Part 2: Taking a principles-based approach

2.1
In this Part, we discuss the principles-based approach in the Act.

2.2
We set out:

• an overview;
• view of the principles-based approach in the Act;
• the principles in the Act for decision-making;
• the principles in the Act for consultation;
• a summary of requirements in the Act for decision-making and consultation; and
• the legal framework under which local authorities operate.

Overview of the principles-based approach in the Act

2.3
The Act sets out the purpose of local government¹ as:

• to enable democratic local decision-making and action by, and on behalf of, communities; and
• to promote the social, economic, environmental, and cultural well-being of communities, in the present and for the future.

2.4
There are a number of pressures on local authorities as they carry out decision-making and consultation. Some citizens want local authorities to “get on with the job”; others want to be assured that local authorities have heard and considered all voices in the community. When local authorities are either conducting their normal services and activities or trialling something new, they must ensure that their processes meet legal requirements. There is tension between managing risks and seizing opportunities. The Act is not prescriptive in these matters. It sets out principles for a local authority to use when engaging in decision-making and consultation processes. A local authority has to judge how it will put these principles and requirements into action.

2.5
A local authority making a significant decision will need to consider several sections and Parts of the Act, including the principles in section 14, the plans and policies in place (decisions need to be made in the context of the LTCCP or the annual plan), the funding and financial policies, the policy on significance, and the decision-making and consultation requirements in Part 6 of the Act.

2.6
In performing its role, a local authority must act in accordance with the principles in section 14. These principles include:

• being open, transparent, and democratically accountable;
• being aware of the views of all its communities;
• being collaborative and co-operative with other authorities and bodies where this will support the achievement of its desired outcomes;
• ensuring that Māori have opportunities to contribute to decision-making;
• conducting commercial transactions in accordance with sound business practice;
• being prudent in its stewardship of its resources, and effective and efficient in its use of those resources; and
• taking a sustainable development approach.²

2.7
In taking a sustainable development approach, a local authority should take into account the social, economic, and cultural well-being of people and communities, the need to maintain and enhance the quality of the environment, and the reasonably foreseeable needs of future generations. How “taking a sustainable development approach” is put into practice will vary between local authorities.

2.8
We expect that local authorities will adopt some form of framework to give effect to all of these principles. We discuss this further in Part 3.

2.9
The Act acknowledges that the principles in section 14 may sometimes be in conflict, and directs that local authorities resolve such conflicts in an open and transparent manner.

2.10
Part 6 of the Act concerns planning, decision-making, and accountability. It sets out the obligations of local authorities for decision-making and consultation. Sections 76 to 81 deal with the requirements of decision-making, and sections 82 to 90 deal with consultation principles and procedures.

Decision-making principles and obligations

2.11
Under the Act, local authorities make decisions in the context of a range of identified community outcomes and of the purpose of local government, which is to enable democratic decision-making by, and on behalf of, communities and to promote the social, economic, environmental, and cultural well-being of communities, now and in the future. The Act also sets out principles for local authorities (section 14) and requirements for decision-making (section 77). In addition, a local authority will also have its own policies and plans to take into account.

2.12
A local authority must carry out, at least once every six years (from 2006), a process that enables the community to debate and identify community outcomes for the intermediate and long-term future of its district or region (section 91). The local authority facilitates, but does not “own”, community outcomes. The local authority must identify other organisations capable of influencing the achievement of these community outcomes, and get their agreement to the process if possible. Identifying these outcomes has a critical role in the local authority’s subsequent decision-making, because local authorities must be able to show how their decisions³ contribute to achieving the outcomes the community wants. This requirement provides the context for the discussion in this guide.

2.13
Under the decision-making requirements in the Act, a local authority must be able to demonstrate how a decision contributes to community outcomes and that it has considered a range of reasonably practicable options and their effects. A local authority must also consider community views during the course of the decision-making process.⁴

2.14
Section 14 includes principles specific to decision-making. Section 14(1)(c) states that, when making a decision, a local authority should take account of the:

• diversity of the community and community interests;
• interests of future as well as current generations; and
• likely effect of decisions on each community well-being.

2.15
Decision-making is subject to the requirements stated in sections 76 to 81 of the Act. Section 76 states that the provisions apply to all decisions by a local authority. This includes a decision not to take any action. Section 79 states that the extent to which a local authority complies with the requirements to identify options and to inform itself of community views is a matter of discretion for the local authority, having regard to the “significance” of the decision.

2.16
Some decisions cannot be delegated. These are listed in clause 32 of Schedule 7 of the Act.

2.17
A local authority can take some decisions only if they are provided for in the Long-Term Council Community Plan (LTCCP) or after it has consulted with its community through the special consultative procedure set out in section 83. Local authorities must use this particular formal process for consultation in certain circumstances, such as:

• setting up a council-controlled organisation (section 56);
• changing the mode in which a significant activity is carried out - for example, by transferring the activity from the local authority to the private sector or a council-controlled organisation (section 88);
• adopting or amending the LTCCP or adopting the annual plan (sections 93 to 97);
• making, amending, or revoking a bylaw (section 86); and
• setting funding and financial policies (sections 102 to 110).

Consultation principles and obligations

2.18
The Act does not define consultation, but sets out principles for consultation in section 82(1). In summary, these principles require a local authority to ensure that it uses participative and enabling processes when carrying out consultation.

2.19
In practice, the sector uses the word “consultation” to describe a range of processes to engage with the community, ranging from the prescribed processes in the Act such as the special consultative procedure (section 83) to informal processes such as e-mail chat groups or anecdotal local knowledge. In this guide, we use the term “consultation” in a broad sense to include any form of local authority engagement with local communities, including activities carried out by the local authority to inform itself of community views as well as specific consultation exercises. When we refer to specific consultation procedures prescribed in the Act, we make this clear in the text.

2.20
The ways in which local authorities use consultation processes and information in their decision-making is an emerging and continually developing field. Some models such as IAP2 (International Association for Public Participation) present a continuum of consultation processes: informing, consulting, involving, collaborating, and empowering.⁵ Another way of looking at engagement with communities is to think about a partnership continuum that moves from coexistence through networking, co-operation, collaboration, and partnership.⁶ Each of these relationships will need some form of engagement, participation, and consultation.

2.21
The Act requires a local authority to ensure that:

• those affected by, or who have an interest in, a matter have reasonable access to relevant information in a manner appropriate to their needs;
• it encourages those affected by the decision to present their views and gives them a reasonable opportunity to do so;
• people have clear information about the purpose of consultation and the scope of decisions to be taken;
• it receives the views presented with an open mind and gives them due consideration; and
• it provides people who give views with information about the decision and the reasons for it.

Figure 1
The Act’s approach to community engagement

* Special consultative procedure as required under the Act.

2.22
A local authority must ensure that it has processes in place for consultation with Māori (section 82(2)).

2.23
A local authority has discretion about how it observes the consultation principles in any particular instance.

2.24
Section 82(4) sets out the matters a local authority must consider when exercising its discretion as to what consultation is appropriate. For instance, it must have regard to affected people, the extent to which community views are already known to the local authority, the nature and significance of the matter, and the costs and benefits of the consultation process.

2.25
Consultation requires that the community be given enough information and opportunity to consider and respond to the information provided.

2.26
The Act also allows a local authority, if it wishes, to choose the special consultative procedure for purposes other than those listed in paragraph 2.17. While the principles for consultation in section 82 apply, the Act also sets out specific requirements for the special consultative procedure in section 83. In summary, the community must:

• be provided with a proposal with relevant information;
• have enough time to consider the proposal; and
• be provided with the opportunity to present their views to the elected representatives. This is usually through, but need not be limited to, a formal submission process.

2.27
All consultation material, such as submissions provided by the community, is publicly available material unless the local authority has good reason for not making the information available - for example, because it contains offensive or defamatory material.

Summary of requirements in the Local Government Act 2002 for decision-making and consultation

2.28
In this section, we provide a summary of the principles and requirements in the Act. The summary is for convenience only. It is not intended as a checklist or to cover every decision.

2.29
As noted in paragraph 2.23, a local authority has discretion as to what it considers appropriate when applying the consultation principles.

2.30
In our view, the principles in the Act require local authorities, in their decision-making and consultation processes, to be:

• prudent;
• considered;
• informed;
• proportional;
• inclusive;
• transparent; and
• effective and efficient.

Prudent financial decision-making

2.31
A local authority must be able to demonstrate prudent financial decision-making (section 14(1)(g)), including having regard to the financial management principles in section 101 and to its financial policies, the LTCCP and annual plan, and current and future interests of the community (section 101(1)). It must demonstrate that it has taken due care, as appropriate to the significance of the decision, and has based its decisions on expert advice as necessary.

Consideration of options

2.32
A local authority must consider the effect of any decision on those affected by, or with an interest in, the matter (section 78(1)), and must identify and assess reasonably practicable options (section 77). A local authority should be able to demonstrate that it has evaluated reasonable options, including input from social, economic, environmental, and cultural viewpoints. We consider that matters of equity between generations would be part of considering the effect of a decision.

Informed decisions

2.33
Community views must be given consideration in the course of the decision-making process (section 78(2)). A local authority could seek the information on community views through a formal consultation process such as the special consultative procedure or a less formal process. The Act requires a local authority to actively engage with others with an interest in the matter (section 14(1)(b) and (e)). A local authority should take a sustainable development approach, in which it takes decisions after assessing the four aspects of community well-being and both the short-term and long-term effects of the options under consideration (sections 14(1)(h), 77(1)(b), and 91(2)(a)).

Proportional process

2.34
How a local authority goes about making a decision should be proportional to the significance⁷ of the decision (section 79), and a local authority should not make a decision without considering its effects. Also, any consultation should be in proportion (in cost, scale, and level of information) to the issue under consideration (section 82(3) and (4)). Assessing the significance of the matter to the community is part of a local authority’s discretion as it applies the consultation and decision-making principles, although in practice local authorities are also often guided by their policies on significance and consultation.

Inclusive process

2.35
The Act requires that, when a local authority carries out consultation, interested and affected persons can participate in the process (section 82). A local authority should take account of the diversity of community needs and interests (section 14(1)(c)), including the reasonably foreseeable needs of future generations (section 14(1)(h)). Local authorities should ensure that Māori are able to participate in decision-making processes (sections 4, 77(1)(c), and 81).

Transparency

2.36
The material used in consultation processes should clearly state the issue, the decision being considered, the stage it is at, and the role of the local authority. For instance, the role could be that of funder, regulator, advocate, or facilitator. The Act states that those who presented their views should receive information about the reasons for the final decisions (section 82(1)(f)). However, in the interests of transparent and open dialogue, we expect information about decisions to be, in general, readily available to the public. It is up to the local authority to determine what is appropriate to achieve this.

2.37
Appropriate documentation enables a local authority to:

• be clear about what
• decision it has made;
• refer back to previous decisions (for example, to assess consistency with any precedents set); and
• report back to the community and interested persons on the decision.

Effectiveness and efficiency

2.38
Effectiveness and efficiency are important elements of good performance. The decision-making and consultation processes that local authorities use will have a considerable effect on whether they appropriately address these elements. The use by local authorities of their discretion as to how to observe the consultation and decision-making requirements, and the proportionality principle, will be relevant to effectiveness and efficiency.

Legal framework

2.39
The Act gives local authorities full capacity and powers for the purpose of performing their role. A local authority must use its powers wholly or principally for the benefit of its district or region. In exercising its powers under the Act or other legislation, a local authority is subject to public law. In performing statutory functions, and exercising statutory powers and duties, local authorities are subject to judicial review by the High Court, and inquiry or review by bodies such as the Ombudsmen or the Auditor-General.

2.40
Any decision of a local authority, including a decision about whether to consult and any decision made after consultation, must be made in accordance with the principles of administrative law. These principles form the grounds for judicial review of decisions. Put simply, they require that local authorities act:

• in accordance with law;
• reasonably; and
• fairly.

2.41
Decisions not made in accordance with these requirements may be challenged on procedural grounds.

Acting in accordance with law

2.42
All decisions of a local authority must be made in accordance with law. A decision will not be in accordance with law if:

• any procedural requirements were not followed;
• the decision is ultra vires - that is, the local authority did not have the power to make it; or
• the decision is made for a purpose other than that for which the power to make it was conferred.

Acting reasonably

2.43
The question of reasonableness is relevant at a number of different levels throughout a decision-making process. Most obviously, the decision ultimately made after consultation, or on which representations or submissions were invited, must not be “unreasonable”.

2.44
The approach of New Zealand courts to the question of unreasonableness is more or less settled, particularly with regard to local authorities, following the decision of the Court of Appeal in the Wellington City Council v Woolworths case.⁸ That case involved a review of the council’s differential rating system. Richardson P, delivering the judgment of the Court, stated:

For the ultimate decisions to be invalidated as “unreasonable”, to repeat expressions used in the cases, they must be so “perverse”, “absurd” or “outrageous” in [their] defiance of “logic” that Parliament could not have contemplated such decisions being made by an elected council.

2.45
The courts will look at the process a local authority has followed to make a decision. However, in those decisions where local authorities have considerable discretion, such as in the preparation of policy or strategy, the court is unlikely to supplant a local authority’s decision-making powers.

2.46
If a decision is found to be unreasonable, the courts may direct the local authority to carry out a new decision-making process.

Acting fairly

2.47
The third broad ground of review is the requirement that decision-makers act fairly in coming to any decision. This ground requires decision-makers to act in accordance with the principles of procedural fairness and natural justice. This requires that:

• interested or affected parties be given adequate notice and an opportunity to be heard; and
• decisions be made free from bias and predetermination.⁹

2.48
A local authority decision could be challenged on the grounds of lack of “fairness” if these requirements are not met. There is more scope to challenge a decision for lack of fairness if the decision affects a person’s rights or legal entitlements than if the decision is a strategic or policy one.

1: Section 10.

2: One of the purposes of the Act is to provide for local authorities to play a broad role in promoting the social, economic, environmental, and cultural well-being of their communities, taking a sustainable development approach - see section 3(d).

3: Section 77(1)(b)(ii) states that, in the course of decision-making, a local authority must assess options by considering the extent to which community outcomes would be promoted or achieved by each option.

4: The four activities the Act lists in the course of decision-making in section 78, in summary, are problem definition, option identification, option assessment, and proposals adoption.

5: See www.iap2.org.

6: Courtney M (2006), Putting Pen to Paper - Creating partnerships that work, Department of Internal Affairs and Waitakere City Council.

7: The definition of significance is in section 5 of the Act.

8: Wellington City Council v Woolworths New Zealand Limited [1996] 2 NZLR 537.

9: See Part 5 of our 2007 publication Guidance for members of local authorities about the law on conflicts of interest.