This article is an extract from the 5th edition of Government Procurement.
In its December 2020 decision in Yorke v. Harris, the Ontario Superior Court of Justice rejected a conflict of interest claim against a municipal councillor after finding that the councillor had no direct financial interest in the matter in question. The dispute dealt with a resolution introduced by and voted on by a member of Waterloo Regional Council in support of the Ontario provincial government’s proposed labour relations reforms that would terminate the practice of close-shop tendering that favoured specific trade unions to the exclusion of contractors associated with other unions or those who are non-unionized.
Members associated with the Carpenters Union, one of the unions favoured under the existing rules, brought a legal challenge against the councillor under Ontario’s Municipal Conflict of Interest Act, alleging that he was in a conflict of interest in voting on the motion since his wife was employed by a competing union, the Christian Labour Association of Canada (“CLAC”), which meant that he stood to gain financially through the reforms.
The court agreed that the councillor’s financial interests were linked to the competing trade union since his wife was employed with that competing union. The competing union’s financial interests were therefore deemed to be his financial interest for the purposes of the Municipal Conflict of Interest Act. However, the court rejected the conflict claim since the resolution in question that the councillor voted on was not a formal legal decision and since any financial interest in the matter was too remote.
As the court stated, the Regional Council had no jurisdiction over the labour relations reforms in question, which fell under provincial jurisdiction. Rather than constituting a legal decision that created a financial interest for the purposes of the conflict law, the council resolution was merely a symbolic political statement:
While Councillor Harris may have had a political interest in the passage of Bill 66, he did not have any control over whether the Bill would in fact be passed. The Labour Relations Act is under the purview of the provincial government, and expressions of support, while politically relevant, cannot create a pecuniary interest for anyone, including Councillor Harris, the Region or CLAC.
Turning to the remoteness issue, the court found that once open tendering procedures were introduced, contractors would be required to compete in a bidding process and would have to win that bidding process before enjoying any financial benefit for themselves, their employees, or any related trade unions. The court ruled that even if the resolution was legally binding, any resulting financial interest was too remote since any resulting work awarded under a new open tendering regime would be contingent on the outcome of subsequent competitive bidding processes:
Possible future outcomes do not qualify as pecuniary interests under the Act. There must be a real issue of actual conflict or, at least, a reasonable assumption that conflict will occur. The pecuniary interest must be definable and real rather than hypothetical.
In summary, the court ruled that the claim of a financial interest was too remote since it involved too many hypotheticals and too many contingencies, including the adoption of legislation by the province allowing municipal governments to override existing close-shop tendering obligations, the actual adoption of open tendering policies by the municipality, the submission of winning bids by companies associated with the CLAC trade union, the corresponding increase in wages to the employees of those winning bidders, and a resulting increase in union dues collected by the trade union in question. The court therefore concluded that the applicants failed to prove a financial interest since the allegations were too speculative and hypothetical.
Furthermore, the court determined that the councillor’s “interest is so remote or insignificant in nature that it cannot be reasonably regarded as likely to have influenced him” given that there was “no evidence that his wife would receive any pecuniary benefit because of her employment with CLAC.” The court ultimately dismissed the application after concluding that the Councillor had been a long-time proponent of open tendering and that the resolution reflected his political views rather than his personal financial interests.
As this case illustrates, elected officials are subject to a high degree of scrutiny in relation to whether any of their formal decisions involve personal financial interests. While in this case the alleged financial interests were too remote and speculative, the legal challenge serves as a useful reminder to avoid conflicts in relation to matters involving the public procurement process.
