Keeping it in the Family: Municipal Conflict of interest in the Context of Familial Relationships
The decision of the Court of Appeal for Ontario (“ONCA”) in Ferri v Ontario (Attorney General), 2015 ONCA 683 [Ferri] is the latest in a string of municipal conflict of interest cases involving prominent municipal politicians. Mario Ferri was a well-known Regional and City Councillor for the City of Vaughan, Ontario. On his own volition, he brought an application in the Ontario Superior Court (“ONSC”) to determine whether he could participate in Council proceedings with respect to an appeal of the City’s Official Plan to the Ontario Municipal Board (“OMB”). The appellant of the Official Plan was represented by the Councillor’s son, Steven Ferri. Thus, father and son were on opposite sides of fence from the standpoint of their respective loyalties.
Section 5 of the Municipal Conflict of Interest Act, RSO 1990, c M50 [MCIA] prohibits municipal council members from participating in council proceedings where a council member has a pecuniary interest in any matter under consideration by that municipal council. Furthermore, s. 3 of the MCIA deems a direct or indirect pecuniary interest of a councillor’s family member to be the pecuniary interest of the councillor. Section 4 of the MCIA functions as a saving provision, whereby the councillor can participate in the matter if the interest is so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the councillor. This is referred to as the reasonable elector test.
The key dilemma raised by this case is whether a conflict declared under s. 3 of the MCIA, that exists by virtue of a familial relationship, is in fact a deemed conflict that overrides the s. 4 exception or whether the declaring councillor gets a second chance at demonstrating its remoteness and insignificance under s. 4. While the ONCA held that a conflict arising under s. 3 should not create a presumption that s. 4 cannot apply in the absence of evidence to the contrary, it gave no reasons or analysis for why it favored this manner of resolving this apparent ‘conflict’ between ss. 3 and 4. On a closer analysis of the facts, it would be reasonable to interpret s. 3 as creating an exception that prima facie fails the reasonable elector test, thereby overriding s. 4. Alternatively, viewing the interplay between ss. 3 and 4 in this light leads to a much different analysis—one that would have compelled the ONCA to consider the councillor in his family member’s position and assess that relative’s conflict as his own. This would have raised a different set of pecuniary interests that the ONCA failed to contemplate, exposing a significant conflict in this type of relationship.
Issues and Reasoning
Motivated by the desire to participate in Council proceedings important to his constituents, Mario Ferri brought an application to the ONSC for a declaration that no conflict of interest existed in the appeal opposite his son, and that he could participate in Council proceedings without breaching the MCIA.
Proceeding under s. 3, which has the effect of deeming the Councillor to have any pecuniary interest that his son is found to have in the matter before Council, the applications judge found the son, Steven Ferri, to have a pecuniary interest in the matter before Council. The reasons were obvious. Steven, as legal counsel to the appellant of the City’s Official Plan, had a financial interest in the outcome of this matter before Council. While the applications judge found that Steven’s “salary, bonus and ongoing employment do not depend on the outcome of the … Appeal or any decision by the City or the Regional council with respect to these matters,” he further held that this ignored the reality that “success doesn’t go unrewarded in the legal profession.”
The ONCA did not address this finding for the simple reason that Mario conceded in the application that Steven had a pecuniary interest and that the Councillor could not recoil from this concession at the ONCA. However, Mario further submitted that the applications judge conflated the analysis required under ss. 3 and 4. The judge had allegedly included his own conclusion—that the Councillor had a pecuniary interest under s. 3 by virtue of his son’s interest—into his determination of whether Mario’s pecuniary interest was remote and insignificant under s. 4. The ONCA stated, in effect, that the applications judge wrongly created a presumption that if s. 3 is triggered, then s. 4 does not apply in the absence of further evidence to the contrary. It provided no basis for this finding, however, nor did it cite relevant case law to support this position.
The ONCA went on to consider whether Mario’s deemed pecuniary interest—in reality, his son’s interest in the matter before Council—could be saved under s. 4. It focused its analysis on applying the correct test for s. 4. It also elaborated on several factors it was required to consider, including the Councillor’s intentions, his years of faithful service to the municipality, whether he was acting in good faith in his motivation to participate, and whether the matter was one of major public interest to his constituents. The ONCA ultimately held that “a reasonable elector apprised of all these circumstances would not conclude that the appellant’s deemed interest in the … Appeal would be likely to influence his participation in debate or voting on the matter before council.”
A Reasonable Alternative to Interpreting s. 3
The ONCA’s finding in this decision is troubling. First, it provides no reasons for its favored interpretation of the interplay between ss. 3 and 4; and second, its application of the reasonable elector test and the consideration of the above factors is based on an unsupported interpretation of s. 3. It is reasonable to conclude that s. 3 operates as a deeming rule to create an exception to the reasonable elector test required under s. 4. If this were not the case, then the pecuniary interest imposed on a councillor by s. 3 due to a child’s pecuniary interest would lack significance. In fact, to achieve this outcome, s. 3 would only need to state that a councillor must disclose the pecuniary interests of his close family members. The test under s 4. would then apply. This would determine whether the pecuniary interest of a family member was so remote or insignificant that a reasonable elector would not conclude that the councillor would be influenced in his participation at council.
The test would likely succeed every time, however, given the simple fact that a councillor and his child are different people with different motivations. It would be very difficult to prove a confluence of interests or a scenario where a father endeavors to help son or vice versa. However, the language of s. 3 and its deeming effect suggest that perhaps the Ontario legislature contemplated mischief that s. 4 was ill-equipped to address. The evidentiary challenge in proving close cooperation—and perhaps even corruption—between family members is not something that the ONCA’s s. 4 analysis can even begin to address. There is room for abuse by the council member, given the possibility that material information might be leaked in the context of a close familial relationship. This could occur under a number of circumstances: If the Council member expended his efforts to oppose the appeal, he would be working directly against his son’s interests; if the son failed in the appeal, or declined to act on the file, there might be direct financial consequences for the law firm that employs him; and if the son failed in the appeal, or declined to act on the file, his career advancement could be jeopardized. These possibilities are supported by the fact that Steven could have stepped down to avoid a perception of conflict but failed to do so—perhaps because his involvement was integral to the outcome of the appeal.
In any event, s. 3 interpreted according to its ordinary meaning creates an automatic pecuniary interest for a councillor whose family member has a pecuniary interest. It operates as a deeming rule and could be reasonably construed to convey an intention by the Ontario legislature that this type interest is neither remote nor insignificant. Alternatively, if s. 3 does not function as an automatic exception, the ensuing s. 4 analysis, at the very least, should be conducted as if the councillor stood in the shoes of the family member. This would raise a different set of circumstances that courts would be required to consider. A court would be required to assess the councillor’s deemed interest through the lens of the family member’s pecuniary interest. It would also be required to look directly at the remoteness and significance of the family member’s interest as if the two individuals were the same. This is consistent with the deeming effect that s. 3 has according to its ordinary meaning.
In this case, it would become quite clear that Steven was being paid to affect a result in the appeal that is inconsistent with opposing it—a position that councillors may decide to take in the interest of their constituents. While it is unlikely his pay would be docked if he were to lose the case, he was under a directive from his employer to do everything he possibly could to further his client’s interests. This is what he was paid for. According to the above interpretation of s. 3, this would also be Mario’s interest, which too is neither remote nor insignificant.
Viewing the interplay between ss. 3 and 4 in the above light leads to a much different analysis than the ONCA undertook in Ferri. Such an understanding of s. 3 would have compelled the court to place the Councillor into his family member’s shoes and assess that relative’s conflict as his own. This would have raised a different set of pecuniary interests that the court failed to contemplate. It also exposes a significant conflict in this type of relationship. Unfortunately, the only litigant in this matter was Councillor Mario Ferri, so it is unlikely that the ONCA’s holding on the interplay between ss. 3 and 4 will progress to the Supreme Court of Canada any time soon.