Posted on May 30, 2021 by Megan Hawley 119

What is a non-pecuniary conflict of interest?

On 4 May 2021, a Principal Member of the Occupational Division of the New South Wales Civil and Administrative Tribunal (‘NCAT‘) found that a Sydney metropolitan council’s mayor had a non-pecuniary conflict of interest in a matter which caused him to breach of his council’s code of conduct (‘Code‘) amounting to misconduct under s 440F(1)(b) of the Local Government Act 1993 (‘LG Act‘).

We frequently receive requests for advice about non-pecuniary conflicts of interest, but until now there has been little guidance beyond the words of each council’s code of conduct.

In this post, we take you through what the NCAT said about non-pecuniary conflicts of interest and provide some recommendations about how council officials might avoid them.

Background and issues

The mayor was in a dispute with two other councillors who, he alleged, had impugned or harmed his public reputation. Lawyers for the mayor sent a letter to the other councillors asking them to delete the relevant content and post a public apology. The letter was written in a way which clearly contemplated defamation proceedings.

At two council meetings following this, the mayor proposed and voted for a motion which included the following:

Call on Councillors who…have made potentially defamatory statements and imputations about other Councillors or who through those comments may have brought the Council into disrepute to withdraw these comments and apologise.

At a third council meeting, where a rescission motion was debated in respect of this item, the mayor participated in debate and voted against the motion.

The NCAT decision addresses the key issues of whether the mayor had a non-pecuniary conflict of interest in the subject matter of the motions, and if so, whether that conflict was significant and was managed appropriately according to the Code.

What did NCAT say about non-pecuniary conflicts of interest?

Part 5 of the Code deals with non-pecuniary interests.

Clause 5.1 of the Code provides that non-pecuniary interests are private or personal interests which commonly arise out of family or personal relationships or involvement in sporting, social, religious or other cultural groups or associations, and may include an interest of a financial nature.

NCAT highlighted clause 5.2 of the Code which provides that such an interest exists :

[W]here a reasonable and informed person would perceive that you could be influenced by a private interest when carrying out your official functions in relation to a matter.

NCAT then made some key observations (at [61]):

• ‘Non-pecuniary conflict of interest’ is not a closed category and can include family, friend, and work associations.
• The test does not require an actual conflict of interest to exist. It ‘focuses on the possibility of influence, rather than a certainty‘, from the perspective of a reasonable and informed outsider.
• The test is similar to the apprehended bias test, but the Code requires a higher level of certainty. It also addresses different concerns, being about council administration and functioning rather than judicial decision-making. (For example, the Code excludes personal and political views from the definition of private interest.)
• Clause 5.1 of the Code is not an exhaustive list but rather gives examples of circumstances which might constitute private or personal interests.

How was it applied in this case?

The Code provides a clear process about how non-pecuniary conflicts are supposed to be dealt with. As NCAT summarised at [58]:

Part 5 of the Code of Conduct applies where a councillor has a private or personal interest which does not constitute a “pecuniary interest” as defined and otherwise managed in accordance with the LG Act and Part 4 of the Code of Conduct. Clause 5.4 confirms that the onus is on the councillor to identify any non-pecuniary conflict of interest that they may have in matters that they deal with, to disclose it fully, and to take appropriate action to manage the conflict. How a non-pecuniary conflict of interest is managed depends on whether it is “significant”: if it is, it is to be managed by not participating in consideration or decision-making in relation to that matter, similarly to how a pecuniary interest would be managed (cl 5.10); and if not, by written disclosure (cl 5.11).

NCAT held:

• The mayor did have a legitimate public interest concern with the motions. However, in wanting to vindicate his reputation and the public perception of his character, the mayor also had a non-pecuniary interest under cl 5.1 in the motions;
• The mayor did not disclose this interest in writing or by having it recording in the minutes, as required by cll 5.6 and 5.7 of the Code;
• The conflict was significant as it involved the conferral of a benefit on the mayor, which is a type of conflict considered to be ‘significant‘ under cl 5.9(f) of the Code.
• The mayor did not comply with cl 5.10 of the Code, which required him to not participate in consideration of, or decision-making in relation to, the matter, or be present at or in the sight of the meeting at which the matter was discussed.
• A reasonable and informed person could be presumed to be aware of the background, and such an observer would perceive that in proposing and voting on the motions, the mayor could be influenced by his private interest.

The mayor’s failure to comply with the applicable provisions of the Code meant he engaged in misconduct under as defined in s 440F(1)(b) of the LG Act.

Implications

Given that each council must have a Code based on the Model Code of Conduct, this case has implications for all council officials.

The key message is that non-pecuniary conflicts go beyond what is specified in clause 5.1 of the Code. That clause focusses on conflicts arising from associations of the relevant council official. Clearly, however, a non-pecuniary conflict can arise from the council official’s own personal interests which are not pecuniary interests. This can include the officials concern to protect his or her reputation (as in this case). NCAT said this went beyond being simply a personal view or opinion, and constituted a private interest.

Further, the Code focusses on the perception, not existence, of a possibility that a private interest might influence how official functions are carried out.

As with all probity matters, it is always better to err on the side of caution. All council officials should consider whether they have a personal interest in a matter before dealing with it or whether a reasonable person might perceive that they have such an interest, even if the official knows that they can still bring an impartial mind to the matter.

You can read the full decision of Deputy Secretary, Local Government, Planning and Policy v Byrne [2021] NSWCATOD 53 here.

To discuss this blog, please contact Megan Hawley on 8235 9703 or Lachlan Penninkilampi on 8235 9719.