof made under section 5 shall, where the meeting is open to the public, be recorded in the minutes of the meeting by the clerk of the municipality or secretary of the committee or local board, as the case may be. (2) Every declaration of interest made under section 5, but not the general nature of that interest, shall, where the meeting is not open to the public, be recorded in the minutes of the next meeting that is open to the public. 14

Overview of MCIA: Procedural Requirements Quorum: Under s. 7, where quorum could be endangered by reason of declaration of conflict, “floating quorum” created As people declare conflicts and leave, the quorum requirement decreases Where attendance reaches less than two, board may apply to court to allow full board to vote (Re Township of Tuckersmith) 15

Overview of MCIA: Timing Interest must be disclosed “prior to any consideration of the matter at the meeting” (s. 5) Should be disclosed as soon as possible (Graham v. McCallion) Obligation to disclose renewed every time the issue arises at a board or committee meeting 16

Overview of MCIA: Exceptions to the Obligation to Declare an Interest S. 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. 17

Overview of MCIA: Exceptions to the Obligation to Declare an Interest The test under s. 4(k) is objective: “would a reasonable person think that a trustee has a conflict in these circumstances?” Courts have confirmed subjective belief is irrelevant (Greene v. Borins; Baillargeon v. Carroll) The s. 4(k) exception can apply to an indirect interest (Whiteley v. Schnurr) Must take into account all the relevant circumstances (Baillargeon v. Carroll) 18

Overview of MCIA: The Validity of the Decision of the Board s. 12 The failure of any person to comply with subsection 5(1), (2) or (3) does not of itself invalidate any proceedings in respect of any such matter but the proceedings in respect of such matter are voidable at the instance of the municipality or of the local board, as the case may be, before the expiration of two years from the date of the passing of the by-law or resolution authorizing such matter unless to make void the proceedings would adversely affect the rights of any person acquired under or by virtue of the proceedings who acted in good faith and without actual notice of the failure to comply with subsection 5(1), (2) or (3). 19

Overview of MCIA: Some Procedural Questions 1. What must be disclosed by a trustee? 2. What is the appropriate form of disclosure? 3. When must the interest be disclosed? 4. What procedure should the Chair adopt after disclosure? 5. If the matter comes before a meeting of a committee and then before a meeting of the board, is disclosure at the committee meeting sufficient? 20

Overview of MCIA: Some Procedural Questions 6. If a matter comes before a meeting only in the context of approval and signing of minutes, must disclosure be made? 7. If the matter comes before a meeting of the committee of which the trustee is not a member, must the trustee make a declaration? 8. What must be recorded in the minutes? 9. At what place in the minutes should the disclosure be recorded? 21

The Prosecution Under s. 8, a judge determines whether a member has contravened s. 5 Application usually launched by an elector Under s. 9, an individual elector must bring a challenge within 6 weeks of obtaining knowledge of contravention; application may be brought within 6 years of alleged contravention Limitation period will be revived if the information is communicated to another elector, who can then bring the application (Re Smith and Adam) 22

The Prosecution: Penalty s. 10(1) Subject to subsection (2), where the judge determines that a member or a former member while he was a member has contravened subsection 5(1), (2) or (3), the judge, (a) shall, in the case of a member, declare the seat of the member vacant; and (b) may disqualify the member or former member from being a member during a period thereafter of not more than seven years; and (c) may, where the contravention has resulted in personal financial gain, require the member or former member to make restitution to the party suffering the loss, or, where such party is not readily ascertainable, to the municipality or local board of which he is a member or former member. (3) The authority to disqualify a member in subsection (1) does not include the right to suspend a member. 23

24 Cost of prosecution: Borne by elector who brings application May be recoverable if elector is successful, but this remedy is discretionary and not automatic (Magder v. Ford) The Prosecution: Penalty

Judge has discretion to mitigate the penalty based on inadvertence or error in judgement: s. 10 (2) Where the judge determines that a member or a former member while he or she was a member has contravened subsection 5(1), (2) or (3), if the judge finds that the contravention was committed through inadvertence or by reason of an error in judgment, the member is not subject to having his or her seat declared vacant and the member or former member is not subject to being disqualified as a member, as provided by subsection (1). 25

The Prosecution: Penalty Inadvertence: failure to observe or pay attention, inattention, oversight. The opposite of deliberate action (Benn v. Lozinski) If member turns his or her mind to whether a conflict exists, such as by seeking legal advice, subsequent conduct will not be considered inadvertent 26

27 Wilful blindness: the defence of inadvertence applies to an oversight that was not reckless or wilfully blind (Baillargeon v. Carroll) Not seeking legal advice constitutes deliberate wilful blindness (Begin v. McInnis) The Prosecution: Penalty

Error in judgment: must be made in “good faith” (Sheehan v. Harte) Motive is not relevant on the issue of conflict but is relevant to issue of error in judgment – error must be made without an improper motive (Graham v. McCallion) To rely on inadvertence or wilful blindness, member must prove:  Honest belief the MCIA did not apply  This belief was not arbitrary  Reasonable steps to inquire into her/his legal obligations  See Magder v. Ford 28

The Prosecution: Penalty Role of legal advice: Legal advice is vitally important in determining whether a member made a bona fide error in judgment If an individual seeks to rely on an error of law, “good faith” requires he or she make an inquiry rather than relying on his/her own interpretation (Madger v. Ford) Reliance on advice of a solicitor may provide a defence (Benn v. Lozinski) 29

The Prosecution: Insurance Under s. 14, a board can purchase a limited form of of insurance to cover legal expenses and costs of defending a trustee under the MCIA Insurance is only payable if trustee successfully defends the claim 30

The View of the Courts

The Prosecution: The View of the Courts No distinctions between elementary and secondary bargaining, involvement of different committees, unions, contracts, etc. (Re Moll and Fisher) A member of the Ontario Teachers’ Federation has an indirect pecuniary interest in a contract between a board and its teachers (Benn v. Lozinski)  Education Quality Improvement Act 1997 now prohibits employees of a school board from serving as trustees in another district 32

33 A trustee with a conflict of interest respecting teacher salaries (i.e. spouse is a teacher) may not vote on the entire budget (Graham v. McCallion) Some suggest a procedural solution: the budget items should be divided and the trustee with a conflict should refrain from voting on teacher salaries Baillargeon v. Carroll shows that a trustee’s conflict may extend beyond teacher salaries to include matters such as program cuts and budget deficits The Prosecution: The View of the Courts

Some Common Questions Upon whom does the onus fall to declare a conflict of interest? 2. Is there an obligation on trustees to take any steps if they are aware of a conflict involving another trustee? 3. A trustee is a contractor and he enters a bid on a contract with the board that is open for public tender. He meets with the superintendent of business and tries to persuade him that his firm is the best one for carrying out the contract. Is this a prohibited attempt to influence the vote? 4. If a trustee whose spouse is a teacher declares a conflict of interest in negotiations and the budget for salaries, is he or she prohibited from voting on the rest of the budget?

35 5. A trustee is a member of OPSEU through his employment as a community college teacher. OPSEU units unrelated to the trustee’s unit are engaged in negotiations with the board. Is there a conflict if the trustee is involved in negotiations or votes on the budget? 6. You are a trustee in Windsor. Your daughter gets married, moves up around North Bay, and becomes a teacher. Are you in a conflict on teacher salaries? 7. Say a trustee’s spouse is an employee of the board. Would the trustee be in conflict to chair the finance committee? Would that be a difficult position to hold? 8. Can class size give rise to a conflict? Some Common Questions

36 9. A trustee’s wife is expecting a baby and plans to leave the teaching profession when the child is born. Is he in conflict to go on negotiating for teacher salary knowing that she may come back but her intention is to not return to work? 10. A trustee may declare an interest during negotiations. After the contract is in place, there is a grievance pertaining to the contract. Do those trustees who have declared an interest have the right to participate in the discussions on the grievances and/or the arbitrations? 11. Can a trustee whose sibling is a teacher vote on teacher salaries? 12. Should trustees look to their board solicitor or fellow trustees for an opinion as to whether or not they might have a conflict? Some Common Questions

Final Points: Six Propositions 1. Elected members are to be held to the highest standard of conduct in their activities as board members 2. The mere existence of a member’s pecuniary/financial interest in a matter triggers the trustee’s obligations under the MCIA (no matter how small the financial interest) 3. If a financial interest exists, the court does not consider the outcome of a vote of the board in determining whether the MCIA has been breached 4. If a financial interest exists, the member must observe the restrictions in the MCIA on participating in discussions and voting 5. The standard for assessing whether the member has contravened the MCIA is objective – the member’s subjective belief in his/her impartiality is not good enough 6. Motivation is only relevant in determining whether the penalty should be reduced based on the member’s good faith inadvertence or error in judgment 37

Mantra Do the right thing For the right reason In the right way At the right time With the right words 38

Reflections on the Dialectic 39 Legislative and structural change in the system of education is often driven by the actions of school boards and the reactions of the Province Be careful You hold the system in your hands