What Is “Absolute Liability”? Absolute liability is the obligation of an insurer to indemnify an innocent third party who was injured by an insured, while the insured was in violation of the insurance policy. Under the absolute liability provision of the Insurance Act, RSNB 1973, c I-12, [the ‘Act’], the insurer may deny coverage to […]read more
Calkin v. Dauphinee, 2014 NSSC 452 – Case Comment
In this recent case, the Supreme Court of Nova Scotia held that the Warden of the Municipality of the District of West Hants did not breach the Municipal Conflict of Interest Act (the “Act”) despite acting as a “go-between” between the Municipality and a friend in the purchase of a lot for an “apparently excessive price”.
In 1985, the Warden and a partner purchased a 24-acre parcel of land called the “Hatfield Lane property”. The land was vacant, undeveloped and used only for cutting hay. Near the Hatfield Lane property was another piece of property owned by an apple grower and distributor, J.W. Mason and Sons Limited (“Mason”). The Warden grew up with and was lifelong friends with three of the four brothers who owned Mason, including its president.
In April 2010, Mason listed for sale 14 acres of land at this site – the “Mason lot” – for $995,000. The Mason lot was less than 1000 feet from the Hatfield Lane property. Soon after it went on the market, the Municipality’s Development Committee looked into acquiring it in order to expand a nearby industrial park; however, the Committee determined that the selling price was too high and did not recommend purchase of the lot to Council.
In April 2011, the Warden met with the president of Mason, who offered to sell the Mason lot to the Municipality for $500,000. That evening, at a closed Committee of the Whole meeting of Council, the Warden proposed that the Municipality purchase the lot for $500,000. The motion carried unanimously.
In early 2012, newly-appointed municipal auditors recommended that the Municipality obtain an appraisal of the Mason lot. This appraisal valued the lot at $185,000. In October 2012, Council passed a motion directing the CAO to obtain two additional appraisals of the lot, which set its market value at $200,000 and $562,000, respectively.
In July 2014, an elector in the Municipality filed an application with the Court alleging that the actions of the Warden contravened the Act. The Applicant argued that the Warden had a pecuniary interest in the Municipality’s purchase of the Mason lot and, as such, had a conflict of interest.
In coming to his decision, Justice Warner reviewed the applicable law in municipal conflict of interest cases. Pursuant to s. 6(1), a member contravenes the Act when he or she has a “pecuniary interest in any matter” before the municipal council and fails to: (a) disclose his interest; (b) withdraw from the meeting; (c) refrain from taking part in consideration of, or voting on, any question on the matter; and (d) refrain from attempting in any way to influence the council’s decision on the matter.
A member does not contravene the Act where a pecuniary interest is in common with other electors generally (s. 5(1)(j)), or where the interest is so remote or insignificant that it cannot reasonably be regarded as likely to influence the member (s. 5(1)(k)).
Justice Warner ultimately held that Council and the Warden acted improperly in a number of ways:
The Warden acted as the go-between between the Municipality and his friend with respect to the purchase of the Mason lot;
The Warden promoted the purchase of the Mason lot “with undue haste, and without apparent involvement of the administration of the municipality or prior due diligence, including an appraisal or assessment of the value lots”;
The details of the Mason lot purchase were kept secret at the instigation of the Municipality, contrary to clear and well-established principles respecting open and transparent municipal government; and
The property was only appraised in the year following the purchase on request of newly-appointed municipal auditors.After this appraisal showed the market value as $185,000.00, Council directed the CAO to obtain two more appraisals.Justice Warner held that the Warden’s explanation as to the reason for additional appraisals lacked credibility.
Justice Warner concluded that there were two possible explanations for the Warden’s actions. The first was that the purchase of the Mason lot for a price above its market value increased the value of the nearby Hatfield Lane property. In the view of the Court, there was no evidence upon which a reasonably well-informed person could infer that the purchase of the lot would, to more than a remote or insignificant degree, affect the Warden’s pecuniary interest in the Hatfield Lane property.
The second possible explanation related to the Warden’s personal relationship with the family who owned the Mason lot. Justice Warner held that the desire to help his lifelong friends was the more likely explanation for the purchase of the lot at an apparently-inflated price.
Despite the problematic circumstances involving the purchase of the Mason lot, Justice Warner held that the Warden did not breach the Act. In his view, “prudent stewardship or good municipal government” is not the focus of the Act. Rather, the purpose of the Act is to prohibit members from engaging in decision-making regarding matters in which they have a personal economic interest. Although the Applicant had good reason to be suspicious of the Warden and his motives, it was not established that he breached the Act. As such, the application was dismissed.
This case is a significant reminder that municipal councillors must always be aware of the requirements of the Act when carrying out their public duties. Even where a member is eventually found not to have breached the Act, a “close call” case can lead to protracted litigation and court scrutiny of a member’s actions.