Summary of case law on Local Government Act 2002 decision-making and consultation provisions

The decision-making and consultation provisions in Part 6 of the Local Government Act 2002 (the Act) have been in force for nearly four years. So far, the courts have had few opportunities to provide judicial guidance about how to interpret them. Several court judgments explicitly discuss these provisions, but none has analysed them in detail or set out significantly new or different expectations about how they should be applied. This Appendix summarises those cases that address the provisions, but they provide only limited assistance.

Paekakariki Informed Community Inc v Kapiti Coast District Council (unreported, High Court, Wellington, 29 September 2004, CIV 2003-485-2760, Ronald Young J)

This case was an unsuccessful attempt at judicial review of the council’s rates-setting resolution. One of the claims made was that the council had failed to consider mandatory relevant factors that were said to arise from the provisions about financial management in section 101(3) of the Act. The Court noted that:

Section 101(3) is concerned to ensure that there is a thorough process by which the local authority identifies and uses sources of funding to meet local authority needs. Subsection (3)(a) in relation to each activity to be funded considers a cost and benefit analysis … Subsection (b) is concerned also with funding needs of local authorities and in relation to funding needs considers the impact on current and future social and economic environment and the cultural wellbeing of a community …

Subsection 3(a) and (b) are to be considered by the local authority when deciding how their funding needs are to be met, i.e. what sources of funding are appropriate. Subsection (a) requires consideration of each activity to be funded and subsection (i) to (v) describe in a general way what is to be taken into account in relation to the identified activity. Subsection (b) requires the Council to stand back after a proposed ‘allocation of liability for revenue’ and consider its impact on a range of community factors. This section will therefore allow Councils, for a particular funding need, to choose for example between fixed or value based rates. It will also allow the Council to choose between any form of rates and other funding sources, for example, loans or direct charges.

However, the Court did not accept that those general propositions gave rise to a mandatory requirement to take into account “the increase in burden of property value driven rates on Paekakariki ratepayers”. In any event, the council had, in fact, considered that matter when creating its revenue and financing policy.

Neil Construction and others v North Shore City Council (unreported, High Court, Auckland, 21 March 2007, CIV 2005-404-4690, Potter J)

This case was a largely successful challenge to aspects of the North Shore City Council’s development contributions policy and is another case that has considered a council’s approach to the financial management principles in section 101(3) of the Act.¹

The High Court found that the council had made errors of law in developing its policy. The council’s policy had attributed the capital expenditure for particular projects or activities in its LTCCP primarily to growth. The Court considered whether this approach was valid in relation to particular examples, including a “park and ride” bus-way project. It held that this “causation” or “exacerbator pays” approach was too narrow, and the council had not sufficiently factored in the benefits to existing ratepayers of some capital projects. This approach was inconsistent with the council’s obligations under the Act to consider and weigh all of the principles in section 101(3) of the Act in its funding decisions for each activity.

The Court also found that the council’s policy did not meet the requirement of the Act to assess development contributions against a “development” that creates a demand for reserves, network infrastructure, or community infrastructure. In some cases, the policy provided for contributions to be charged against developments that did not create such demand.

The Court did not uphold a challenge to the council’s policy of imposing the maximum allowable development contribution for reserves, finding that there was a “high policy content” in the decision about the quantity and quality of reserves and parks to be provided for in the council district and that the weight to be attached to particular factors such as community outcomes was a matter for the council to determine. The council had considered the statutory criteria and its decision was not unreasonable or arbitrary, so the Court would not intervene.

In a concluding observation, the Court noted that the Act had given councils a valuable new funding tool in the form of development contributions. The Court stressed the need for councils to consider the purpose and principles of the Act in their decision-making processes and the importance of transparency and enabling community participation, commenting:

In exercise of their discretions, given the greater flexibility in decision-making conferred on councils by the Act, it is therefore necessary and important that councils carefully observe the purpose and principles of the Act and the role of local authorities, that they ensure both openness in their decision-making process, and the ability of sectors of the community affected by their decisions, to participate in those processes.

Reid v Tararua District Council (unreported, High Court, Wellington, 8 November 2004, CIV 2003-454-615, France J)

This case was an unsuccessful challenge to the council’s decision to sell land at Woodville. One of the claims was that the council had not complied with its obligations under sections 77 and 78 of the Act – in that it had not identified all reasonably practicable options; it had failed to consider the social, economic, environmental, and cultural well-being of the district; and it was wilfully blind to its legal responsibilities.

The council’s decision was made in early 2003 after it had given public notice, considered officer reports, and heard from interested parties. It had already been negotiating with a prospective purchaser. Sections 77 and 78 of the recently enacted Act were already in force, although at the time the council thought they did not apply.

The Court summarised the decision-making provisions of the Act as follows:

… s 77 requires the Council to try to identify all reasonably practicable options for achieving the object in a particular case. In support of that, the Council is required to undertake a cost-benefit analysis considering a broad range of factors. Then, in terms of s 78, the Council is required to consider the views and preferences of, amongst other matters, persons having an interest in the matter.

It is clear from s 79 that the Council has to make a judgment about what ss 77 and 78 require in a particular case so that the decision-making process is in proportion to the significance of the decision. Further, in making this judgment, the Council is to have regard to matters such as the principles in s 14 of the Act.

The Court held that, although the council had not expressly turned its mind to the statutory factors, it had nevertheless done enough to comply with them (albeit “by accident”).

The Court accepted that “it may well be” that the effect of the new decision-making sections in a particular case will mean that the council’s focus has to be a broader one, and “it is expected” that the new Act will bring about changes in a council’s decision-making processes. However, in this case, the decision was the narrow one of simply whether to sell. The council did not have to debate the mode of sale or details of the sale. Nor were there any other issues that it had failed to consider here, and Reid’s alleged previously expressed interest in the matter did not oblige the council to do things differently.

Te Puaha O Waikato Whanui Trust v Franklin District Council (unreported, High Court, Auckland, 3 May 2005, CIV 2004-404-4435, Harrison J)

This case was an unsuccessful challenge to the council’s decision to sell land at Port Waikato on which a camping ground was located. The arguments included a general claim that the council had failed to comply with the Act.

The Court indicated that it would expect such a claim to identify in a logical and structured way the areas in which it was said the council had breached its duties. The Court was unimpressed with the relevance or validity of two supposedly reasonably practicable options that the trust said had not been identified or considered, where the trust had not explained how those options could work.

Willowford Family Trust v Christchurch City Council (unreported, High Court, Christchurch, 29 July 2005, CIV 2004-409-2299, Panckhurst J)

This case was a successful challenge to a bylaw that regulated the location of brothels. The Court was primarily focused on the validity of the bylaw under the Bylaws Act 1910 and the Prostitution Reform Act 2003.

In the course of the judgment, the Court said that sections 77 to 79 of the Act “prescribe a code for local authority decision-making”. The Court summarised the decision-making provisions as follows:

In broad terms the local authority must follow a staged process by which the relevant problem is defined, options to address it are identified, proposals to that end are developed and assessed and, finally, a solution is adopted. In terms of s79 the local authority has a discretion as to how compliance with the earlier two sections is achieved.

The Court agreed with a submission that the procedural requirements that surround the making of bylaws under the Act “introduce a new degree of rigor [sic] and accountability” compared to the less exacting procedure that applied under the 1974 Act.

Scott v Auckland City Council (unreported, High Court, Auckland, 23 November 2006, CIV 2006-404-7226, Priestley J)

This case was an unsuccessful challenge to decisions that were anticipated to be made by two local authorities about whether a proposed waterfront stadium should be built to host the Rugby World Cup. The councils had been asked by the Government to make a decision, give some form of indication, or express a preference between the proposed waterfront stadium and an existing venue. The Government expected them to do so within a short time frame.

The plaintiffs sought an urgent injunction to prevent the councils taking those decisions. They were concerned that the process of consultation had been rushed, that the councils had not complied with their obligations under Part 6 of the Act, and that the plaintiffs had not been able to take part in any meaningful way in a consultation process.

The Court’s decision was focused on whether interim relief needed to be granted to preserve the plaintiffs’ position before the case could be fully considered. The Court accepted that the councils would be exercising relevant statutory powers and that the matter raised an arguable case. They were decisions caught by section 76 of the Act (even if the decision did no more than offer comment on the Government’s proposal). The Court noted that, although a consultative process is essential, it by no means determines local authorities’ decisions.

It accepted that the Part 6 procedures had been truncated and, in some cases, arguably ignored. However, the Court struggled to understand exactly what it was the councils were going to resolve or decide. In addition, the effect of granting an injunction would be to prohibit the councils from having any input on the Government’s proposed stadium at all. The Court considered that it would be wrong in principle to prevent the councils from making decisions. Any decisions they did make could still be legally challenged afterwards (and the Court noted that it would be surprised if the timelines imposed had not caused the councils’ legitimate concern).

New Plymouth District Council v Waitara Leaseholders Association Inc (unreported, Court of Appeal, 20 March 2007, CA 259/05 & 260/05, O’Regan, Arnold and Ellen France JJ)

The council had decided to offer to sell certain land to the Crown. The council’s objective was that the land would be ultimately transferred to iwi as part of a settlement of Treaty of Waitangi claims in the district. The council had followed the consultation and decision-making requirements in Part 6 of the Act.

The High Court found that the council had acted unlawfully. The High Court said that the land was held on statutory trusts for particular specified purposes and that, as trustee, the council was bound to exercise its powers for the purpose for which they were created. The High Court held that the council had failed to act in accordance with its duties as trustee. It had given no consideration to whether selling the land would fulfil the purposes of the trusts. Rather, its primary purpose (to return the land to tangata whenua) was contrary to the terms of the trusts. It was also acting in an attempt to release the land from legislative constraints, which was a wrongful purpose.

The council argued that the decision was nevertheless lawful because it was made to further the purposes and principles in sections 10 to 14 of the Act and in compliance with the decision-making processes in sections 76 to 82 of the Act. It argued that its overarching responsibility was to promote the well-being of the community. The High Court held that the council was not entitled to take into account Part 6 of the Act, and the fact that it did so did not make its decision lawful. Those provisions apply only to the extent that they are not inconsistent with the requirements under which the decision is made. Considering whether a decision promotes the well-being of the district was not consistent with – and was not relevant to – the council’s duty as trustee to determine whether selling the land would promote the purposes of the trust or was in the best interests of the beneficiaries.

However, the council then appealed successfully to the Court of Appeal. The Court of Appeal held that a “statutory trust” meant that the land is held on the terms contained in the statute, but that does not mean that the local body will be subject to all the obligations of a trustee under an ordinary trust; nor that the circumstances necessarily create a charitable trust. The Court of Appeal held that the council recognised that it currently held the land subject to statutory restrictions and that it was entitled to decide to sell the land subject to the relevant statutory restrictions being removed. It was able to take steps to seek the removal of those restrictions.

1: For a discussion of some of the issues for councils in adopting a development contributions policy in their 2006-16 LTCCPs, see our report Local government: Results of the 2005/06 audits, parliamentary paper B.29[07b].

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