Apparent Conflict of Interest
Table of Contents
- Basic concepts
- Apparent conflict of interest in government vs. the private sector
- An international concern
- The values and ethics code for the public service
- Values and responsibilities
- Not limited to financial interests
- Distinguishing apparent conflicts of interest from real and potential ones
- The elements of apparent conflict of interest
Public servants in the Government of Canada are required to be as concerned with preventing apparentFootnote 1 conflicts of interest as they are with preventing real and potential conflicts of interest. This paper was developed to contribute to a better understanding of the meaning and significance of apparent conflict of interest, given its implications for the integrity of government, the public service, and individual public servants. The paper is intended to be of use to public servants and public service managers, but will also be of value to members of the public, especially those who work with the public service, to understand the special duties that public servants are required to uphold.
The first section of the paper examines some of the basic concepts about apparent conflict of interest in the broad context of government. The different standard in the private sector is described, along with a reference to the standards of other national governments. The rules governing apparent conflict of interest in the federal public service are summarized, followed by definitions to distinguish apparent conflicts of interest from real and potential ones. An in-depth analysis of the elements of apparent conflict of interest is then set out, based in large part on judicial and tribunal rulings where apparent conflict of interest has been found to exist.
The role of public service integrity in supporting democratic government, and the resulting need to respect certain ethical values, is the fundamental concept underlying the concerns about apparent conflict of interest. As stated in the 1996 report of the Task Force on Public Service Values and Ethics:Footnote 2
Every day, in myriad ways, public servants make decisions and take actions that affect the lives and interests of Canadians: they handle private and confidential information, provide help and service, manage and account for public funds, answer calls from people at risk. Because public servants hold such a significant public trust, ethical values must necessarily have a heightened importance for them.
Public servants hold a public trust; they are trustees for the interests of the citizens of Canada, as represented by the democratically elected government and expressed in law and the Constitution.
Among the most important public service values...is a heightened awareness that...public officials act within a web of law and procedures which serve to...preserve the integrity, reputation and legitimacy of the public service as an important national institution in support of democratic government".
The Supreme Court of Canada has reinforced these concepts in various rulings. In one judgment that emphasized the need for ethical behaviour by public servants in the context of good government, the Court also clarified the concept of apparent conflict of interest. "The importance and necessity of an impartial and effective public service" was the basis for a leading judgment (Fraser)Footnote 3upholding the dismissal of a public servant for breaching the duty of loyalty. The Court went on to state that the fundamental task of the public service is to administer and implement policy. "In order to do this well, the public service must employ people with certain important characteristics. Knowledge is one, fairness another, integrity a third".Footnote 4 It describes the tradition of Canada's public service as emphasizing the characteristics of "impartiality, neutrality, fairness and integrity".Footnote 5
Appearance, or perception, is a key characteristic of impartiality, neutrality, fairness and integrity. In Fraser, the Court asserted that "A job in the public service has two dimensions, one relating to the employee's tasks and how he or she performs them, the other relating to the perception of a job held by the public".Footnote 6 The judgment went on to assert "the public interest in both the actual, andapparent, impartiality of the public service".Footnote 7
The Supreme Court elaborated on the aspect of appearance in a later ruling. In Hinchey,Footnote 8 it pointed out that the Court had on several previous occasions interpreted the provision of the Criminal Code that created an offence for accepting a commission, reward, advantage or benefit from someone who has dealings with the government. Previous judgments had decided that "the crucial purpose encompassed by this section is not merely to preserve the integrity of government, but to preserve the appearance of the integrity as well".Footnote 9
In a passage of major significance for understanding apparent conflict of interest, the Court concluded its analysis of previous judgments in the following terms:
[P]reserving the appearance of integrity, and the fact that the government is fairly dispensing justice, are, in this context, as important as the fact that the government possesses actual integrity and dispenses actual justice (emphasis added).Footnote 10
The Court then outlined the difference between the concepts in a way that again linked "appearance" to good government and the democratic process:
The two concepts are, however, analytically distinct. For a government, actual integrity is achieved when its employees remain free of any type of corruption. On the other hand, it is not necessary for a corrupt practice to take place in order for the appearance of integrity to be harmed. Protecting these appearances is more than a trivial concern. This section recognizes that the democratic process can be harmed just as easily by the appearance of impropriety as with the actual impropriety itself.Footnote 11
The Supreme Court has been clear that integrity and good government are inextricably linked. In Hinchey, it stated, "Protecting the integrity of government is crucial to the proper functioning of a democratic system".Footnote 12
Apparent conflict of interest in government vs. the private sector
In setting a high standard for both apparent and actual government integrity, the Courts distinguish this from the standard that applies outside government. "[G]iven the heavy trust and responsibility taken on by the holding of a public office or employ, it is appropriate that government officials are correspondingly held to codes of conduct which, for an ordinary person, would be quite severe".Footnote 13 The expectation that public servants recognize and observe this is stated by the Supreme Court in Fraser in the following way: "A person entering the public service or one already employed there must know, or at least be deemed to know, that employment in the public service involves acceptance of certain restraints".Footnote 14
This distinction between working in the public sector and in the private sector was addressed by the Federal Court of Appeal (Threader)Footnote 15. Here, the public servant who had been disciplined on the ground of an apparent conflict of interest argued that the appearance of a conflict of interest cannot, in law, support disciplinary action. The argument was based on private sector law, under which "only an actual conflict of interest supports dismissal for cause". The Court emphatically rejected this argument, underlining the higher standards expected of the public service:
The Crown is quite entitled to demand different standards of its employees than those prevailing in the private sector. It is not only entitled in law to enjoin its servants from putting themselves in a position of an apparent conflict of interest; the rationale for its doing so is patently obvious. [The Fraser judgment is quoted, including the need "to ensure that the public service is perceived as impartial and effective in fulfilling its duties".] ...Manifestly, the public service will not be perceived as impartial and effective in fulfilling its duties if apparent conflicts between the private interests and the public duties of public servants are tolerated.Footnote 16
The different standards of the public and private sectors, and the need for public servants to avoid apparent conflicts of interest, pose special challenges for those workers moving from the private sector to the public sector, or contemplating such a move.
An international concern
The link between integrity and good government, and the resulting need to properly manage conflicts of interest, including apparent conflicts, are not specifically Canadian concerns. They are shared by other developed democracies. In its 2003 Guidelines for Managing Conflict of Interest in the Public Service, the Organization for Economic Cooperation and Development (OECD) emphasizes the link between integrity and good government, and the need to properly manage conflicts of interest.
Serving the public interest is the fundamental mission of governments and public institutions. Citizens expect individual public officials to perform their duties with integrity, in a fair and unbiased way. Governments are increasingly expected to ensure that public officials do not allow their private interests and affiliations to compromise official decision-making and public management. In an increasingly demanding society, inadequately managed conflicts of interest on the part of public officials have the potential to weaken citizens' trust in public institutions.Footnote 17
According to the OECD Guidelines, inappropriately managed or resolved conflicts of interest have the potential to undermine the proper functioning of democratic governments by:
- Weakening adherence by public officials to the ideals of legitimacy, impartiality, and fairness in public decision-making, and
- Distorting the rule of law, the development and application of policy, the functioning of markets, and the allocation of public resources.Footnote 18
The values and ethics code for the public service
The ideas outlined so far, and their applicability to apparent conflict of interest are reflected and formalized for the Canadian public service in the "Values and Ethics Code for the Public Service" ("the Code") adopted by the Government of Canada in 2003.
The opening passage states: "The Public Service of Canada is an important national institution, part of the essential framework of Canadian parliamentary democracy".Footnote 19 The importance of preventing conflicts of interest, including apparent ones, is explained by the Conflict of Interest Measures contained in the Code in the following way:
Avoiding and preventing situations that could give rise to a conflict of interest, or the appearance of a conflict of interest, is one of the primary means by which a public servant maintains public confidence in the impartiality and objectivity of the Public Service.Footnote 20
The Conflict of Interest Measures "serve to uphold the Public Service Values" set out in the Code.Footnote 21 The "Ethical Values", identified in the Code are of particular relevance to the provisions on conflict of interest. They are summarized as meaning "Acting at all times in such a way as to uphold the public trust".Footnote 22
Values and responsibilities
The first Ethical Value is couched in broad terms related to fostering good government. "Public servants shall perform their duties and arrange their private affairs so that public confidence and trust in the integrity, objectivity and impartiality of government are conserved and enhanced".Footnote 23 The second Ethical Value establishes a high standard of behaviour required of public servants, and has special relevance to the prevention of apparent conflicts of interest. "Public servants shall act at all times in a manner that will bear the closest public scrutiny; an obligation that is not fully discharged by simply acting within the law".Footnote 24
The first "overall responsibility" stipulated in the Conflict of Interest Measures is that "in carrying out their official duties, public servants should arrange their private affairs in a manner that will prevent real, apparent, or potential conflicts of interest from arising".Footnote 25 The second overall responsibility is: "If a conflict does arise between the private interests and the official duties of a public servant, the conflict should be resolved in favour of the public interest".Footnote 26 More generally, "All public servants are responsible for ensuring that they comply with [the] Code".Footnote 27
The Code encourages public servants "faced with an ethical dilemma...[to]...use the opportunities and mechanisms established by their Deputy Head to raise, discuss and resolve issues of concern related to this Code".Footnote 28 Acknowledging that it is "impossible to prescribe a remedy for every situation that could give rise to a real, apparent, or potential conflict of interest", the Code states: "When in doubt, public servants should seek guidance from their manager, from the senior official designated by the Deputy Head, or from the Deputy Head and refer to the Public Service Values...".Footnote 29
Methods of Compliance are spelled out in the Conflict of Interest Measures, including the submission by public servants to their Deputy Head of a Confidential Report outlining assets, benefits received or "participation in any outside employment or activities that could give rise to a conflict of interest".Footnote 30 In some instances, other measures are necessary including:
- avoiding or withdrawing from activities or situations that would place the public servant in real, potential or apparent conflict of interest with his or her official duties; and
- having an asset sold at arm's length or placed in a blind trust where continued ownership would constitute a real, apparent or potential conflict of interest with the public servant's official duties".Footnote 31
In such cases, the Deputy Head determines, in discussion with the public servant, the appropriate measure to reduce or eliminate the conflict. (Where there is disagreement between the public servant and the Deputy Head, and in accordance with the principle of "obey now, grieve later", the Code provides that "the disagreement shall be resolved through the established grievance procedures".Footnote 32) The Code stipulates that public servants must report, within 60 days of their first appointment or any subsequent appointment, transfer or deployment, all "outside activities, assets, and direct and contingent liabilities that might give rise to a conflict of interest with respect to their official duties".Footnote 33 This report is to take the form of the Confidential Report mentioned above.
The Code makes it clear that the reporting requirement is not limited to the time of initial or subsequent appointments, but may be triggered by subsequent changes in the public servant's circumstances:
Every time a major change occurs in the personal affairs or official duties of public servants, they must review their obligations under this Code. If a real, apparent or potential conflict of interest exists, they must file a new Confidential Report with their Deputy Head.Footnote 34
In sum, public servants have a duty to assess their circumstances on an ongoing basis - in light of changes in either their personal affairs or their official duties - and to be constantly vigilant to prevent apparent conflict of interest.
The consequences of failure to observe this and the other duties described above can be very real and potentially severe. Under the heading "Failure to Comply", the Code states:
A public servant who does not comply with the requirements of this Code is subject to appropriate disciplinary action, up to and including termination of employment.Footnote 35
The Code forms part of the conditions of employment in the Public Service of Canada. At the time of accepting their letter of offer, public servants acknowledge that the Code is a condition of employment. For public servants who were already employed on , when the Code became effective, the Code became a condition of employment.
Not limited to financial interests
The Code underlines that apparent and other conflict of interest "does not relate exclusively to matters concerning financial transactions and the transfer of economic benefit. While financial activity is important, it is not the sole source of potential conflict of interest situations".Footnote 36 Examples are provided in the Code under the heading "Avoidance of Preferential Treatment"Footnote 37, such as staffing action providing preferential assistance to family or friends, or giving family or friends certain types of information. The OECD Guidelines cited above explain this concern: "A conflict of interest may involve otherwise legitimate private-capacity activity, personal affiliations or associations, and family interests, if those interests could reasonably be considered likely to influence improperly the official's performance of their duties."Footnote 38
The Guidelines go on to state that "the negotiation of future employment by a public official prior to leaving public office is widely regarded as a conflict of interest situation."Footnote 39 Chapter 3 of the Code is devoted to "Post-Employment Measures", designed to minimize the possibility of apparent and other conflict of interest between departing public servants' new employment and their most recent responsibilities within the federal public service.
Distinguishing apparent conflicts of interest from real and potential ones
Having established the importance of preventing apparent conflict of interest, it must be said that it's not always easy to assess the risk of or see the presence of an apparent conflict of interest. To assist in understanding how apparent conflicts of interest differ from real and potential ones, two sets of definitions are set out below:
A real conflict of interest denotes a situation in which [a public official] has knowledge of a private economic interest that is sufficient to influence the exercise of his or her public duties and responsibilities.
A potential conflict of interest incorporates a concept of foreseeability: when individuals can foresee that a private interest may someday be sufficient to influence the exercise of their duty, but has not yet, they are in a potential conflict of interest.
An apparent conflict of interest exists when there is a reasonable apprehension, which reasonably well-informed persons could properly have, that a conflict of interest exists.
These definitions were accepted by a commission of inquiry (ParkerFootnote 40) as being in accordance with the common law.
Another definition of the three types of conflicts of interest is as follows:
An actual conflict of interest involves a direct conflict between a public official's current duties and responsibilities and existing private interests;
A potential conflict of interest arises where a public official has private interests that could conflict with their official duties in the future;
A perceived or apparent conflict of interest can exist where it could be perceived, or appears, that a public official's private interests could improperly influence the performance of their duties – whether or not this is in fact the case.
This is the definition adopted by a recent Australian commission reportFootnote 41, which was based on the principles in the OECD Guidelines referred to above.
These definitions make clear that the appearance of conflict of interest in the eyes of members of the public, is the distinguishing feature from the other types of conflict of interest.
The elements of apparent conflict of interest
The rest of this paper tries to deepen the understanding of the meaning and elements of apparent conflict of interest beyond what is summarized in these definitions. This deeper understanding is derived largely from judicial or tribunal rulings where an apparent conflict of interest has been found to exist, and from looking at the negative consequences to the public service – and to individual public servants – when the rules governing apparent conflicts of interest are not observed.
Typically, the issue of an apparent conflict of interest is brought before judicial bodies when the government as employer takes disciplinary action against a public servant on the basis that the public servant's conduct has created an apparent conflict of interest. The public servant has refused to resolve the matter to the satisfaction of the employer, or has resolved the matter to the satisfaction of the employer, but challenges the employer's initial findings and resulting instructions. The resulting disciplinary action takes such forms as suspension or dismissal; where the public servant chooses to contest the disciplinary action, a grievance or complaint is filed alleging that his or her conduct did not constitute an apparent conflict of interest.
The grievance or complaint is adjudicated by a body such as the Public Service Labour Relations Board (formerly the Public Service Staff Relations Board). In the event of a judicial review from that administrative tribunal, a higher level of court, notably the Federal Court of Canada, deals with the matter. Cases may go, by way of ultimate appeal, to the Supreme Court of Canada.
An analysis of judicial and tribunal rulings provides guidance on the basic concepts and on the interpretation in practice of the Government's conflict of interest rules. Because the rulings are based on "real life" cases, they shed valuable light on various aspects of apparent conflict of interest.
1. Appearance to the public is the key, not the public servant's integrity or good faith
A public servant who was a director in the Department of Regional Economic Expansion was dismissed when he was found to have exploited his position as director to his advantage by buying shares of a company that was the recipient of a grant from the Department. The public servant grieved his dismissal, but the dismissal was upheld by the Public Service Staff Relations Board ("the Board"), in McKendry.Footnote 42
The employer alleged that the public servant purchased shares of an applicant company after offers of grants had been made by the Department and during the period between the date on which the offers were accepted and the date on which the general public was made aware of them. In his defence, the public servant argued that when the shares were purchased, information about the grants was known to the general public, and that he was authorized by his immediate superior to purchase the shares, albeit not in writing. He claimed there was no corrupt motive in connection with the purchases, and that he honestly believed he had the right to buy them as a result of the discussions he had with his superior.
In its reasons, the Board stated that the public servant "was sufficiently experienced and qualified to recognize a conflict of interest when it arose, and to foresee the probable consequences for his Department if it became known that one or more of its officers speculated for private gain on the strength of unpublished information acquired in an official capacity".Footnote 43
In developing its reasons, the Board refers to American experience, beginning with the Congress' attempts to legislate against conflict of interest as early as 1853. It cites the book by Dean Manning of Yale Law School ("Federal Conflict of Interest Law") which dealt with two sorts of interests:
[O]ne is the interest of the government official (and of the public) in the proper administration of his office; the other is the official's interest in his private economic affairs. A conflict of interest exists whenever these two interests clash, or appear to clash.
A conflict of interest does not necessarily presuppose that action by the official favoring one of these interests will be prejudicial to the other, nor that the official will in fact resolve the conflict to his personal advantage rather than the government's. If a man is in a position of conflicting interests, he is subject to temptation however he resolves the issue. Regulation of conflicts of interest seeks to prevent situations of temptation arising.Footnote 44
The Board notes that it underlined the words "or appear to clash" because they "go to the root of the problem".Footnote 45 While conflict of interest is described as "inherently an abstract and subtle concept",Footnote 46 the Board asserts that:
a conflict of interest or the appearance thereof can be easily recognized by an intelligent citizen as contrary to public policy. Dean Manning has cited the extreme example of a government tax auditor auditing his own tax return, which any reasonable man would instantly identify as improper no matter how great the integrity of the auditor. An infinite variety of other examples, less obvious but no less real, could be given. In many of these, the problem would arise from the appearance...rather than from actual resulting injury to the interests of the state.Footnote 47
In concluding that the dismissal of the public servant in McKendry should be maintained, the Board provides guidance about the meaning of apparent conflict of interest. (This passage has been cited with approval in subsequent rulings.)
It is not a good defence here to show that certain stock was purchased in good faith without any intent to jeopardize the public interest. Nor is it a good defence to establish that judgment remained unimpaired or that there was no actual bias. This is not a matter of yielding to public suspicion or malicious criticism. The essential requirements are that the public servant should serve only one master and should never place himself in a position where he could even [be] tempted to prefer his own interests or the interests of another over the interests of the public he is employed to serve. These requirements constitute the rationale of the doctrine that he should avoid a position of apparent bias as well as actual bias, and that he should never place himself in a position where – as Dean Manning puts it – "two interests clash, or appear to clash."Footnote 48
Applying these principles to the case of the public servant at issue, the Board stated that "Whatever his motives, and whatever approval or acquiescence...there may have been, my conclusion is that in the circumstances his share purchases were so wanting in judgment and responsibility that by his own acts he has unfortunately disqualified himself as a senior employee in the public service".Footnote 49
2. Apparent conflict of interest must be resolved in the public interest even if the public servant is convinced of the innocence of his or her activities
In a subsequent case, these principles of apparent conflict of interest were applied with emphasis on the need for public servants to avoid activities that might appear to compromise their effectiveness as public servants, even to the slightest degree, and despite the public servants' being convinced of their innocence and integrity. An employment counselor at the Canada Employment and Immigration Commission (CEIC) in Toronto, who was responsible for matching vacant positions in various trades with clients seeking employment was suspended because of misconduct involving a client. His grievance was heard by the Board (Ennis).Footnote 50
The facts were that after his efforts to find employment for a particular client were unsuccessful, the grievor invited the client to find out about a business opportunity involving sales. He provided the client a business card indicating the grievor's enterprise ("Bruce Ennis + Associates") and showing his business telephone number to be that of his CEIC office. On the reverse of the business card was indicated the time and place of a meeting at which presumably the details would be explained about the business opportunity that the grievor was proposing. At the meeting, the client learned that the business proposition involved becoming a distributor for a pyramid sales operation.
The client filed a formal complaint with the grievor's supervisor because of his "real concern as a taxpayer that a [CEIC] employee would be engaged in an official capacity on the Commission's time and using Commission facilities to advance his own business interests".Footnote 51 He also stated that he "[felt] that Bruce Ennis is affecting the integrity of the Manpower organization by soliciting people who come to Manpower for assistance and are subjected to a cheap scheme of this sort".Footnote 52
The grievor asserted he had done nothing wrong, particularly after every effort had been expended to help a client find a position from the Commission's inventory of vacant positions. The employer was to some extent aware of the grievor's involvement with the pyramid sales operation, although it had not been disclosed as required by the Conflict of Interest Guidelines. Indeed, the grievor stated he had never received a copy of the Guidelines, but he did not suggest in his grievance that "his failure to be acquainted with the guidelines in any way mitigated [his] responsibility of avoiding activities that are likely to compromise his official duties and thereby impair his effectiveness as a public servant".Footnote 53
The Board found that he "improperly exploited confidential information received by a client during the course of his employment to advance his own financial interests".Footnote 54
The complaint by the CEIC client quoted above is noteworthy, as its emphasis on the public servant's actions "affecting the integrity" of the public servant's department is a "real life" expression of the concept stated in the Conflict of Interest Measures: that prevention of apparent conflicts of interest is a primary means by which public servants maintain public confidence in the impartiality and objectivity of the public service. It also echoes the statement in the OECD Guidelines that "Citizens expect individual public officials to perform their duties with integrity". The complaint further illustrates the principles quoted above from the Supreme Court of Canada, including "The importance and necessity of an impartial and effective public service" (Fraser).
The Board in Ennis referred to another PSSRB decision (AtkinsFootnote 55) concerning the grievance of a superintendent in the Marine Safety Branch (Ministry of Transport). He was suspended for having a substantial interest in a company that sold maps, compasses and other instruments that would best result in compliance with the regulations that in his official capacity he was required to enforce. The Board in that case emphasized that an employee's own opinion as to the integrity of his behaviour was irrelevant to his being in conflict of interest.
It is not sufficient for the public servant or his associates to be convinced of their own innocence and integrity. Nor is it necessary to prove that they have been disloyal to the employer. Even in the absence of willful wrongdoing, a conflict of interest or the appearance thereof can be easily recognized by an intelligent citizen as contrary to public policy.Footnote 56
It is clear from these and other decisions that the awareness of the public servant that his or her actions may create the appearance of a conflict of interest is not a relevant consideration.
3. But the public servant must knowingly participate in the activity
The individual, must, however, have knowingly participated in the activity that gave rise to the apparent conflict of interest (as in the McKendry, Ennis and Atkins cases). This point is made in a judgment of the Federal Court of Appeal (SpinksFootnote 57). After stating that "The state of mind of the individual is irrelevant to the process"Footnote 58 of determining the existence of an apparent conflict of interest, the judgment goes on to clarify that:
An individual could not, for instance, be penalized if an action, activity or commitment giving rise to the appearance of a conflict is taken without his knowledge; as, for instance, if someone were to add the name of that individual to a petition without the consent and knowledge of that individual. On the other hand, an individual could be penalized if he knowingly was responsible for an action which turns out to give rise to an appearance of a conflict of interest, although he does not know at the time the action was committed that it would create such an appearance".Footnote 59
In words that echo the previously quoted passages, the judgment concludes that in the case under consideration, "[the] ignorance [on the part of the grievors] of the fact that they were or could be in an appearance of a conflict of interest situation does not affect the perception that an informed person could have."Footnote 60
These cases demonstrate the intellectual effort public servants must make to avoid apparent conflicts of interest. Public servants - and their managers - are required to think beyond the scope of their own perceptions and motives, and to consider how their actions may be perceived by the public.
4. To whom must conflict of interest be apparent?
As is clear from the cases cited above, the key factor distinguishing "apparent" conflicts of interest from the other types of conflict of interest is that a conflict appears to, or is perceived by, outside persons. As stated in Threader, "The appearance of anything, including a conflict of interest, surely lies in the mind of the beholder, not in the conduct of the beheld".Footnote 61 The challenge for public servants is to put themselves in the mind of beholders.
In Ennis, the perception by "an intelligent citizen"Footnote 62and by "a reasonably objective member of the public"Footnote 63 are variously stated to be the test. (Underlining is added for emphasis in this and the following quotations.)
In Lalla, another case by the Board, the test used is the perception by a "reasonable person".Footnote 64
"What assessment would a fair-minded member of the public make of the circumstances" is a criterion in the Australian report for determining apparent conflicts of interest.Footnote 65
In a decision by the Supreme Court of Canada ("N.E.B.") involving apprehension of judicial bias, the test was stated to be:
a reasonable apprehension, which reasonably well-informed persons could properly have of a biased appraisal and judgment of the issues before the tribunal.Footnote 66
The criterion of "reasonableness" is the common element of these cases, especially in the description of the hypothetical person whose perception is the key to apparent conflicts of interest.
The test proposed in Threader was:
Would an informed person, viewing the matter realistically and practically and having thought the matter through, think it more likely than not that the public servant, whether consciously or unconsciously, will be influenced in the performance of his official duties by considerations having to do with his private interests?Footnote 67
Unlike the previously cited cases, this test does not adopt the "reasonableness" test. It is based on the test formulated by the Federal Court of Appeal that was overturned by the Supreme Court of Canada in N.E.B. The perception of a "reasonable person" (a hypothetical member of the public) seems more appropriate, and better supported by the authorities.
5. How much information is needed in order to "be informed"?
The Supreme Court has adopted the criterion of reasonableness for the degree of information to be possessed by the observer. The N.E.B. judgment refers to the apprehension, or perception, "which reasonably well-informed persons could properly have." (Parker uses the identical formulation.)
The criterion of "reasonably well-informed persons" is consistent with the Code's insistence on conserving and enhancing public confidence and trust in the integrity of government. Too high a standard of information by outside observers of apparent conflicts of interest - requiring for instance that they conduct extensive research into the situation, become knowledgeable about all its circumstances, and engage in deep thinking - would unreasonably limit the scope of apparent conflicts of interest and undermine the Code's objectives. It would add requirements that the Supreme Court has not accepted.
6. Nature of perception?
Closely related to the question of how informed the outside observer need be, is the question of the nature of the perception of the conflict of interest. An objective test is appropriate, so that irrational flights of fancy are not captured, and those charged with deciding on a situation do not have to be worried about wild allegations of conflict of interest. As stated inMcKendry, an apparent conflict of interest "is not a matter of yielding to public suspicion or malicious criticism". A "reasonable perception", or "reasonable apprehension" as stated by the Supreme Court in N.E.B. and as echoed by Parker, seems the appropriate test.
7. Does the degree of conflict of interest matter?
The degree of the conflict of interest that is "reasonably perceived" is not relevant to the test to determine if there is an apparent conflict of interest. As stated in Ennis:
The Public Servants Conflict of Interest Guidelines make it abundantly clear that not only must an employee be circumspect in the type of outside activities he engages in, particularly where he is liable to secure a financial gain, but he must consciously avoid activities that might appear to compromise his effectiveness as a public servant. Where there may exist the slightest doubt that such extra curricular activities may appear to impair his effectiveness as an employee, the public servant is duty-bound to disclose his outside business activities to his superiors [...] There is absolutely no question that when a public servant engages in outside activities that may be perceived to cast the slightest shadow upon his duties and responsibilities as an employee, a conflict of interest may reasonably be concluded to exist. In such instances, the onus rests upon the public servant to take sufficient and definitive action to remove any such conflict".Footnote 68
In other words, an apparent conflict of interest need not be a major one: if it is reasonably perceived by a reasonably informed and reasonable person that there is a conflict of interest, the situation - in plain language - fails "the smell test" and infringes the rules.
This interpretation flows from the high standards of values and ethics imposed on public servants by the Code, notably that "Public servants shall act at all times in a manner that will bear the closest public scrutiny"Footnote 69
8. The onus is on the public servant to detect the apparent conflict of interest, and to take steps to comply with the rules
The responsibility of public servants to identify apparent conflicts of interest created by their actions, and to bring themselves into compliance with the Conflict of Interest Measures (typically by way of prevention and disclosure), is clarified in a series of cases that build on the decisions cited above (notably McKendry and Ennis).
- The onus to prevent conflict of interest continues after filing a disclosure report
A public servant completed conflict of interest documentation in which he said that he owned two dormant companies and that he was pursuing development work towards a patent. His department advised him that his business interests did not pose a real or apparent conflict of interest at that time, but if his position with the department or his business interests should change, revised conflict of interest reports should be submitted.
While on government business in Japan, he promoted his own business interests by discussing a potential partnership with a Japanese corporation with which he was authorized to undertake official business. When he was discharged for this and other similar incidents, the public servant argued in his defence that he met his end of the bargain by completing the confidential declaration in his conflict of interest filing and that the onus then shifted to the employer to come back to him for further information if the employer required it. The Board in Lalla rejected this argument:
The general thrust of the entire [Conflict of Interest] Code is constructed in such a manner as to make the employee responsible for taking whatever steps are necessary "to prevent real, potential or apparent conflicts of interest". If I were to accept the argument put forward by counsel for the grievor, it would be easy to foresee a situation where the employee might provide only limited information to the employer but where, unless the employer came back to the employee for clarification, the employee would have a free hand to proceed as he saw fit. I do not believe that such an interpretation would be in keeping with the requirements of the Code.Footnote 70
In reaching this conclusion, the Board referred to the relevant provision in the Conflict of Interest Code that clearly places the onus on public servants to prevent apparent conflicts of interest. In its present formulation the provision (which was quoted earlier in this text) reads: "Public servants have the following overall responsibilities: a) In carrying out their official duties, public servants should arrange their private duties in a manner that will prevent real, apparent or potential conflicts of interest from arising".
- The onus continues even if the supervisor does not seek additional information further to disclosure
In reaching a separate finding that the department was remiss in not seeking amplification of the information contained in the public servant's Confidential Report, the Board in Lalla stated: "Nevertheless... the onus is on the employee to ensure that a conflict of interest does not exist."Footnote 71 In short, even where the supervisor is remiss in not seeking amplification of the information in the Confidential Report, a public servant may be disciplined for creating an apparent conflict of interest, because the onus rests with the public servant to prevent the problem.
- The onus remains even where the supervisor urged that less information be disclosed
In another case decided by the Board (Cottingham), the onus was found to be on the public servant even when the supervisor urged a public servant to submit less information than the public servant himself might have been inclined to provide. The Chief, Policy, Planning and Development in Transport Canada was suspended without pay (for 20 days) when it came to light that he was involved in a proposed seminar to be offered to the private sector entitled "How to Maximize your opportunities for Selling to the Federal Government". The public servant grieved that suspension.
It transpired that his supervisor was a principal in a company ("Mystl Management Corporation") that was sponsoring the planned seminar. After discussion, they agreed that a formal disclosure under the Conflict of Interest Guidelines should be made by the grievor. However, it was couched in general terms (e.g. "The business activity will consist of providing lectures on a contract basis to a private sector clientele, based on information available in the public domain"), and made no mention of the specific seminar that was planned. Senior management learned about the plans following an internal investigation resulting from reports in the Toronto Star that alleged that certain public servants, including the grievor, were in a conflict of interest situation as a result of their association with Mystl. The investigation disclosed that the grievor had intended to refer specifically to his planned seminar in his conflict of interest disclosure memorandum (by attaching a synopsis of the seminar), but, that he had been talked out of it by his supervisor (who was subsequently dismissed for his involvement in Mystl).
The Board found that the evidence established an apparent conflict of interest for the grievor, and that it came into existence as soon as he agreed to present his seminar on doing business with the federal government. The grievor ought to have recognized this apparent conflict of interest, and he breached the Conflict of Interest Guidelines in two ways: he "failed to arrange his private affairs in a manner that would have prevented the apparent conflict of interest", and failed "to act in a manner so scrupulous that it will bear the closest public scrutiny".Footnote 72
This ruling is an illustration of a tribunal giving legal consequences – i.e. upholding the suspension of a public servant – based on the rule stated as an Ethical Value in the Code that public servants "shall act at all times in a manner that will bear the closest public scrutiny".
- The onus extends to disclosing items about which there is doubt
As to the grievor's argument that his supervisor had influenced him to not fully disclose all the important facts in his memorandum of disclosure, the Board in Cottingham rejected this categorically:
The [Conflict of Interest] Guidelines...make it clear that the onus is on each employee to provide written details of any activity that might be construed as a conflict of interest for that employee. Accordingly, it was incumbent on the grievor under the Guidelines to make disclosure of any of his activities about which he was in doubt and that might conceivably be construed as an apparent conflict of interest for him. [The grievor's] duty to make such a disclosure did not shift to his supervisor simply because the latter urged the grievor to submit less information than the grievor himself might have been inclined to provide.Footnote 73
9. The legal consequences of apparent vs. real or potential conflict of interest are equivalent
The Board in Cottingham also stated "the Guidelines require employees to take as much care to avoid the appearance of a conflict of interest as they must to avoid an actual or potential conflict".Footnote 74 This is an application to the conflict of interest context of the Supreme Court's statement in Hinchey quoted earlier that "preserving the appearance of integrity...[is]...as important as the fact that the government possesses actual integrity..."
The equivalent significance of apparent, real and potential conflicts of interest should be kept in mind in dealing with situations where it may be difficult to make a clear determination among the types of conflict of interest. Tribunal decisions recognize that such a determination is not always simple. In Lalla, for example, the Board asserts that a reasonable person should have little difficulty concluding that the state of affairs in that case would constitute "a real, potential or, at least, an apparent conflict of interest".Footnote 75
Experience has shown, for example, that public servants or their supervisors may expend an inordinate amount of time and energy endeavouring to determine if a given fact situation constitutes an "apparent conflict of interest" or a "real conflict of interest". Given the equivalent significance of the types of conflict of interest in the Code (including the measures to prevent them, methods of compliance, and consequences for breach of the rules), the effort to make a definitive classification may be counterproductive and unnecessary. It would be more productive in such situations to devote the effort towards preventing or resolving a conflict of interest - whether apparent or real - rather than to making a definitive classification.
Apparent conflict of interest has important implications for the integrity of government, the public service, and individual public servants. It is therefore a key focus of the values and ethics regime of the public service. Public servants are required in their actions to be as concerned with preventing apparent conflicts of interest as they are with preventing real and potential conflicts of interest.
A "real" conflict of interest is where a public servant's private interests are sufficient to influence the exercise of his or her public duties. A "potential" conflict of interest is where such a situation could arise in the future. An "apparent" conflict of interest, however, is where it appears to members of the public that a public servant's private interests could improperly influence the performance of his or her duties. "Private interests" are not limited to financial interests.
The principal features of apparent conflict of interest can be summarized as follows:
- Public servants contribute in a fundamental way to good government. Good government and integrity are inextricably linked. Preserving the appearance of integrity in government is as important as actual integrity. Public servants are therefore required to take as much care to avoid apparent conflicts of interest as to avoid actual or potential ones.
- Public servants are held to more onerous conflict of interest standards than private sector employees.
- Public servants are required to arrange their private affairs in a manner that will prevent apparent conflicts of interest from arising.
- Public servants are required to act at all times in a manner that will bear the closest public scrutiny.
- These and other rules governing apparent conflicts of interest are set out in the Values and Ethics Code for the Public Service, with which public servants are required to comply. This Code (which also addresses real and potential conflicts of interest) spells out measures to prevent apparent conflicts of interest as well as measures of compliance.
- In determining apparent conflicts of interest, the appearance of a public servant's actions to the public is the key, not the public servant's integrity or good faith. Public servants can be found to be in apparent conflict of interest even if they are not aware that their actions create an apparent conflict of interest. Public servants - and their managers – are required to think beyond the scope of their own perceptions and motives, and to consider how the public may perceive their actions.
- An apparent conflict of interest is determined by the perception of "a reasonable person" (a hypothetical member of the public) who is "reasonably well-informed".
- Such a person is to have a "reasonable perception" that a conflict of interest exists, even if the conflict of interest is not a major one.
- The onus is on public servants to anticipate apparent conflicts of interest arising from their actions, and to take steps to comply with the rules.
- This onus on public servants is ongoing, as apparent conflicts of interest may arise at any time, if their personal affairs or official duties change. This onus extends to disclosing items about which there is doubt, and continues after filing a disclosure report.
- Whether a conflict of interest is apparent or potential or real, the consequences are the same. The conflict must be remedied. Efforts should therefore focus on determining appropriate methods of compliance, rather than making definitive classifications on the type of conflict of interest.
- Public servants who do not comply with the Code, including the requirement to prevent or resolve apparent conflicts of interest, are subject to disciplinary action, including termination of employment.
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