Confusion over conflict of interest disclosure exemption

A “significant proportion” of Councillors may need to exercise caution navigating a legislative change to exemptions applying to conflict of interest disclosures

To apply, or not to apply, that is the question.  There is much confusion among Councillors and Chief Executive Officers over when to apply the exemption to the disclosure obligations for a Councillor who has an interest in a matter no greater than other persons in the local government area or, as per the new provisions, no greater benefit or loss than that of a significant proportion of other persons.   What seemed obvious and logical a few years ago is now proving to be not so in today’s environment, requiring a bit of a second take. 

Under the Local Government Act 2009 (the “Act”), the Councillor conflict of interest provisions do not apply where the Councillor (personally or through a close associate, related party or certain donor) stands to gain a benefit or suffer a loss in relation to a matter that is no greater than the benefit or loss that a significant proportion of persons in the local government area stand to gain or lose^[1].  Most of us would be more familiar with the previous version of the exemption, which was couched in similar terms and applied up until 12 October 2020.  Before then, the disclosure obligations did not apply in relation to matters where the Councillor had no greater personal interest (or in the case of material personal interests, the Councillor stood to gain no greater benefit or suffer no greater loss) in the matter than that of other persons in the local government area.  The only substantive difference between the two versions being the clarifying words “significant proportion”.

So, the existence of the exemption is all well and good, but the burning questions are: when is it applied and can one be certain that they’ve applied it correctly?  Let’s face it, no one wants to inadvertently contravene the legislative provisions and receive a letter from the Office of the Independent Assessor! 

The unfortunate reality is that there is very little guidance on the matter, particularly for those not-so-obvious situations that haven’t been explicitly referred to in any training conducted, or informative guide provided, by the various agencies that have an interest in this subject matter.  In the local government environment where there is an enormous array of varying factual permutations, this can be somewhat disconcerting for a Councillor. 

The relatively newly established Councillor Conduct Tribunal considered the previous version of the exemption in the matter of IA v Councillor, Gympie Regional Council F19/3356.  In that case, the exemption was successfully applied.  At an ordinary meeting the Council was considering the Final Concept Master Plan for “Our Towns – Sustainable Centres Program”, Stage 3 – Tin Can Bay and Cooloola Cove (Our Towns Program).  The Councillor was a resident of Tin Can Bay and owned the sole newsagency in the area.  The Tribunal found that the Councillor did have a personal interest in the improved town centre environment, which was incorporated in the program, as it would enhance the environment of the central business area of Tin Can Bay.  However, the Tribunal found that the overall program of work was general in nature and did not benefit one property or business owner over another and therefore the Councillor had no greater interest in the matter than other persons in the area.  The Tribunal also noted a number of things, including the proposal was officer-developed and was brought to the meeting in accordance with normal process, the Councillor did not propose the works, nor did the Councillor have any involvement in the community’s consideration of the proposal or discuss the proposal with anyone prior to the Council meeting.  Seemingly despite the exemption, the Tribunal further stated that although it considered that the Councillor did have a personal interest in the matter, it was “not to a level or of a nature that would create a conflict of interest situation”. 

More recently in the matter of IA v Councillor Dane Swalling, Cloncurry Shire Council F19/8353, the Tribunal found that Cr Swalling, as a local business owner, potentially affected by the proposed revised procurement policy, did have an interest in Council’s consideration of the revised policy greater than that of other persons in the local area.  The Tribunal rejected the Respondent’s submission that he had no greater interest in the outcome of the vote than any other business owner and that “his interest arose simply from being a member of the large class of local business owners in Cloncurry”.   The Tribunal accordingly formed the view that the exemption did not apply to exclude the Respondent’s conflict of interest. 

In the absence of all the evidence and the full and detailed reasons for the Tribunal’s decisions in the above matters (decision summaries only are publicly available), it is difficult to gain any general concrete guidance of much utility to the vast array of circumstances that Councillors face on a daily basis.  That said, there are two evidently arguable differences between the two cases which may shed some guiding light:

1. the nature of the matters considered by Council; and
2. the nature of the benefits to be derived by the subject Councillors from the matters considered.

In the Gympie case, the matter considered and the related benefit, was general in nature and applied to the community as a whole, not just local business owners in the town centre of which the Councillor was one.

In Swalling, the matter considered, being the revised procurement policy and, in particular, the local supplier advantage provisions, related to local business suppliers specifically and not the community as a whole.  Further, any potential benefit (or detriment) to be derived from Council’s decision on the matter by the subject Councillor, as a local business supplier, would be more direct.  In contrast, any benefit to the community as a whole through the local supplier advantage provisions of the procurement policy would be of an indirect nature only.     

So, where does that leave us?  Nowhere certain, that’s for sure.  The reason is this: the test isn’t, and never has been, whether the benefit or detriment will be shared by the community as a whole, as opposed to a single Councillor plus a few more people – the test is whether the benefit or detriment to be derived from a matter is shared by a significant proportion of persons in the local government area.  The Gympie decision gives us no guidance or hint on that and the Swalling decision simply dismisses the relevance of the large class of local business owners of which the subject Councillor was a member.

While the Tribunal is yet to consider the exemption in its current form, it is still unclear as to what the Tribunal will consider to be a ”significant proportion” and when the Tribunal will consider it appropriate to apply the exemption.  As with all matters concerning potential conflicts of interest, the unique facts and circumstances of each and every case must be carefully considered and assessed against the provisions, as it is rare that any two cases are exactly the same. 

If you need assistance in applying the legislative provisions to your particular situation, please email Tim Fynes-Clinton or Kirsty Ling or call us now on (07) 3243 0000. 

[1] Section 150EF(2A) of the Act