COURT FILE NO.: CV-19-073
DATE: 2020/02/05
COURT OF ONTARIO,
SUPERIOR COURT OF JUSTICE
In the matter of the Municipal Conflict of Interest Act, RSO 1990, c. M.50, as amended
RE: TOWN OF LAURENTIAN HILLS, Applicant
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: J. Paul R. Cassan, for the Town of Laurentian Hills
David Winfield, Ratepayer, Objector
HEARD: January 23rd, 2020
DECISION and reasons
[1] This is an application pursuant to section 7 (2) of the Municipal Conflict of Interest Act.[^1] That is a provision of the Act that permits a judge under certain circumstances to authorize a municipal council to vote on matters in which the members of the council would otherwise be disqualified. Without an exemption, each member of the council must declare a conflict and withdraw from decision making in matters where they might have a direct or indirect financial interest.
[2] The order is sought because every member of the council either receives remuneration or is closely related to someone who receives remuneration from the town’s major employer. There is a reasonable prospect that whenever a matter relating to the company comes before the council, decision making would be paralyzed, or the members of council might face sanctions and penalties if they proceed with a vote. If the entire council had to recuse itself, there would be no quorum and the duly elected council could not function in relation to those matters.
[3] Although the Act permits a section 7 (2) application to be brought without notice, when this matter first came before the court, Justice James directed the town to give notice to the electors. The respondent is one such elector and he opposes the application which he likens to a blank cheque. He questions whether an order can or should be made in advance without knowing the precise issue and the form of the question that the council will be called upon to consider.
[4] To dispose of the application, I must determine whether I have the jurisdiction to grant the requested order, whether it is appropriate to do so and what terms should be imposed.
Background
[5] The Town of Laurentian Hills is a small municipality consisting of the village of Chalk River and the former townships of Rolph, Buchanan, Wylie and McKay. The council consists of four councillors and a mayor. The adjoining municipality is the Town of Deep River.
[6] Chalk River Laboratories (“CRL”) have been a centrepiece of the Canadian nuclear industry since the second world war and a major source of employment in the region. There have been significant changes at CRL in the past two decades including changes to the role and structure of Atomic Energy Canada Limited (“AECL”). AECL is a federal crown corporation and the owner of the site but it has divested itself of direct responsibility for operations. The primary presence at the site is Canadian Nuclear Industries (“CNL”).
[7] The Canadian nuclear industry and the operation, cleanup and redevelopment of nuclear sites and research facilities involves a complex and changing web of government ownership, private sector investment, nuclear regulation, environmental issues and numerous legal entities. There are environmental, regulatory, security, development and economic issues. Some of these issues require input, co-operation or decisions by surrounding municipalities, particularly Laurentian Hills and Deep River and in some cases require tri-partite agreements between those towns and CNL.
[8] I mention this by way of background because the respondent took issue with the accuracy of the affidavits describing the relationship between AECL and CNL and whether CNL was a subsidiary or an independent privately owned company. While it appears from its web site that CNL was originally spun off from AECL and is now owned by a private sector consortium, this is entirely insignificant for what I have to decide and not a fact that I need to determine. The particulars of AECL restructuring and the precise role and ownership structure of CNL is irrelevant.
[9] What matters for purposes of the motion is the significant presence of CNL in the community and the fact that every member of the current council has some degree of economic link with that corporation. CNL is a major employer and is deeply enmeshed in many municipal activities. There are agreements in place with CNL for the provision of certain municipal services such as water and fire services. There are co-operation agreements having to do with fire and emergency services and nuclear preparedness. Those agreements have funding components and must be renegotiated or renewed from time to time.
[10] A significant issue in the community is a proposal to build a Near Surface Disposal Facility (“NSDF”) at the CRL site. As the manager of the site, CNL is one of the proponents of the NSDF. In that capacity, CNL has previously asked this council as well as the councils of Deep River and other surrounding municipalities to write letters of support for the initiative. While this was a resolution of the council with no legal significance insofar as it was neither an appropriation of public funds nor a legislative act, it was the trigger for a previous legal proceeding.
[11] When the town was asked by CNL to declare its support for the NSDF, the council considered the matter and passed a unanimous resolution to that effect. At the time, the members of the council did not perceive this as a financial issue and none of them declared a conflict or withdrew from the vote.
[12] When this came to the attention of Mr. Winfield, he believed that Councillor Hoyle should not have voted on the matter because he is a current employee of CNL. Mr. Winfield may not have realized that under the legislation, councillors who have spouses or children that are employees are in the same situation. In any event, he launched an application seeking to have a judicial finding that Councillor Hoyle should not have voted and was in a conflict of interest.
[13] That application came on for a hearing in May of 2019. It was heard by Justice James and dismissed due to a gap in the evidence. There was no evidence before the court as to whether the NSDF would financially benefit CNL or whether CNL was simply acting as an agent for AECL or others in gauging the level of municipal support. In the view of the court, the evidence was insufficient to demonstrate that CNL itself had a pecuniary interest in the NSDF or in having the town council pass a resolution in support of the NSDF. As such, the court did not decide if Councillor Hoyle’s employment with CNL gave him an interest that was so remote or minimal to fit under one of the exceptions.[^2]
[14] This experience appears to be one of the reasons for the current application. Although that particular application failed, it demonstrates the potential consequence of misjudging what is and is not a financial interest. “Pecuniary interest” is not a defined term in the legislation. Given the challenge to the previous vote, the prudent course of action would be for the council members to recuse themselves if they are in any doubt but that may be unworkable. The council may have to take further decisions regarding the NSDF but it will certainly have to consider other matters involving CNL. According to the affidavit evidence, it was the advice of the Integrity Commissioner to bring this application.
[15] The evidence also discloses the following matters that are anticipated to require the attention of the council. The municipal fire department responds to emergencies at CNL under certain circumstances and receives funding from CNL pursuant to a mutual-aid agreement. That agreement must be renewed from time to time. The town also participates on the Laurentian Hills, Deep River Nuclear Preparedness Committee. This committee is chaired by the mayor and the deputy mayor is a committee member. The municipality provides water services to CNL and collects a fee. CNL has certain municipal licences it must renew. The town receives payments in lieu of taxes for the federally owned lands where CNL operates.
[16] In September, after this application had been commenced but before the hearing, the council was called upon to approve a tri-partite funding agreement between the town, Deep River and CNL. That agreement expired at the end of September and had to be renewed. In that case, on consent, Justice James granted an order permitting the council to proceed with the matter but this or similar issues may arise again within the life of the council. CNL is a significant actor in the municipality, a recipient or provider of services and issues involving CNL must be regularly considered by the Town council or its committees.
The Legislative Framework
[17] Although the Act is not new, there have been significant amendments to this Act and related legislation over the past three years. Some of those amendments only came into force last year. As such, there is little jurisprudence under the current wording of the statute. It is fair to say that the legislation seeks to hold municipalities to high standards of integrity and transparency. The amendments provide for the appointment and assistance of Integrity Commissioners and also provides for more nuanced judicial involvement than had previously been the case.
[18] A key provision which creates a real problem in the context of this council is the definition of “indirect pecuniary interest”. The Act provides that a member of the council has an indirect pecuniary interest in a matter before council if the member is in the employment of a person or body that has a pecuniary interest in the matter. It also provides that the member has the same pecuniary interest as a parent, child or spouse of the member. Consequently, if CNL has a pecuniary interest in a matter before council then any member of council who is an employee or closely related to an employee has an indirect interest in the matter and may not participate or influence the decision.
[19] On the current council only one of the councillors is a current employee of CNL but every one of the other councillors and the mayor have children or children-in-law who work there. All but one of those councillors are also CNL pensioners. If CNL has a pecuniary interest in a matter before council, every member is disqualified and the council cannot function.
[20] This is not as simple as it may seem. Just because CNL might be involved in a decision does not necessarily mean that CNL has a financial interest in the outcome. A simple agreement to co-operate on emergency preparedness, for example, may or may not involve a financial interest. An agreement by CNL to sponsor a municipal activity would involve expenditure of money by CNL but not necessarily any measurable financial benefit to the sponsor. Negotiated agreements involving financial contributions to the municipal budget or funding for fire services almost certainly would trigger the legislation.
[21] To complicate the matter, there are exceptions. The most relevant is an exception for a pecuniary interest of the member that is so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the member. Members of the council must therefore make two calculations when dealing with a CNL matter. Firstly, does CNL have a financial interest in this matter? Secondly, if it does, is the member’s indirect financial interest (by reason of being an employee or related to an employee) so remote or insignificant that it cannot reasonably be regarded as likely to influence the member?
[22] Although legislation now provides for the appointment of integrity commissioners and members of council may obtain advice from that source, integrity commissioners do not make rulings that insulate a member from a complaint.[^3] The consequence of miscalculating can be significant. Section 8 of the Act provides that an elector or a person acting in the public interest, amongst others, may apply to a judge following a decision of the council to determine if a member has contravened the Act.
[23] A finding by a judge does not automatically result in a penalty. Indeed, one of the amendments gives a judge greater discretion and adds considerations, such as the advice of the Integrity Commissioner, which the judge must take into account. Nevertheless, a successful complaint may result in reprimand, suspension, removal from office, disqualification from holding office in future and a financial penalty.[^4]
[24] Even if a member is not removed from office or subjected to a penalty, an application to a judge by a ratepayer or elector may result in a time consuming legal proceeding and damage to public reputation. The most prudent approach would be err on the side of caution and to declare a conflict if in doubt. The problem is that too timid an approach in this situation might paralyze the council
[25] The Act recognizes the impact this might have on a council in some circumstances and although a quorum necessary for the conduct of business is normally a majority of the council[^5], in the case of recusals for pecuniary conflict of interest, the council may legally consider a matter as long as it has a quorum of at least two members.[^6]
[26] Section 7 (2) provides for the situation which might arise with this council in matters relating to CNL. If there is not quorum of at least two councillors who would not be disqualified then the council may apply to a judge for an exemption. The legislation permits the judge to authorize the council to proceed as if ss. 5, 5.1 or 5.2 do not apply. Section 7 reads as follows:
Remedy for Lack of Quorum
Quorum deemed constituted
7 (1) Where the number of members who, by reason of the provisions of this Act, are disabled from participating in a meeting is such that at that meeting the remaining members are not of sufficient number to constitute a quorum, then, despite any other general or special Act, the remaining number of members shall be deemed to constitute a quorum, provided such number is not less than two. R.S.O. 1990, c. M.50, s. 7 (1).
Application to judge
(2) Where in the circumstances mentioned in subsection (1), the remaining number of members who are not disabled from participating in the meeting is less than two, the council or local board may apply to a judge without notice for an order authorizing the council or local board, as the case may be, to give consideration to, discuss and vote on the matter out of which the interest arises. R.S.O. 1990, c. M.50, s. 7 (2).
Power of judge to declare s. 5, 5.1 or 5.2 not to apply
(3) The judge may, on an application brought under subsection (2), by order, declare that section 5, 5.1 or 5.2 does not apply to the council or local board, as the case may be, in respect of the matter in relation to which the application is brought, and the council or local board thereupon may give consideration to, discuss and vote on the matter in the same manner as though none of the members had any interest therein, subject only to such conditions and directions as the judge may consider appropriate and so order. R.S.O. 1990, c. M.50, s. 7 (3); 2017, c. 10, Sched. 3, s. 6.
Issue and Analysis
[27] The issue raised by the respondent is whether these provisions allow the court to make an order before a matter has come before the council and a conflict has been declared. Subsection (1) uses the phrase “at that meeting”. Subsection (2) speaks of “the meeting” and “the matter”. Subsection (3) speaks of “the matter in respect of which the application is brought”. Certainly, a rigid and literal reading of these provisions would be that in order to trigger the remedy, a matter must first come before the council and all of the councillors declare a conflict before they could bring an application. The applicant argues that such an interpretation would be unduly cumbersome. For his part, Mr. Winfield argues that the legislation is designed to require consideration of issues on a case by case basis and does not permit the court to grant blanket exemptions.
[28] The purpose of this section is to permit the council to function when it could otherwise not do so because there are fewer than two councillors who are not disqualified. The remedy is not automatic and may be made on terms. No doubt a proper consideration for the judge is the importance of the issue and the significance of the conflict but essentially this is a remedy of necessity and not an exemption or a declaration that the conflict of interest is unimportant. An analogous provision may be found in Ethical Principles for Judges where notwithstanding an apparent conflict of interest, disqualification is not appropriate if “no other tribunal can be constituted to deal with the case, or because of urgent circumstances, failure to act could lead to a failure of justice”[^7] These provisions of the Act fall under the heading “remedy for lack of quorum”.
[29] It follows that the court must be satisfied an order is necessary to avoid the loss of quorum and the resulting paralysis of decision making. Secondly, the judge must know what the issue is, whether the conflict is actual or simply apparent, the importance of the issue to the functioning of the municipality. There must be some precision to the request. It will be insufficient to simply argue that an issue may arise and to ask for a blanket exemption for anything involving CNL.
[30] It does not follow that an application may only be made after the fact. Where there is a recurring matter that will come before the council or if there are matters that can be reasonably foreseen to require the attention of the council, it is consistent with the purpose of the Act and of the section to obtain approval from the court either before or after the event. In this case the council is acting on the advice of the Integrity Commissioner who has advised that an exemption should be sought.
[31] I agree that the legislature did not intend that judges could simply exempt the town from the provisions of the Act because of hypothetical difficulties. It would strain the language of the section to simply grant an exemption so that the issue of conflict need not be considered by the members of council. On the other hand, I agree that the section should be given practical application and it is reasonable to grant an order for recurring issues or issues identified with sufficient precision. The alternative of first placing a matter on the council agenda, declaring conflicts and then coming to court each time an issue arises is neither desirable nor required.
[32] I am prepared to grant an order in relation to specific issues that the council can identify that will come before it and which will inevitably result in declarations of conflict and loss of quorum. For example, the council knows it is in support of the NSDF and will be called upon to renew that support or to take active steps to facilitate the development. The council should also be able to prepare a list of agreements with CNL or involving CNL that will expire and will have to be renewed or renegotiated. Similarly, there are joint committees and working groups which make recommendations or decisions that may have impact on municipal finances and will have to be approved. Providing these can be specifically identified and listed in a schedule to the formal order, it will be appropriate to provide the requested exemption without returning to court on each separate occasion.
[33] On the other hand, I cannot simply grant an exemption for all matters involving CNL. Any matters that are only hypothetical or currently unidentified cannot possibly come within the definition of authority to “discuss and vote on the matter out of which the interest arises.” When and if such matters are identified and it appears all members of the council are disqualified, an application may be made. While it is certainly within the discretion of the judge hearing the matter to require notice, as was done in this case, the statute specifically provides that the application may be brought without notice.
[34] There are many matters that require judicial oversight where legislation permits the matter to proceed ex parte. Just because notice is not required, however, and even if approval is routinely given, it does not mean that the oversight is meaningless or can simply be avoided because it is too much trouble.
Conclusion and Terms
[35] In summary, I am granting the application for the life of this current council in relation to matters that are sufficiently identified, are presently known and which will trigger declarations of conflict due to potential pecuniary interest. The applicant may provide a schedule of such matters when submitting a draft order. The order will not apply to matters that have not yet been foreseen and have not yet arisen and are not listed in the schedule.
[36] In addition, because the court may impose terms on such orders, it seems important to ensure obligations of transparency and disclosure consistent with the purposes of the Act. It is important that the electors can assess the manner in which the council operates and hold it to account when it is time to cast their ballots.
[37] Each of the councillors is to file and update a declaration of their interest in CNL matters pursuant to section 5.1 of the Act. A copy of this order and the schedule of matters to be considered will be placed in the municipal conflict register maintained pursuant to section 6.1 of the Act. Finally, a copy of the order shall be posted at the municipal office and a copy of the order will be made available on the town’s web site.
[38] This is not a case for costs. The town was required to bring the application and although Mr. Winfield was in some cases focused on issues that were not important, his main argument that a blanket exemption could not be given was correct. This is a matter of public interest and costs against the respondent are not appropriate.
Mr. Justice C. MacLeod
Date: February 5, 2020
COURT FILE NO.: CV-19-073
DATE: 2020/02/05
ONTARIO
SUPERIOR COURT OF JUSTICE
In the matter of the Municipal Conflict of Interest Act, RSO 1990, c. M.50, as amended
RE: TOWN OF LAURENTIAN HILLS, Applicant
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: J. Paul R. Cassan, for the Town of Laurentian Hills
David Winfield, Ratepayer, Objector
DECISION AND REASONS
Mr. Justice Calum MacLeod
Released: February 5, 2020
[^1]: RSO 1990, c. M.50, as amended. Hereinafter “the Act” [^2]: See 2019 ONSC 4772 [^3]: See s. 223.3 of the Municipal Act, 2001, S.O. 2001, c. 25, as amended [^4]: S. 9 of the Act [^5]: S. 237, Municipal Act, 2001, SO 2001, c. 25 [^6]: S. 7 (1) of the Act. See Davidson v. Christopher (SCJ), 2017 ONSC 4047, Mondoux v. Tuchenhagen, 2011 ONSC 5398 (Div. Ct.) and Cooper v. Wiancko, 2018 ONSC 342 (SCJ) [^7]: Canadian Judicial Council, Ethical Principles for Judges, “Impartiality”, Principle E: Conflicts of Interest, para. 3