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Intro

The Local Government Act 1995 (the Act) places specific obligations on elected members of council, local government employees and other persons involved in making decisions or giving advice on Council matters to act honestly and responsibly in carrying out their functions.

Generally those obligations include the lodgement of disclosure of interest returns, the lodgement of written declarations and the verbal disclosure of financial interests at council and council committee meetings.

This guideline is based on Part 5, Division 6, Subdivision 1 of the Act. The guidelines are an advisory guide issued for information purposes to assist those persons captured by this area of the Act to become aware of their respective responsibilities and requirements under the financial interest provisions.

These guidelines, however, do not provide legal advice and you should seek your own legal advice on any issues of concern. The guidelines are in a question/answer format. Where appropriate it identifies the relevant section of the Act and regulations. Details of the guidelines can be accessed online on our website and particular sections of the Act can be found at the State Law Publisher's website. It is suggested that the guidelines be read online so that the hyperlinks can be fully utilised. You should take care that any information relied upon in these guidelines, including hyperlinked legislation, is the most current version.

The guidelines should be read in conjunction with the relevant provisions of the Act. The onus is on elected members, local government employees and other relevant persons to determine whether they are affected by the financial interest provisions in relation to a matter under consideration by the council. The guidelines have been designed to assist people to comply with their financial interest obligations. It should be kept in mind that the guidelines have no legal standing.

Given the importance of probity, accountability and transparency, persons affected by the financial interest provisions of the Act are advised to err on the side of caution and disclose an interest in any matter before council or council committee where they may, or may appear to have, an interest. When in doubt about a financial interest, persons affected should consider obtaining their own legal advice on the matter before proceeding.

Elected members, local government employees and other persons must also be mindful of their obligation to deal with personal interests not regulated under the financial interest provisions of the Act. Such interests may give rise to a conflict of interest that should be managed according to the Local Government (Rules of Conduct) Regulations 2007 or the local government’s code of conduct. It is suggested that reference be made to the Department’s Guidelines on “Interests Affecting Impartiality” Guideline Number 2.

The guidelines are not designed to be an exhaustive document. Where a matter raises complex questions of law or where there is a real possibility of a financial interest or if a matter is otherwise highly contentious, further legal or professional advice should be sought before taking action or making a decision at a council or council committee meeting.

Financial interests

What is a financial interest?

If you think you may have a financial interest in a matter, you should consider sections 5.60A, 5.60B, 5.61 and 5.63 of the Act and associated regulations. These sections set out the statutory definition of the various categories of a financial interest which include a direct financial interest, an indirect financial interest and a proximity interest.

Before examining what is a financial interest some terms need to be clarified. These terms are:

Who is a relevant person? (section 5.59)

A relevant person is a council member or a member of a committee, an employee who provides advice or a report to Council or a Committee, or has a delegated power or duty. It also includes a person who, under a contract for services with a local government, provides advice or a report on a matter.

Who is a Person that is closely associated to the relevant person? (section 5.62)

The following persons are to be treated as being closely associated with a relevant person:

  • a person who is in partnership with the relevant person;
  • an employer of the relevant person;
  • a person who is a beneficiary under a trust, or an object of a discretionary trust, of which the relevant person is a trustee;
  • a person who, within the previous 12 months, was a client or adviser of a relevant person;
  • a body corporate:
    • of which the relevant person is a director, secretary or executive officer; or
    • in which the relevant person holds shares having a total value exceeding $10,000 or one percent of the total value of the issued share capital of the company, whichever is less;
  • a person who is the spouse, de facto partner or child of the relevant person and is living with the relevant person;
    • the relevant person is a council member and the person – 
    • gave a notifiable gift (refer to “Provider of election-related gifts”) to the relevant person in relation to the election at which the relevant person was last elected; or
    • has given a notifiable gift to the relevant person since the relevant person was last elected; or
  • the relevant person is a council member and since the relevant person was last elected the person:
    • gave to the relevant person a gift that section 5.82 requires the relevant person to disclose; or
    • made a contribution to travel undertaken by the relevant person that section 5.83 requires the relevant person to disclose; or
  • the person has a relationship specified in any of the first five categories above in respect of the relevant person’s spouse or de facto partner if the spouse or de facto partner is living with the relevant person.

When does a person have an interest? (section 5.60)

For the purpose of the financial interest disclosure provisions you will be treated as having an interest in a matter, if either you (as a relevant person), or a person with whom you are closely associated, has:

  • a direct or indirect financial interest in a matter; or
  • a proximity interest in a matter.

What is a direct financial interest? (section 5.60A)

The Act provides that:

A person has a financial interest in a matter if it is reasonable to expect that the matter will, if dealt with by the local government, or an employee or committee of the local government or member of the council of the local government, in a particular way, result in a financial gain, loss, benefit or detriment for the person.

The elements are:

  • there is a matter to be dealt with;
  • if the matter were to be dealt with in a particular way, it would be reasonable to expect the person to enjoy a financial gain or benefit, or suffer a financial loss or detriment.

All elements must exist for there to be a direct financial interest. When considering the elements to test whether you have a direct financial interest in a matter, remember that the same test must be applied to persons with whom you are closely associated.

What is a reasonable expectation?

It must be objectively reasonable to expect that a particular decision will result in a financial gain, loss, benefit or detriment for the person (or person with whom he or she is closely associated). Further, that question is to be addressed at the time the matter is to be dealt with by the relevant decisionmaker(s). Therefore, it may not be reasonable to entertain such an expectation if the prospect of any gain, loss etc from the decision depends on mere speculation as to future events. For example, it could be that the person (or closely associated person) may be in a position to gain/lose etc if, at some future time, particular events take place.

However, if the future events, which would place the person (or closely associated person) in a position to gain/ lose etc, can be regarded as certain to take place, or highly probable, then it may still be objectively reasonable to expect that the decision will have the relevant consequences for the person (or closely associated person).

Example

Consider the case of an elected member who is a real estate agent. It could be claimed that the agent would have an interest in the matter of a sub-division approval that is before council as he or she is in the business of selling land. Such a claim would be pure speculation as it could not be established at the time the matter was dealt with by council that the agent would be engaged by the developer to sell the sub-divided lots. However, should the agent have such an agreement at the time the matter is dealt with, or because of previous work for the developer there is a reasonable expectation the agent would be engaged, there would be an interest to disclose.

Another example is provided by the case of Attorney General v. Legg (from 1979). It was claimed that a councillor had an indirect pecuniary (financial) interest in an application for the proposed development of a retail shopping complex.

It was alleged that the fact that the councillor’s legal practice was situated in a nearby shopping complex and the fact that one of his largest clients was a company which owned a major portion of another shopping complex constituted such an interest.

In particular, it was argued that the establishment of a new shopping complex would have a detrimental effect on the councillor’s income since there would be a reduction in the number of leases and/ or level of rents from his client. His own legal practice would also suffer from the reduced number of people coming through the business premises. J.Mclelland of the NSW Supreme Court in his decision refuted these contentions as entirely speculative and too remote.

“There was no reasonable likelihood or expectation that the nature of such a withdrawal would have that effect.”

The fact that a future event, which would give rise to a gain/loss etc to a person (or closely associated person), is contingent on a decision by another person (including a future decision by the local government), will not necessarily mean that there can be no reasonable expectation of that gain/loss etc. Again, it will depend on the situation and in particular on the degree of probability that the contingency will eventuate.

Example

A local government is considering the terms of a redundancy package to be included in its employees’ conditions of employment. Councillor X’s wife is an employee. Councillor X has an interest in this matter because his wife is a closely associated person under the Act. The actual financial interest is not speculative because it forms a financial benefit as part of Councillor X’s wife’s employment contract. If the wife wishes to take such a package if it is offered, and would be likely in that event to be granted the package, it would probably be reasonable to expect that the decision of the local government will have a relevant consequence (i.e. either to allow or preclude, the wife achieving her aim). That is, the contingency (grant of a package) is certain, or highly probable to eventuate. On the other hand, if the wife has no intention of seeking such a package and/or would be unlikely to be granted, then it may not be objectively reasonable to expect the gain/loss etc.

How can a local government deal with matters in a particular way?

The matter must be capable of being dealt with by the local government, or an employee or committee of the local government or member of the council of the local government, in a particular way. Matters can be dealt with by the local government at council or committee meetings or by employees under delegated authority.

Council meetings can deal with matters by approval, rejection, amending recommendations, referring back, laying on the table and other various ways of dealing with matters. Committee recommendations, although not dealing with the matter insofar as making a decision, are part of the decision making process that eventually leads to council dealing with the matter. Therefore, if a matter in which you have an interest goes before both a committee of which you are a member and council, you must disclose that interest at both meetings.

However, where an interest exists in a matter that is dealt with by a committee acting under delegated decision making authority from council and the committee decision is subsequently reported to council for information, the interest need only be disclosed at the committee meeting as council can no longer deal with the matter.

Delays caused by a committee’s decisions during its deliberation process would also be a particular way in which a matter may be dealt with.

Elected members must remember that a financial or proximity interest can exist even though the matter is being dealt with by employees under delegated authority. Therefore you should avoid any involvement in discussions on those matters at meetings that you attend as a member.

Does there have to be a financial effect?

It is important to understand the ways the local government can deal with a matter as the existence of a direct financial interest relies on whether one of the ways of dealing with the matter will give a reasonable expectation that it may result in a financial gain, loss, benefit or detriment for the person. This means that for you, or a person with whom you are closely associated, to have an interest it is not necessary that money has to change hands or that there be immediate financial consequences as a result of a decision. The decision may mean the reasonable expectation of future financial consequences.

Example

You would have a direct financial interest if the decision raises the value of your property, even though you have no immediate intention of selling the property and cashing in on the benefit.

When does a proximity interest exist? (section 5.60B)

The Act requires you to disclose a proximity interest that you, or a person with whom you are closely associated, has in a matter before a council or council committee meeting.

You (or a person with whom you are closely associated) have a proximity interest in any matter that concerns:

  • a proposed change to a planning scheme affecting land that adjoins the person’s land;
  • a proposed change to the zoning or use of land that adjoins the person’s land; or
  • a proposed development of land that adjoins the person’s land (development refers to the development, maintenance or management of the land or of services or facilities on the land).

The existence of a proximity interest is established purely by the location of land, a financial effect on the valuation of your land or on the profitability of your business does not have to be established. It is therefore important that you fully understand when a proximity interest exists.

The person’s land referred to is both land in which you, or a person with whom you are closely associated, have any estate or interest.

Land that adjoins a person’s land is defined by the Act as land that:

  • not being a thoroughfare, has a common boundary with the person’s land;
  • is directly across a thoroughfare from the person’s land; or
  • is that part of a thoroughfare that has a common boundary with the person’s land.

For example, the owner of Lot 13 submits a development application to Council (see Figure 1 on page 9). Councillor A would have a proximity interest as part of Lot 13 is directly across a thoroughfare from his land, Lot 5.

Councillor B would not have a proximity interest as his land, Lot 11, does not have a common boundary with Lot 13, nor is any of his land directly across a thoroughfare.

Approval for road works (as indicated in Figure 1) in First Street is before Council. Councillor B has a proximity interest as part of the thoroughfare on which the road works will be undertaken has a common boundary with Councillor B’s land, Lot 11.

Councillor A does not have a proximity interest as there is no common boundary.

When does an indirect financial interest exist? (section 5.61)

The Act states that a reference to an indirect financial interest of a person includes a reference to a financial relationship between that person and another person who requires a local government decision in relation to the matter. The word “includes” in this context is not exhaustive and therefore other indirect financial interests do exist.

An indirect financial interest also includes an interest a person has in a matter if it is reasonable to expect that the matter will, if dealt with by the local government in a particular way, result in an indirect financial gain, loss, benefit or detriment for the person.

The Act does not expressly define “financial relationship”, therefore it should be taken to have its ordinary meaning of a relationship which is of a financial nature (whether or not the relationship also has other aspects). For example, you may have a personal relationship with a person (e.g. friendship), but also a business relationship with that person.

It is to be remembered that the existence of an indirect financial interest in a matter can be established by showing that you, or a person with whom you are closely associated, has a financial relationship with a person requiring a local government decision in relation to that matter. There is no requirement to establish a financial gain, loss, benefit or detriment in this instance, the mere existence of a financial relationship and the requirement for a decision is sufficient for a breach of the provision to have occurred.

An example of where an indirect financial interest exists is:

Example

A developer made an application that requires a local government decision in relation to the closure and purchase of a thoroughfare. A councillor is an employee and director of a real estate business that leases its office from the developer. The councillor is “closely associated” with the real estate company that has a financial relationship (flow of money) in the form of the lease with the developer (who is the other person that requires a local government decision in relation to the matter). Clearly, the real estate company as a closely associated person to the councillor has an indirect financial interest in the matter to be discussed at a council meeting.

Is it important that I understand the concept of a closely associated person? (section 5.62)

Yes, it is important. As highlighted previously, the Act requires that you disclose any interests that you or persons with whom you are closely associated have in matters before a meeting you attend as a member. It is important that you become familiar with those persons that the Act defines as being closely associated because, although in many cases there may be no financial affect on you whatsoever, if there is a financial affect on the person, the Act deems that you have the same interest and you must disclose it.

Figure 1: The relationships covered by ‘proximity’ interests

The relationships covered by ‘proximity’ interests

 

Should I have an awareness of certain types or classes of person? (section 5.62(1))

Yes, you should be reasonably familiar with the types or classes of closely associated persons in order to assess your position in relation to whether or not you have an interest to disclose.

Partnerships (section 5.62(1)(a))

If you are in partnership with a person who has a matter before council or a committee of council which could result in a financial gain, loss, benefit or detriment for that person, you are deemed to share the interest and must disclose it. It does not matter that the partnership is not associated with the matter before the meeting.

Example

You have a partner in a dry cleaning business. That partner has a development application for his caravan park before a meeting of council. You are not a partner in the caravan park and council dealing with the development application will have no financial affect on you, however, as the Act deems your partner to be closely associated with you, you must disclose an interest in the development application at the meeting.

Employer (section 5.62(1)(b))

If your employer has a matter for consideration before council or a committee of council, you are deemed to have an interest as a result of your employment.

Example 1

A negative decision on a matter that your employer has before a council meeting could lead to job losses, of which your job may be one. Alternatively, any expansion prospects as a result of the decision could enhance your promotional prospects, or security of employment. In that situation you should disclose your interest.

Example 2

Your spouse, who lives with you, is employed as a gardener at a BHP site. BHP has a development application before the council. You are deemed to have an interest as your spouse who is a closely associated person has a financial interest as a result of her employment.

Trusts (section 5.62(1)(c))

Any beneficiary or object of a discretionary trust, of which you are a trustee, that has a matter before council is regarded as being closely associated with you. If the matter has a financial affect on the beneficiary or object of a discretionary trust, you are deemed to have that interest and must disclose it.

Prescribed persons [section 5.62(1)(ca)]

Client or advisor of a relevant person [Admin Reg. 20]

If an elected member of your local government has supplied legal or financial professional services to you within the past 12 months that person is a closely associated person with you.

Similarly, if you as an elected member have supplied legal or financial professional services to another elected member within the past 12 months that elected member is a closely associated person to you.

Body corporates [section 5.62(1)(d)]

This impacts on you if:

  • you are a director, secretary or executive officer of a body corporate; or
  • you hold shares in that company which have a total value exceeding either $10,000 or one percent of the total value of the issued share capital, whichever is less; and
  • that company has a matter before council for consideration, you are deemed to have an interest that must be disclosed.

The value of a share is the closing price of the share on the Australian Stock Exchange Limited on the last trading day of the preceding financial year. If the share was not listed on the Australian Stock Exchange Limited on the last trading day of the preceding financial year the nominal value of the share is used.

The nominal value of the share is the issued value of the share as part of the authorised share capital, also known as the par value.

If you hold shares with a value below the prescribed amount, you are not treated by the Act as being closely associated to the body corporate. However, you will still need to determine whether the ways in which the local government can deal with the matter will affect the value of your shares. If the value of your shares is affected you have a direct financial interest you must disclose.

Spouses, de facto spouses and children (section 5.62(1)(e))

If your spouse (including a de facto spouse) or a child of yours has a matter before council for consideration and there is a financial effect on them, you are deemed to have an interest in the matter, provided that at the time of the meeting at which the matter is discussed, your spouse, de facto spouse or child is living with you.

Example

Your spouse, whilst living with you, owns a company which is to supply your local government with goods and services. You do not have any shares in your spouse’s company, you are not a partner, nor an employee, nor have you lent money to establish or run the business, nor acted as a guarantor for bank loans etc. However, you are still regarded by law as having an interest in the matter that involves your spouse’s company because of a close association.

Under section 9.44 of the Act, a spouse or de facto spouse is presumed to be living with you unless the contrary is proved (for example by production of a separation order). No such presumption is made in respect of a child.

If a child of yours has a matter before council for consideration and the child is not living with you, you are not deemed to have an interest that must be disclosed regardless of any financial effect on your child.

However, even if a spouse, de facto spouse or child is not living with you it is still possible for you to have an interest in a matter they have before the council if the council’s determination of the matter could have a financial effect on you.

Example

If a matter before council has the potential to affect your child’s property and you have guaranteed repayment of a loan on the property, you may have an interest. In this case, the disclosure would be made because of the general requirement to disclose direct financial interests rather than because of the specific requirements of section 5.62 about closely associated persons.

Provider of election-related gifts (section 5.62(1)(ea))

A person who gives you a notifiable gift in relation to the election at which you were last elected, or a gift since you were last elected, is deemed to be a “closely associated” person within the meaning of the Act if you were required by the Local Government (Elections) Regulations 1997 to provide information on that gift. Accordingly, for the term of your office you must disclose an interest in any matter that the person has before a meeting of which you are in attendance as a member.

The Provider of a gift that is to be disclosed in annual return (section 5.62(1)(ea) & (eb))

A person who gives you a gift of a kind that is to be disclosed in your annual return in accordance with sections 5.82 and 5.83 of the Act is deemed to be a “closely associated person” within the meaning of the Act if you are required to disclose the receipt of that gift or a contribution to travel in your annual return.

Ancillary relationships of spouses and de facto spouses (section 5.62(1)(f))

Under this provision you are deemed to have an interest in situations where:

  • your spouse or de facto spouse (who is living with you) has a close association with a person or organisation defined in sections 5.62 (a) to (d); and
  • that person or organisation has a matter before council or a committee of council that has financial consequences for that person or organisation.

Example

If your spouse or de facto spouse is a trustee and a beneficiary under that trust has a matter before council for consideration, you are deemed to have an indirect financial interest that you must disclose.

Likewise, if your spouse or de facto spouse holds shares worth more than the prescribed amount in a body corporate which has a matter before council for consideration, you are deemed to have an interest and must disclose it.

The same would apply for your spouse or de facto spouse being in a partnership, a director of a body corporate or in the employment of another person who has a matter for consideration before council.

Do I have a duty to vote? (section 5.21(2))

Each elected member and each member of a committee that has been delegated a power or duty, if present at the meeting as a member, must vote on each matter that comes before the meeting for a decision. If you fail to vote you commit an offence under the Act.

The only occasion on which the member is not to vote is where the member has disclosed an interest in the matter and neither the meeting nor the Minister has allowed the member to participate.

What should I consider before deciding to disclose?

The decision on whether to disclose an interest is yours and yours alone. Nobody can direct you to disclose or disclose for you.

When you receive the agenda of a council or committee meeting you are to attend as a member, examine the report for each agenda item and determine the ways that the meeting could deal with that item, then consider whether if the matter is dealt with in any of those ways would it be reasonable to expect that there would be a financial effect on you or a person with whom you are closely associated. You also need to consider whether you have a proximity interest in any items. This process will assist you to determine whether you have an interest to disclose and the nature of the interest.

The interest may be a change in the valuation of your property or a change to the terms of a contract to which you are a party. Your employer’s business could be affected by the decision, or a decision could have an effect on the profitability of your spouse’s partner’s business. Interests disclosed on your primary and annual returns must also be considered.

If you determine that you, or a closely associated person, have an interest in one or more matters to be discussed, what should you do?

First you should consider whether:

  • the interest is one which is exempt and need not be disclosed; or
  • it is one for which the meeting or the Minister may give you approval to participate.

f the interest is not exempt or approval cannot be given for you to participate, you then need to disclose the interest in the manner described under “Disclosing Your Interest”.

Are there any exempt interests? (section 5.63(1))

The aim of the financial interest provisions is to prevent members and employees participating in the discussions and influencing decisions for their personal financial gain or loss. However, the Act acknowledges that the need for community representation in the decisionmaking process at council and committee meetings may, on some occasions, outweigh this aim and therefore it allows for members and employees to participate even though they may have an interest.

Consequently some interests are exempt from the disclosure requirements to allow participation by all members. As stated earlier, the decision of whether to disclose is yours and yours alone. The exemptions are there to assist you to participate more fully in the decision making process by making use of the exemptions. However, before doing so give consideration to whether they apply in your circumstances.

Prescribed exempt interests are as follows:

An interest common to a significant number of electors or ratepayers in your local government area (section 5.63(1)(a))

If the nature and extent of your interest is no more or less than that affecting a significant number of the electors or ratepayers of your local government district then the interest is considered common between them and you and no disclosure is required.

It is not intended that the provision apply to a significant number of electors or ratepayers in only, for example, a ward.

If you wish to use this exemption you would need to establish:

  • the nature and extent of your interest;
  • the number of either electors or ratepayers that have the same interest as you, both nature and extent; and
  • whether that number could be considered to be significant.

As the Act does not define a significant number, what could be considered significant?

This will vary from case to case and could relate to a significant number of all ratepayers or electors or a particular class of ratepayers or electors.

In attempting to assess whether the number of electors or ratepayers with which you have a common interest is significant you need to consider the word “significant” as it is used in every day language.

The number would certainly have to be “sufficiently large to be important” and would need to be a number that could not be brushed aside as trifling. It must be of sufficient number to have some real meaning. It certainly need not be as many as half of the electors or ratepayers, although clearly one or two percent would not be enough. It is important to identify the nature and extent of your interest before you make a decision about whether you have an interest in common. The examples provided may assist you with your deliberations.

Example

Council is considering the issue of extended trading hours. Two elected members are shop owners. One discloses an interest and does not participate. The other decides the interest is in common because a significant number of electors or ratepayers shop and would benefit by the extended hours. Who is correct?

The answer is determined by establishing the exact nature of the interest. Extended trading hours, whether a shop opens or not during the extended hours, will affect the potential takings and profit of the shop. Therefore the interest is the effect that the decision of council will have on the profitability of the shop.

It could not be claimed that an interest in the profitability of a shop would be common to a significant number of electors or ratepayers as only a small number own shops and the interest would only be common with these people. There is no interest in common with the significant number of people who may actually shop as the nature of the interest is different. Clearly the member who disclosed an interest was correct.

Conversely, a decision to allow extended trading hours at a local shopping complex would enable a customer to shop more frequently and potentially lead to lower prices. However, any interest you would have as merely a customer, would clearly be one in common with a significant number of people in the community. Disclosure in these circumstances would be unnecessary.

You are responsible for determining whether the exemption can properly be claimed. It would be prudent to seek advice if you have any doubt, but keeping in mind that ultimately you are responsible for the decision.

The determination of whether you have an interest in common with a significant number of electors or ratepayers requires the exercise of judgment on your behalf. A mistaken assessment by you of your circumstances, and accordingly a failure to disclose an interest, may mean that you are in breach of the Act.

An interest in the imposition of any rate, charge or fee by the local government (section 5.63(1)(b))

As a member, or an employee giving advice to council or a committee, you are not required to disclose any interest you have in the imposition of any rate, charge or fee.

This applies in all respects and to all categories of rating, including differential rating, specified area rates or decisions regarding moves from an unimproved valuation base to a gross rental value base.

It also applies for the setting of service charges, fees for services (eg hall hire, rubbish charges) and to the imposition of a rate, charge or fee under legislation other than the Local Government Act 1995.

The specific exemption applies only in relation to the imposition of rates, fees and charges. It does not apply to other matters. Thus, if council is considering action against you for non-payment of a rate, fee or charge, the decision would relate to the recovery of the debt, not the imposition of the debt. Consequently, you must disclose any interest you have.

An interest relating to local government payments and gifts to its members (section 5.63(1)(c))

You may participate fully in discussions and voting on the payment of allowances, expenses benefits or gifts provided by the local government to you as a member.

This includes mayors or presidents participating in the question of their local government allowance. This exemption applies only to those allowances, expenses, benefits or gifts authorised by the Act.

The exemption only applies for those fees, reimbursements, allowances or gifts in accordance with Part 5, Division 8 of the Act.

An interest relating to the pay, terms or conditions of an employee unless:

  • you are the employee; or
  • either your spouse or child is the employee (if the spouse or child is living with you) [s5.63(1)(d)]

If you are a local government employee who is giving advice or a report to a meeting on the pay, terms or conditions of employees, you need not disclose an interest unless the advice or report relates to you or to a spouse or child who is living with you.

Thus, employee A, who is giving advice to council need not disclose an interest in a report about the pay of employee B. However, this exemption would not apply to employee A if he or she was reporting on his or her own pay level.

If you are a council or committee member you need not disclose an interest in a matter relating to the pay, terms or conditions of an employment contract unless the contract being discussed is one that you, or a person with whom you are closely associated has with the local government.

An interest arising only because you are, or intend to become, a member or officebearer of a body with non-profit making objects (section 5.63(1)(f))

If the interest you have in an association with nonprofit making objects arises only because you are a member or officebearer, there is no requirement to disclose that interest should that association have a matter before council or a committee of council.

A body with non-profit making objects is one where any profit made by the body is not distributed to the members. These are usually bodies such as sporting clubs and community bodies that are formally incorporated under legislation.

Example

If you are a member, or even the treasurer, of a non-profit community sporting organisation to which you pay an annual subscription but have no other interest in the association, then all matters relating to that club which come before council are ones to which the exemption would apply. Consequently you would be able to participate fully in the debate and vote.

However, the exemption would not apply to you if the matter before the council related to:

  • a current loan owed by the club to you;
  • an overdraft if you were a signatory to a guarantee for that debt; or
  • a lease of land to or from the club if you were the lessor or lessee; or x if you are paid an honorarian.

An interest arising only because you are, or intend to become, a member, office bearer, officer or employee of a Department of the Public Service of the State or Commonwealth or a body established under this Act or any other written law (section 5.63(1)(g))

If the interest that you have arises only because of your employment or intended employment by the Commonwealth or State, your membership or intended membership of a body established under written law or you are, or might become a member of the council of a regional local government, there is no requirement to disclose an interest should a matter concerning that relevant body come before council or a committee of council.

This exemption allows you to participate in the decision-making process relating to your nomination to the council of a regional local government even though you may benefit from the payment of sitting fees and other reimbursements if elected to the regional body. The exemption also applies if you are a member of a regional local government and the meeting is considering a matter relating to the local government of which you are an elected member.

Examples

An elected member may teach at a government school that is requesting financial assistance from the council. As the Education Department owns the school and is the employer, the member is closely associated and therefore has an interest that should, in other circumstances, be disclosed. However, as there could be no financial impact on the teacher as a permanent employee of the Department, section 5.63(1)(g) provides for an exemption.

Another example would be where the member is also a member of a Statutory Board and that Board is conducting business with the local government. There is no need to disclose any interest in such circumstances provided the interest arises only because of your membership of the Board.

However, any other interest that may arise would need to be disclosed. For example, the funds requested may be for the purchase of an item that a business owned by the teacher (or someone closely associated) is to supply. Here, although the teacher is employed by the State, the benefit received comes about for reasons other than her employment.

Given the trend towards employment contracts that reward the performance of government employees, elected members who are government employees or members of a relevant body should satisfy themselves that any interest arises only because of their employment or membership before using this exemption.

A prescribed interest (section 5.63(1)(h))

The regulations prescribe exemptions for:

  • An interest relating to an allowance to which section 5.98A (allowance for deputy mayor or president) and section 5.99A (allowance in lieu of reimbursement of expenses) refers.
  • An interest in the payment by the local government of money that the local government is legally obliged to pay.

Example

You have supplied goods or services to council in accordance with a legal contract and the only question before council for consideration is for payment of the contract. As there is a legal obligation for council to make payment, you are entitled to participate and vote on that payment authorisation even though you may have a direct interest in the matter which is the cause of that payment or be a direct beneficiary of the payment. The point at which your interest should have been disclosed was at the time of the decision by council to enter into the contract for the particular service.

  • An interest that arises in a question asked during public question time, except where a question in which you have an interest is directed to you. In such instances you are to make a statement disclosing the interest and allow another person to respond to the question. There is no requirement to leave the room. However, you must ensure that your disclosure is recorded in the minutes.
  • An interest relating to the provision by a local government of refreshments, meals or accommodation to persons:
    • attending a meeting or function of the local government;
    • attending a conference relevant to local government business; or
    • on other local government business.
  • An interest relating to:
    • the provision by the local government of office equipment to a relevant person for both local government purposes and occasional personal use;
    • a relevant person becoming the owner of office equipment:
      • that is provided by the local government as above; and
      • that has only minor residual value after use by the relevant person; or
      • setting an amount of a minor residual value.

       

     

     

     

 

 

The local government may wish to provide all elected members with portable computers to assist them in their role. For all practical purposes the computer will have no value at the end of the elected member’s four-year term of office and allowing the member to keep the computer is a satisfactory solution. The exemption applies for both the decision to purchase the computers and for the decision that allows elected members to keep the computer after a certain period.

  • An interest relating to:
    • the making of a decision by a local government for the purposes of defining hospitality under its code of conduct; or
    • a gift that can be accepted by a relevant person in accordance with the local government’s code of conduct, Local Government (Administrative) Regulations 1996 and Local Government (Rules of Conduct) Regulations 2007.

     

 

Exemptions in relation to town planning and development matters (section 5.63(2)(3)(4) and (5))

The Act provides that in certain circumstances in which interests arising in town planning and development matters need not be disclosed. Because of the number of planning and development applications that come before councils and the likelihood that in many cases the valuation of your property may be affected, these exemptions should be thoroughly understood.

You have a financial interest if the valuation of land that you own or have an estate or interest in may be affected by:

  • any proposed change to a planning scheme for any area in the district;
  • any proposed change to the zoning or use of land in the district; or
  • the proposed development of land in the district (development refers to the development, maintenance or management of the land or of services or facilities on the land).

However, the exemption provides that you are not required to disclose that financial interest unless the land subject of the proposed changes or development is your land or land adjacent to your land.

The Act does not define “adjacent”. However, dictionaries define adjacent as “adjoining” or “near to”. Legal precedents recognise that “adjacent” has a wider meaning than “adjoin”. Although the word indicates a degree of proximity, its meaning is not necessarily confined to a physical link, but is to be determined as a question of fact. Accordingly, there is no certain measure that can establish that within a prescribed distance one property is “adjacent” to another.

All that can be said is that a degree of proximity is required in the particular circumstances applying.

It is important to understand that this exemption only applies in relation to effects on the valuation of your land. If the land subject to the changes or development has a common boundary with your land a proximity interest exists and is not exempt from disclosure. Proximity interest relies on physical location, not effects on valuation.

The example explains a situation in which a ruling was sought on whether land was adjacent. It must be remembered that it is only an example and the circumstances of each situation must be considered separately

Example

A proposal was before a council to redevelop a portion of a housing estate. Estimates from the developer suggested that the value of all surrounding properties in the suburb would increase by 40 percent. A councillor lived three streets from the planned redevelopment. Advice to the councillor was that his property was not considered to be adjacent and therefore under section 5.63(2) he was entitled to participate in the discussion and decision-making procedures in relation to the redevelopment.

In addition to any financial interest relating to the effect on the valuation of your land or proximity interest, you will also need to consider whether you have any other financial interest arising because of the proposed changes or development.

Figure 2: Section 5.63(2) and (3) of the Local Government Act 1995.

Some circumstances in which interests related to land valuations need not be disclosed.

A workflow of some circumstances in which interests related to land valuations need not be disclosed.

 

For example, if a planning scheme is being amended to allow a business to be established in competition with a business you own and the new business is likely to have a financial impact on your business, there is potentially a financial interest to be disclosed. This may even apply if the business is being established in another part of the district some distance from your own. (Refer also to Figure 2.)

General comment on exempt interests

It must be stressed again that the decision to disclose an interest is yours and yours alone. Only you will know all the facts relevant to your situation and accordingly you must decide whether you have an interest in a matter and, if so, what the nature and extent of that interest is. You will also need to decide whether any of the exemptions allowed by the Act apply.

Note: If you are in any doubt, you should seek advice from the CEO, your legal practitioner or the Department of Local Government. If after receiving advice you still have doubts it may be in your best interests to make a disclosure as severe penalties apply.

If the interest is properly regarded as exempt, then you are entitled to participate and no disclosure is required.

Disclosing your interest (section 5.65)

How should an interest be disclosed?

If you have an interest in any matter to be discussed at a council or committee meeting that you will be attending as a member, you must disclose the nature of that interest either:

  • in a written notice given to the CEO before the meeting; or
  • at the meeting itself, immediately before the matter is discussed.

Where you have given written notice of your disclosure to the CEO before a meeting, the CEO must ensure that the notice is given to the person who is to preside at the meeting. The presiding person must then, immediately before discussions are commenced on the relevant item, bring the notice and its contents to the attention of the persons attending the meeting (section 5.66).

Alternatively, if you decide to disclose your interest verbally at the meeting, it must be done immediately before the matter in which you have the interest is discussed by the meeting.

Although by giving written notice you have complied with the disclosure requirements of the Act, it is still your responsibility to ensure that you leave the room when the matter in which you disclosed an interest is discussed. It is also your responsibility to ensure that your departure and disclosure are recorded in the minutes correctly.

If the practice at your meetings is for disclosures of interests to be called for at the start of a meeting, this can continue, but the disclosure does not absolve the member from the need to disclose the interest again immediately before those matters are discussed.

The Act intends that there be an association between the time of disclosure and the discussion on the matter in which the interest exists. That association will be emphasised by your disclosure or the reading out of your disclosure, and your subsequent departure from the meeting.

If your council deals with committee recommendations en bloc or by exception, it is important that you have those matters in which you wish to disclose or have disclosed an interest at the committee meeting withdrawn and dealt with separately. This allows you to make a disclosure in that matter in which you have an interest but still participate in the discussion and decision making process for all other committee recommendations. Members would need to withdraw the item at the appropriate time or procedures may be developed whereby staff would automatically identify matters in which interests have been disclosed at committees and list them separately on the agenda for the council meeting.

What is to be disclosed?

When disclosing an interest you are required on all occasions to disclose the nature of the interest. You should ensure that the full disclosure and the times you left and re-entered the meeting are recorded in the minutes of the meeting. In recognising the way in which you, or a closely associated person, may be affected financially or by proximity with the matter being dealt with by the meeting, you have identified the nature of the interest. When disclosing the interest you should state it in such a way that will enable others to clearly understand what the nature of your interest is.

The examples below will assist you in determining the nature of interests that you or a closely associated person may have and how your disclosure should be expressed.

Example 1

If you have shares in a company that has a matter before the meeting, you are closely associated with that company. You therefore have an interest that must be disclosed. You could disclose the nature of your interest as ‘I am closely associated with the company making the application’.

Example 2

If an application before the meeting is in respect to your land, or land adjacent to yours and the valuation of your land may be affected, you are required to disclose that interest. You could disclose the nature of your interest as ‘The application may affect the valuation of land I own’.

Example 3

Should you be a contractor that has tendered for works with the local government, then when that tender is discussed by the meeting, you must disclose the nature of the interest. The nature of the interest could be described as ‘I (or my business) have submitted a tender for the contract to be discussed by the meeting’.

Example 4

You own and operate a business and there is an application before the meeting for a rezoning that may both affect the valuation of the land occupied by your business and the profitability (increase or decrease) of the business. The land the subject of the rezoning is not adjacent to the land occupied by your business and therefore is considered not to effect the valuation of the land upon which your business is located. This is an exempt interest. However, the effect on the profitability is not an exempt interest but a direct financial interest and must be disclosed. You could disclose the nature of your interest by saying ‘The profitability of the business I own and operate may be affected by the rezoning’.

Example 5

Your land has a common boundary with land subject to a decision by Council. You would disclose the nature of your interest by saying “I have a proximity interest in the land to which this matter relates”.

Are disclosures recorded? (section 5.73 and Administration Regulation 11(b))

Having disclosed the nature of your interest, for your own protection you must make sure that the full details of your disclosure and the time of departure from and re-entry to the meeting have been fully recorded in the minutes before the minutes of the meeting are confirmed. If your disclosure is not recorded, you should get it recorded at the next meeting before the minutes are confirmed.

Must a member leave the room after disclosing an interest? (section 5.67)

If you have disclosed an interest in writing before the meeting or immediately before the matter is discussed during the meeting, you must not:

  • preside at the part of the meeting relating to the matter; or
  • participate in, or be present during any discussion or decision-making procedure relating to the matter.

In brief, having disclosed an interest you must leave the room. You may re-enter the room and be present during the discussion on the matter in which you disclosed an interest only if allowed by the members present.

The Minister for Local Government may also allow you to be present. (refer to “Can the Minister give approval to participate?”).

Can members be allowed to stay and participate? (section 5.68)

Members allow you to be present (section 5.68(1)(a))

After disclosing the nature of your interest in a matter to the meeting, or the presiding person having read out the disclosure, you may, without further disclosure, request the remaining members present who are entitled to vote (you are not entitled to vote) to allow you to be present during any discussion or decision-making procedure on the relevant matter.

Members allow you to participate (section 5.68(1)(b))

After disclosing the nature of your interest in a matter at a meeting, or the presiding person having read out the disclosure, you may, after also disclosing the extent of your interest, request the other members present to allow you to preside (if you are the presiding member) or, to participate in discussions and the decision making procedures relating to the matter. To enable the remaining members to make this judgement you must also disclose the full extent of your interest.

Section 5.59 of the Act defines the extent of an interest to include the value and amount of the interest. The following examples will assist you in determining how to express the extent of the interest to be disclosed.

Example 1

If you disclose the nature of your interest as: ‘I have shares in the company making the application, the value of which may be affected’, the extent to be disclosed could be that ‘The value of the shares I have in the company is $11,000 and this value may be affected by a five percent increase’.

Example 2

If the nature of the interest you have disclosed is ‘The application may affect the valuation of land I own’, you could disclose the extent of the interest as ‘The effect may be a 10 percent increase in the valuation of the land I own which equates to $4700’.

On some occasions it may prove difficult to precisely state the value and amount (extent) of the interest that you have. For example, how do you value the possible effect a proposal before the meeting may have on the valuation of your land. It would be appropriate on these occasions to estimate as closely as possible the extent.

You should advise the meeting that you have estimated the extent and outline the method by which you arrived at the estimation.

After the request is made to participate you must leave the room while the request is put to the meeting and the members decide whether to allow you to stay. The other members may not feel that they can freely consider your request and its likely implications for council or the committee while you are present.

The remaining members present can allow you to participate only if they decide that the interest is either:

  • so trivial or insignificant as to be unlikely to influence your conduct in relation to the matter; or
  • held in common to a significant number of electors or ratepayers.

These determinations are based on the extent of the interest. Thus when considering a member’s request to participate, other members must make certain they are aware of the full extent of the interest of the member making the request. If you are not happy that a member has fully disclosed the extent or believe that the method of estimation is unsatisfactory, seek more information. You cannot justifiably decide if the interest is trivial or insignificant or held in common without knowing the full extent of the interest. For instance $10,000 worth of shares in a large organisation such as Telstra may be trivial or insignificant whereas $500,000 may not.

If allowed by the members to be present, you may return. In determining your request members will also decide the extent of your participation. They may allow you to speak only, vote only or both speak and vote. There is no right of appeal against the decision of the meeting.

Figure 3: Section 5.68 (1) of the Local Government Act 1995. Some circumstances in which members may allow you to stay and participate.

A workflow of some circumstances in which members may allow you to stay and participate.

Example 1

You are one of 500 store holders in a market complex that has been subjected to damage by vandalism because the area adjacent to the markets has inadequate or non-existent street lighting.

The community in general has expressed deep concern about the matter. Everyone agrees that something must be done. The meeting at which you are in attendance examines the fact that you have an interest as one of the shopkeepers, but decides that your interest is held in common with all the other shopkeepers and that 500 store holders are a significant number of electors or ratepayers. Despite the fact that you would benefit financially from the reduction in vandalism which might be directed, amongst others, to your own shop, the meeting can allow you to participate in the discussions or decision-making procedures in relation to the matter.

Example 2

You hold $11,000 worth of shares in BHP and the company has a matter before the meeting. You disclose your financial interest as required by the Act but because of the size of BHP you believe your interest to be trivial. At your request the other members can resolve to allow you to participate as the interest is so trivial or insignificant as to be unlikely to influence your conduct in relation to the matter.

Should the members not allow you to be present or participate, then as you have already disclosed your interest in the matter to be discussed, you have no alternative other than to remain absent from the meeting as required by the Act.

Recording of disclosure (section 5.68(2) and Administration Regulation 11(f))

Having disclosed the extent of your interest, for your own protection make sure that your disclosure is recorded, in full, in the minutes together with details of any participation allowed by the meeting. The resolution of the meeting which allows you to participate should also be recorded in the minutes in the words of the reasons allowed under the Act (i.e. trivial, insignificance or in common). If these matters are not recorded you should get them recorded before the minutes are confirmed.

How valid is the approval given by members’ to participate?

If the remaining members present at a meeting, acting in good faith, allow a member to participate under the provisions of section 5.68 of the Act, then that judgement should be capable of withstanding any challenge in the Courts.

Council has the power under the Act to decide such matters and Courts are reluctant to overturn such a decision unless normal administrative law rules have been abused, or there has been an attempt to defraud or corrupt.

There is an onus on the disclosing member to make a full disclosure of the interest to the meeting and respond to any requests for further details.

Can the Minister give approval to participate? (sections 5.69 and 5.69a)

Elected Members

If you have disclosed the nature of your interest in a matter, the council or the CEO (but not you) may apply to the Minister for Local Government to allow you to participate in the part of the meeting, and any subsequent meeting, relating to the matter. An application made to the Minister must include:

  • details of the nature of the interest disclosed and the extent of the interest; and
  • any other information the Minister requires.

If the Minister is of the opinion that:

  • there would not otherwise be a sufficient number of members to deal with the matter; or
  • it is in the interests of the electors or ratepayers that you participate.

You may be allowed to participate in discussions and/or the decision-making procedures relating to the matter to the extent, and on such conditions, as the Minister may determine.

The Minister can allow you to participate in discussions on a matter for the meeting and subsequent meetings. An example would be where the Minister allows a member to participate in the development of a town planning scheme over a number of meetings or a specified period of time.

The Minister may also allow qualified presiding members who have disclosed an interest in a matter to preside at a meeting while the matter in which they have disclosed is dealt with. It is an offence under the Act to contravene a condition imposed by the Minister.

It should be noted that you are not prevented from discussing or participating in the decision-making process on the question of whether an application to allow you to participate should be made to the Minister.

As members must disclose an interest before an application can be made to the Minister, it is suggested that whenever possible members give written notice of their interests to the CEO as soon as possible before the meeting. This will enable an application to be lodged and a decision to be made by the Minister before the meeting.

Applications are normally processed quickly; however, late lodgement of an application could mean a decision of council being delayed to a later meeting. Should the CEO see the need to lodge an application, the extent of the disclosing member’s interest will then have to be sought so that it can be included in the application.

If you have determined that you have an interest and:

  • the interest is not one that is exempted by section 5.63; or
  • one for which members may allow you to participate under section 5.68(1)(b).

What can you do if neither council nor the CEO is prepared to approach the Minister for an exemption to be granted to you?

In this case, there is no recourse other than to disclose your interest and comply with the provisions of the Act. There is no provision for you as an individual to apply to the Minister directly for approval to participate.

As you must make a disclosure before ministerial approval can be sought for you to participate, should the Minister not approve the application, a disclosure has been made and you have no option other than to leave the room when the matter comes before the meeting.

Can committees of council be exempt?

The council or a CEO may also apply to the Minister to exempt the members of a committee from some or all of the obligations imposed by the financial interest provisions. Such an application must include:

  • the name of the committee, details of the function of the committee and the reasons why the exemption is sought; and
  • any other information required by the Minister for the purposes of the application.

The Minister may grant an application to exempt committee members on any conditions if he or she determines that it is in the interests of the electors or ratepayers to do so.

Can an elected member participate in matters of policy concerning gifts, payment of legal fees and other benefits?

Elected members in a number of local governments may often participate in the decision making process concerning policies on the provision of gifts by local governments to elected members, such as gifts on retirement and the payment of legal fees provided for in policies relating to legal representation for council members and employees.

The question has arisen as to whether an interest exists for members when dealing with such matters in the context of policy development.

The department has considered this issue when dealing with applications for approval to participate as these types of interest have potential financial consequences for all members and employees, and the situation for Councils that find the matter cannot be dealt with due to an insufficient number of members.

The following guidance is provided:

  • There would appear to be no doubt that a motion to provide legal advice to elected members and employees free of cost gives rise to a declarable interest as defined in section 5.60A of the Act and should be declared in accordance with section 5.65 of the Act.

    This view is supported on the grounds that the best way to characterise the ‘financial interest’ that is being disclosed is as an indemnification. For example, a policy which gives members an entitlement, subject to certain criteria, to receive cost free legal advice acts as a type of insurance that is considered of personal benefit to the member. Similar to an insurance policy the member is protected against a future liability by the policy, just as a home owner is protected against future damage or loss by an insurance policy.

    There is good reason to believe, on balance, that most of council’s consideration of cost free legal advice policies, given that a declarable interest is involved, would need to be dealt with in accordance with section 5.65 of the Act.

    When considering this matter it should be kept in mind that it is irrelevant whether the council member, at the time council dealt with the matter, had no intention of availing themselves of the legal services proposed by the policy.

    Nevertheless, it is suggested that due to the potential diversity of issues dealt with by policies each member needs to assess for themselves as to whether they have a financial interest under the relevant provisions in Part 5, Division 6 of the Act.

    Also it should be noted that a disclosure of interest made by a council member in respect to a policy providing cost free legal advice does not alleviate an obligation to disclose an interest in a matter concerning any subsequent individual application for legal costs indemnification under the policy
  • A policy on gifts in special circumstances where the gift may or may not be received by the member or the member may not expect to receive such a gift is considered to be subject to the test of “remoteness”. It would be left to each member to assess whether a financial interest exists for them under the relevant provisions in Part 5, Division 6 of the Act.
  • A policy relating to the provision of free membership to health clubs, wellness or fitness programs is considered to constitute a financial interest for elected members. If the matter is dealt with by the council in a particular way, that the matter will result in a financial gain or benefit for the person. A cost free membership or invitation to take up a free gym or health fitness program would result in a financial benefit to a person in that they could take advantage of a service that they would otherwise need to pay for.
  • A policy that confers a financial interest would also be linked to an item in the local government’s budget. The consideration of a budget that includes an allocation of funds associated with the policy should be declared pursuant to section 5.65 of the Act as the budget determines the scope or extent of the financial interest.

    Where a budget does not itemise the allocation to the policy which confers a financial interest it still determines the scope of that financial interest and should, therefore, be declared in accordance with section 5.65 of the Act.

What are the penalties for offences by members? (sections 5.65(1), 5.67, 5.69, 5.69A and 5.89)

The penalties are severe for a member who is found guilty of contravening any section of the provisions relating to disclosure of financial and proximity interests. These penalties extend to providing written or oral information when disclosing an interest that you know to be false or misleading in a material particular or which is likely to deceive in a material way. The penalties provided in the Act are:

  • a maximum penalty of $10,000; or
  • imprisonment for up to two years.

In addition to the above penalties, section 2.22 of the Act provides that a member may be disqualified from holding office if the member has been convicted in the preceding five years of a serious local government offence (that is, one carrying a penalty of $10,000 or two years’ imprisonment).

A Court that has sentenced a person for a serious local government offence may make an order waiving any disqualification or reducing the five year disqualification period.

Who can prosecute an offence and when? (sections 9.24 and 9.25)

The Act allows for the following persons at any time in the future to commence proceedings for an offence against the financial and proximity interest provisions of the Act:

  • the departmental CEO or a person authorised by the departmental CEO to do so;
  • a person who is acting in the course of his or her duties as an employee of a local government or a regional local government; or 
  • aperson who is authorised to do so by a local government or a regional local government.

Is there a defence to prosecution? (section 5.65(2))

It is a defence to prosecution if you can prove that you did not know that you had an interest in the matter or that the matter in which you had an interest would be discussed at the meeting. The burden of proof is yours.

Example

An example of where you may not know that you had an interest might be in the investment of superannuation funds. A fund manager invests funds in many enterprises. Should that investment be shares in a company and that company has a matter before council, you may be able to successfully claim that you did not know you had an interest. Your defence would be that, as the investment was made without your knowledge, you could not reasonably be expected to be aware of all investments the fund manager makes.

Ignorance of the law requiring disclosures is not a defence. The fact that you did not know that the interest was an interest that should have been disclosed is not a defence.

However, the fact that you can prove that you did not know that you had that particular interest is a defence.

Are employees and persons under contract required to make disclosures? (section 5.70)

The Act requires employees to disclose their interests and the interests of any person with whom they are closely associated. For disclosure purposes an employee includes a person under a contract for services with a local government, for example consultants or contractors.

Employees presenting written reports, via printed agenda, to a council or committee meeting on a matter in which they have an interest, should commence the report with a disclosure as to the nature of the interest. Employees presenting verbal reports to council or a committee must preface their advice to the meeting by making a verbal disclosure as to the nature of the interest.

If required to do so by the council or committee meeting, an employee giving a report or advice direct to a meeting must also disclose the extent of the interest.

There is no legislative requirement for employees to disclose an interest in a matter if they are not providing a report or advice directly to a meeting. However, if such disclosures are deemed appropriate they could be required under policy or as a requirement of the local government’s code of conduct.

It should be noted that there is no legislative requirement for employees to leave the meeting when making the relevant disclosures.

Are employees required to disclose interests in relation to delegated functions? (section 5.71)

Employees who have been delegated a power or duty under Division 4, of the Act, cannot exercise that power or discharge that duty in respect of any matter in which they have an interest.

As soon as practicable after becoming aware that they have an interest, employees must disclose the nature of the interest, in the case of:

  • the CEO, to the mayor or president; or
  • any other employee, to the CEO.

It is then up to the council or the CEO, as the case may be, to exercise the power or discharge the duty.

What are the penalties for offences by employees? (sections 5.70 and 5.71)

Local government employees who:

  • fail to disclose an interest;
  • exercise a delegated power or duty when they have an interest; or
  • provide, in relation to a disclosure, written or oral information that they know to be false, misleading or likely to deceive in a material way, commit an offence.

Employees committing such offences may be liable for a penalty of $10,000 or two years’ imprisonment.

Is there an employees’ defence to prosecution? (section 5.72)

It is a defence to a prosecution if employees can prove that they did not know that they had an interest in the matter in respect of which advice or a written report was provided.

What are the duties of the CEO?

The Act gives the CEO important statutory duties in relation to the disclosure and recording of disclosed interests. These duties are as follows:

Written disclosures of interest (sections 5.65(1) and 5.66)

Where a member has given written notice of an interest to the CEO before the meeting, the CEO is to cause the notice to be given to the presiding member before the meeting.

The presiding member must bring the notice of the disclosure and its contents to the attention of the persons present immediately before the matters to which the disclosure relates are discussed.

Recording disclosures of interest in the minutes (section 5.73)

The minutes of council and committee meetings must record:

  • each disclosure of an interest by a member or employee (including the nature of the interest);
  • the point reached in the agenda and the time at which a disclosing member left the room and returned;
  • each decision to allow or disallow a disclosing member to be present or participate in the discussion and decision making procedures in relation to a matter, together with the extent of any participation allowed;
  • the basis for each decision to allow members to participate (for example, so trivial or insignificant as to be unlikely to influence the disclosing member’s conduct in relation to the matter); and
  • where the extent of a member’s or employee’s interest has also been disclosed, the extent of that interest.

Recording disclosures of interest in a register (section 5.88(2)(b))

As well as ensuring that each disclosure is recorded in the minutes of the relevant meeting, the CEO is to keep a register as a consolidated record of the disclosures made. The register must include particulars of the nature of the interest disclosed and the extent of the interest where disclosed.

The register is to be available for inspection free of charge by any person during office hours [section 5.94(b)].

Reporting any Breaches of Financial Interest (s28 Corruption and Crime Commission Act 2003)

The CEO as the principal officer of a local government has the legal duty and responsibility to report any breaches under Part 5, Division 6 of the Act in accordance with section 28 of the Corruption and Crime Commission Act 2003.

Are decisions valid in which members wrongly participate?

If it is later determined that a member should have disclosed an interest but failed to do so, is the resulting council resolution valid?

The Interpretation Act 1984 states that the powers of council shall not be affected by the presence or participation at a meeting of a person not entitled to be present or participate.

Let us consider some situations that might occur:

Example

A member fails to disclose an interest and then participates fully in the discussion and decision-making procedures on a matter. Can the administration put the local government’s decision into effect? An offence is not known to have been committed until a court makes a finding. Proceedings for prosecution can be slow. Many months may pass before a finding is made. Implementation of a resolution should not be delayed in the belief that an offence has occurred.

If the beneficiary of a council decision has acted on the matter in good faith a court would be unlikely to overturn the decision:

Example

If a member discloses an interest and is unsuccessful in obtaining council approval to allow him or her to participate, the Act clearly states that the member shall not be present during the discussion or decisionmaking procedure.

If the member nevertheless attempts to vote, the presiding member should rule the attempted vote ultra vires and it should not be counted. The decision of the meeting will rest on the majority of valid votes cast.

Quorums

The CEO should advise the presiding member carefully when interests are disclosed so far as the question of a quorum is concerned.

The purpose of a quorum is to ensure that a sufficient number of members are present and vote on a matter, to preserve the democratic process.

Take a situation where the quorum is set at five and, at a particular meeting, only five members are present. If one of the members present discloses an interest then there would be no quorum in respect of the matter in which the interest was disclosed.

The other four members cannot make a decision and the matter would have to be adjourned to a subsequent meeting. If a committee does not have a quorum to deal with a matter, the matter would be referred to council for a decision.

Under these circumstances a request can be made either to the meeting or to the Minister for approval to allow the disclosing member to participate. Alternatively, an application can also be made to the Minister to reduce the number of members for a quorum.

Concluding remarks

The Act imposes a responsibility on you as an elected member to represent the interests of electors, ratepayers and residents of the district and to participate in the local government’s decision-making processes at council and committee meetings. It is therefore incumbent upon you to be familiar with the disclosure of interest provisions and not forgo the right of the community to be represented by unnecessary disclosures.

For these reasons it cannot be emphasised too strongly that if, after closely considering whether or not you have an interest and you are still in doubt, seek advice. However, do not expect the CEO or other members to make your decision for you. The responsibility on whether to disclose is yours and yours alone.

Sometimes matters arise in which you have doubts as to your position but in which you are passionately concerned and wish to participate or in which the community have strongly requested that you represent them. In such cases where your feelings may tend to override your doubts, you would be well advised to take legal advice.

It is always open for council or a committee to allow disclosing members to participate if they can be satisfied that the interest is trivial or insignificant, or that it is shared in common with a significant number of the electors or ratepayers.

Use this provision where you believe it to be appropriate. However, if the council or committee do not believe that you should participate, then that is a sufficient indication that your disclosed interest should preclude further participation.

You need to constantly be aware of the link between disclosures at meetings and disclosures in returns.

Having disclosed an interest in a return, the disclosure must be taken into account if matters relating to it come before meetings. Non-disclosure at both meetings and in returns is an offence.

Disclosure in one and not the other may indicate that an offence has occurred.

On the other hand, interests such as those of closely associated persons will need to be disclosed at meetings but not necessarily in returns, likewise interests obtained since the completion of your last return will not yet have been disclosed.

You are advised to keep a record of the disclosures that you make so that when you lodge your annual return you do not inadvertently fail to disclose in the return an interest disclosed at a meeting.

Sometimes it will happen that the CEO or an elected member will informally draw your attention to the possibility that you may have an interest in a matter.

You should take the approach as well meaning and in your own best interest. Think about it, take advice if you wish, but do not be pressured into disclosing unnecessarily.

Decisions on whether to disclose or not can be very complex and you will be responsible for the decisions you make. Give due regard to the requirements, but do not interpret them so strictly as to prevent your participation unnecessarily.

Page reviewed 25 June 2019