In British Columbia and across the country, school trustees will face election in the  fall. In the run-up to the election, it is important to bear in mind that election campaign contributions have been the basis for claims of disqualifying conflicts of interest.   While the case law indicates that a disclosed election campaign donation does not amount to a conflict of interest in and of itself, the donation may be evidence of a conflict which should result in disqualification of the elected official. Much, however, depends on the unique circumstances around the donation, as discussed in further detail below.

WHAT IS A DISQUALIFYING CONFLICT OF INTEREST?

In British Columbia, both the School Act, R.S.B.C. 1996, c. 412 and the common law establish rules about conflicts of interest that are applicable to school board trustees. Other provinces have similar legislation with similar requirements.

Under the School Act, only a “pecuniary interest” is set out as a possible disqualifying conflict of interest in Part 5 (the common law likely supplements this with other grounds for disqualification).

“Pecuniary interest” is defined in section 55 of the School Act as “an interest in a matter that could monetarily affect the trustee and includes an indirect pecuniary interest referred to in section 56”. Section 56 deals with the trustee’s ownership of shares of public and private companies and employment and business relationships (either through partnership, firm membership, or direct employment). Pecuniary interests of the trustee’s spouse, child, or parent can also be deemed to be the pecuniary interest of the trustee in certain circumstances (section 57). “Pecuniary interests” are similarly defined across Canada.

If a trustee has a “pecuniary interest” in a matter and is present at a meeting of the board at which the matter is considered, the trustee must disclose the interest and not take part in the discussion or vote on any question in respect of the matter. As well, the trustee must not attempt, whether before, during, or after the meeting, to influence the voting on the question (section 58). A knowing contravention of section 58 can result in the trustee’s office being declared vacant or requiring the trustee to make restitution if a benefit is received by the trustee (section 63).

There are certain kinds of “pecuniary interests” that do not require disclosure under section 58, namely a pecuniary interest in any matter that a trustee may have:

  1. by reason of the trustee having a pecuniary interest in the matter which is a pecuniary interest in common with electors generally,
  2. by reason of the trustee being entitled to receive any indemnity, expenses or remuneration payable to one or more trustees in respect of the matter,
  3. by reason only that the trustee is a member of an association incorporated under the Cooperative Association Act or a credit union having dealings or contracts in respect of the matter with the board of the school district of which he or she is a trustee, or
  4. by reason only of a pecuniary interest of the trustee that is so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the trustee (section 59).

If in doubt about whether an interest requires disclosure under section 59, seek legal advice.

FINANCIAL CONTRIBUTIONS TO A TRUSTEE’S ELECTION  CAMPAIGN

There is a wealth of case law on pecuniary interests of trustees, municipal counsellors and alderpersons, especially in the non-election context. In many of these cases, a disqualifying interest has been found to exist. For a recent decision where council members were found to be in a conflict of interest when the council members voted on certain contracts, see Schlenker v. Torgrimson, 2013 BCCA 9.

There have only been a handful of cases in which elected officials have faced allegations of undisclosed pecuniary interests when they were  called to vote on a matter that involved a person who contributed funds to their election campaign. The leading case law is from British Columbia. While this issue arises more frequently in the municipal context, it could easily arise for school board trustees given that trustees may accept election campaign donations and, like many municipal officials, can be disqualified from office for the failure to comply with conflict of interest laws.

The principles that arise from election campaign donation cases can be summarized as follows:

  • it is important to balance democratic rights to accept election campaign funding with the transparency and integrity of elected officials;
  • so long as the elected official properly discloses the donation in full compliance with election laws, the donations do not, without more, give rise to a pecuniary interest and disqualification; and
  • there is no magic number that a donation must exceed to rise to a pecuniary interest and disqualification.

We explore the judicial comments on these principles below.

(a)   It is Important to Balance Democratic Rights with Transparency and Integrity of Elected Officials

In Guimond v. Vancouver (City) (1999), 22 B.C.T.C. 109 (S.C.), the petitioners alleged that the Mayor and two counsellors were in a conflict of interest when they voted on a re-zoning application for a company that had made contributions to each of their election campaigns. The contributions represented 0.78%, 1.16% and 0.58% of their respective total campaign contributions. The judge observed that “at issue is the balancing of the democratic right to support a candidate or party of choice in a municipal election and the importance of transparency and integrity in the carrying out of the duties of public office”. The Court found that the contributions had been disclosed as required by law and that the amounts of contributions were very small. The Court also found that the “saving provisions” (or exception provisions) of the conflict rules applied, as any such pecuniary interest caused by these contributions was sufficiently remote and insignificant to not reasonably be expected to influence the officials in relation to  the matter.

(b)  Disclosed Donations, Without More, Do Not Give Rise to Disqualifications

In Ferneley v. Sharp (1999), 72 B.C.L.R. (3d) 121 (S.C.), a counsellor had voted in favour of proposals put forward by the Canadian Union of Public Employees, a union that was the counsellor’s major campaign contributor, contributing $2,500 (75% of her total contributions). The petitioner alleged that the counsellor voted in favour of a compressed work week because of the campaign financing received from the Union. The Court observed  that counsellors

…must make their decisions upon what they believe is in the best interests of the municipality and its electors. On the other hand, it is clear that every elector should be eligible to run for office in the municipality regardless or their status, their wealth, or occupation of their spouse. Elections cost money and they are most frequently funded by contributions from friends, family and political or other supporters of the candidate. It is a fact in the real world that contributions are made by those who frequently hope that the candidate, if elected, will think as they do and support those ideals, policies and projects which they support. This is so whether the contributors be trade unions, corporations, institutions, or wealthy individuals.

It is a traditional part of democratic system to permit (with certain limitations) those wishing to run for office to accept campaign donations. There is nothing in the legislation to prohibit it, though the Municipal Act [now the Local Government Act] does require full disclosure of donations beyond a minimal amount.

In summary, the receipt of a donation to a political campaign that has been fully disclosed does not amount to a conflict of interest in and of itself. It can of course be evidence of such a conflict depending on the context of its receipt and the conduct of the recipient. Each case involving issues such as we have here must be decided on its own facts.

The Court found that the respondent fully disclosed the contributions. The Court was “far from satisfied” that the counsellor had a direct or indirect pecuniary interest when voting for the proposal of a compressed work week.

In King v. Nanaimo (City), 2001 BCCA 610, rev’g [1999] B.C.J. No. 83 (S.C.), Mr. King failed to file a proper disclosure statement about his campaign finances, including a donation of $1,000 from a property developer (representing 22% of his total campaign finances). He later voted on a proposal made by that property developer, and the petitioner alleged that he was in a conflict of interest when he did so. The trial Court agreed that Mr. King was in a disqualifying conflict of interest. The Court of Appeal disagreed, holding:

… Nothing in the facts established in this proceeding could justify the conclusion that Mr. King had a pecuniary interest, direct or indirect, in any of [the matters voted on]. The mere fact that Northridge made campaign contributions could not, in and of itself, establish any such interest. There could, of course, be circumstances  in which the contribution and the “matter” could be so linked as to justify a conclusion that the contribution created a pecuniary interest in the matter. Indeed, the  chambers judge took note of an example of such a situation when he said in his reasons:

There is no evidence of a direct pecuniary interest in the sense that he agreed to vote for those projects in return for their campaign contribution of $1,000.

It would not be useful to speculate as to what circumstances could create an indirect pecuniary interest. It is enough to say that the mere fact of the applicant having made a campaign contribution is not enough.

The Court of Appeal set aside the trial decision and found that Mr. King was not in a conflict of interest. The Court of Appeal refused to deal with the issue of the non-proper disclosure of campaign financing (which the City argued  required that he be disqualified under the applicable municipal legislation), since Mr. King’s term as alderman had expired, making the issue moot.

(c)      No Magic Number which Campaign Contributions Cannot Exceed

In Highlands Preservation Society v. Highlands (District), 2005 BCSC 1743, a corporation contributed $250 to each of four counsellors during their election campaigns. Arithmetically, the corporation’s contributions amounted to more than 25% of the collective total received by the four counsellors. All these amounts were properly disclosed. The counsellors later voted on a proposal involving the corporation. The petitioner alleged that the counsellors were in a conflict of interest when they voted on the proposal, as they voted in favour as a quid pro quo for the financial contributions. In his arguments about disqualification, the petitioner focused on the percentage of the total contributions received by the counsellors, which the Court held was misguided,  writing:

The question is not whether there is a magical number which campaign contributions cannot exceed, but whether there is any evidence of contributions coupled with a promise, implicit or otherwise, to deliver a vote. If the evidence revealed that a counsellor agreed to sell her vote for a campaign contribution of five dollars, the size of the bribe, or the percentage overall contributions, would be superfluous. In such a case, it is the link to dishonest conduct that is reprehensible.

Similarly, if a counsellor happens to receive only one campaign contribution from a single person, it does not automatically follow that the counsellor must have agreed to sell his vote in exchange. Absent such an arrangement, the contributor is simply exercising the democratic right to make a campaign contribution to a candidate that she or he chooses to support. There is nothing reprehensible in that so long as the councillor does not agree, implicitly or otherwise, to vote a certain way.

The Court held that the counsellor did not have a pecuniary interest in the matter voted upon.

CONTRIBUTIONS ALONE NOT ENOUGH TO DISQUALIFY

The above cases from British Columbia support the rule that campaign contributions are not, in and of themselves, enough to give rise to a disqualifying conflict of interest. However, as with all conflicts of interest, the circumstances surrounding the donation and the conduct of  the elected official are important to determine whether there is a pecuniary interest that must be disclosed. With so few cases on this issue, there are many circumstances that might give rise to a pecuniary interest. The case law is clear that, at minimum, trustees will need to consider:

  • whether the contribution is really a “bribe” (and so should be rejected); and
  • whether the contribution must be disclosed under election laws (and if it must, then how to comply with the disclosure requirements).

Yet, even if a pecuniary interest arises from a given campaign contribution, a disqualification or removal from office does not automatically result. Trustees must carefully consider their obligations under sections 58 and 59 of the School Act.