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Part 5: Non-pecuniary conflicts of interest

Guidance for members of local authorities about the law on conflicts of interest.

5.1
Having a pecuniary interest in a matter before the local authority, as discussed in Part 3, is one type of conflict of interest. However, quite apart from the Act, there are legal rules about conflicts of interest more generally, which apply to non-pecuniary conflicts of interest. In this Part, we focus on the common law rule about bias as it relates to non-pecuniary conflicts of interest.

What is bias?

5.2
To determine if bias exists, consider this question:

Is there a real danger of bias on the part of a member of the decision-making body, in the sense that he or she might unfairly regard with favour (or disfavour) the case of a party to the issue under consideration?

5.3
The question is not limited to actual bias, but relates to the appearance or possibility of bias. This is in line with the principle that justice should not only be done, but should be seen to be done. Whether or not you believe you are not biased is irrelevant.

5.4
Your focus should be on the nature of the conflicting interest or relationship, and the risk it could pose for the decision-making process.

5.5
The need for public confidence in the process is paramount. Perception can be an important factor. Each case must be decided on its own circumstances.

How does the law about bias apply to local authorities?

5.6
The courts recognise that local authorities are different in nature from other decision-making bodies. In particular, they acknowledge that, where Parliament entrusts a function to an elected or political body (instead of to a tribunal or a court), it is natural to expect that:

  • the members of the authority will bring their own experience and knowledge to the decision-making process;
  • the members may already have views – even strong or publicly stated views – about the matter; and
  • political considerations may play a part in the decision.

5.7
The courts also take into account the type of function being exercised. They are likely to take a stricter approach with decisions that directly affect the legal rights, interests, and obligations of an individual or small group of individuals (as opposed to decisions with a large policy or political element).

5.8
For instance, the sorts of decisions where a stricter approach may be taken include:

  • licensing applications;
  • decisions under the Resource Management Act 1991;
  • decisions requiring a formal statutory process and hearing (such as roadstopping proposals);
  • dealings in land; or
  • other decisions that have a regulatory or coercive effect.

5.9
By contrast, the courts may be more lenient with decisions about:

  • high-level policy-making;
  • issues in which the authority has only advocacy or recommendatory powers;
  • operational or service functions; or
  • matters where the authority is expected or required to have developed a preliminary view or proposal.

Situations where a risk of bias may exist

5.10
The most common risks of non-pecuniary bias are where:

  • your statements or conduct indicate that you have predetermined the matter before hearing all relevant information (that is, you have a “closed” mind); or
  • you have a close relationship or involvement with an individual or organisation affected by the matter.

5.11
Paragraphs 5.12 to 5.44 discuss these two types of non-pecuniary bias, and offer our view of some common scenarios. The examples are a general guide, but each situation needs to be assessed on its own merits. Our suggestions are neither authoritative nor comprehensive.

Predetermination

5.12
A claim of bias may be made on the basis of predetermination. Predetermination generally relates to conduct. Accordingly, it is an issue within your control. By exercising care over your statements and behaviour, you should be able to prevent this issue creating problems for you.

5.13
For example, predetermination might occur if your public statements indicate that you made up your mind about the matter before it came to be heard and deliberated upon. In other words, that you as decision-maker had a “closed” mind and were not prepared to listen fairly to all of the arguments.

5.14
You are not expected to approach matters without any existing opinions at all. Elected members take office with publicly stated views on a wide variety of policy issues. In local authority decision-making, the courts therefore acknowledge that a degree of local knowledge and pre-existing views – especially where a matter involves wide public policy issues – is both inevitable and desirable.

5.15
The critical factor is that you remain (and are seen to remain) open to persuasion – that is, that you do not express views in a way which implies an unwillingness to listen fairly to new arguments or to give the matter further consideration when it comes before the authority.

What is predetermination?

5.16
We think it is unacceptable to participate in the authority’s consideration of a matter if you:

  • make statements that suggest your mind is made up about the particular matter before having heard all views, or that your position is so fixed that you are unwilling to fairly consider the views of others, or that you are not prepared to be persuaded by further evidence or argument;
  • refuse to read or listen to reports or submissions presented to the authority about the matter; or
  • have made a formal submission to the authority in your personal capacity, to support or oppose a particular proposal, as part of a public submissions process.

5.17
As noted earlier, the nature of the decision is important. It is more acceptable for you to comment about broad policy issues, particularly where your remarks are expressed in general terms. We think it is wise to exercise extreme caution in respect of specific decisions that are focused on the rights and interests of one individual or a few individuals, and where other people have the right to make a submission to a formal hearing about the matter.

5.18
However, we think the law about bias should not prevent you from:

  • discussing issues and exchanging ideas with members of the public;
  • promoting a particular view during debate around the meeting table; or
  • advocating opinions or policies in public – or campaigning for election – about issues of public interest (so long as you do not indicate that you have already closed your mind to further consideration of a particular matter).

5.19
General personal factors, such as your ethnicity, religion, national origin, age, political or philosophical leanings, wealth, or professional background, will, of themselves, not often constitute predetermination.

Presence at hearings

5.20
Where evidence and submissions are being heard on a particular matter, you need to be present for the whole hearing to show a willingness to consider all points of view. Very short absences might be acceptable, but lengthy periods of nonattendance at a hearing could suggest that you have predetermined the matter.

Relationship with other persons or organisations

5.21
A conflict of interest may exist if you have a close relationship with a person or organisation involved in or affected by the matter before the local authority; for example, if the matter involves or affects a family member, or an organisation to which you belong, or a business of which you are an employee. Such a connection could affect how other people view your impartiality.

5.22
This sort of conflict of interest arises not from something you have said or done, but from a pre-existing state of affairs. Accordingly, no matter how careful you are, this type of conflict sometimes cannot be prevented.

5.23
In deciding whether to participate, you should consider:

  • the extent of your personal links or involvement with the other person or group; and
  • the degree to which the matter under discussion directly affects that person or group.

5.24
However, remember that, in politics, the merest perception of impropriety can be extremely damaging, whether or not a court would find your actions to be lawful. If you have any relationship with a person or organisation involved in a matter, you should seriously consider the wisdom of whether to participate at all. The safest advice is always “if in doubt, stay out”.

Personal relationships

5.25
We consider that it is unacceptable to participate in the authority’s consideration of a matter if:

  • the decision directly affects a member of your immediate family or a close friend; or
  • a member of your immediate family has made a submission about the matter.

5.26
Exercise your judgement carefully where the matter involves or affects:

  • a personal or professional acquaintance;
  • someone who funded your election campaign;
  • or a more distant relative.

5.27
It will often be wise to not participate in these situations.

Wider kinship relationships

5.28
Some cultures, including Māori culture, have a broad concept of who is regarded as a family member or relative. This can make it difficult to assess whether a conflict of interest exists.

5.29
In general, you should apply the same principles as for personal relationships set out in paragraphs 5.25 to 5.26. However, we do not think that a person needs to be regarded as part of your immediate family just because they are part of your wider kin group descended from a common ancestor (such as an iwi or hapū).

Membership of other organisations

5.30
We consider that it is unwise to participate in consideration of a matter before the authority involving or affecting a club or similar organisation if:

  • you are an executive officeholder or trustee, or are otherwise strongly publicly identified with the club; or
  • the matter specifically and significantly involves or affects the club – such as a proposed grant of money to the club, or something else directly affecting the club’s finances or property.

5.31
On the other hand, it may be acceptable to participate if:

  • you are a passive or ordinary member of the club, and the organisation is relatively large; or
  • the matter affects the club only indirectly – such as a broad public policy issue in which the club has chosen to take an interest.

5.32
It will usually be acceptable to participate if you have only a past involvement with the club, or merely have friends who are involved in the club.

Employment with other organisations

5.33
If the matter concerns your employer, we consider it is unwise to participate if:

  • you are a senior executive (particularly where the matter directly concerns the organisation); or
  • you are personally involved in the issue as part of your employment.

5.34
It may be acceptable to participate if you are a junior staffmember (particularly in a large organisation), and have had no personal involvement in the issue through your employment. However, you will always need to exercise your judgement carefully.

5.35
See also paragraph 6.12 for discussion of whether your employment might raise a question of a pecuniary interest.

Membership of committees and community boards

5.36
It is common for members of a local authority to also be on committees or subcommittees of the authority, or on a community board. It is normally acceptable to participate in a matter at one of these levels and then again when the matter reaches the governing body of the local authority.

5.37
However, it would be unwise to participate if your involvement at the other level could raise a risk of predetermination. An example is where you are a councillor and also a member of a community board, and the board decides to make a formal submission to the council about a review of representation arrangements for elections. In this situation, you need to decide at which level you can best participate. For example, you should refrain from participating in the board’s decision if you want to preserve your ability to participate later at the council level.

Appointment as the local authority’s representative on another organisation

5.38
You may have been appointed as the authority’s representative on the governing body of a council-controlled organisation or another body (for example, a community-based trust).

5.39
That role will not usually prevent you from participating in authority matters concerning the organisation – especially if the role gives you specialised knowledge that it would be valuable to contribute.

5.40
However, you should not participate in a matter that raises a conflict between your duty as a member of the local authority and your duty to act in the interests of the other organisation. An example may be if the council is considering a change in the mode of delivery of one of its services that could affect the financial position of a council-controlled organisation, or where the authority is making a decision about funding the other organisation.

5.41
It will also be unwise to participate if your involvement with the other organisation raises a risk of predetermination – for example, if the other organisation has made a formal submission to the authority as part of a public submissions process.

Membership of some other public body

5.42
If you have been appointed or elected to the governing body of some other public entity unconnected with your position on the local authority (such as a district health board), you will need to consider potential conflicts of interest on a caseby- case basis. You should consider whether your ability to consider a matter before the local authority with an open mind could be affected by:

  • your legal duty to act in the interests of the other body;
  • any involvement you may have had in the matter through the other body; or
  • the degree to which the other body is affected by or interested in the local authority’s decision on the matter.

5.43
We consider that it will often be wise to not participate.

Other personal involvement with an organisation

5.44
Even if you are not formally associated with an organisation affected by a matter before the local authority, it may be unwise to participate if you have a close personal involvement with the organisation – for example, if you have helped the organisation prepare its application to the authority, or have been paid to do so in a professional capacity.

What to do?

5.45
If you decide you have a non-pecuniary conflict of interest in a matter before the authority, we recommend you follow the same procedures that you are required to follow in cases of a pecuniary interest – that is:

  • declare that you have a conflict of interest when the matter comes up at the meeting;
  • ensure that your declaration is recorded in the minutes; and
  • refrain from discussing or voting on the matter.

5.46
We consider that it is good practice to also leave the meeting table.

5.47
Non-pecuniary conflicts of interest always involve questions of judgement and degree. In the interests of openness and fairness, we encourage members to take a cautious approach and, if in doubt, to declare an interest and abstain from discussing or voting on the matter.

5.48
Appendix 3 contains summaries of a number of cases in which the courts have considered non-pecuniary conflicts of interest.

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