THE APPREHENSION OF BIAS CHALLENGE
146 The factual basis of this challenge concerns three councillors. The first was Councillor Hanna who conducted a menswear retail shop in the Marrickville strip shopping area. He was a director of the company who owned the property in which the business was carried on. The second was Councillor Thanos who was a director of the company that conducted a retail shop in the Dulwich Hill strip shopping area and which owned the property in which that business was carried on. The third was Councillor Macri who carried on a hairdressing business also in the Marrickville strip shopping area in a property that appeared to be owned by members of his family.
147 With respect to each of these councillors, it was submitted that they all had and continued to have business interests which were in competition with the Centre and therefore stood to benefit from any decision to subsidise the Business-General ad valorem rate by creating what the appellant erroneously kept referring to as the Marrickville Metro sub-category. Further, they had an interest in the fixing of an ad valorem rate for that sub-category which had the effect of reducing the ad valorem rate applied to the Business-General sub-category within which they carried on their respective businesses.
148 It was common ground that the provisions of Chapter 14 of the Act relating to disclosure by councillors of a pecuniary interest had no application to the present case. In other words, the interests of the three councillors relied upon by the appellant did not require them to disclose those interests, decline to attend the relevant meetings of the council or decline to vote at those meetings. Nevertheless, it was submitted that the concept of apprehended bias was applicable to the decisions of the Council in the present case, reliance being placed upon the decision of this Court in McGovern v Ku-ring-gai Council [2008] NSWCA 209; (2008) 161 LGERA 170; (2008) 72 NSWLR 504.
149 It was further submitted that the present was a case of a conflict of interest rather than one of pre-judgment. Accordingly, the appellant called in aid the following passage from the judgment of Spigelman CJ in McGovern at [26]:
"A conflict of interest requires a different analysis as to the relationship, as reasonably perceived, between the interest and the decision. Questions of fact and degree do not arise in the same way. In a pre-judgment case it is necessary to consider the degree of 'closure' of the allegedly closed mind. Where a relevant conflict of interest is established the reasonable apprehension follows almost as of course."
150 The Chief Justice also referred (at [29]) to the following passage in the judgment of Sopinka J who delivered the judgment of the majority of the Supreme Court of Canada in Old St Boniface Residents Association Inc v City of Winnipeg [1990] 3 SCR 1170 at 1196 where that learned judge said:
"I would distinguish between the case of partiality by reason of pre-judgment on the one hand and by reason of personal interest on the other. It is apparent from the facts of this case, for example, that some degree of pre-judgment is inherent in the role of a councillor. That is not the case in respect of interest. There is nothing inherent in the hybrid functions, political, legislative or otherwise, of municipal councillors that would make it mandatory or desirable to excuse them from the requirement that they refrain from dealing with matters in respect of which they have a personal or other interest … Where such an interest is found, both at common law and by statute, a member of Council is disqualified if the interest is so related to the exercise of public duty that a reasonably well-informed person would conclude that the interest might influence the exercise of that duty. This is commonly referred to as a conflict of interest."
151 The Chief Justice considered that McGovern was a case of pre-judgment and not conflict of interest. However, the test articulated by Sopinka J in the second-last sentence of the passage from his judgment cited above is consistent with Australian authority.
152 In the same case Basten JA discussed the legal principles concerning the impartiality of councillors noting, however, at [70] that it was necessary to identify the relevant legal principles applicable to questions of partiality and pre-judgment in relation to decision-making by a local government body "acting as a consent authority for planning purposes". In the present case the Council was not so acting. Nevertheless, in my opinion the following statement from his Honour's judgment at [71] has some resonance, even in a conflict of interest case. His Honour said (omitting citations):
"Absence of bias, including questions of partiality and prejudgment, whether actual or apparent, are part of the requirements of natural justice … As such they will be taken to apply to any exercise of public power unless clearly excluded, but will have a flexible quality depending upon such matters as the nature of the power, the character of the repository of the power and the circumstances in which the power comes to be exercised ." (Emphasis added)
153 In the same paragraph his Honour recognised that however the test is formulated, it will undoubtedly operate differentially with respect to conflicts of interest as compared with allegations of pre-judgment. Nevertheless, in my opinion the operation of the test in respect of an alleged conflict of interest case, such as the present, requires consideration of the nature of the power being exercised, and in particular the qualifications of the councillors given the context in which the power was exercised.
154 Before the primary judge the appellant submitted that in the present case the financial interests of the three councillors in question extended to include the possibility of their businesses becoming more competitive as a result of the differential rating decision adopted by the Council and their trading competition in the Marrickville and Dulwich Hill shopping strips. They had a vested interest in ensuring that the Centre paid higher rates as a business competitor regardless of whether their businesses paid lower rates. This was a conflict of interest giving rise to an apprehension of bias.
155 During the course of argument on the appeal attention was drawn to s 448(b) of the Act which provides that an interest as a ratepayer is not one which would need to be disclosed by a councillor or would prevent him or her from voting. Being in Chapter 14 of the Act, that fact is only of background relevance to the issue to be determined in the present case, although I do not believe it can be ignored. This is because, as was also pointed out during the course of oral argument on the appeal, the question of apprehended bias depends upon an understanding of the statutory scheme and, in particular, that part of the scheme dealing with the qualification of councillors to be elected to office.
156 Thus, s 274 of the Act provides that a person is qualified to hold civic office if, relevantly, that person is entitled to be enrolled as an elector. Section 266 provides that that person is entitled to be so enrolled if that person is entitled to vote at an election of members of the Legislative Assembly or at an election of members of the Commonwealth House of Representatives provided that person is a resident of the ward or an owner of rateable land in the ward or an occupier or rate-paying lessee of rateable land in the ward.
157 A fair-minded observer would know all these factors. That observer would, therefore, be aware that if there was discrimination or differentiation in the ad valorem rates determined with respect to different categories or sub-categories of rateable land within the LGA, there may be some benefit to an individual councillor, being a resident or the occupier or owner or rate-paying lessee of rateable land, whether residential or business, from the fixing by a council of differential ad valorem rates with respect to any particular category or sub-category of rateable land within its area. In fact, that observer would realise and understand that that was inevitable: cf British American Tobacco Australia Services Ltd v Laurie & Ors [2009] NSWCA 414 at [80]-[87] as to what, albeit in a different context, the hypothetical lay observer is to be taken to have appreciated and understood.
158 In those circumstances, the fair-minded observer in the present case would not conclude that that interest, which would apply to all councillors, might influence any one or more of them in the exercise of their public duty.
159 In oral submissions the Council built upon the proposition articulated above by submitting that the councillors in the present case were almost certain to be ratepayers falling into one or more of the categories or sub-categories about which they were making decisions with respect to the determination of the ad valorem rate to apply to those categories and sub-categories. Those councillors would either receive a benefit if the rate applicable to the land in the category or sub-category in which they had a personal interest decreased; or would suffer a detriment if the amount of the rate increased.
160 Any fair-minded observer, being generally aware of the statutory provisions for the determination of sub-categories and the power of a council to determine ad valorem rates which differed from category to category or sub-category to sub-category, would not be likely to conclude from those factors that the councillors might not properly perform their annual public duty to determine the ad valorem rate to be applied to any particular category or sub-category of rateable land within its area.
161 The appellant responded to this argument on the basis that the present case was different as it concerned what was referred to as the partitioning off of a particular parcel of land (the Centre) in order to distinguish it from other retail land falling within the Business-General sub-category. Because the particular action taken was focussed upon one landholding, the fair-minded observer would conclude that the decision to determine a sub-category confined to that one parcel of land and to determine an ad valorem rate applicable thereto which would have the result of decreasing, albeit by a minor amount with respect to individual properties, the overall rate income of the Business-General sub-category, might cause those councillors who owned rateable land in that sub-category to exercise their public duty in a manner whereby their duty conflicted with their interest.
162 Thus the appellant submitted that from the discussion or debates of which the fair-minded observer would be aware, statements were made by councillors to the effect that it was appropriate to impose a higher rate burden on the Centre's land in order to "protect" the businesses in the residential strip shopping areas. Of itself this was enough for those councillors with an interest in local businesses in those areas to realise that the observer might apprehend that they might be influenced in their voting intentions.
163 Before the primary judge the appellant's emphasis was that the interests of the councillors in question were as trade competitors to the Centre. This was not directly pursued on the appeal. Her Honour, after considering a number of authorities, concluded this issue relevantly in the following terms:
"184. All these cases suggest that the potential financial benefit giving rise to a conflict of interest must have sufficient nexus to the decision under challenge to suggest an apprehension of bias in the mind of a fair-minded observer. The issue arises in this case of whether the alleged interest of certain councillors as trade competitors can be an interest which gives rise to an apprehension of bias at all in a rating determination. There is no suggestion of any direct financial benefit accruing to any of the three councillors which results from the rating determination. There is no evidence apart from the councillors having business interests in retail shops as owners of leased land or as small business operators that they are trade competitors of any of the shops in Marrickville Metro. Any competition can be presumed to exist at a broad level of generality only.
185. … no case has been found which identifies as a relevant pecuniary interest an interest as remote as being a trade competitor and therefore trying to cause greater cost burden to another trader rather than obtaining direct financial benefit. This suggests the interest, if it exists, is too remote to give rise to an apprehension of conflict of interest in the mind of a fair minded observed. …
186. Considering the [Act], the roles and duties of a councillor are identified and Ch 14 identifies those interests that do require disclosure. Section 442(2) states that a person does not have a pecuniary interest if the interest is so remote or insignificant that it would not be likely to influence any decision that person might make. An interest as a trade competitor, assuming it exists, fits within this description.
187. Another reason why the alleged interest, if it exists, is too remote or tenuous to found a conflict of interest is that it is not clear why an interest as a trade competitor in the business category giving rise to a perception in the mind of a fair minded observer of wanting another business category to pay a higher rate is any different to an interest as a ratepayer in any category in paying a lower rate and therefore seeking to have another rating category pay a higher rate. For example, a councillor who owned residential property could also be perceived as wishing to keep residential rates low and therefore favour higher rates in other rating categories. This situation arose in the Council's resolution of 23 April 2002 which proposed to use the increase in rate revenue from the introduction of the Metro sub-category to reduce residential rates.
188. As most councillors are likely to have rateable land in the LGA in some category and are therefore potentially motivated by a desire to lower rates in that category, it is arguable that if I found there was an interest giving rise to an apprehension of bias in this case then most councillors would have an interest which may give rise to an apprehension of bias. An interest as a ratepayer is not required to be disclosed under Ch 14. Ultimately councillors are elected from their local community to represent that community. It is highly likely that they will have personal and business interests in that community. These circumstances are not such that a fair-minded lay observer might reasonably apprehend that a councillor might not bring an impartial mind to the resolution of the issue of rate setting before him or her."
164 Paragraph 188 of her Honour's reasons is, in my opinion, of particular relevance. It is consistent with the matters put to the appellant during the course of argument on the appeal. In my view her Honour's analysis in the paragraph to which I have referred and in particular her conclusion therefrom was correct.
165 At the conclusion of the oral argument on the appeal the parties were referred to the decision of the Commonwealth Industrial Court (Spicer CJ, Joske and Smithers JJ) in Steuart v Oliver (No 2) (1971) 18 FLR 83. The facts of that case bear no relationship to those of the present case but it was referred to as possibly supporting the proposition that the apprehension of bias principle has at least limited application where the decision which is impugned is that of a democratically elected body and the decision under challenge is more of a legislative nature than a judicial or quasi-judicial nature: in other words, where the decision affects a large section of the public generally, rather than that of particular citizens. Written submissions were received from the parties after the conclusion of argument with respect to the application of this decision.
166 It is to be noted that the decision in Steuart was discussed by Campbell JA in the context of alleged apprehended bias in a local government planning context in McGovern at [243]-[251]. As his Honour considered that the present standing of that decision had not been the subject of argument, he preferred to neither adopt nor reject the proposition for which it was said to be authority, namely, that participation of a disqualified person in the decision of a collective body necessarily vitiates that decision.
167 The Council nevertheless submitted that the decision in Steuart was consistent with its contention that a finding of apprehended bias with respect to any of the three councillors nominated by the appellant for the purpose of this ground of challenge in relation to the striking of the challenged rates would not invalidate the Council's decisions with respect thereto. The analogy with Steuart was that those councillors were equivalent to the unauthorised persons whose presence and participation in the meeting the subject of that case did not render invalid the decision adopted at the meeting.
168 It was thus submitted that rate fixing was essentially legislative or quasi-legislative in nature so that councillors whose decisions are perceived to be affected by apprehended bias and whose participation in the business of a relevant meeting places them, in effect, in the position in which they ought not to vote, have a similar status to the disqualified persons to whom Joske J referred in Steuart at 87. There his Honour held that the principle that where a disqualified person votes any resulting resolution is invalid, appears to apply only to cases where the body is acting in a quasi-judicial capacity in the sense of having legal authority to determine questions affecting the rights of citizens and of having the duty to act judicially.
169 It was thus submitted on the basis of Steuart that where a councillor is "disqualified" from voting due to apprehended bias, but nonetheless votes, the decision of the council would not be vitiated. At least there was no "general rule" that it was.
170 The Council further submitted that as noted by Joske J at 84, in the absence of a general rule, the particular circumstances surrounding the case would need to be taken into consideration in reaching a finding as to whether the impugned decision was in fact vitiated. In the present case the Council meeting was properly constituted, a quorum was present so that, even in the absence of the three councillors named by the appellant as potentially biased, the decisions would very probably have been reached even if they had not voted. Whether this is so or not, I do not find that argument compelling.
171 Given the limitations as to the current authority of Steuart referred to by Campbell JA in McGovern at [252] with which I agree, in my opinion, at most, Steuart provides some very limited support for the proposition, which I would adopt, that in a case such as the present, where councillors are exercising the power (and duty) to annually determine the ad valorem rate with respect to the categories and sub-categories of rateable land within its area, such an exercise, which is obviously capable of affecting all ratepayers in one way or another in that area, is more akin to a quasi-legislative process.
172 Accordingly, the fair-minded observer would understand that the very nature of the rate fixing process would result in the determination of differential rates which would inevitably affect, either beneficially or adversely, the councillors themselves as being owners of rateable land in either the residential or business categories or sub-categories or both. Furthermore, that observer would realise and understand that social and political consideration might well influence the decisions of a collegiate body of elected councillors. The appellant acknowledged as much.
173 In such circumstances, in my opinion that observer would not conclude that the three councillors in question might be improperly influenced in the exercise of their public duty. Furthermore, on one view of the matter, the nature of the appellant's challenge founded on apprehended bias is not confined to the three identified councillors. All the other councillors would, at the very least, have been residential ratepayers.
174 The decision of the Council, particularly that made on 23 April 2002, was that the increase in the ad valorem rate fixed with respect to the Centre's land should be used to reduce the residential rate. All councillors would therefore be likely to benefit although the amount of that benefit to individual ratepayers would, one would anticipate, be miniscule. Yet, disqualification for apprehended bias of the whole council would frustrate the legislative purpose of the rate fixing process. A fair-minded observer would not contemplate such a result on the basis that each councillor's interest in having their residential rate reduced dictated the conclusion that all of them might be improperly influenced in the exercise of their public duty.
175 For these additional reasons in my opinion the appellant's challenge to the various decisions on the ground of apprehended bias on the part of the three nominated councillors should be rejected.