Municipal Conflicts of Interest in Nova Scotia

prepared by Cox & Palmer

The rules regulating conflicts of interest for municipal councillors are set out in the Municipal Conflict of Interest Act (the “MCIA”). The framework of the MCIA is clear: if a councillor has a “pecuniary interest” in a matter being considered by council, they are in a conflict of interest, and must disclose their interest and refrain from participating in the discussion and decision-making process. The consequences of a judicial finding that a councillor has breached the MCIA are severe; unless the judge determines that the breach was inadvertent or a bona fide error of judgement, the judge is required to declare the seat of the councillor vacant. As such, it is essential that municipal councillors be familiar with the MCIA and understand best practices to ensure compliance.

What is a “pecuniary interest”?

Although the MCIA does not define “pecuniary interest”, case law has determined that the term connotes something to do with money or finances, i.e., where a councillor stands to be impacted financially. The MCIA lays out three types of pecuniary interests: (1) direct; (2) indirect; and (3) deemed. A direct pecuniary interest arises when a matter before council has a direct financial impact on the councillor as an individual. For example, in Mino v. D’Arcey, a councillor was found to have breached the Ontario equivalent to the MCIA because he did not recuse himself from a council discussion regarding an RFP for the construction of new municipal offices, despite being listed as a sub-contractor on five of the tenders that had been submitted in response to the RFP.  

A councillor has an indirect pecuniary interest where, for example, he or she: (1) is a shareholder in, or a director or senior officer of, a corporation that does not offer shares to the public; (2) has a substantial interest in, or is a director or senior officer of, a corporation that offers shares to the public; or, (3) is a member of a body, whether incorporated or not, that has in interest in a matter in which the council or local board is concerned. Thus, the focus here is whether the councillor has an interest in a corporation or unincorporated body which has an interest in a matter before council.

Finally, a councillor has a deemed pecuniary interest where a matter before council impacts the financial interests of the councillor’s spouse or other family members.

However, the MCIA sets out a number of interests to which its provisions do not apply. These include, among others:  

  1. being a director or senior officer of a corporation incorporated for the purpose of carrying on business for and on behalf of the municipality
  2. having a pecuniary interest in common with the electors in an area or the entirety of the municipality; and
  3. having an interest that is so remote or insignificant that it cannot reasonably be regarded at likely to influence the councillor.

Duties of a Councillor Under the MCIA

Where a councillor is present at a meeting where a matter is being considered in which he or she has pecuniary interest, the councillor has a duty to, as soon as practicable after the commencement of the meeting, disclose his or her interest and the general nature of that interest. In the case of a closed meeting, the councillor must leave the room in which the meeting is being held for the duration of the consideration of the matter. In the case of a meeting open to the public, the councillor may either leave the room or remain in the room in the section set aside for the general public while the matter is being considered. The councillor must refrain from taking part in the consideration or discussion of the matter and from voting on any question relating to the matter, and must refrain from attempting in any way (whether before, during or after the meeting) to influence the decision of council with respect to the matter.  

If the councillor was not present at a meeting where a matter in which he or she had a pecuniary interest was considered, the councillor has a duty to disclose that interest at the next meeting they attend.  

Consequences of Breaching the MCIA

The Attorney General or an elector in the municipality can bring an application to the courts for a determination of whether a councillor has contravened the MCIA. The consequences of breaching the MCIA are harsh: unless the contravention was as a result of “inadvertence or bona fide error in judgment”, the judge must declare the councillor’s seat vacant. If the judge declares the seat vacant, the councillor is not permitted to run in the subsequent election to fill the vacancy. Furthermore, the judge has authority to levy additional sanctions, including disqualifying the councillor from being a member of any council or local board for a period of up to ten years, or, where the contravention results in personal financial gain, requiring the councillor to make restitution. If the contravention was made for the purpose of personal financial gain, the judge must impose a penalty of up to $25,000, or, in default of payment, imprisonment for up to one year.

Best Practices

Municipal councillors must be proactive in ensuring that they do not breach the rules set out in the MCIA. Some best practices include:  

  1. Councillors should review the MCIA regularly to ensure that they are familiar with their obligations under the statute. Councillors should also review the MCIA whenever they suspect they may have a pecuniary interest in a matter that will be put before their council.
  2. Councillors should carefully review agendas of council and committee meetings in advance of the meetings. This ensures that councillors are (by being aware of the matters that will be discussed at a particular meeting) able to declare any potential conflicts at the beginning of the meeting, and that the discussion of matters in which they may have a pecuniary interest does not begin before they have fulfilled their duties under the MCIA.
  3. Even though the MCIA does not require a councillor to leave the room after declaring a conflict in an open meeting, it may be prudent to err on the side of caution and wait outside until discussion on the matter has concluded. This could help to ensure that the councillor will not be viewed as attempting to influence council through his or her continued presence in council chambers. Moreover, this practice also helps to ensure that the councillor will not be tempted to (or accidentally or inadvertently) speak to or enter debate on a point on which he or she has a conflict.   
  4. The MCIA defines a council “meeting” as including informal as well as formal meetings.  This means that a councillor should avoid discussing matters in which he or she has a pecuniary interest with other councillors, even outside of council chambers.