Complaint no. LA/SI/490 concerning an alleged contravention of the Councillors' Code of Conduct by Councillor Alexander Cluness of Shetland Islands Council

• Introduction
• Outline of the Complaint and the Response
• The Investigation
• Consideration of the Evidence
• Findings and Conclusion

Introduction

1.1 Complaint number LA/SI/490 alleges a contravention of the Councillors’ Code of Conduct (“the Code”).  The Code was issued by the Scottish Ministers in terms of section 1 of the Ethical Standards in Public Life etc. (Scotland) Act 2000 (“the 2000 Act”) and came into effect on 1 May 2003.

1.2 The complaint has been lodged by Mr Michael Peterson (“the complainant”) who alleges a contravention of the Code by Councillor Alexander Cluness (“the respondent”).  The respondent is an elected member of Shetland Islands Council (“the Council”).

1.3 It is alleged that the respondent has contravened the Councillors’ Code of Conduct, and, in particular, the provisions in section 3 relating to Gifts and Hospitality; in section 4 relating to the Registration of Interests; and in section 5 relating to the Declaration of Interests.

1.3.1 With regard to Gifts and Hospitality paragraphs 3.6 to 3.13 of the Code state:

"3.6 You must never ask for gifts or hospitality.

3.7 You are personally responsible for all decisions connected with the acceptance of gifts or hospitality offered to you and for avoiding the risk of damage to public confidence in your Council and in local government. As a general guide, it is usually appropriate to refuse offers except:

(a) isolated gifts of a trivial character or inexpensive seasonal gifts such as a calendar or diary or other simple items of office equipment of modest value;

(b) normal hospitality associated with your duties and which would reasonably be regarded as appropriate; or

(c) civic gifts received on behalf of the Council.

3.8 You must not accept any offer by way of gift or hospitality which could give rise to a reasonable suspicion of influence on your part to show favour there may be any reasonable perception that any gift received by your spouse or cohabitee or by any company in which you have a controlling interest, or by a partnership of which you are a partner, can or would influence your judgement. The term "gift" includes benefits such as relief from indebtedness, loan concessions, or provision of services at a cost below that generally charged to members of the public.

3.9 You must not accept any offer of a gift or hospitality from any individual or organisation who is an applicant awaiting a decision from the Council or who is seeking to do business or to continue to do business with the Council. If you are making a visit to inspect equipment, vehicles, land or property, then as a general rule you should ensure that the Council pays for the cost of these visits.

3.10 You must only accept offers to attend social or sporting events where these are clearly part of the life of the community or where the Council would be expected to be represented.

3.11 You must not accept repeated hospitality from the same source.

3.12 If it is the practice of the Council to seek sponsorship for some of its activities or events, you must ensure that your involvement with the sponsors is limited to the event in question and does not damage public confidence in the relationship between the Council and the sponsors.

3.13 You must record with the appropriate officer the details of any gifts or hospitality received. This record will be available for public inspection." or disadvantage to any individual or organisation. You should also consider whether

1.3.2 Section 4 of the Code deals in its entirety with the Registration of Interests, the relevant paragraphs in relation to this complaint being as follows:

"4.1 The following paragraphs set out the categories of interests, financial and otherwise, which you have to register. These are "Registerable Interests", and you must ensure that they are registered, when you are elected and whenever your circumstances change.

4.2 Regulations made by Scottish Ministers describe the detail and timescale for registering interests. It is your personal responsibility to comply with these regulations and you should review regularly and at least once a year your personal circumstances. Annex B contains key definitions and explanatory notes to help you decide what is required when registering your interests under any particular category. The interests which require to be registered are those set out in the following paragraphs and relate to you. It is not necessary to register the interests of your spouse, or cohabitee.

Category One: Remuneration

4.3 You have a registerable interest where you receive remuneration by virtue of being:

• employed;
• self-employed;
• the holder of an office;
• a director of an undertaking;
• a partner in a firm; or
• undertaking a trade, profession or vocation, or any other work.

4.4 You do not have a registerable interest simply because you are a councillor.

4.5 If a position is not remunerated it does not need to be registered under this category. However, unremunerated directorships may need to be registered under category two "Related Undertakings".

4.6 If you receive any allowances in relation to membership of any organisation the fact that you receive such an allowance must be registered.

4.7 When registering employment, you must give the name of the employer, the nature of its business and the nature of the post held in the organisation.

4.8 When registering self-employment, you must provide the name and give details of the nature of the business. When registering an interest in a partnership, you must give the name of the partnership and the nature of its business.

4.9 Where you otherwise undertake a trade, profession or vocation, or any other work, the detail to be given is the nature of the work and its regularity. For example, if you write for a newspaper, you must give the name of the publication and the frequency of articles for which you are paid.

4.10 When registering a directorship, it is necessary to provide the registered name of the undertaking in which the directorship is held and detail the nature of its business.

4.11 Registration of a pension is not required as this falls outside the scope of the category.

Category Two: Related Undertakings

4.12 You must register any directorships held which are themselves not remunerated but where the company (or other undertaking) in question is a subsidiary of, or a parent of, a company (or other undertaking) in which you hold a remunerated directorship.

4.13 You must register the name of the subsidiary or parent company or other undertaking and the nature of its business, and its relationship to the company or other undertaking in which you are a director and from which you receive remuneration.

4.14 The situations to which the above paragraphs apply are as follows:

• you are a director of a board of an undertaking and receive remuneration - declared under Category one - and
• you are a director of a parent or subsidiary undertaking but do not receive remuneration in that capacity.

Category Three: Contracts

4.15 You have a registerable interest where you (or a firm in which you are a partner, or an undertaking in which you are a director or in which you have shares of a value as described in paragraph 4.20 below) have made a contract with the Council of which you are a member:

(i) under which goods or services are to be provided, or works are to be executed; and

(ii) which has not been fully discharged.

4.16 You must register a description of the contract, including its duration, but excluding the consideration.

Category Seven: Non-Financial Interests

4.21 Councillors may also have significant non-financial interests and it is equally important that relevant interests such as membership or holding office in public bodies, companies, clubs, societies and organisations such as trades unions and voluntary organisations, are registered and described. In this context, non-financial interests are those which members of the public might reasonably think could influence your actions, speeches or votes in the Council."

1.3.3 Section 5 of the Code provides direction and guidance on the circumstances when Declaration of Interests should be made. In regard to this complaint the relevant paragraphs read as follows:

"5.1 The key principles of the Code, especially those which specify integrity, honesty and openness are given further practical effect by the requirement for you to declare interests at meetings which you attend. The rules on declaration of interest, along with the rules which require registration of interests, are intended to produce transparency in regard to interests which might influence, or be thought to influence, your actions as a councillor.

5.2 It is your responsibility to make decisions about whether you have to declare an interest or make a judgement as to whether a declared interest prevents you from taking part in any discussions or voting. You are in the best position to assess your personal circumstances and to judge how these circumstances affect your role as a councillor in regard to a particular matter. You can, of course, seek advice from appropriate Council officers or from other sources which may be available to you. In making decisions for which you are personally responsible you are advised to err on the side of caution.

5.3 You may feel able to state truthfully that an interest would not influence your role as a councillor in discussion or decision-making. You must, however, keep in mind that the test is whether a member of the public, acting reasonably, would think that a particular interest could influence your role as a councillor.

5.4 Much of the content of the rules set out in this section of the Code refers to Council or Committee meetings. The principles relating to declaration of interests are not confined to such meetings. You must apply these principles no less scrupulously in your dealings with Council officers, at meetings with other councillors, including party group meetings, meetings of Joint Boards and Joint Committees and any other meeting, formal or informal, where you are representing your Council.

Interests which Require Declaration

5.5 Interests which require to be declared may be financial or non-financial. They may or may not cover interests which are registerable in terms of this Code. Most of the interests to be declared will be your personal interests but, on occasion, you will have to consider whether the interests of other persons require you to make a declaration. The paragraphs which follow deal with (a) your financial interests, (b) your non-financial interests and (c) the interests, financial and non-financial, of other persons.

Your Financial Interests

5.6 Any financial interest which is registerable under any of the categories prescribed in Section 4 of this Code must be declared.

5.7 The financial interests which you may have to declare are not confined to those which are registerable. You may, for example, in the course of employment or self-employment, be engaged in providing professional advice to a person whose interests are a component of a matter to be dealt with by a Council Committee.

5.8 You do not have a financial interest which you have to declare as a Council tax payer or ratepayer or, in respect of any issue relating to the terms of services which are offered to the public generally, as a recipient or non-recipient of those services. Similarly, you do not have a financial interest in relation to any consideration of councillors' allowances or services provided by the Council to councillors to assist them in carrying out their duties.

Your Non-Financial Interests

5.9 If you have registered a non-financial interest under category seven of Section 4 you have recognised that it is a significant non-financial interest. There is, therefore, a very strong presumption that this interest will be the subject of declaration in any context where there is any link between a matter which requires your attention as a councillor and the registered interest.

5.10 As a councillor you will serve on other bodies as a result of express nomination or appointment by your Council or otherwise by virtue of being a councillor. Your membership of statutory Joint Boards or Joint Committees which are composed exclusively of Councillors does not raise any issue of declaration of interest in regard to Council business. In relation to service on the boards and management committees of limited liability companies, public bodies, societies and other organisations, you must decide, in the particular circumstances surrounding any matter, whether to declare a non-financial interest. Only if you believe that, in the particular circumstances, the nature of the interest is irrelevant or without significance, should it not be declared. You must always remember the public interest points towards transparency and, in particular, a possible divergence of interest between the Council and another body. Keep particularly in mind the advice in paragraph 3.19 of this Code about your legal responsibilities to any limited liability company of which you are a director.

Making a Declaration

5.14 You must consider at the earliest stage possible whether you have an interest to declare in relation to any matter which is to be considered. You should consider whether agendas for meetings raise any issue of declaration of interest. Your declaration of interest must be made as soon as practicable at a meeting where that interest arises. If you do identify the need for a declaration of interest only when a particular matter is being discussed you must declare the interest as soon as you realise it is necessary.

5.15 The oral statement of declaration of interest should identify the item or items of business to which it relates. The statement should begin with the words "I declare an interest". The statement must be sufficiently informative to enable those at the meeting to understand the nature of your interest but need not give a detailed description of the interest.

Effect of Declaration

5.16 Declaring a financial interest has the effect of prohibiting any participation in discussion and voting. You should leave the meeting room until discussion of the item of business is concluded.

5.17 A declaration of a non-financial interest involves a further exercise of judgement on your part. You must consider the relationship between the interest which has been declared and the particular matter to be considered and relevant individual circumstances surrounding the particular matter.

5.18 In the final analysis the conclusive test is whether, in the particular circumstances of the item of business, and knowing all the relevant facts, a member of the public acting reasonably would consider that you might be influenced by the interest in your role as a councillor and that it would therefore be wrong to take part in any discussion or decision making. If you are not confident about the application of this objective yardstick, you should play no part in discussion and should leave the meeting room until discussion of the particular item is concluded. If you, in conscience, believe that your continued presence would not fall foul of this objective test, then declaring an interest will not preclude your involvement in discussion or voting.

Frequent Declarations of Interest

5.19 Public confidence in a local authority is damaged by perception that a Council's decisions are substantially influenced by factors other than the public interest. If you would have to declare interests frequently at meetings of a particular committee or in respect of any role which you are asked to discharge as a councillor, you should not accept a role or appointment with that attendant consequence. Similarly, if any Council appointment or nomination to another body would give rise to objective concern because of your existing personal involvements or affiliations, you should not accept the appointment or nomination.

Dispensations

5.20 In some very limited circumstances dispensations may be granted by the Standards Commission in relation to the existence of financial and non-financial interests which in terms of this Code would otherwise prohibit participation in discussion and voting. 5.21 Applications for dispensations will be considered by the Standards Commission which will be able to entertain requests for dispensations which will apply generally to a class or description of councillors who are all affected by a particular category of interest. In situations where general or category dispensations are not granted by the Standards Commission, applications for particular dispensations should be made as soon as possible in advance of any meetings where dispensation is sought. You should take no part in consideration of the matter in question unless, and until, the application for dispensation is granted."

1.4 Regulations 4 to 7 of the 2003 Regulations are relevant to this complaint and are as follows:

"First Notice

4. - (1) Each responsible person shall give to the applicable proper officer or standards officer a first notice of interests.

(2) The responsible person shall give that first notice by the latest of -

• 1st June 2003;
• one month after the date of any application of acceptance or date of appointment, as the case may be, of that person; or
• one month after the date on which a members' code has effect in accordance with section 3 (10) of the 2000 Act.

(3) The first notice shall state -

• the name of the responsible person;
• for each category listed in the first column of the Schedule to these Regulations in respect of which the responsible person has a registerable interest, information of the kind described in the councillors' code or members' code as set out in the second column of that Schedule; and
• for each other category so listed, that the responsible person does not have such an interest.

Further notices

5. - (1) Each responsible person shall on any change to the information contained in a notice under regulation 4 or this regulation, give a further notice to the proper officer or standards officer, as the case may be, setting out the details of that change.

(2) The further notice shall -

(a) be given within one month of the change to the information; and

(b) provide the details of that change in the manner prescribed by regulation 4(3).

Recording the information

6. - (1) Every proper officer or standards officer shall, subject to paragraph (3), maintain a record in the register of interests of information contained in a notice under regulation 4 or 5.

(2) The record shall consist of -

(a) the date of receipt of that notice;

(b) the name of the responsible person who gave that notice; and

(c) a statement of the information contained in, or a copy of, that notice.

(3) The proper officer or standards officer, as the case may be, shall maintain that record in respect of any person until five years after the date that person ceases to be a responsible person."

1.5 The respondent has signed a declaration of acceptance of the office of councillor under the Local Authorities (Councillors) (Declaration of Acceptance of Office) (Scotland) Order 1990, as amended, in terms of which the respondent has undertaken to meet the requirements of the Councillors' Code of Conduct.

1.6 For the purpose of this investigation, I was assisted by Mr Jon Miller,Investigating Officer.

Outline of the Complaints and Response

The Complaint

2.1 The complaint is set out in a letter dated 16 August 2006 with attachments from the complainant. The complainant alleges that the respondent has a) failed to register as interests those companies or other bodies from which he receives remuneration as a nominee director or trustee, and in particular his directorship of Smyril Line p/f and chairmanship of the Shetland Fisheries Training Centre Trust; b) as convener of Shetland Islands Council, he failed to declare his interest as a nominee director of Smyril Line p/f appointed to the Board of that company by Shetland Development Trust, participated in meetings of the Council and Trust and influenced funding decisions in support of the company; c) as a nominee director of Smyril Line p/f he received repeated hospitality from that company such as to give rise to a reasonable suspicion that he could be influenced in his attitude towards that company, and that he failed to record such hospitality within the Register of Hospitality available for public inspection.

The Response

2.2 The response is set out in a letter dated 20 September 2006 from the respondent, together with supplementary letters dated 18 December 2006 with attachments, and 29 January 2007 with attachment. The respondent refutes the allegations relating to declarations of interest and acceptance of hospitality.

The Investigation

3.1 To establish the background to the complaint, the Investigating Officer sought and received information from the Council.

3.2 Having considered the documentary evidence, the Investigating Officer proceeded individually to interview the complainant, the respondent and relevant witnesses. The interviews took place on 11 and 12 December 2006.

Consideration of the Evidence

4.1 Councillor Alexander Cluness has been an elected member since 1973, with an unbroken period of office which commenced in 1999. He is the current Convener of Shetland Islands Council. The respondent is a member of the Scottish Liberal-Democrat group, and represents the Lerwick North Central ward.

4.2 The aim of Shetland Development Trust is to support the Shetland economy by investing funds derived from oil revenues accruing to Shetland Islands Council. The Trust operates as an independent body although investments over £250,000 are subject to approval by the Council. The Trust is governed by a board of trustees, currently chaired by Mr Joseph Simpson, and managed by its own staff headed by Mr Neil Grant as General Manager. The respondent was a trustee until April 2005 when his term of office came to an end.

4.3 Smyril Line p/f is a commercial company incorporated in the Faroe Islands. The company was formed with the intention of operating a passenger and cargo shipping service linking the Faroe Islands with Scotland and Scandinavia. It now operates a single cruise ferry, the Norrona, which operates a sailing schedule linking Denmark, Faroe, Iceland and Shetland.

4.4 Shetland Development Trust, which then comprised all members of the Council, made its initial investment in Smyril Line in January 2001. The primary purpose of this investment was to encourage and develop trade and tourism, and to ensure that Lerwick would continue to be a port of call for the Norrona. A shareholders agreement was established which in summary placed an obligation on the company to include Lerwick in the sailing schedule, establish an office in Shetland, and placed a nominee of Shetland Development Trust on the board. Mr Morgan Goodlad, the Council's Chief Executive, was appointed as the nominated director.

4.5 In recent years the company has encountered difficult trading conditions and have required further investment of equity and loan funds. Extensive discussions have taken place between Smyril Line and representatives of Shetland Development Trust and the Council as to the restructuring of the company and the maintenance of Lerwick as a port-of-call.

4.6 In March 2005 the Chief Executive of Shetland Islands Council, Mr Morgan Goodlad, intimated his intention to resign his directorship of the Smyril Line due to the time commitment which was detracting from his Council duties. The respondent was nominated to take his place and this was agreed formally at a meeting of the Trust on 16 March 2005. The appointment did not take place however until the meeting of the Smyril Line board which took place on 9 June 2005. The identification of the respondent as an appropriate replacement was influenced by his experience as a former trustee and connections in Faroe at ministerial level.

4.7 At the time of nomination the respondent was aware that the directorship carried entitlement to remuneration in the form of a director's fee. No formal documentation appears to exist regarding this, but the fact that it was payable has been confirmed by the respondent, the Trust, and Mr Goodlad, the latter having declined the fee during his tenure as a director. The respondent had indicated that he would be prepared to accept the annual fee which approximated to the Faroese equivalent of £8,000 but due to a taxation issue in Faroe the initial payment was not made until December 2005.

Registration of Interest

4.8 Shetland Islands Council has adopted a practice which seeks to ensure that councillors maintain the currency of the statutory register of interests by issuing e-mail reminders at six-monthly intervals. This is administered by Ms Anne Cogle, a member of the Monitoring Officer's staff, who, when notified of changes to interests, makes the necessary amendments to the electronic version of the register maintained as part of the Council's publicly-available website. Paper copies of the e-mail exchanges are retained within a manual file which is held within the Legal Department, and from which an audit trail of changes can be derived. The website version displays only the current position for individual councillors and it is not possible to call-up retrospectively the interests registered at any previous date. In pursuance of the Council's records management policy the paper copies relating to amendment notifications have been destroyed and it is only possible to reconstruct the sequential record from early 2005.

4.9 From print-outs provided by the Monitoring Officer it is possible to establish the following sequence of events in regard to the relevant sections of the respondent's registration of interests:

4.10 The Monitoring Officer is satisfied that this represents a true record in relation to the registration of interests relating to Smyril Line and The Shetland Fisheries Training Centre Trust (referred to as 'NAFC'), but it is apparent that the system of electronic record keeping does not allow for retrospective tracking of changes, and there are references in the respondent's e-mail exchange with Ms Cogle to his involvement in companies which may or may not have been recorded in the electronic register. A more consistent policy of retaining hard copies of changes has now been introduced, although the requirement to examine a series of paper records derived from e-mail updates does not provide means of ascertaining the state and details of registration at a particular date.

Registration of Interest in Smyril Line p/f

4.11 On being appointed as a director of Smyril Line the respondent was required in terms of the Code to consider whether this constituted an interest which required to be registered. He was statutorily required to do so within one month of appointment as a director on 9 June 2005, that is, by 9 July 2005. The respondent notified his directorship to Mrs Cogle on 2 September 2005 and this was registered by her under Category 2 'Related Undertakings'. The first instalment of the director's fee, £2,669.92, was paid on 16 December 2005 (although it may not have been recorded in the respondent's bank account until the following day) but this was not reflected in the respondent's registration of interests until nine months later by which time he had received a net payment of £5,326.59. These payments were in respect of the respondent's directorship from June 2005 to August 2006.

4.12 It is apparent that updates to the register relied entirely upon prompts by Mrs Cogle, rather than volunteering changes to the status of his interests as they occurred, and that the respondent was imprecise as to the relevant categories under which these interests should be registered. The recording of his directorship of Smyril Line p/f under Category Two was inaccurate.

4.13 On 8 February 2005, as part of her routine updating procedure, Mrs Cogle e-mailed the respondent in the following terms:

'Sandy - please see your Register of Interest, attached. You may wish to consider reviewing/amending, particularly reference to Reporter, etc.
Regards
Anne'

4.14 The following exchange of e-mails ensued:

8 February 2005: Respondent to Anne Cogle

'Anne
Thanks - you can delete the Reporters post + Unison. Check with Jan [the Monitoring Officer] as to whether I have now to include Directorships of Shetland Seafish Ltd and Shetland Aerogenerators Ltd; SLAP and SLAP Trading Ltd.
Sandy'

8 February 2005: Anne Cogle to Respondent

'Sandy
I can tell you that you should include director/trustee positions, and advise if you receive any allowances for them.
Anne.'

8 February 2005: Respondent to Anne Cogle

'Anne
Will get back to you on this.
Sandy.'

29 March 2005: Anne Cogle to Respondent

'Reminder that you were going to get back on update to your Register of Interests.
thanks
Anne'

5 April 2005: Respondent to Anne Cogle

'Anne
Other than losing Shetland Oil Tools directorship nothing else has changed. You can include Shetland Sea Fish Limited and Shetland Aerogenerators Ltd. Do we include NAFC and Shetland College? SLAP and SLAP trading? Jan seemed unsure.
Sandy'

14 April 2005: Anne Cogle to Respondent

'I have removed Shetland Oil Tools.

For the other positions, the matter of whether they are registerable will depend on whether they are remunerated or not. If you receive remuneration it is a registerable interest and must also be declared at meetings. If you do not receive remuneration, it may be registerable under Category 2 or 7, depending on whether you are a director or a member/trustee.

I have attached a copy of the Code for you to read the information relating to the categories, and then you can let me know whether you want them registered, and if so, the details to be recorded.

Anne'

4.15 On 1 September 2005 Mrs Cogle issued another reminder to elected members which resulted in the following exchange with the respondent:

2 September 2005: Respondent to Anne Cogle

'Anne
Please add directorship of Smyril Line.
Sandy.'

2 September 2005: Anne Cogle to Respondent

'Okay - is this a remunerated position? If so, what is the amount.
Anne'

It should be noted that the respondent was not required by the Code or the Regulations to state the amount of remuneration.

5 September 2005: Respondent to Anne Cogle

'Anne
Not so far, alas!
Sandy'

4.16 On 1 March 2006 Ms Cogle again issued her six-monthly reminder. The respondent replied as follows, without identifying the relevant category of registration:

13 March 2006: Respondent to Anne Cogle

'Anne
Can't get into our website for some reason at present - add Directorship of Smyril Line for me please.
Sandy'

Mrs Cogle noted the request but took no action on this as she had already registered the directorship under Category Two.

4.17 On 1 September 2006 the routine reminder produced the following exchange:

1 September 2006: Respondent to Anne Cogle

'Anne
Smyril Line change - Fee for Directorship £4500 per annum net of Faroese tax at source. First instalment 17.12.05.

Also include if required NAFC Chairman's Honorarium £5000 per annum'

4 September 2006: Respondent to Anne Cogle

'Anne
Take out the reference to NAFC - I'll put it back should I decide to accept payment.
Sandy'

11 September 2006: Respondent to Anne Cogle

'Anne
I find my £5000 NAFC honorarium has been paid directly into my bank account this month - please update the records.
Sandy'

12 September 2006: Respondent to Anne Cogle

'Anne
Delete directorship of Smyril Line - have resigned!
Sandy'

4.18 The effect of this was that on 5 September 2005 Mrs Cogle registered the respondent's interest as an unremunerated director of Smyril Line under category Two 'Related Undertakings'.

4.19 On 1 September 2006 the respondent notified Mrs Cogle that he had now received payment of £4,500 from Smyril Line, having slightly underestimated the actual amount of £4,573.72. Mrs Cogle registered this payment under Category One 'Remuneration'.

4.20 In response to this investigation Councillor Cluness provided documentation from his bank which detailed five payments from Smyril Line which were credited to his account between December 2005 and September 2006. No payment appears to have been made in respect of April 2006. The payments total 59,982.08 Danish Kroner which, with the deduction of bank commission, equates to net payments of £5,326.59. These statements indicate gross salary of approximately DDK105,231.71 or £9,344.89 prior to deductions. The following table lists the individual payments:

4.21 Within his letter of response to the complaint dated 20 September 2006, the respondent accepted that he had not registered his interest as required, and attributed this to an 'administration oversight'. Following a request by the company for details of his bank account to facilitate the transfer of his director's fee, he had contacted Mrs Cogle with a view to updating the register, but being unable at the time to confirm the details of his registration from the Council's website, the matter had then slipped his mind.

Declaration of Interests in Smyril Line p/f

4.22 During the currency of the respondent's directorship of Smyril Line, the Council discussed the company on 5 occasions. The respondent was present at 4 of these meetings and the minutes show that on each occasion he declared his interest and withdrew from the meeting.

4.23 During the same period the trustees of Shetland Development Trust discussed its interest in Smyril Line on 22 occasions. The respondent attended only 2 of these meetings. As the respondent was specifically appointed to represent the interests of the Trust on the board of Smyril Line his interest as a director was self-evident. The respondent did not and could not participate in the funding decisions of the Trust as his term of office as a trustee ended prior to his appointment to the Smyril Line board.

4.24 The complainant, founding on an anonymous letter, alleges that the respondent used his office to lever further investment by Shetland Development Trust in Smyril Line. He links this with the assertion that the respondent failed to declare his interest in Smyril Line and withdraw from meetings of the Council and Trust at which further investment was considered. The table above shows that in relation to Council meetings the respondent was scrupulous in observing the requirements of the Code. No requirement to declare an interest arose within meetings of the Trust itself as the respondent was no longer a trustee and attended meetings as their nominated director of Smyril Line.

4.25 The anonymous letter alleges that the respondent presented a letter written by the Council's Director of Finance to a meeting of Shetland Development Trust on 5 July 2006. This letter conveyed the wish of the Council that the Trust approves further investment in Smyril Line.

4.26 At the meeting of the Trust on 5 July 2006 opinion was divided as to further investment. A motion to continue investment in Smyril Line found no seconders, while an amendment that due to lack of information the Trustees felt unable to make further investment was unanimously agreed. It was at the instance of the trustees that the Chief Executive and the respondent were invited to meet with them and clarify the way forward. On 7 July a further meeting of the Trust was convened at which the respondent explained the Council's position which was supportive of maintaining the viability of the company and its links with Shetland. This reflected the decision of the Council at its meeting on 17 May, at which the respondent declared his interest and withdrew and at which two other trustees were present as elected members. The complainant's submission referred to a letter which was in fact written by the Council's Director of Finance following a meeting with the Trust's General Manager on 6 July, and it was the latter officer, and not the respondent, who provided copies to the trustees along with independent advice he had commissioned from the Trusts's legal advisors.

Hospitality Received from Smyril Line p/f

4.27 The complainant has alleged that in attending meetings related to Smyril Line the respondent may have received hospitality in the form of travel, accommodation, and subsistence which went beyond reimbursement of reasonable expenses.

4.28 Hospitality and gifts are recorded by Shetland Islands Council in electronic format (as part of the register of interests) with details being publicly available on the Council's website. Notifications are entirely a matter for individual councillors; reminders to members are not directed at gifts and hospitality specifically but at the register of interests generally.

4.29 The respondent has stated that he received no hospitality or gifts from Smyril Line beyond normal reimbursement of expenses, accommodation and subsistence incurred as a result of his attendance at director's meetings. Accordingly he made no entries in the Hospitality Register. Details have been obtained of the meetings attended by the respondent which show that while some expenses were met wholly and directly by the company, others were met by the Council or Trust, and some recharged to Smyril Line. The following table illustrates the position:

4.30 It is possible that some costs include other Council or Shetland Development Trust officers but as the expenses were all backed by appropriate tickets or receipts no issue of hospitality arises. Normal meals and refreshments were provided by Smyril Line. Details of the costs incurred have been withheld by the company but it is understood from the respondent, the Council Chief Executive, and representatives of Shetland Development Trust who attended the meetings, that the hospitality afforded was not inordinate and restricted to the business in hand. Travel costs were high due to the lack of direct flights between Shetland and Faroe.

Registration of Interest as Chairman of Shetland Fisheries Training Centre Trust

4.31 The North Atlantic Fisheries College (NAFC) is based at Scalloway, Shetland and undertakes a range of activities in support of the fishing and maritime industries, including functions related to aquaculture which were previously undertaken by the Council. The College is governed by the Shetland Fisheries Training Centre Trust of which the respondent has been Chairman since 2003.

4.32 On 30 June 1988 the Shetland Fisheries Training Centre Trust was registered as a charitable trust with the objects inter alia of maintaining a Shetland Fisheries Training Centre. Initially management and governance were undertaken by a Board of Management and separate Board of Trustees. These bodies were merged however in 2003 and the Board of Trustees thereafter comprised five elected members of the Council, and four representatives of the Shetland fishing industry. The core funding for the college is provided mainly by the Council and Shetland Development Trust, with additional revenues being generated by commercial activities and student fees. In September 2005 the institute's name was changed to NAFC Marine Centre to reflect the scope of the work being undertaken. The change of name did not however alter the funding or governance arrangements.

4.33 On 1 November 1999 the then Principal of the College, Mr Morgan Goodlad, (now the Council's Chief Executive) proposed to a joint meeting of the Board of Trustees and Board of Management that in recognition of greater involvement in strategic management, the Chairman of the Board of Management, Mr John Goodlad, should be paid an annual honorarium of £5,000. Payment of the honorarium was agreed subject to the rider that as the Chairman was Secretary of the Shetland Fisherman's Association and represented that organisation on the Board of Management, the payment should go to that body rather than to Mr John Goodlad personally. There is no specific provision within the Trust deed to authorise the payment of an honorarium, although clause 14 of the Schedule of Powers annexed to the Trust deed entitles the trustees to reimbursement of expenses reasonably incurred in connection with the administration of the Trust.

4.34 The respondent was appointed by the Council as an ex officio member of the Trust, and on 30 September 2003 he was appointed Chairman of the Board of Trustees, which had now amalgamated with the Board of Management. At the meeting of the Trust on 1 April 2005 it was explained that he had not received the honorarium since his appointment, and that in his additional role as Chairman of the North Sea Commission Fisheries Group he would be required to attend meetings and incur considerable out of pocket expenses. It was agreed that the respondent should be paid a meetings allowance of £200 up to an annual maximum of £5,000. The respondent withdrew from the meeting while this item was under consideration. He was required to register the remunerated nature of the post by 1 May 2005, being one month after the decision of the Trust on 1 April 2005.

4.35 On 15 September 2005 the Trust reconsidered this arrangement, again outwith the presence of the respondent, and it was decided that an alternative system of payment should be agreed between the respondent and the Director and Support Services Manager of the Centre. The annual payment of the £5,000 honorarium was then resumed, not linked to attendance at specific meetings. The respondent received payments of £400 on 29 June 2005, and £4,600 on 16 November 2005. In August 2006 he received a single payment of £5,000.

4.36 As detailed above the register of members' interests is maintained and updated by Mrs Anne Cogle, primarily through e-mail reminders to Councillors. For ease of reference the e-mail exchanges relating to the respondent's receipt of an honorarium by virtue of his Chairmanship of the Shetland Fisheries Training Centre Trust is repeated here. It will be noted that he refers to this as 'NAFC' being the initial letters of the North Atlantic Fisheries College.

5 April 2005: Respondent to Anne Cogle

'Anne
Other than losing Shetland Oil Tools directorship nothing else has changed. You can include Shetland Sea Fish Limited and Shetland Aerogenerators Ltd. Do we include NAFC and Shetland College? SLAP and SLAP trading? Jan seemed unsure.
Sandy'

1 September 2006: Respondent to Anne Cogle

'Anne
Smyril Line change - Fee for Directorship £4500 per annum net of Faroese tax at source. First instalment 17.12.05.

Also include if required NAFC Chairman's Honorarium £5000 per annum'

4 September 2006: Respondent to Anne Cogle

'Anne
Take out the reference to NAFC - I'll put it back should I decide to accept payment.
Sandy'

11 September 2006: Respondent to Anne Cogle

'Anne
I find my £5000 NAFC honorarium has been paid directly into my bank account this month - please update the records.
Sandy'

4.37 It appears from this exchange that while initially the respondent was expressing some doubt as to the requirement to register the honorarium, he had by 11 September 2006, concluded that it should be recorded.

Declaration of Interest as Chairman of Shetland Fisheries Training Centre Trust

4.38 The principal matter coming before the Council relating to the Shetland Fisheries Training Centre Trust relates to the funding of the North Atlantic Fisheries College. The annual funding allocation is considered initially by the Council's Executive Committee, with a recommendation being passed to the Council for approval. Most recently the Executive Committee received a briefing from the Principal on the College business plan. At the subsequent Council meeting on 8 February 2007, when funding was to be determined, the respondent declared his interest as Chairman of the Shetland Fisheries Training Centre Trust and left the meeting. Shortly after his return further discussion ensued in relation to the College and again the respondent declared his interest and withdrew.

Other Directorships held by the Respondent

4.39 The complainant has raised the question of other companies in which the respondent holds directorships, and the requirement to register these as financial or non-financial interests. The respondent has accepted that he holds or has held a number of directorships by virtue of his position as Convener of the Council or trustee of Shetland Development Trust. He did indeed make reference to Shetland Oil Tools Ltd, Shetland Seafoods Ltd and Shetland Aerogenerators Ltd, SLAP and SLAP Trading Ltd, and his trusteeship of Shetland College, in his e-mail exchanges with Mrs Cogle regarding the necessity for registration.

4.40 The following table gives details of the respondent's current directorships:

4.41 An attendance allowance is paid to members attending meetings of Shetland Leasing and Property Developments Ltd up to a maximum of £31.70 per day. The respondent has claimed approximately £350 over a three-year period. No remuneration or allowances are payable in relation to the other directorships.

4.42 The Council's website utilises a computer system known as COINS which is also used by several other local authorities in Scotland. This system lists in tabular format positions held by Councillors under the headings of Committees, Joint Boards, Trusts, Outside Bodies, and Registered Interests. In regard to the respondent 10 Trusts and 22 Outside Bodies are listed. Included within the list of Outside Bodies are the 10 Trusts already listed separately, and the companies listed in the table above with the exception of the subsidiaries of Shetland Fisheries Training Centre Trust. At the date of the complaint the respondent's Register of Interests contained only the remunerated chairmanship of the Shetland Fisheries Training Centre Trust (from 11 September 2006) and rental income derived from his ownership of the shop at 80 Commercial Street, Lerwick. The former entry referred merely to 'NAFC', while the latter was erroneously listed as 'retail income' as opposed to 'rental income'.

Findings and Conclusion

5.1 The complainant alleges that Councillor Alexander Cluness has contravened the Councillors' Code of Conduct, as outlined in paragraphs 1.3 and 2.1 of this Note of Decision.

5.2 The complainant alleges that the respondent a) has failed to register as interests those companies or other bodies from which he receives remuneration as a nominee director or trustee, and in particular his directorship of Smyril Line p/f and chairmanship of the Shetland Fisheries Training Centre Trust; b) as convener of Shetland Islands Council, failed to declare his interest as a nominee director of Smyril Line p/f appointed to the Board of that company by Shetland Development Trust, participated in meetings of the Council and Trust and influenced funding decisions in support of the company; c) as a nominee director of Smyril Line p/f received repeated hospitality from that company such as to give rise to a reasonable suspicion that he could be influenced in his attitude towards that company, and that he failed to record such hospitality within the Register of Hospitality available for public inspection.

5.3 In placing a duty on councillors to register interests which might be regarded as influencing their decisions the primary purpose of the Code is to ensure transparency in Council decision-making. For that reason councillors are enjoined to err on the side of safety and encouraged to make full and prompt disclosure. It is self-evident that the details of registered interests should be available to the public in accessible format and that there should be clarity and accuracy of detail in identifying declared interests.

5.4 Category One in section 4 of the Code provides that a councillor has a registerable interest under that category where the councillor receives remuneration by virtue of being employed or self-employed, the holder of an office, director of an undertaking, partner in a firm, or undertaking any trade, profession, vocation, or other work. Category Two provides for the registration of directorships which are not remunerated but where the company is a subsidiary or parent company of a company in which the councillor holds a remunerated directorship.

5.5 Registration of interests had initially to be done by way of a first notice to be received by June 2003 after the local government elections, and any change to the information contained in the first notice has to be registered within one month of the change. The details required are set out in regulation 4(3) of the 2003 Regulations as detailed in paragraph 1.4 above.

Registration of Interest in Smyril Line p/f

5.6 In this case the respondent was appointed to the Board of Smyril Line p/f as the nominee director of Shetland Development Trust on 9 June 2005. He was aware at the time that a director's fee was payable and had decided that he would accept this remuneration. It was incumbent on him to have registered the directorship within the one month period allowed, that is by 9 July 2005. The respondent notified the directorship to the officer who maintained the register as set out in his e-mails of 2 and 5 September 2005 which was taken as being unremunerated. His registration was outwith the time allowed for registration and in any event the information he provided was insufficient given the requirements of the Regulations, in terms of which the respondent should have indicated into which category the interest fell and the nature of the company's business.

5.7 The respondent was remunerated as a director with effect from 9 June 2005, and received the first instalment of his director's fee on 16 December 2005. He registered the directorship on 2 September 2005 but did not specify the category of the registration or the nature of the company's business, indicating on 5 September 2005 that it was not remunerated. He did not register the remunerated nature of the directorship (namely Category One) until 1 September 2006. He was thus in breach of paragraphs 4.1 to 4.3 and 4.10 of the Code. I find accordingly.
Declaration of Interest in Smyril Line p/f

5.8 Having been appointed as a director of Smyril Line p/f, and registered this initially under Category Two, and subsequently under Category One, the respondent was required to declare this interest and withdraw from Council meetings when issues relating to Smyril Line p/f arose. I note that agenda items relating to the company were discussed by the Council on five occasions between 20 October 2005 and 17 May 2006. The respondent was present at four of these meetings and the minutes record that on each occasion he declared his interest and withdrew from the chamber while the items of business relating to the company were under discussion. The respondent therefore acted appropriately and in accordance with the Code, and I find accordingly.

5.9 In regard to attendance at meetings of Shetland Development Trust I note that the respondent was appointed to the Board of Smyril Line after demitting office as a trustee. He was not therefore entitled to speak at meetings of Shetland Development Trust or take part in their decision making as he was no longer a trustee. As their nominee director it was his role to represent the interests of the Trust in negotiations with Smyril Line, to report back, and where appropriate make recommendations, to the Trust. Clearly there was no requirement for him to declare an interest on these occasions. I am bound to observe however that the respondent's position as a nominee director of a company in which the Trust had a significant investment and was being asked to commit further funds, potentially placed the respondent in what could have been perceived to be a conflict of interest. The Council, of which the respondent is Convener, would be required to endorse any further investment exceeding £250,000 by the Trust, and while the respondent excluded himself from meetings of the Council when the Smyril Line was considered he was known to be closely involved as a member of the team negotiating with the company to retain its commitment to Shetland.

5.10 The degree to which the respondent's position as Convener of the Council may be said to have influenced the Council's or Trust's decisions on further investment is a matter for speculation and for that reason I have made no finding in this respect. I note however that the actual sequence of events does not accord with the allegation contained in the anonymous letter upon which the complainant relies, and the decision to support the Council's position was entirely one for the Trustees who had at their meeting on 5 July 2006 shown independence of mind. Having regard to the public service nature of the company's activities and the involvement of the Council (albeit indirectly through the Trust as a major shareholder) and in order to avoid any suggestion of a potential conflict of interest, it may well have merited an application to the Standards Commission for a dispensation similar to that which is currently available to councillors who have been appointed by their Councils to certain public bodies. Councillors benefiting from a dispensation may participate in Council discussions but they are still required to register and declare their interests.

Hospitality Received from Smyril Line p/f

5.11 The complainant has asked that consideration be given to the possibility of hospitality and/or gifts having been provided by Smyril Line. No specification has been made however and I have found no evidence that the degree of hospitality afforded by the company was inordinate or that any personal benefit was derived by the respondent. Expenses incurred by the respondent were met either by Shetland Development Trust or the Council, with appropriate recharges being made to Smyril Line. In some cases direct bookings of hotel accommodation were met directly by the company as a matter of local practicality. Incidental expenses claimed by the respondent were not inordinate and supported by appropriate receipts. I have found no evidence of impropriety and find accordingly.

Registration of Interest as Chairman of Shetland Fisheries Training Centre Trust

5.12 In regard to the respondent's receipt of payment by means of an honorarium from the Shetland Fisheries Training Centre Trust the question of registration again arises. In this case he has accepted that he received payments of £400 and £4,600 in June and November 2005 respectively, and £5,000 in September 2006, which totalled £10,000.

5.13 The respondent first made reference to his involvement with the Shetland Fisheries Training Centre Trust (as 'NAFC') on 5 April 2005 when he sought advice as to whether this required to be registered. He was informed that it must be registered if remunerated but took no further measures to do so until 1 September 2006. In this case the chairmanship was remunerated with effect from 1 April 2005 and the respondent was obliged to register that interest, giving the appropriate category of registration (namely Category One), by 1 May 2005. He was therefore in breach of paragraph 4.1 to 4.3, and 4.10, of the Code, and I find accordingly.

Declaration of Interest as Chairman of Shetland Fisheries Training Centre Trust

5.14 No specific allegation has been raised by the complainant regarding the respondent's declaration of interest as Chairman of the Shetland Fisheries Training Centre Trust. The respondent was, however, required to comply with the terms of the Code by declaring his financial interest and withdrawing from the meeting during the consideration of matters relating to the Trust or its constituent elements. On the most recent occasion that matters relating to the trust were discussed, namely at the meeting of the full Council on 8 February 2007 when the budgetary allocation was considered, the respondent declared his interest and quite properly withdrew from the meeting.

5.15 I would observe that the public nature of the Trust's functions as a College and the involvement of the Council as the main funder of the Trust may (as in the case of the Smyril Line) in order to avoid any suggestion of a potential conflict of interest have merited an application to the Standards Commission for a dispensation similar to that which is currently available to councillors who have been appointed by their Councils to certain public bodies to allow the councillors to enter into discussion in the Council Chamber on matters affecting such bodies.

Other Directorships held by the Respondent

5.16 The complainant has sought scrutiny of other directorships or appointments held by the respondent in the context of registration. His current directorships of six companies are all held by virtue of his role as a trustee of Shetland Charitable Trust or Shetland Fisheries Training Centre Trust, and attract no remuneration other than in the case of Shetland Leasing & Property Developments Ltd a relatively small allowance. The registration of unremunerated directorships is a matter for the personal judgement of councillors, but they are required to comply fully with the requirements of the Code and the Regulations. To some extent the transparency issue has been addressed by the Council in its listing of Trusts and Outside Bodies within the COINS system on its website, but this should not be regarded as a substitute for the Register of Interests which is a statutory requirement. Duplication of entries on different lists, and the use of acronyms or abbreviated designations, is unhelpful and it should also be borne in mind that access to the Council's website will not be universally available.

5.17 It is also a matter of concern that the practice of issuing six-monthly reminders to elected members, while a sound practical measure, may have resulted in a perception that Council officers will take the initiative in ensuring the currency of registered interests. The Code and Regulations place a personal responsibility on councillors to review their personal circumstances which is not relieved by administrative practices adopted by Councils to issue reminders. The requirement on Councils to maintain records in an accessible format may also be compromised by reliance on electronic systems such as COINS that provide current data but do not allow access to retrospective information. I recommend that the Council should review its practice in regard to registration of interests.

Summary of Conclusions and Recommendations

5.18 In relation to complaint number LA/SI/490, I have come to the conclusion that, having regard to the findings in section 5, and in particular paragraphs 5.6 and 5.7 and 5.12 and 5.13 of this Report, relating to his failure properly and timeously to have registered his interests in Smyril Line p/f and Shetland Fisheries Training Centre Trust respectively, Councillor Alexander Cluness has contravened the Councillors' Code of Conduct.

5.19 This Report raises a number of issues relating to the registration and declaration of interests relating to the Shetland Islands Council and I have therefore recommended that the Council give further consideration to the following:

(i) as referred to in paragraphs 5.10 and 5.15, the case for applying for a dispensation to allow councillors, who are also members of the public bodies in question, to allow them to discuss and vote on matters relating to such bodies which come before the Council;

D Stuart Allan
Chief Investigating Officer
Forsyth House
Innova Campus
Rosyth Europarc
Rosyth
KY11 2UU
2 May 2007