• What is the pecuniary interest rule?
• What is a pecuniary interest?
• When is a pecuniary interest held “in common with the public”?
• Indirect pecuniary interests
• Direct and indirect interests
• Declaration of interest and recording in minutes
• Matters to which the pecuniary interest rule does not apply
• Exemptions and declarations

This section explains the prohibition against discussing or voting on a matter in which you have a pecuniary interest.

What is the pecuniary interest rule?

The pecuniary interest rule is that members of an authority are not allowed to participate in discussion or voting on any matter before the authority in which they have:

• a direct pecuniary interest; or
• an indirect pecuniary interest,

other than an interest in common with the public.

It is an offence under the Act to participate in any matter in which you have a pecuniary interest.

There are several exceptions to the pecuniary interest rule. These are described on pages 30-32. In addition, we can grant exemptions from the rule in particular circumstances (see pages 32-35 for more details).

What is a pecuniary interest?

The Act does not define a pecuniary interest. The test we use is:

whether, if the matter were dealt with in a particular way, discussing or voting on that matter could reasonably give rise to an expectation of a gain or loss of money for the member concerned.

When is a pecuniary interest held “in common with the public”?

If your pecuniary interest can be said to be “in common with the public”, you will not be prohibited from discussing and voting on the matter.

In considering whether your interest is in common with the public, you need to consider whether the interest is:

• of a different nature or kind to that of other people, or
• significantly different in size.

Another way is to ask yourself whether the matter affects you in a different way, or to a materially greater degree, than most other people.

For example, an interest may not be “in common with the public” if:

• you are a property developer – because you may have an interest in town planning or development matters that is different in kind to that of most other residents or “ordinary” property owners; or
• you are one of a small number of ratepayers affected by a targeted rate – because your interest in decisions about that rate may not be shared by a group large enough that it could be reasonably said to constitute “the public”.

We accept that some tolerance is necessary so as to apply the “interest in common with the public” exception in a realistic and practical way. In order to rely on the exception:

• You do not need to be affected to exactly the same extent as other members of the public. For instance, all ratepayers are affected slightly differently by the adoption of an overall rate. Nevertheless, we consider that this can safely be treated as an example of an interest which is in common with the public.
• The interest does not need to be shared by all members of the public in the district – it is sufficient that you are part of a large group of people affected in a similar way. The question of whether or not a group of people should be treated as “the public” is often a matter of degree. We acknowledge that it can be difficult to draw a clear line.

If you think that your pecuniary interest is not in common with the public, it is possible that you may still be able to participate, if:

• your pecuniary interest is remote or insignificant (see page 33); or
• we make a declaration for you under the Act (see pages 34-35).

Indirect pecuniary interests

It is difficult to be precise about when an indirect pecuniary interest exists. Each case will have its own circumstances. However, the Act does provide certainty where an indirect pecuniary interest exists through a member’s spouse or in a company.

Interest through spouse²

If your spouse has a pecuniary interest in a matter before the authority, you are deemed to have the same interest.

Interest in a company

If either you or your spouse is involved in a company that has a pecuniary interest in a matter before the authority, you are deemed to have the same interest only if:

Direct and indirect interests

The “deeming” provisions on indirect interests can be deceptive. They mean that the member is deemed to share a pecuniary interest that their spouse or a company has in a matter. A member could also have their own separate direct interest in a matter, in addition to or separate from an indirect interest that the member has through their spouse or a company.

For example, a member may be one of many landowners who form a company to develop a community asset in the surrounding area, in partnership with the authority. Besides the company’s interest, the member may have a direct interest which arises from the prospect of increased land values in the vicinity of the project. That interest could be caught separately by the pecuniary interest rule even if the member’s involvement in the company is insufficient to meet the “deemed interest” test.

Declaration of interest and recording in minutes

If a matter comes before the authority in which you have a pecuniary interest, you must:

• abstain from discussion and voting; and
• declare to the meeting the existence of a pecuniary interest.

Matters to which the pecuniary interest rule does not apply

The Act sets out a number of matters to which the pecuniary interest rule does not apply. This means that a member can participate in discussion and voting on the following matters, despite the fact that the member may have a pecuniary interest:

• If you were elected by or appointed to represent a particular activity, industry, business, organisation, or group of persons, and your pecuniary interest in a matter is no different from the interest of those whom you represent, then you may participate in the consideration of that matter.
• Any payment to or for your benefit where it is legally payable and the amount, or the maximum amount, or the rate, or maximum rate, of the payment has already been fixed – such as payment of remuneration to members in accordance with determinations made under the Local Government Act 2002.
• Any contract of insurance insuring you against personal accident.
• Your election or appointment to any office, notwithstanding that any remuneration or allowance is or may be payable in respect of that office. This would apply, for example, to the appointment by a local authority of one of more of its members as directors of a council-controlled organisation. It would not, however, apply to any subsequent discussion of the directors’ remuneration: see Calvert & Co v Dunedin City Council, discussed on pages 62-63.
• Any formal resolution to seal or otherwise complete any contract or document in accordance with a resolution already adopted.
• The preparation, recommendation, approval, or review of a district scheme or any section of such a scheme³, unless the matter relates to:
  • any variation or change of or departure from a district scheme or section of the scheme, or
  • the conditional use of land.
  (Note: This wording is based on the repealed Town and Country Planning Act 1977. We interpret it by reference to the Resource Management Act 1991.)

• The preparation, recommendation, approval or review of:
  • general schemes under the Soil Conservation and Rivers Control Act 1941 for the preventing or minimising of damage by floods or erosion; or
  • reports as to the effect or likely effect on the environment of any public work or proposed public work within the meaning of the Public Works Act 1981.

Exemptions and declarations

We can grant an exemption or declaration to allow a member to participate in a matter in which the member has a disqualifying pecuniary interest.

The procedure

If you think you have a disqualifying pecuniary interest in a matter, you can apply for an exemption or a declaration to enable you to participate in the matter.

The application must be in writing, and can be made by you or by the authority on your behalf.

In order to be able to consider an application for an exemption or declaration, we need to be provided with detailed information about:

• The nature of the matter which is to come before the authority;
• The nature and extent of your pecuniary interest in the matter, and how that interest may be affected by the matter; and
• The reasons why the necessary grounds for an exemption or declaration may exist (see below).

Exemptions

We can grant an exemption under section 6(3)(f) of the Act if your interest is, in our opinion, so remote or insignificant that it cannot reasonably be regarded as likely to influence you when voting or taking part in discussion on the matter.

Declarations

We can grant a declaration under section 6(4) of the Act if we are satisfied that either:

• the application of the pecuniary interest rule would impede the transaction of business by the authority; or
• it would be in the interests of the electors or inhabitants of the district that the rule should not apply.

2: At the time of publication, a Bill was before Parliament which proposed defining “spouse” to mean “husband, wife, civil union partner, or de facto partner”, with intended effect from 16 October 2004.

3: This exception was applied in the case of Auditor-General v Christensen [2004] DCR 524.