Part 4: the non-financial interests of Councillors Nelson, Wilson, and Urquhart
4.1
No statute prescribes how to manage non-financial conflicts of interest. Individual elected members must decide whether an interest creates a risk of bias – or the appearance of bias – and decide whether it is appropriate to participate in a decision. In general, elected members who participate when they have a non-financial interest do not risk any personal liability. However, they can still create a risk that the Council’s decision will be challenged in court on the grounds of bias.
4.2
In this Part we explain the type of interest that Councillors Urquhart, Nelson, and Wilson had and the reasons for the decisions they each made, and set out our comments.
Councillor Nelson
4.3
Councillor Nelson’s sister-in-law owns land within the area that has been designated. Because of this link, he has declared an interest and did not take part in the Council’s decisions on two occasions:
- On 15 November 2012, when the operations committee of the Council decided on the preferred location of the land for the second urban bridge; and
- On 22 May 2014, when the Council formally decided to accept the commissioners’ recommendation and designate that land.
4.4
He has participated in all other decisions on this issue.
4.5
Councillor Nelson told us that he drew a distinction between:
- “process” decisions – for example, about seeking submissions and obtaining the community’s views – when he considered his role was to support the process; and
- “substantive” decisions, when the Council was actually taking firm decisions on the location of the route and the land that would be affected.
4.6
Councillor Nelson told us that he understood that there was a risk that he could be regarded as having a conflict of interest if he took part in the discussion and voted at the 22 May meeting. This was because a relative could be financially affected by the Council’s decision to designate the land for the second urban bridge – the designation would restrict what she could do with her land. He noted that, although he did not socialise with his sister-in-law, he felt he should err on the side of caution.
4.7
He declared a conflict of interest at the May 2014 meeting because the Council was making a substantive decision that would determine whether the Project would proceed using that route. He regarded the previous decisions he had participated in as process decisions.
Councillor Wilson
4.8
Councillor Wilson’s brother owns land within the area that has now been designated. Councillor Wilson told us he accepted that there was a need for a second bridge but that he opposed the proposed route. He was not convinced it was the right traffic solution. He also felt that the New Zealand Transport Agency should fund the bridge, not the Council.
4.9
Councillor Wilson told us that he was financially independent of his brother and that they moved in independent social circles. He told us that, although he was aware there could be a perception of a conflict of interest, he decided to participate in the discussion because he had been elected to represent all ratepayers of the district, many of whom had contacted him agreeing with his stance on the bridge. He felt that he owed it to the ratepayers who had encouraged him to participate.
Councillor Urquhart
4.10
Councillor Urquhart had two potential non-financial conflicts of interests to consider:
- His son owns property adjacent to the designated area, but not within it.
- He had been an active member of the Bridge Action Group campaigning against the proposed route. The bridge issue was a feature of his election campaign, and he has made some strong public statements on it.
4.11
Councillor Urquhart told us that his election campaign was based on not supporting the bridge decision and seeking more transparency from the Council as a whole. He did not object to a second bridge. However, he had concerns about the location and who should pay for it. Councillor Urquhart told us that he believed that he approached the decision about the bridge with an open mind. He also felt that his main responsibility was to consider the views of the community.
4.12
Councillor Urquhart told us that he had declared a conflict of interest at the meeting on 28 November 2013 because the chief executive advised him that he should, based on the legal advice the chief executive had received by telephone about the risk of perceived predetermination. Councillor Urquhart did not have time to seek his own advice and so followed the chief executive’s advice.
4.13
As set out in Part 2, Councillor Urquhart later sought his own advice by talking with two other lawyers. He told us that both lawyers thought the Council’s advice was not sound and that he was free to participate. He also wrote to us. He did not find our response helpful, because we did not explicitly say whether we agreed with the Council’s advice.
4.14
Councillor Urquhart knew that he had to make up his own mind about whether to participate. He decided that he did not have a conflict of interest that would prevent him from participating in the decision on 22 May 2014.
Our views
4.15
Each of these three councillors had to decide whether their personal situation created a risk that the Council’s decision would be tainted by bias if they took part. These decisions are rarely straightforward.
4.16
Holding office as an elected member of a local authority carries obligations to carry out the duties of office and to represent the people of their community. In our experience, elected members take these obligations seriously and do not decide lightly that they should withdraw from important decisions. They need to be satisfied that their participation would create a real legal risk for the council that outweighs their general obligations.
4.17
Nobody has the power to prevent an elected member from taking part: elected members have to make those decisions themselves. Colleagues and council staff can provide advice, but cannot tell them what to do.
4.18
Most local authorities provide training and support to help elected members through these situations. However, training is inevitably limited to the general principles and concepts and some common examples. Few cases come to court, so the law does not provide clear or detailed guidance for many of the practical situations that regularly arise in the local government sector.
4.19
Councillors need to consider how close the relevant relationship or link is to the affected interest, how substantially the decision will affect the person or organisation that they are linked to, how direct the effect of the decision will be, the nature of the decision being taken, how it might look to an objective observer, and any other relevant factors. It is rare for situations to be black and white. In our experience, these assessments can be a matter of fine judgement.
4.20
Because the legal and practical risks of participation are often vague, and the assessment of what constitutes a conflict of interest is uncertain, the individual councillor has considerable room for judgement on what to do.
The steps the Council took
4.21
Council staff must do their best to manage the risk that a Council decision will be legally challenged on the grounds of actual or apparent bias. Even if the practical risk of legal challenge is low, the Council has to be conscious of the need to protect its reputation and public confidence in the decision making process. To do this, the Council needs to be able to demonstrate that decisions have been properly made, in accordance with the relevant statutory criteria, and with the proper degree of impartiality.
4.22
In our view, Council staff took all the proper steps to manage conflict of interest risks in this situation. Elected members were provided with appropriate guidance on how to identify and manage conflicts of interest, including a workshop for new members shortly after they were sworn in. As soon as the chief executive learned of the possibility of conflicts of interest affecting the decisions on the Project, he wrote to all of the elected members to explain the risks and remind them of their legal obligations. When Councillor Urquhart approached him for advice, he arranged for him to be given specialised advice from a law firm recognised for its experience and expertise in this area. He also specifically reminded elected members of their obligations during the relevant meetings. The meeting papers also included substantial advice on the legal constraints applying to the Council’s decision-making.
4.23
There is little more that staff can do. After talking with all three councillors, we found that each of them had a reasonable understanding of the risks and principles that they needed to consider before making their own decisions about participation.
The Councillors’ decisions on non-financial interests
4.24
Our assessment is that all three councillors thought seriously about their own situations and the risk of a conflict of interest arising from their family’s property interests. They all made considered decisions on what to do. Councillors Urquhart and Wilson decided that the effect on their relatives’ land did not prevent them from participating. Councillor Nelson decided that he could participate on procedural decisions but did not participate in the main substantive decisions.
4.25
Our good practice guides on conflicts of interest encourage a precautionary approach, with the advice “if in doubt, stay out”. However, we appreciate that on matters of high community and political significance, an elected member with a marginal non-financial interest might decide that this approach was unduly restrictive.
4.26
In our view, the choices that each of these councillors made on this issue, although different, were all reasonable.
Councillor Urquhart’s decision on the predetermination risk
4.27
Councillor Urquhart’s decision to take part, despite the risk that he would be regarded as predetermined, is more complex. This is a difficult area of law and practice, because the legal principles on bias and predetermination have largely been set in cases about decisions of an administrative or judicial character. Few cases consider how far those principles should apply to elected decision-makers deciding matters of policy or political concern. Those cases acknowledge that the democratic context, political policy platforms, and electoral mandates are relevant. However, they do not spell out the boundary between the different types of decisions or say how open a councillor’s mind needs to be in a given situation.
4.28
Council staff had written legal advice that Councillor Urquhart would probably be perceived as biased, and so his participation would taint the decision and create a legal risk. They had communicated this advice to Councillor Urquhart. We had also encouraged him to take account of that advice (without providing our own view). Councillor Urquhart talked to other lawyers and was given different views. He also put weight on his representative responsibilities and the fact that concern about the Project was central to his reason for standing for office. In the end, he decided that his sense of responsibility to the people he represented outweighed the risks of his participation and so he took part in the vote.
4.29
This was a choice that Councillor Urquhart was entitled to make. As explained in paragraphs 4.15 - 4.20, the decision on whether to take part does rest with the individual councillor and there is considerable room for judgement.
4.30
From our discussions with him, we consider that Councillor Urquhart understood the legal principles and risks, received advice from a range of sources, and made up his own mind. It was a reasonably significant decision not to follow the formal advice that Council staff had obtained for him. It is entirely possible that he has exposed the Council decision to some level of risk. However, in our view it was a choice that was open to him.
4.31
In our work, we do see situations from time to time where the council and an individual councillor reach different views on whether it is appropriate for the councillor to participate in a decision. In that situation we always encourage the councillor to work through the issues closely with council staff and to seek advice on any matters in dispute. In the end though it is for the individual councillor to decide whether to participate.