Fresh Look at Conflict of Interest

Local Authorities (Members' Interests) Act up for review

In his final months as Minister of Local Government Rodney Hide continues to shape the agenda for the sector.

Last week he announced the release of a Discussion Document signalling the start of a review of the Local Authorities (Members' Interests) Act 1968 (the Act). A copy of the Discussion Document can be found here.

Purpose of Discussion Document

Queries about the contracting rule in section 3, and the discussing and voting rule in section 6 of the Act, are among the most difficult and frequent questions Brookfields is asked by its local government clients. In particular the provisions of section 6, which prohibit members from voting or taking part in local authority business on any matter in which they have a pecuniary interest, create a great deal of uncertainty. It also creates confusion with the common law governing conflicts relating to non-financial interests.

The declared purpose of the Discussion Document is to elicit ideas and suggestions for how conflicts of interest in public bodies generally, but particularly in local authorities, should be managed.

Problems with the Act

The Discussion Document notes the following problems with the Act:

• the way it deals with issues and the drafting style are out of date, and difficult to understand and apply;

• the public bodies covered are varied, and have little in common;

• the Office of the Attorney General has difficulties administering it;

• the low monetary limits in the contracting rule impose unnecessary compliance costs, and may deter some candidates from seeking election to local government;

• the 2009 investigation of complaints about Environment Canterbury councillors has contributed to increased uncertainty about the application of the discussing and voting rule.

Comments

The approach to conflicts of interest taken in the Act differs from that applied to crown entities under the Crown Entities Act 2004. Under that legislation the emphasis is on disclosing potential conflicts before they arise, and there is greater flexibility to deal with individuals who have failed to disclose an interest, or to grant an exemption where appropriate. There is no equivalent of the contracting rule in that legislation, which is viewed as just a variant of the conflict of interest provisions.

The Discussion Document poses a series of questions for those interested in contributing to the review. The deadline for receipt of submissions is 18 November 2011.

This is an opportunity for local authorities to seek clearer guidance on conflict issues in new or amended legislation, and the Discussion Document itself is useful in providing an understanding of these issues.

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Last updated: 30 August 2011

The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.