Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Office of Local Government v Councillor Smith [2014] NSWCATOD 92 Hearing dates: 1 August 2014 Decision date: 18 August 2014 Jurisdiction: Occupational Division Before: Hon W Haylen QC , Deputy President/ Divisional Head Decision: (a) Councillor Stephen Smith is found to have breached the conflict of interest provisions of the Gunnedah Shire Council's Code of Conduct and his conduct thereby constitutes misconduct for the purposes of s.440 F of the Local Government Act 1993 (b) Councillor Stephen Smith is suspended from civic office for a period of one month commencing seven days after the date of this decision. Catchwords: CATCHWORDS: Local Government Act 1993 - breach of Code of Conduct - significant non-pecuniary conflict of interest - misconduct - employment relationship with applicant for council approval - failure to declare conflict - councillor attends meeting and votes on application - councillor suspended from civic duty for one month Legislation Cited: Local Government Act, 1993 Cases Cited: Director General, Department of Premier and Cabinet re: Councillor Stephen Smith, Gunnedah Shire Council (LGPIDT 01/2013) Category: Principal judgment Parties: Chief Executive, Office of Local Government (Applicant) Councillor Stephen Smith (Respondent) Representation: P. Barley (Applicant) S Smith (Respondent in person) File Number(s): 1420194 reasons for decision 1Councillor Stephen Smith (Clr. Smith) is in his fifth term as an elected member of the Gunnedah Shire Council. For more than seven years he has been employed by Whitehaven Coal Mining Pty. Ltd. ("Whitehaven"). On two occasions during Clr. Smith's term on the Council, Whitehaven ( or a related company) has been involved in applications under consideration by the Council. On each occasion, Clr. Smith has participated in Council's considerations and has voted on the application. 2The first application was considered in February 2009. A related company within the Whitehaven Group had lodged a development application with Council. The application sought approval for the construction and operation of a coal devolatilising plant incorporating importation of coal by road and dispatch of char by road and rail and all ancillary activities. When the application was listed for determination by Council, Clr. Smith attended the meeting and voted in favour of a grant of development consent. 3The Director General of the Department of Premier and Cabinet subsequently ordered that Clr. Smith be suspended from civic office for a period of one month, having considered that the councillor had failed to declare a conflict of interest and thus had breached the Council's Code of Conduct. Clr. Smith appealed this suspension to the Local Government Pecuniary Interest and Disciplinary Tribunal but the Tribunal upheld the suspension order on the basis that Clr. Smith's employment with Whitehaven was sufficient to constitute a conflict of interest ( see, Clr. Smith v DG Department of Premier and Cabinet, LGPIDT 01/2013). 4It is of some significance that the 2009 matter had been the subject of Departmental scrutiny at the time of the second vote in 2012, but had not yet proceeded to the Tribunal. Clr. Smith, however, was aware of this scrutiny and had been provided with a copy of a departmental report of the matter in June 2012. 5The present matter concerns two meetings in November 2012, where Clr. Smith attended and voted on the application made by Whitehaven proposing an agreement with Council to enter into a licence arrangement for a proposed water monitoring bore on a property known as the Road Reserve on Surrey Lane. The Tribunal was informed that in order to obtain a groundwater monitoring licence from the NSW Office of Water, Whitehaven required Council's written approval to establish the bore within the road reserve. 6On 7th November 2012, the Council's Works and Services Committee considered a report regarding Whitehaven's application. The report supported approval of the application on the basis that a formal agreement be entered with Whitehaven and an annual lease fee of $660 be paid by the applicant. Clr. Smith attended the meeting and was the chairperson of the Committee: he did not disclose a conflict of interest prior to or during the Committee's consideration of the Whitehaven proposal. 7The report and recommendation of the Committee was submitted to an ordinary meeting of the Council, held on 21st November 2012. Clr. Smith was present at and participated in this meeting and moved the motion to adopt the Committee's recommendation: he did not disclose a conflict of interest prior to or during Council's consideration of the Committee recommendation concerning the Whitehaven application. 8In January 2013 a complaint was received alleging that Clr. Smith had breached the Council' Code of Conduct in failing to disclose a conflict of interest between his personal employment with Whitehaven and his public duty in dealing with the Whitehaven application. This complaint was investigated on the authority of the Chief Executive, Local Government and concerned whether Clr. Smith had complied with conflict of interest disclosure and management provisions of the Council's Code of Conduct. In due course the investigation yielded a report and finding that Clr. Smith had a significant non-pecuniary conflict of interest arising from his employment with Whitehaven. The Chief Executive then referred the alleged misconduct of Clr. Smith for consideration by this Tribunal. 9At the Tribunal hearing Clr. Smith did not dispute the facts relied upon by the Chief Executive nor did he contest that he had breached the Council's Code of Conduct as alleged. He had filed an affidavit in which he set out a number of mitigating factors that the Tribunal was asked to take into consideration in determining an appropriate order under the provisions of the Local Government Act 1993 ("the Act"). In addition he called brief oral evidence regarding his good character. 10Section 440F of the Act defines misconduct to include a failure by a councillor to comply with an applicable requirement of a code of conduct under s.440. Section 440 of the Act deals with the Code of Conduct with the regulations prescribing a model code of conduct. Sub section (5) provides that councillors must comply with the applicable provisions of the council's adopted code. 11Gunnedah Council had adopted a Code of Conduct in accordance with these legislative provisions. Clause 7 of the Code dealt with conflicts of interest, how they were to be identified and how they might be managed. Clause 7.1 provided that such a conflict existed where a reasonable and informed person would perceive that a councillor could be influenced by a private interest when carrying out a public duty. Clause 7.2 provided that councillors must avoid or appropriately manage any such conflict with the onus being on the councillor to identify the conflict and to take appropriate action to manage it "in favour of your public duty". Clause 7.3 provided that such conflicts were to be managed to "uphold the probity of council decision making." The public interest purpose of these provisions is clear. 12Clause 7.10 dealt with non pecuniary interests, identifying that they were private or personal interests not amounting to a pecuniary interest as defined in the Act. Such interests were said to commonly arise out of, inter alia, personal relationships or involvement in groups or associations. Clause 7.15 provided that how a non-pecuniary interest was managed depended on whether or not it was "significant". Clause 7.16 provided a general rule for identifying a significant non-pecuniary interest as involving a relationship that was "particularly close" and included a "business relationship". Closeness was defined by the nature of the business relationship, the frequency of contact and the duration of the relationship. An "affiliation" between a councillor and a corporation that was particularly strong satisfied this definition. 13Where a non-pecuniary interest arose, clause 7.13 provided that a councillor must disclose the interest fully and in writing, even if the interest was not significant. By clause 7.17, where a significant non-pecuniary conflict of interest arose, a councillor was relied to manage it by removing the source of the conflict (eg by relinquishing or divesting the interest) or by having no involvement in the matter, by being absent from and taking no part in any debate or voting on the issue. 14In the decision of the previous Tribunal concerning Clr. Smith's actions in 2009 where he voted in favour of a development application lodged by a related company that was part of the Whitehaven Group, it was concluded that Clr. Smith has a significant non-pecuniary conflict because he was employed within the same group of companies. That employment was held to represent an affiliation between the councillor and the corporation that could be regarded as particularly strong. In this case the employment relationship is direct - Clr. Smith's employer was seeking approval from council involving the placement of a water monitoring bore, an approval that might be seen as particularly valuable to the mining company. A reasonably and informed person could, in such circumstances, perceive that Clr. Smith could be influenced by a private interest when carrying out his public duty. He should have declared this interest as a significant non-pecuniary interest and should have left the council meeting in terms required by the legislative scheme. 15The fact of the employment relationship alone is sufficient to call into operation the non-pecuniary conflict of interest provisions of the Code of Conduct. It is not necessary that a councillor be closely associated with management figures in their everyday work or that there is a close social connection outside of work. A reasonable and informed person could readily perceive that the employment relationship may influence a councillor to attempt to ingratiate himself with his employer by supporting the employer's application to council. Alternatively it may be readily perceived by such a person that the employer may have an influence over the councillor simply by virtue of the employment relationship. These are the perceptions that must be avoided by counsellors in order to secure public confidence in the transparency of council decisions. 16It follows from this finding that Clr. Smith had a significant non-pecuniary conflict of interest in the Whitehaven application: he should have declared that conflict at both meetings and should not have participated in or voted at the meetings when the Whitehaven application was presented for discussion and determination. In failing to take those steps he has breached the Council's Code of Conduct and has misconducted himself, contrary to the provisions of s.440F. 17It is then necessary to consider what consequences are appropriate in dealing with Clr. Smith's misconduct. The legislative scheme provides a range of orders that might be made in such circumstances, ranging from counselling or a reprimand to suspension from civic office for a period not exceeding six months or the suspension of the councillor's right to be paid fees or other remuneration for a period not exceeding six months. 18The Chief Executive regarded the breach as sufficiently serious to warrant a suspension of more than a month. It was pointed out that the onus was on the councillor to examine council papers to ensure that a conflict did not arise. Clr. Smith should have been on notice to check conflicts arising from his employment because of the 2009 incident, even though that matter had not advanced beyond the report stage when the current issue arose. The Chief Executive also identified matters that could be taken into account in favour of Clr. Smith. These were: the fact that the present matter was not of the same scale as the development proposal of 2009; the councillor's participation in the Committee meeting and the Council meeting preceded the Tribunal's June 2013 decision to confirm suspension from civic office arising from his employment relationship with Whitehaven; and the fact that the councillor had acknowledged and apologized for his misconduct. 19In his affidavit evidence Clr. Smith again apologized for not declaring his interest in the application, stating that it was" a lapse of judgment" in failing to recognise before the meeting that his employer was the applicant. In oral submissions he pointed out that he lived outside the town and relied upon his iPad to read council papers. The reception was not good and it was not always easy to read the detail. He had a particular interest in the protection of ground water, an important issue for Gunnedah, and had focused on the licence for the monitoring bore rather than the entity making the application. 20Whilst not wishing to detract from his apology, Clr. Smith emphasised that he had not made a conscious decision to conceal his interest and stay in the chamber and vote on the application. He had simply failed to realize that Whitehaven was the applicant. He readily accepted that he bore the onus to satisfy himself about possible conflicts arising in matters before council and accepted that he had failed to adequately scrutinize the business paper at the committee stage. When the matter came before Council, as chairman of the committee he thought that he was simply moving adoption of the minutes in their entirety and not individual recommendations. The council had adopted the practice of dealing with committee recommendations globally rather than individually. It was said that this practice had since altered. In addition he stated that he appreciated the issue of the credibility of Council, it's processes and the perception of both to the community. While he had failed in the ways alleged he regarded himself as a person of integrity and principle. 21There are a number of mitigating factors that fall in favour of Clr .Smith: the Chief Executive has identified some of the important matters. The councillor readily accepted that he was in breach of the Code of Conduct and apologized for his failures. He has taken responsibility for his conduct and proposes to be diligent in the future regarding conflict of interest issues. In the Tribunal the allegations were not contested and that is an important factor to be considered. Further, there is no evidence before the Tribunal to suggest that this conduct was undertaken for an ulterior or improper purpose. The conduct, however, does demonstrate Clr. Smith's lack of care and diligence in considering the council papers before participating in the process. If he could not fully read the Council papers then he should have taken steps to obtain hard copies he should have been able to do so at the Committee meeting where the recommendation referred in several places to Whitehaven as the applicant. 22Having considered all the submissions, one matter stands out and that is the need to enforce the provisions of the Code of Conduct and to reinforce the need for transparency in the conduct of council business. This case shows how simple lack of attention and lack of diligence can lead to serious consequences for a Councillor and jeopardize the processes of Council. In all the circumstances, Clr. Smith should be suspended from civic office for a period of one month, to commence seven days after the date of this decision. ORDERS 23The Tribunal makes the following orders: (a)Councillor Stephen Smith is found to have breached the conflict of interest provisions of the Gunnedah Shire Council's Code of Conduct and his conduct thereby constitutes misconduct for the purposes of s.440 F of the Local Government Act,1993. (b)Councillor Stephen Smith is suspended from civic office for a period of one month, commencing seven days after the date of this decision. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 August 2014