This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2010 decision in Mondoux v. Tuchenhagen, the Ontario Superior Court of Justice found that an elected municipal official had breached the Municipal Conflict of Interest Act by participating in a council vote to approve a tendering process for the sale of property for which he intended to bid. The case dealt with vacant property that had been seized by the City of Thunder Bay due to tax arrears and was to be put up for sale by public tender. The respondent was, at the material time, an elected official who had served on the municipal council for 12 years. He took an interest in acquiring the property in question and ultimately submitted the winning bid. Rather than recusing himself from council’s approval process, he participated in the council vote that authorized the city to proceed with the tendering process. A neighbour of the relevant property submitted the only other bid on the property and, after losing the bidding process, launched an application under the Municipal Conflict of Interest Act seeking a declaration that the councillor had breached the statute and seeking restitution for financial loss arising out of that breach.
The Court determined that the respondent knew he would be bidding on the property in question, should have disclosed this intention to council, and should have recused himself from the vote when council approved the tendering process for the sale of the land in question.
After determining that the respondent had breached the statute by failing to follow the prescribed disclosure and recusal protocols, the Court then considered whether the statutory breach could be excused as having been made through inadvertence or by reason of an error in judgment. The Court concluded that it could not be excused on those grounds:
I accept that Mr. Tuchenhagen was open with Realty Services Division about his interest in the property. However, I do not find that there was otherwise the requisite candour and complete frankness required of him in the circumstances. This is not to attribute ill motive to Mr. Tuchenhagen. However, Mr. Tuchenhagen had been a member of Council for almost 12 years. He would, or should, have been well aware of the need to avoid placing himself in a conflict of interest. If he had turned his mind to the question of conflict on this issue, one would reasonably expect him to have some uncertainty about his position. Just hours before attending the Committee of the Whole on July 21, 2008, he had made an appointment to view the property. If, notwithstanding the steps that he had taken, he did not consider the question of conflict, then it is reasonable to characterize his conduct as reckless or wilfully blind. Further, in my opinion, a reasonable and fair-minded elector, apprised of all the circumstances, would not accept that Mr. Tuchenhagen’s attendance at the July 21, 2008 meeting of the Committee of the Whole amounted to an error in judgment on his part within the meaning of the MCIA.
After finding the respondent in breach of the statute, the Court noted the statute required that the councillor’s seat be declared vacant. However, since the respondent was no longer serving on council, the Court ordered that he be disqualified from holding municipal office for four years, which effectively barred him from running in the next election:
Unlike subsection 10(1)(a), subsection 10(1)(b) is discretionary – a member who has contravened subsection 5(1) may be disqualified from being a member for not more than seven years. The issue is, how serious was the contravention. There is no evidence that Mr. Tuchenhagen acted in bad faith. The City suffered no loss. There was no policy prohibiting Mr. Tuchenhagen from bidding on real estate declared surplus to the City’s needs. There was no interference with the public tender process. Mr. Tuchenhagen has given the City 12 years of public service. However, because the municipal election has just been held, any disqualification of less than the four-year term of the present Council would result in no sanction. It was Mr. Tuchenhagen’s choice not to run in the most recent election. The only meaningful sanction that I can impose, because I cannot declare his seat vacant, is to disqualify Mr. Tuchenhagen from running in the next election. If I had been required to declare Mr. Tuchenhagen’s seat vacant, I would have been disposed to impose a shorter disqualification as was done by Killeen J. in Blake v. Watts, 1973 CarswellOnt 372 (Co. Ct.), where he declared vacant the seat on Council of the respondent members and imposed a nominal two week disqualification. In the present case, there must be some consequence flowing from the contravention. I hold that a disqualification of four years would be fair and just in this case.
However, the Court denied the applicant’s request for damages for restitution, finding that the applicant had failed to prove that the respondent had made a profit from the transaction in question or had caused the applicant to suffer a financial loss.
The former elected official appealed the trial decision, but that appeal was dismissed. As this case illustrates, the failure to adhere to statutory conflict of interest disclosure and recusal protocols can have significant consequences on elected officials. Where that conflict causes a loss to other affected parties, restitution may also be available as a legal sanction. In this instance, the former councillor was barred from running in the subsequent election. While no financial restitution was awarded, the former councillor was subsequently ordered to pay the applicant $16,750 in court fees, plus $3,568 in related disbursements.
