Australia: A free lunch or a bottle of Grange – fail to disclose at your peril: conflict of interest and local government

Last Updated: 4 June 2014
Article by Philip Mavor

The resignation of the NSW Premier over a bottle of Grange has lessons which resonate for local government.

The recent Panel Inquiry into a metropolitan Council is a cogent reminder of the extent of the obligations of a Council member to disclose an interest under Regulation 11(2) of the Local Government (Rules of Conduct) Regulations 2007.

The rule of conduct in that rule is that a Council member must disclose the nature of an "interest" to the Chief Executive Officer before the meeting or at the meeting immediately before the relevant matter is discussed.

What is an interest?

Interest is defined as "an interest that could, or could reasonably be perceived to, adversely affect the impartiality of the person having the interest and includes an interest arising from kinship, friendship or membership of an association."

In the State Administrative Tribunal case of Bradley and Local Government Standards Panel [2012] WASAT 44 Senior member McNab said that an allegation that a council member has committed a breach of regulation 11(2) of the Regulations "is an allegation of undeclared conflict or bias (apparent or real) clouding the exercise of public duty".

What must be disclosed?

The Panel Inquiry considered that ordinary decision making processes dictate that factors which might affect, or be reasonably perceived as affecting, the objectivity of an elected member be made known before the member's participation in the making of the relevant decision.

Two members of Council attended a luncheon hosted by representatives of a law firm. There was no declaration or disclosure in the Council's gifts register for this luncheon. No other elected member was appraised of the meeting, its purpose, or result.

Regulation 12(1) of Local Government (Rules of Conduct) Regulations 2007 requires that any gift over the value of $50.00 must be entered into the Council's gift register.

It was uncertain whether the value of the luncheon was above $50.00. However, the Panel Inquiry took the view that the two members of Council were aware of the fact that they met with and received a benefit (albeit minor) from the law firm prior to their subsequent involvement in supporting a motion to introduce the law firm to the Council's Legal Services Panel. This lunch meeting was not disclosed at the Council meeting in which the law firm was discussed.

In accepting the "free lunch" the two members of Council were obliged to reveal this benefit as soon as the law firm became part of Council deliberations.

Finding of the Panel Inquiry

A finding of the Panel Inquiry is that the luncheon provided by the law firm was an "interest" that could, or could reasonably be perceived to, adversely affect the impartiality of the two members of Council for the purposes of Regulation 11 of the Local Government (Rules of Conduct) Regulations 2007. The Panel Inquiry recommended that the failure to disclose be referred to the Council's Complaints Officer as a Minor Breach under 5.107 Local Government Act 1995.

One of the two members of Council was also found to have a business relationship with the law firm at the time the matter came before Council. He was receiving legal advice on a person matter. The Panel Inquiry found that this was a failure to disclose a financial interest by virtue of his 'close association' (as defined in Regulation 20(1) and (2) Local Government (Administration) Regulations 1996) with the law firm and recommended that it be considered for referral under section 5.114 of the Local Government Act 1995 to the Department CEO as a Serious Breach.

The lessons for members of Council

It is common for members of Council to attend luncheon meetings with various businesses or other bodies. Members of Council must be aware of the extent of their obligation to disclose and should declare the luncheon as an "interest" if a relevant matter is before Council. Better still, enter the luncheon on the gift register even if it problematic that its value is over $50.00.

We strongly recommend to always disclosure everything, especially bottles of Grange, that way you are always protected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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