A Recent Saskatchewan court decision provides clarity on whether rural municipalities are responsible for reimbursing a councillor’s legal fees for proceedings related to their role on council.
On January 9, 2023 the Saskatchewan Court of King’s Bench (the “Court”) released Probe v Sherwood No. 159 (Rural Municipality) (the “Decision”).
The Decision considers whether the Rural Municipality (“RM”) in question was required to pay the Councillor either (1) legal fees the Councillor expended towards several legal claims related to their role on Council or (2) their honorarium leading up to their formal removal from Council by Court Order.
The Court concluded that Councillor was entitled to the honorarium up until his disqualification and removal was ordered, but the RM was not obligated to reimburse him for his legal fees.
Background
The Councillor personally expended close to $200,000 on legal fees as a result of the following legal proceedings:
- Initial Inquiry: In 2014, an inquiry took place which led to the removal of the RM’s Reeve (the “Inquiry”). Consequently, the RM passed a bylaw authorizing reimbursement for these legal expenses the Councillor and others expended personally as part of their involvement in this Inquiry. However, ratepayers successfully applied for this bylaw to be quashed and proceeded to lobby the RM to require these fees be paid back to the RM.
- Conflict Complaint: At a Council meeting considering this issue, the Councillor did not declare a conflict of interest and in fact voted in favour of the agenda, moved a motion to instruct the motion be tabled pending legal advice, and voted in favour of the motion. As a result, a complaint was brought to the Provincial Ombudsman asserting that the Councillor was in breach of his conflict of interest obligations (the “Conflict Complaint”).
- Criminal Charges: An incident related to the Conflict Complaint led to criminal charges being brought against the Councillor. Although the Councillor was acquitted they incurred additional legal fees to defend these charges.
- Repayment of Fees: The RM later brought a legal claim against the Councillor for repayment of these legal fees. The Councillor did proceed to pay the majority of the fees back, but also had to hire legal counsel to defend this claim.
The Conflict Complaint led to the Ombudsman issuing a report concluding that the Councillor breached his conflict of interest obligations and recommended the RM bring an application disqualifying him from Council. Consequently, the Councillor no longer attended meetings but remained in his seat. The Councillor did not receive his honorarium up until the Court issued a decision in January 2018 disqualifying him from Council.
Consequently, the Councillor sought to recover his legal fees as well as payment of his honorarium from January 2017 to January 2018 from the RM.
The RM was not required to reimburse legal fees
The Court concluded that the RM was not required to cover the Councillor’s legal fees on the following basis:
- The ability of RMs to reimburse the legal costs of Councillors for good faith actions as part of their duties is discretionary as a RM cannot be required to fund every legal issue arising from Council’s service – not every issue will be worth funding.[1]
- The RM was found not to be vicariously liable given how the Councillor’s conduct did not cause liability or financial loss to anyone and the applicable section of the Act does not apply to criminal offences.
- The Court also considered a section of the Act which provides that a Councillor can be reimbursed for fees relating to disqualification proceedings if the application is dismissed or if an order is issued asserting that they remain on Council.[2] However, as the Councillor was removed from Council, he was not eligible for reimbursement under this section.
The RM was required to pay the councillor’s honorarium
The Court concluded that the RM was required to pay the Councilor’s honorarium up until the order for his removal in 2018[3] as he was only disqualified from Council when the Court ordered it. There was nothing in the order to suggest it was retroactive and the operation of the applicable sections of the Act protects against immediate disqualification and suggests that there is no automatic backdating.[4]
Takeaways for municipalities and members of council
The Decision clarifies that reimbursement of legal fees under the Act is not mandatory – the RM can exercise its discretion to determine whether reimbursement is appropriate.
The Decision also highlights the importance of ensuring appropriate conflict of interest policies are in place and that Council members receive adequate training on how to manage potential conflicts of interest as they may arise.
RMs, or Councillors on their own behalf, should take steps to ensure that appropriate insurance is in place so that Councillors do not end up faced with legal costs for which they may not be reimbursed relating to actions relating to their role on Council.
MLT Aikins has extensive experience advising municipalities in implementing bylaws, developing policies, providing training, and helping municipalities navigate circumstances where the conduct of Members of Council may be in question. Contact one of our municipal lawyers to learn more.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
[1] The Act, s. 355.
[2] The Act, s. 151.
[3] The Act, ss. 147-149.
[4] The Act, ss. 147-149.