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Deconstructing the New Council Member Conflict of Interest Provisions![](/resources/Pictures/Normans%20Stak%20logo%20CMYK.jpg)
The Local Government (Accountability and Governance) Amendment Act 2015 (the Amendment Act) was assented to and became law on 5 November 2015. The amendments are expected to come into force in the first half of 2016.
The Amendment Act provides for a number of amendments and insertion of new provisions to the Local Government Act 1999 (the LG Act). The Amendment Act also amends the City of Adelaide Act 1998 and repeals the Local Government Act 1934.
From a governance perspective, there are many notable amendments, including:
• the requirement for a council member to notify the CEO of any change or variation to information appearing on the register within one month of the change or variation;
• details such as income sources or employer, membership of a political party, trade union or professional association, and gifts must now be published on a website determined by the CEO;
• a requirement upon councils to develop a policy on managing ‘informal gatherings’; and
• the introduction of offences for the disclosure of information or documents the subject of a confidentiality order.
However, the amendment which has garnered the most attention for the Local Government sector is the wholesale replacement of the current council member conflict of interest provisions with a new, substantially different framework.
Material Conflicts of Interest
The new provisions now divide conflicts of interest into various different categories, namely, material, actual and perceived conflicts of interest.
A council member is considered to have a material conflict of interest if the council member would either gain a benefit or suffer a loss (directly or indirectly) depending on the outcome of a matter considered at the meeting. This benefit or loss may be of a personal or pecuniary nature.
The precise scope of what is a ‘personal interest’ is unclear, as this language has not previously been used in the LG Act.
A council member would also be considered to have a material conflict of interest if, for example, a relative, partner, employer, employee, or a body corporate of which the council member is a director, gains a benefit or suffers a loss depending on the outcome of the consideration of the matter.
However, a council member is taken not to have a material conflict of interest where the benefit or loss would be enjoyed with all or a substantial portion of the ratepayers, electors or residents of the council area. This, for example, allows council members who live in the council area to set council rates.
Another exemption is where a council member did not know or could not reasonably be expected to know of a relative’s interest, providing that the relative is not the council member’s spouse or domestic partner.
The Amendment Act provides that where a council member has a material conflict of interest in a matter, the council member must inform the council of the conflict of interest and leave the meeting room so that he/she cannot view or hear any discussion or voting. Council members are now also no longer permitted to stay in the meeting to ask and answer questions.
Serious penalties are prescribed for a breach of the provision, with a maximum penalty of $15,000 or four years’ imprisonment where the council member votes on the matter.
Actual and Perceived Conflicts of Interest
Separate provisions have also been inserted for ‘actual and perceived’ conflicts of interest. Actual and perceived conflicts of interests are considered to be less serious than material conflicts, but still must be disclosed and documented.
An actual conflict of interest is where there is a conflict between a council member’s interests (whether direct or indirect, personal or pecuniary) and the public interest that might lead to a decision that is contrary to the public interest. For example, a decision that could impact personal relationships, but which does not fall into the more serious ‘material conflicts of interest’ provisions, could be an actual conflict of interest. However, the word ‘actual’ in this part of the provision does in itself create confusion about its intention.
A perceived conflict of interest is where the council member could reasonably be taken, from the perspective of an impartial, fair-minded person, to have a conflict of interest in the matter discussed at a council meeting. This appears to be an attempt to codify the common law concept of ‘reasonable apprehension of bias’. However, the extent to which common law concepts will continue to interact with the LG Act is not yet apparent.
A council member who has an actual or perceived conflict is required to deal with the conflict in a ‘transparent and accountable way’. What is considered ‘transparent and accountable’ has not been defined in the Amendment Act. However, the Amendment Act clearly indicates that non-participation in a council meeting is not the only way to deal with an actual or perceived conflict.
The new terminology may present interpretative challenges while the provisions remain new and relatively untested. There are, in our view, ambiguities in the proposed provisions which may require analysis from Courts, tribunals or public integrity institutions before the proper application of the provisions will be made clear for council members generally.
It is worth noting that the staff conflict of interest provisions have not been amended.
Norman Waterhouse is currently in the course of providing training sessions for council members and staff, and other interested stakeholders, to discuss and analyse the changes to the LG Act. We would be pleased to provide training and advice on any aspect of the LG Act. We look forward to assisting the Local Government sector navigate these extensive changes, both now and in the years to come.
For more specific information on any of the material contained in this article, please contact Sathish Dasan on 8210 1253 or sdasan@normans.com.au.