Mangawhai Not Struck Out by Kaipara Council

Interesting result for Mangawhai Ratepayers Association....after their first day in the High Court. (You can read here my account of that day).

I provide a few extracts from the judgment in this posting:

Paying for a sewage treatment plant at Mangawhai
[1] Mangawhai Ratepayers’ and Residents’ Association Inc (the Association) seeks judicial review of certain decisions made by the Kaipara District Council (the Council), all of which arise out of the Council’s resolution, in August 2005, to construct a sewage treatment plant at Mangawhai.
[2] The primary focus of the proceeding is on the question whether rates levied to meet the cost of the project were unlawfully struck, in the sense that they were assessed and levied in a manner that was beyond the powers conferred on the Council by the Local Government Act 2002 (the Act) or the Local Government (Rating) Act 2002 (the Rating Act). That challenge necessarily involves a consideration of the circumstances in which the Council resolved to build the plant and to borrow money to pay for it.
[3] It is now acknowledged that there were irregularities in the rate fixing processes; so much so that the Member of Parliament for Northland has promoted a local bill that is designed, if enacted, to validate the Council’s actions.
[4] This proceeding demonstrates how badly things can go wrong when a democratically elected Council assumes significant financial obligations to an arm’s length third party without disclosing the extent of the borrowing to its ratepayers.

This gets the ball rolling....there follows a succinct account of the facts. These are largely undisputed between Kaipara District Council (KDC) and Mangawhai Ratepayers & Residents Association (MRRA). In terms of the Validating legislation which is presently making its way through Parliamentary processes (the Parliamentary Select Committee has finished hearing public submissions), the judgment notes:

[21] As the Bill is presently making its way through Parliamentary processes, it is inappropriate for the judicial branch of Government to comment on the appropriateness or otherwise of the Legislative branch taking steps to validate the rates. The corollary is that, in the absence of legislation having the effect of proscribing this Court’s ability to hear and determine an application for judicial review in respect of the relevant decisions, this Court must proceed to deal with it.

Then follows a description of the submissions made by KDC in support of its application to strike out from the judicial review proceedings the KDC decisions to borrow for Ecocare and to issue rate demands to repay those borrowings. The Judge notes:

[30] While there are other grounds for advancing its application, the primary plank of the Council’s case is that, as a matter of law, there is no right to challenge decisions of that type because the financing arrangements are “protected transactions”, for the purposes of s 117 of the Act. Certificates given under s 118 of the Act are said to create an irrebuttable presumption that the Council has complied with the requirements of the Act in relation to those transactions, even though it may not (in fact) have done so.

And then in comparing the submissions of MRRA and KDC the judge writes:

[39] Mr Goddard’s submission requires ss 117 and 118 to be interpreted in a manner that provides complete protection to a creditor, particularly when a certificate under s 118 has been given. The consequence is that the loan agreement is deemed to be valid (and to have been entered into lawfully), notwithstanding any actual unlawful conduct giving rise to it. Mr Goddard accepted that his
interpretation reflected a “black is deemed to be white” approach to the application of s 117.
[40] Mr Palmer advanced a more nuanced interpretation. While accepting the need to protect the validity and enforceability of the loan agreement between the Council and ABN Amro, Mr Palmer submitted that the section did no more than that. It did not, he contended, authorise the Council to levy rates or to borrow other money to repay a loan into which it had entered unlawfully or (in an administrative law sense) unreasonably.
[41] That approach contrasts with Mr Goddard’s submission that protection of the transaction necessarily carries with it an implicit power to levy rates to meet financial commitments made pursuant to it.
[42] Mr Palmer submitted that the creditor’s rights to enforce payment of its loan were unaffected. It retained the ability to obtain a charging order over moneys coming into the Council’s accounts, to seek the appointment of a receiver,24 or to take any other available debt collection step. Mr Palmer submitted that was the consequence of the validity and enforceability of the transaction being “protected” by ss 117 and 118.

Drawing to his conclusion, the Judge has this to say, which I explain next...

[50] ...... I accept Mr Palmer’s submission that declaratory relief could vindicate the ratepayers in a manner that might not otherwise be possible. There is, I perceive, a real difference between a solemn declaration made by the High Court, exercising its supervisory jurisdiction over statutory powers of decision made by public officials, confirming a particular state of affairs and (for example) a report issued through the Office of the Auditor-General. Without wishing to understate the value of a report from the Auditor-General, it does not carry the same authority as a decision of this Court. Any judgment of this Court will be given after full argument from both sides, contain transparent (and publicly available) reasons and be subject to rights of appeal.

What the judge is talking about here when he mentions: "declaratory relief", is what MRRA is asking for in the judicial review. MRRA is asking for the judge to declare whether certain of KDC's decisions were unlawful. The judge is stating here that a report from the Office of the Auditor General (even though we are all very keen to see it!) does not have the same weight.

And then comes the final decision...

Result
[52] For those reasons, I dismiss the application to strike-out the first cause of action.
[53] Counsel were agreed that costs should follow the event. Costs are awarded in favour of the Association, on a 3B basis, together with reasonable disbursements. Each shall be fixed by the Registrar. I certify for second counsel and direct that their reasonable travel and accommodation expenses should be included within the disbursements to be fixed.
[54] I direct the Registrar to set this proceeding down for a case management conference before me at 9am on the first available date after 12 September 2013. I invite counsel to confer about directions that may be required and to confirm the length of time estimated for the substantive hearing. From discussions at the conclusion of the hearing of the present application, I understand that five days will be required, based on my decision to permit all causes of action to go to trial.
[55] The joint memorandum shall be filed no later than midday on 12 September 2013. Although I have received indications from counsel as to their availability in November and December, I have not yet been able to secure a hearing date. I will endeavour to do so before the next conference date and advise counsel.

So this means that MRRA has won the right to a full judicial review of the most problematic decisions of KDC. But not without enormous cost to individuals, hours of voluntary work put in, stress-filled hours, and the feeling that New Zealand institutions are doing their best to thwart, delay, procrastinate, and otherwise frustrate resolution of an immense and apparently obvious injustice.