Mangawhai: What Now?

This is not a wrap-up, more of an update on where things have got to with the legal action and other matters relating to the EcoCare wastewater scheme at Mangawhai, the rate strike, judicial review, Office of Auditor General report, Mike Sabin MP's stance, and what Kaipara District Council is doing....

The judicial review proceedings are not complete. The judge gave an interim decision on 28th May. Which you can download here - my post about it is here, and NZ Herald's report is here. There are various other reports on the decision, including stuff, Northern Advocate, the Bob Dey report, and The National Business Review. 

The judge requested submissions from the parties to the court action for a judicial conference which was scheduled for June 20th. But this has now been changed - see below. But first a little recent background.....

The parties to the action are Mangawhai Ratepayers and Residents Association (MRRA), and Kaipara District Council. Though Justice Heath did seek written submissions from Ms Gwyn, on behalf of the Attorney-General. It is unclear at this stage (outside the tent) whether the Attorney General or/and Dept of Internal Affairs are involved now.

Here is what Mangawhai Ratepayers and Residents have told members, after the interim decision:

The High Court judgment is a draft judgment only. The judge has made no final determinations on any of the matters before him (although he has indicated what he is “minded” to do) and in a move that we understand is highly unusual he is seeking input from counsel before he finalises his position and seals the judgment.

No court judgment can take effect until it is sealed. The process of getting counsel’s views will not take place until June 20th at the earliest.

After that the judge may alter some aspects of his judgment, or add things to it.

While the judgment as it stands vindicates the MRRA’s contention that the council was acting both illegally and ultra vires over many years, it does not yet contain declarations on some matters upon which declarations were sought by us.

The situation is very fluid, with extensive legal review and discussion under way, including new discussions between the MRRA and the Commissioners, initiated by them, which are productive, cordial and candid. We will come back to you as soon as possible with advice about whether or not to pay any of the withheld rates. Pending this advice, please patiently wait a little longer in the knowledge that we are hard at work advancing your interests.

The judge clearly wants the parties to find a way through the legal and financial quagmire we are in that gives fairness and justice to everyone. He has signaled the things that are of concern to him and suggested the matters that need to be brought to him. He has indicated that parties other than the ratepayers should be pursued for the illegal debts. This is, of course, of fundamental concern to us on your behalf. We will not agree to anything that does not satisfactorily deal with this issue.

Just so that nobody is left wondering, both parties to this litigation have the option to appeal all or part of the judgment. If in our view the judgment, when finalized, is wrong, or is harmful to our interests, we will not exclude the possibility of lodging an appeal. KDC will also reserve the right to do this, of course. If we go to appeal it is highly likely that we will have to again ask our members to assist with financing that, but it will not cost anything like as much as the previous hearings. If an appeal is necessary, and we sincerely hope it is not, we will only proceed if we have enough money to see it through.

And what about the Commissioners? Well. Immediately after the preliminary/interim decision was released Chairman Robertson launched a media offensive defending KDC's actions. The key phrase in his media release states:

"...the court's judgment has made it crystal clear that rates are valid and payable...for those who have withheld their rates on the advice of MRRA... the decision will cause you to review your position..."

This is a very disappointing representation of what the judgment actually means. It is also untrue. For a start the judgment is interim, and cannot therefore be called a decision. It is likely that Justice Heath's view of the Validation Bill will prevail - ie that it was within Government and Parliamentary power to enact the validation bill - but that did not deal with the huge and illegally incurred debts.

When I was involved with MRRA (I was on the Exec for a year) and the legal action was being prepared, I wrote this post in April 2013 - about the law being an ass. The final paragraphs of that post follow:

The law that is the ass here, is the local government law that allows banks to sell loans to badly informed councils whose ratepayers appear to have no redress, and the light handed regulatory law that appears to allow government entities like the Office of the Auditor General and its agents to wash their hands of the consequences of their failures to protect the public interest.

Central Government needs to step up.

An earthquake has been allowed to happen in Mangawhai. And the law, the enforcers of the law, and those who regulate and audit compliance with the law, permitted it to happen.

At the time the legal advice I had sought on behalf of the MRRA was to the effect: that the matter of the legality of the loans was, in his pro-bono words: "a slam dunk", but, because of the protected-transaction-get-out-of-jail-free-card, the fundamental issue he saw for MRRA was how to get existing ratepayers off the hook for these illegally incurred debts....? That was the $64,000 question then, and it is still the $64,000 question today, even with the interim judicial review decision on the table.

What Justice Heath says in his interim judgment about this matter is this:

[59] The Council is not under a duty to levy rates to meet the debt. It should consider all available options in an endeavour to ascertain what approach to repayment will be in the best interests of its ratepayers. That includes evaluating the advantages and disadvantages of negotiating with existing creditors to ascertain whether there are means of restructuring debt arrangements that would place less of a burden on its ratepayers. The possibility of recovering some of the costs from third parties should also be considered. That type of analysis should enable the Commissioners to make more informed decisions about its options.

The KDC commissioner media release (quoted earlier) is surprising when read in the light of Justice Heath's comment quoted just above. Clearly, commissioners have NOT considered all options, or indeed any options other than rating the socks off existing residents, otherwise we'd have heard about that by now.

A quick read of their terms of reference indicates  that their role includes this:

Phase three - June 2013 to June 2015: The Commissioners will: - carry out extensive community and iwi engagement to continue to rebuild confidence and trust in the Council; - conduct a review of the Council’s financial strategy, plans, rating policies, and capability (including debt and asset management), to ensure financial resilience and equitable and sustainable funding;

Now. I'm not sure what the word "equitable" or even the word "sustainable" might mean to KDC's commissioners. But I'd hazard a guess that, given Justice Heath's arguments to date, that imposing rates on existing ratepayers for an illegally incurred debt could not be described as equitable or sustainable.

Mike Sabin, MP for the area, has been especially noisy of late. In the Mangawhai Memo dated 23rd June he urges the Office of the Auditor General to front up:

"... the buck stops with them ... debt blowout of scheme from $35 million to $63 million... further and ongoing failings of the OAG .... a sheepish apology doesn't cut it...  principle at stake here... ... I will not give up on this..."

Strong words. But maybe Mike's got agreement from his party for him to step out of line here. You can almost hear PM John Key saying, "fill your boots Mike, go for it. We understand you've got to speak out. But don't be under any illusion that we're going to do anything real here...."

Is your objection and fight a real one Mike? Or are you just going through the motions?

Finally, it appears that the judicial conference that is the next step in finalising the judicial review decision will now be held on 1st July. The advice that MRRA has circulated to members in the last few days includes this information:

4. For the judgment to be acceptable to us there will have to be a compulsory road map out of the shambles that has been created by the KDC that does not simply dump all the problems on the shoulders of the Kaipara ratepayers. .
5. We have developed a detailed settlement plan for consideration by the council.
6. If they accept it, or if they come to the table and negotiate a compromise that is workable and fair, we will present it to the judge as a joint proposal which he can then issue as a court order. That way, each side has to abide by its respective undertakings, because the order will have the force of law.
7. If they do not accept it, we will make it available to the court, indicating that we were willing to settle on fair and reasonable terms, but the council would not.....

Go for it MRRA.

So. Is the law still an ass?

Possibly not. Now. Certainly Justice Heath's interpretation of Local Government Act consultation provisions is a line in the sand that has not been drawn by the High Court until now. So that's progress. Councils can still take out loans from banks, and banks can still be secure in the protected transaction regime and provide loans at 2% off commercial interest rates (because they don't carry so much risk), but the law is now clearer about the principle of Councils needing to consult before deciding to take out such loans. It would be helpful though for the LGA to explicitly provide a mechanism so that ratepayers are entitled to go after any councillors, mayor and CEO involved in sanctioning unlawful loan decisions.

But this still does not get the unfair proportion of the debt paid. It may be that MRRA can get KDC Commissioners to deliver in accordance with the spirit of their terms of reference. It should not now be beyond the wit of Commissioners to meet up with Mike Sabin and go together to the PM and get a pragmatic resolution. That's one thing John Key's government seems to be good at. Whether the money comes from OAG's professional insurance (does it have such a thing?), or from the consolidated fund, it's time the powers that be fronted up to the banks, negotiated a sensible number, and cleared the debt.