Legal News

Conflict of Interest Requires No Personal Financial Benefit
January 18, 2013

The BC Court of Appeal has issued animportant decision regarding whether an elected public trustee can be in a director indirect pecuniary conflict of interest where they derive no financial benefitfrom a matter.

In November 2008, two individuals wereelected as trustees to a Local Trust Committee responsible for land useplanning and regulation for Salt Spring Island. The appellants in this casewere electors who brought a petition to contest payments made by the Committeeto two societies incorporated by the two trustees. The issue before the Courtwas whether the trustees had a direct or indirect pecuniary interest in thepayments, thus giving rise to a conflict of interest.

In the spring and summer of 2011, the twotrustees incorporated two non-profit societies and became directors of thosesocieties. In September of 2011, the trustees brought a motion to provide oneof the societies with $4,000 to run a workshop to raise awareness of waterissues on the island. One month later, they brought another motion, this timeto provide the other society with $4,000 to provide a progress report ongreenhouse gases. On neither occasion did the trustees disclose the fact thatthey were directors of the incorporated societies. The chambers judge hearingthe petition dismissed it on the ground that the trustees had not received apersonal financial benefit from the transactions.

The Court of Appeal disagreed with the chambersjudge’s narrow interpretation of the rules against conflict of interest. TheCourt found that the advancement of the cause of a non-profit entity bydirectors under a legal duty to put the interests of that entity first, couldbe a powerful motive to put the public interest second. The purpose of thelegislation at issue was to prevent elected officials from having dividedloyalties in deciding how to spend the public’s money. In the Court’s view, itmade no difference that the trustees didn’t personally gain financially. Solong as the matter involved the expenditure of public funds and the trusteeshad an interest in the matter, a well-informed elector would conclude thatthere was a conflict with their duty as councillors.

Key to this decision is the requirementthat elected officials have undivided loyalty in the discharge of their duties.Where this does not occur, the public is disadvantaged whether the conflictedparty gains financially or not.

Schlenkerv Torgrimson

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