Ku-ring-gai Council v Garry West as delegate of the Acting Director-General, Office of Local Government

[2017] NSWCA 54

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Ku-ring-gai Council v Garry West as delegate of the Acting Director-General, Office of Local Government [2017] NSWCA 54

Hearing dates:

16 and 17 February 2017

Decision date:

27 March 2017

Before:

Basten JA at [1];
Macfarlan JA at [115];
Sackville AJA at [129]

Decision:

(1)   Allow the appeal.

 

(2)   Set aside the orders made in the Land and Environment Court on 30 May 2016 and 20 September 2016, with respect to the proceedings brought by Ku-ring-gai Council.

 

(3)   Set aside the examination and report of the delegate, Mr Garry West, in relation to the proposed amalgamation of part of Hornsby Shire and Ku-ring-gai local government areas, the report being sent to the Minister on 22 March 2016.

 

(4)   Set aside the review of the Boundaries Commission and the comments sent to the Minister on 22 April 2016.

 (5)   Order that the second and third respondents pay the costs of the appellant, both in this Court and in the Land and Environment Court, including the costs of commencing proceedings in the Common Law Division.

Catchwords:

JUDICIAL REVIEW – Minister’s proposal to merge part of a local government area (LGA) with the whole of another LGA – Merger Proposal referred to a Delegate of the Chief Executive for examination and report – whether the Delegate was required to consider the advantages and disadvantages of the Merger Proposal insofar as it contemplated the excision of part of one LGA – whether the Delegate misapprehended his functions under s 263(1) and (3) of the Local Government Act 1993 (NSW) – whether relief futile – whether Delegate carried out the statutory task of examination and report in relation to the Merger Proposal – whether constructive failure to fulfil the statutory function because the Delegate lacked access to documents over which the Department claimed public interest immunity

 

PUBLIC INTEREST IMMUNITY – whether the primary Judge was correct to uphold a claim of public interest immunity to the production of documents recording analyses of the financial advantages and disadvantages of the Merger Proposal – documents prepared by consultants but submitted to Cabinet – whether public interest in the production of the documents outweighed the public interest in preserving secrecy and confidentiality

 

PROCEDURAL FAIRNESS – whether an objecting Council denied procedural fairness because it was refused access to documents relevant to the Delegate’s task

STATUTORY INTERPRETATION – whether reasonable public notice of an inquiry given as required by s 263(2B) of the Local Government Act 1919 (NSW)

Legislation Cited:

Administrative Decisions (Judicial Review) Act 1977 (Cth), s 5
Civil Procedure Act 2005 (NSW), s 149B
Evidence Act 1995 (NSW), ss 9, 130, 131A; Pt 3.10
Family Law Act 1975 (Cth), s 60CC
Government Information (Public Access) Act 2009 (NSW), Sch 1 cl 2
Government Sector Employment Act 2013 (NSW), Sch 1 Part 2
Land and Environment Court Act 1979 (NSW), ss 20, 23
Local Government Act 1993 (NSW), ss 204, 206, 207, 212, 213, 214, 215, 216, 217, 218, 218A, 218B, 218C, 218D, 218E, 218F, 219, 221, 260, 261, 262, 263, 264, 265, 672, 673, 745; Pt 1, Divs 1, 2, 2A, 2B, Ch 9; Sch 2 cl 12; Dictionary
Supreme Court Act 1970 (NSW), s 75A

Administrative Arrangements Order 2014 (NSW), s 4
Local Government (City of Parramatta and Cumberland) Proclamation 2016, cl 4

Cases Cited:

Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88; [2005] HCA 72
Attorney-General for the State of New South Wales v Quin (1990) 170 CLR 1; [1990] HCA 21
Belmorgan Property Development Pty Ltd v GPT Re Ltd [2007] NSWCA 171; 153 LGERA 450
Bondelmonte v Bondelmonte [2017] HCA 8
Botany Bay City Council v Minister for Local Government [2016] NSWCA 74; (2016) 214 LGERA 173
Botany Bay City Council v State of New South Wales [2016] NSWCA 243
Burmah Oil Co Ltd v Bank of England [1980] AC 1090
Chen Shi Hai v Minister for Immigration and Multicultural Affairs (2000) 201 CLR 293; [2000] HCA 19
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 322
Eastman v The Queen (1997) 76 FCR 9
Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67
Hunter’s Hill Council v Minister for Local Government [2016] NSWLEC 124
Khan v Minister for Immigration and Ethnic Affairs [1987] FCA 457; (1987) 14 ALD 291
Kioa v West (1985) 159 CLR 550; [1985] HCA 81
Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1
Ku-ring-gai Council v Mr Garry West in his capacity as delegate of the Acting Director-General of the Office of Local Government [2016] NSWLEC 62
Ku-ring-gai Council v Garry West as Acting Director-General of the Office of Local Government [2016] NSWSC 442
Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40
Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; [1996] HCA 6
Minister for Local Government v South Sydney City Council (2002) 55 NSWLR 381; [2002] NSWCA 288
Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518; [2003] HCA 11
National Companies and Securities Commission v News Corporation Ltd (1984) 156 CLR 296; [1984] HCA 29
Ryan v State of Victoria [2015] VSCA 353
Salahuddin v Minister for Immigration and Border Protection (2013) 229 FCR 290; [2013] FCAFC 141
Sankey v Whitlam (1978) 142 CLR 1
State of New South Wales v Public Transport Ticketing Corporation [2011] NSWCA 60
SZSSJ v Minister for Immigration and Border Protection (2015) 234 FCR 1; [2015] FCAFC 125
Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277
The Commonwealth v Northern Land Council (1993) 176 CLR 604
The King v The Public Service Commissioner for the Commonwealth of Australia; Ex parte Killeen (1914) 18 CLR 586
Woollahra Municipal Council v Minister for Local Government [2016] NSWCA 380; (2016) 219 LGERA 180
Woollahra Municipal Council v Minister for Local Government [2016] NSWLEC 86; 218 LGERA 65

Texts Cited:

A Poukchanski, “Considering ‘Proper, Genuine and Realistic’” (2014) 21 AJ Admin L 201

  MC Harris, “Fairness and the Adversarial Paradigm: An Australian Perspective” (1996) Public Law 508

Category:

Principal judgment

Parties:

Ku-ring-gai Council (Appellant)
Mr Garry West, in his capacity as delegate of the Acting Director-General of the Office of Local Government (First Respondent)
New South Wales Department of Premier and Cabinet (Second Respondent)
Minister for Local Government (Third Respondent)
New South Wales Local Government Boundaries Commission (Fourth Respondent)

Representation:

Counsel:
Mr G Kennett SC/Ms V McWilliam (Appellant)
Mr NJ Williams SC/Ms F Gordon/Ms M Ellicott (Third Respondent)

  Solicitors:
Sparke Helmore Lawyers (Appellant)
Crown Solicitor’s Office (First to Fourth Respondents)

File Number(s):

2016/287574

 Decision under appeal 

Court or tribunal:

Land and Environment Court of New South Wales

Citation:

[2016] NSWLEC 118

Date of Decision:

20 September 2016

Before:

Moore J

File Number(s):

2016/154495

headnote

[This headnote is not to be read as part of the judgment]

On 6 January 2016, the Minister for Local Government referred a series of proposals for council amalgamations and boundary alterations to the Acting Chief Executive of the Office of Local Government for the purpose of “examination and report” under s 218F(1) of the Local Government Act 1993 (NSW) (“LGA”). The Acting Chief Executive then delegated his functions of examination and report to a number of persons. One of the proposals was for “the merger of Hornsby Shire and Ku-ring-gai local government areas north of the M2 [motorway].” The task of examining and reporting on this proposal was delegated to Mr Garry West.

In composing his report, the delegate placed reliance on certain KPMG studies said to underpin the financial assessment of the proposal. The delegate, and the Council, were given access to only some of these documents, as the remainder were subject to a public interest immunity claim by which the government withheld them on the basis of confidentiality.

On 22 March 2016, Mr West forwarded his report to the Minister and to the Boundaries Commission. The delegate recommended that the proposal proceed to implementation. The Boundaries Commission reviewed the delegate’s report, and sent comments to the Minister on 22 April 2016 supporting the delegate’s recommendation.

On 22 March 2016, the appellant Council commenced proceedings in the Supreme Court seeking judicial review of the delegate’s report and an order setting the report aside under LGA s 673. Those proceedings were transferred to the Land and Environment Court and, on 20 September 2016, were dismissed by Moore J.

The questions on appeal before this Court were whether:

(1)   the proposal involved the amalgamation of two or more local government areas;

(2) the delegate failed to take account of a mandatory consideration under LGA s 263(3), namely the impacts of the excision of Hornsby Shire south of the M2 motorway, and if so, whether the delegate’s report should be set aside;

(3)   the primary judge erred in upholding the government’s claim of public interest immunity over the withheld KPMG documents;

(4) the delegate failed to fulfil his statutory function under LGA s 263(3)(a), of considering the proposal having regard to the financial advantages and disadvantages to the residents and ratepayers of the areas concerned, without access to the withheld KPMG documents;

(5)   the appellant was denied procedural fairness in that the delegate had relied in his report on the KPMG documents which were not made available to either the appellant or the delegate;

(6) the primary judge erred in finding that the delegate had given “reasonable public notice” of the holding of an inquiry into the proposal, as required by LGA s 263(2B).

The Court (Basten JA, Macfarlan JA and Sackville AJA) allowed the appeal and

held:

In relation to question (1):

1. (Per Basten JA, Macfarlan JA agreeing): The proposal was to “amalgamate two or more areas” pursuant to s 218A. The provision does not expressly allow for the amalgamation of fewer than two areas, or the amalgamation of parts of areas. On one view, s 218A was not engaged by the terms of the present proposal: [16]. The primary judge was correct in concluding that the delegate did not assess the merits of the excision. The proposal neither required nor permitted such an examination: [59].

In relation to question (2):

2. (Per Sackville AJA, Macfarlan JA agreeing): The delegate did not consider that the function of examining the boundary alteration had been conferred on him, and thereby misapprehended the function he was to perform: [115], [228], [239].

3. (Per Sackville AJA): The merger proposal incorporated two elements, namely the excision of Hornsby South and the amalgamation of the rest of Hornsby with Ku-ring-gai. The delegate was required to examine and report on each of the elements having regard to the factors enumerated in LGA s 263(3): [224]. This necessitated an assessment of the impact of the proposed merger on both the excised area of Hornsby South and the remainder of Hornsby Shire, not simply on the whole of the Hornsby local government area: [225]-[227].

Woollahra Municipal Council v Minister for Local Government [2016] NSWCA 380; (2016) 219 LGERA 180, distinguished; Botany Bay City Council v Minister for Local Government [2016] NSWCA 74; (2016) 214 LGERA 173, discussed.

4. This is not a case where relief would be futile: [62]. Although, if the decision were to be remade by the same delegate, it is likely that the same result would be reached, that conclusion does not follow as a matter of law: [65]. It cannot be assumed that the Minister would elect to refer the unchanged proposal for further examination or, if he did, that the process would necessarily produce the same recommendation: [241]. If the flawed examination can be redone properly, relief allowing that to happen should be granted: [66], [242].

In relation to question (3):

5.   (Per Basten and Macfarlan JJA): in considering a claim of public interest immunity where Evidence Act 1995 (NSW) s 130 is engaged, the statutory structure must be followed, which requires the balancing of the public interest in admitting information into evidence against the public interest in preserving secrecy or confidentiality: [85].

The Commonwealth v Northern Land Council (1993) 176 CLR 604; Sankey v Whitlam (1978) 142 CLR 1, discussed.

6. (Per Basten and Macfarlan JJA): in this case, the public interest in preserving confidentiality is so qualified as to carry little weight, and is inadequate to outweigh the public interest in the production of the documents. The contrary view adopted by the primary judge cannot stand: [94]-[95], [128].

7. (Per Sackville AJA, dissenting): the issues in this case can be resolved without the appellant having access to the KPMG documents: [299]-[300]. If it were necessary to address this question, the primary judge’s decision should be upheld on the ground that there was no substantial public interest in the production of the KPMG documents to the appellant: [301].

In relation to question (4):

8.   The reasons of the primary judge did not address any argument that there was a constructive failure of the delegate to exercise his statutory function, and therefore this ground of appeal must be upheld in a formal sense. The ground may be dealt with by this Court pursuant to Supreme Court Act 1970 (NSW) s 75A: [98].

9. The financial advantage expected to accrue from the amalgamation was a critical element of the proposal: [100], [119]. An administrative decision-maker required to “examine” a proposal has a duty to form his or her own view about the matter and not adopt uncritically the view propounded in documents accompanying the referral: [117], [282]-[285], [287].

Bondelmonte v Bondelmonte [2017] HCA 8; Khan v Minister for Immigration and Ethnic Affairs [1987] FCA 457; (1987) 14 ALD 291; Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48, discussed.

10. (Per Basten and Macfarlan JJA): the delegate could not properly carry out his function of examination without access to the KPMG documents which were the source of the calculations: [100]. The delegate failed to form his own judgment about the financial advantages or disadvantages, and therefore constructively failed to fulfil his statutory function of examining the proposal: [102], [127].

11. (Per Sackville AJA, dissenting): the delegate was not obliged, in order to discharge his statutory functions, to seek production of the KPMG documents: [290]. He made his own enquiries and assessment of the financial projections, and properly fulfilled his statutory function: [292]-[293].

In relation to question (5):

12. (Per Basten and Macfarlan JJA): absent any legal justification for withholding the documents, procedural unfairness is established: [105]. The appellant was denied procedural fairness as the delegate chose to rely on the KPMG analysis, rather than conducting his own assessment of the merger, when the appellant was not in possession of the document in which the analysis was contained: [126].

13. (Per Sackville AJA, dissenting): the delegate’s decision to make his recommendation without access to the KPMG documents did not involve a denial of procedural fairness: [274]. This conclusion does not depend upon determining the public interest immunity claim: [275].

Woollahra Municipal Council v Minister for Local Government [2016] NSWLEC 86; (2016) 218 LGERA 65; Minister for Local Government v South Sydney City Council (2002) 55 NSWLR 381; [2002] NSWCA 288, discussed.

In relation to question (6):

14. There is no reason to doubt that the statutory requirement of public notice was satisfied: [111]. The complaints made by the appellant in this regard had no substance: [298].

Judgment

1. BASTEN JA: On 6 January 2016, the Minister for Local Government referred to the Acting Chief Executive, Office of Local Government, a series of proposals for council amalgamations and changes in council boundaries. One such proposal was described as a proposal by the Minister “for the merger of Hornsby Shire and Ku-ring-gai local government areas north of the M2 [Motorway].” The purpose of the referral, made under s 218F(1) of the Local Government Act 1993 (NSW), was “for examination and report” by the Chief Executive.

2. On the same day, 6 January 2016, the Acting Chief Executive, by instrument of delegation, purportedly made pursuant to s 745(1) of the Local Government Act, delegated to a number of persons the Chief Executive’s functions in relation to the examination of and reporting on the proposals, including that involving the appellant.

3. On 22 March 2016 the delegate, Mr Garry West, forwarded his report to the Minister. Presumably it was also forwarded to the Acting Chief Executive, although the evidence was silent on that point. Because the proposal was “an amalgamation proposal”, and had been referred to the Acting Chief Executive, he was required to furnish his report to the Boundaries Commission “for review and comment”. [1] The Boundaries Commission reviewed the delegate’s report and sent comments to the Minister on 22 April 2016.

   1. Local Government Act, s 218F(6).

4. The delegate “recommended that the proposal as submitted proceed to implementation.” [2] The Boundaries Commission assessed that: [3]

“● the Delegate’s Report shows that the Delegate has undertaken all the processes required by section 263 of the Act,

● the Delegate’s Report shows that the Delegate has adequately considered all the factors required by section 263(3) of the Act, and

●   the Delegate’s recommendation in relation to the proposed merger is supported by the Delegate’s assessment of the factors.”

2.    Delegate’s report, p 1.

3.    Boundaries Commission Report, p 1.

5. On 22 March 2016 the appellant Council commenced proceedings in the Supreme Court seeking judicial review of the delegate’s report and an order setting aside the report under s 673 of the Local Government Act, which permits a court to make an order “to remedy or restrain a breach of this Act.”[4] A breach of the Act includes a contravention of or failure to comply with the Act and a threatened or apprehended contravention or failure to comply with the Act. [5] Those proceedings were, in due course, transferred to the Land and Environment Court. On 20 September 2016, Moore J dismissed the proceedings. [6] The present appeal seeks to reagitate a number of grounds raised before the primary judge which, the appellant contended, had been wrongly rejected.

   4. Local Government Act, s 673(1).

   5. Local Government Act, s 672(a).

   6. Ku-ring-gai Council v Mr Garry West as delegate of the Acting Director-General, Office of Local Government [2016] NSWLEC 118 (“Ku-ring-gai LEC – final”). The name of the officer was mis-stated; he was the Acting Chief Executive.

6. One of the grounds of challenge had in fact been upheld by the primary judge, but relief had been declined. For reasons more fully explained by Sackville AJA, I agree that the appeal should be upheld on this ground and the judgment below set aside.

7. The appellant originally sought, in the event of success, that the examination of the proposal be remitted to a delegate (albeit a different person). Such an order would not have been appropriate unless the Court were satisfied that the kind of “delegation” was within power and the delegate being reviewed had been properly appointed. Because, in the course of the hearing, the appellant reformulated the relief, abandoning the proposed order for remittal, the validity of the appointment need not be determined. It will be sufficient to order that the report of the delegate be set aside. It follows that the review and comments of the Boundaries Commission will have no operation and that the steps required to be taken before an amalgamation can proceed remain uncompleted.

5. Given the appellant’s success on the first ground, it remains to consider whether the Court should address other grounds. The High Court has remarked that “it is important for intermediate courts of appeal to consider whether to deal with all grounds of appeal, not just with what is identified as the decisive ground.”[7] In a case where a matter of public interest arises, which may give rise to an appeal to the High Court, findings with respect to all the grounds which were argued prevents the need for a further hearing if the determination on the decisive ground were to be reversed. This case involves challenges limited to jurisdictional error on the part of the delegate, which can conveniently be dealt with within a short compass. The issues were fully argued. Further, although the notice of appeal sought to raise 11 grounds, with one exception (which should be rejected) they focused upon a particular consideration required to be examined by the Chief Executive, namely “the financial advantages or disadvantages” of the amalgamation proposal.

   7. Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12] (Gleeson CJ, Gummow, Kirby and Hayne JJ).

6. The exception concerned whether reasonable public notice had been given of the inquiry conducted by the delegate. That ground can be addressed briefly. The quashing of the decision of the delegate removes the need to address the challenge to the review conducted by the Boundaries Commission, which was “put only formally, in the light of Botany Bay City Council v The State of New South Wales [2016] NSWCA 243 at [91]-[101] which is not said to be plainly wrong.” [8] The relevant passages in the reasoning of Sackville AJA in Botany Bay rejected a submission that the Commission, in conducting a review under s 218F(6)(b) of the Chief Executive’s report, was “free to re-examine the merits of an amalgamation proposal”[9] and that the Commission could and should “go beyond a review of the Chief Executive’s report and undertake its own independent evaluation of whether the proposal should be recommended for implementation.”[10] There may remain live issues as to the scope of the Commission’s functions, which were not explored in this appeal.

   8.    Appellant’s written submissions, par 129.

   9. Botany Bay at [97].

   10. Botany Bay at [96].

7. Before addressing the substantive challenges to the delegate’s report, it is convenient to set out the principal features of the statutory scheme and identify the critical steps in the process of examination by the delegate. (The latter task may be supplemented by reference to the more complete account provided by Sackville AJA.)

Statutory scheme for amalgamation proposals

11. Chapter 9 of the Local Government Act provides for the constitution of “any part of New South Wales as an area.”[11] In common parlance, these are referred to as local government areas, but the statutory term, which is not unimportant for present purposes, is “area”. It is a defined term and means “an area as constituted under Division 1 of Part 1 of Chapter 9.” [12] An area is constituted by a proclamation, made by the Governor. [13]

    11. Local Government Act, s 204.

    12.    Local Government Act, Dictionary, area. (The definition has been amended since the date of the referral to delete “Division 1 of”.)

    13. Local Government Act, s 204(1).

12. A council is automatically constituted by the statute for each proclaimed area. [14] The council takes its name from the name of the area which is determined by the Governor’s proclamation. [15] The procedure for creating a local government area is governed by s 204, which appears in Pt 1, Div 1 of Ch 9.

204   Constitution of areas

(1)   The Governor may, by proclamation, constitute any part of New South Wales as an area.

(2)   The area is to have the boundaries determined by the Governor by proclamation.

(3)   An area must be a single area of contiguous land.

14. Local Government Act, s 219.

15. Local Government Act, s 207 and s 221.

13. Part 1, Div 2 sets out the procedural steps which must be undertaken before an area can be constituted. In short, there must be a “proposal” made either by the Minister or to the Minister by a council or a group of electors. [16] Public notice must be given of the proposal and representations entertained. [17] If the Minister wishes to continue with the proposal, it must be referred to the Boundaries Commission “for examination and report”. [18] If the Minister recommends to the Governor that the proposal be implemented, and modifications are made to the original proposal, the matter cannot be recommended to the Governor if the modifications “constitute a new proposal.”[19] The clear implication is that significant modifications will require that a new proposal be prepared and the process will need to be restarted.

    16. Local Government Act, s 215.

    17. Local Government Act, s 216 and s 217.

    18. Local Government Act, s 218(1).

    19. Local Government Act, s 218(2).

14. Division 1 of Pt 1 also confers power on the Governor to dissolve an area, by the following procedure:

212   Dissolution of areas

(1)   The Governor may, by proclamation, dissolve the whole or part of an area.

(2) The Minister may not recommend the making of a proclamation to dissolve the whole or part of an area until after a public inquiry has been held and the Minister has considered the report made as a consequence of the inquiry.

15. The present case concerned land entirely within the areas of Ku-ring-gai and Hornsby Shire, although not the whole of the Hornsby Shire area. The proposal put forward by the government was described as a “merger proposal”. The term “merger” does not appear in the Local Government Act; rather, the Act provides for the “amalgamation of areas” pursuant to s 218A which provides:

218A   Amalgamation of areas

(1)   The Governor may, by proclamation, amalgamate two or more areas into one or more new areas.

(2)   On the date specified in the proclamation as the date on which the areas are to be amalgamated:

(a)   the areas are dissolved, and

(b)   the new area or new areas are constituted, and

(c) subject to section 218C, the councillors of the former areas cease to hold office.

(3) Divisions 1 and 2 apply to a new area constituted by a proclamation under this section in the same way as they apply to an area constituted by a proclamation under section 204.

(4) Section 212(2) does not apply to the dissolution of a former area by a proclamation under this section.

16. What may be amalgamated under this provision are “two or more areas”: the provision does not expressly allow for the amalgamation of fewer than two areas, or the amalgamation of parts of areas. That would appear to be deliberate, as the result of an amalgamation is that “the areas” are dissolved. Further, the section expressly refers to s 212(2) which deals with the dissolution of “the whole or part of an area”. To amalgamate part only of an area will therefore result in the dissolution of the whole, leaving the unamalgamated part in limbo. On one view, s 218A was not engaged by the terms of the present proposal, involving fewer than two whole areas.

17. There is further provision in Pt 1, Div 2A of Ch 9 for the alteration of boundaries of areas. Section 218B is in the following terms:

218B   Alteration of boundaries of areas

The Governor may, by proclamation, alter the boundaries of one or more areas.

18. To alter a boundary common to two areas will result in land being transferred from one area to the other. To transfer a discrete parcel of land from one area to another would not constitute an amalgamation. As will be seen below, one aspect of the overall set of proposals formulated by the government involved the transfer of part of the Hornsby Shire area to the City of Parramatta, by altering the boundary between the two areas. Two points of difference between the statutory provisions may be noted. First, a boundary alteration does not result in the dissolution of either affected area, let alone the whole of both areas. Secondly, there is no provision with respect to boundary alterations for Divs 1 and 2 to apply, as is the case with amalgamation of areas. Division 1 includes the requirement for a public inquiry before dissolution can occur; Div 2 contains provisions with respect to initiation and formulation of proposals, the giving of public notice and the making of representations. [20]

    20. Local Government Act, ss 214-218.

19. Despite the second point of distinction noted above, Div 2B requires that there be a proposal made to or by the Minister, in terms which reflect those in s 215, with respect to the exercise of functions under s 218A and s 218B. [21] More is required, however, than 28 days public notice, the consideration of representations and referral to the Boundaries Commission. The more detailed provisions are contained in s 218F:

    21. Local Government Act, s 218D and s 218E.

218F   Referral of proposal for examination and report

(1)   On making or receiving a proposal, the Minister must refer it for examination and report to the Boundaries Commission or to the Departmental Chief Executive.

(2) Sections 263, 264 and 265 apply to the examination of a proposal by the Departmental Chief Executive in the same way as they apply to the examination of a proposal by the Boundaries Commission.

(3) For the purpose of examining a joint proposal of 2 or more councils for the amalgamation of two or more areas under section 218A, the Boundaries Commission or Departmental Chief Executive, as the case requires, must seek the views of electors of each of those areas:

(a)   by means of:

(i)   advertised public meetings, and

(ii)   invitations for public submissions, and

(iii)   postal surveys or opinion polls, in which reply-paid questionnaires are distributed to all electors, or

(b)   by means of formal polls.

(4)   The period over which the views of electors are to be sought as referred to in subsection (3) must be a period of at least 40 days.

(5)   Part 3 of Chapter 4 applies to a formal poll taken by the Boundaries Commission or Departmental Chief Executive in the same way as it applies to a council poll referred to in that Part.

(6)   If a proposal that is not supported by one or more of the councils affected by it, or that is an amalgamation proposal, has been referred to the Departmental Chief Executive under subsection (1):

(a)   the Departmental Chief Executive must furnish the Departmental Chief Executive’s report to the Boundaries Commission for review and comment, and

(b)   the Boundaries Commission must review the report and send its comments to the Minister.

(7) The Minister may recommend to the Governor that the proposal be implemented:

(a)   with such modifications as arise out of:

(i)   the Boundaries Commission’s report, or

(ii)   the Departmental Chief Executive’s report (and, if applicable, the Boundaries Commission’s comments on that report), and

(b)   with such other modifications as the Minister determines,

but may not do so if of the opinion that the modifications constitute a new proposal.

(8) The Minister may decline to recommend to the Governor that the proposal be implemented.

20. There was no joint proposal of two or more councils, so that subss (3)-(5) were not engaged. The proposal was not supported by the present appellant, (nor by Hornsby Shire Council) with the result that it was required to be referred to the Boundaries Commission under subs (6). As the proposal was in fact referred to the Chief Executive (and not the Boundaries Commission) the terms of subs (2) were also engaged. Sections 264 (dealing with representation) and 265 (dealing with the conduct of a survey or poll) are not presently in issue. The operation of s 263 was, however, central to the case run by the appellant. The relevant provisions are as follows:

263   Functions of the Boundaries Commission

(1)   The Boundaries Commission is required to examine and report on any matter with respect to the boundaries of areas and the areas of operation of county councils which may be referred to it by the Minister.

(2)   For the purpose of exercising its functions, the Boundaries Commission:

(a)   may hold an inquiry if the Minister so approves, and

(b)   must hold an inquiry if the Minister so directs,

but may not hold an inquiry otherwise than as referred to in paragraph (a) or (b).

(2A) Despite subsection (2), the Boundaries Commission must hold an inquiry for the purpose of exercising its functions in relation to a proposal for the amalgamation of two or more areas that has been referred to it in accordance with section 218F.

(2B)   Reasonable public notice must be given of the holding of an inquiry under this section.

(3)   When considering any matter referred to it that relates to the boundaries of areas or the areas of operations of county councils, the Boundaries Commission is required to have regard to the following factors:

(a)   the financial advantages or disadvantages (including the economies or diseconomies of scale) of any relevant proposal to the residents and ratepayers of the areas concerned,

(b)   the community of interest and geographic cohesion in the existing areas and in any proposed new area,

(c)   the existing historical and traditional values in the existing areas and the impact of change on them,

(d)   the attitude of the residents and ratepayers of the areas concerned,

…

(e1)   the impact of any relevant proposal on the ability of the councils of the areas concerned to provide adequate, equitable and appropriate services and facilities,

…

(e5)   in the case of a proposal for the amalgamation of two or more areas, the need to ensure that the opinions of each of the diverse communities of the resulting area or areas are effectively represented,

(f)   such other factors as it considers relevant to the provision of efficient and effective local government in the existing and proposed new areas.

…

(5)   The Boundaries Commission must allow members of the public to attend any inquiry held by the Commission under this section.

…

(7)   The Supreme Court may not make an order in the nature of prohibition in respect of, or an order for removing to the Court or quashing, any decision or proceeding made or conducted by the Boundaries Commission in connection with the exercise of its functions.

21. In s 263(1), the obligation to examine and report on any matter “which may be referred to it by the Minister” should be understood, not as identifying a class of matters, all of which may be examined, but rather, in a temporal sense, those matters which are in fact referred to it. Because the function was understood to relate to “a proposal for the amalgamation of two or more areas”, it was assumed that subs (2A) applied, and the Chief Executive (and, it was also assumed, his delegate) was required to hold an inquiry.

22. There was an issue raised by the appellant as to whether reasonable public notice had been given, pursuant to subs (2B). As will be briefly explained below, there was no substance in the challenge to the notice in fact given and nothing turns on the nature or extent of the inquiry in fact conducted.

23. One major issue on the appeal was whether the delegate complied with the obligation “to have regard to” the matters identified in subs (3)(a), namely the financial advantages or disadvantages of the proposal.

24. Although the privative clause in s 263(7) appears to prevent this Court granting relief (a) in the nature of prohibition, which must be based on jurisdictional error, as well as (b) an order setting aside the decision or proceeding of the delegate, which may be on the ground of error of law on the face of the record, it was accepted by the parties that a challenge could be mounted on the basis of jurisdictional error, being within the constitutionally protected supervisory jurisdiction of this Court. [22] There might have been an issue as to whether, in circumstances in which the privative clause was expressed to refer to the Supreme Court, it was to be assumed that the clause did not apply to the Land and Environment Court; that would have been a surprising result. On the other hand, if the provision did apply to the Land and Environment Court,[23] as well as to this Court, there might have been a further question as to whether that Court enjoyed the same constitutionally protected jurisdiction as the Supreme Court. Although proceedings were in fact commenced in the Supreme Court, they were transferred to the Land and Environment Court without reference to these issues. [24]

    22. Kirk v Industrial Court of New South Wales (2009) 239 CLR 531; [2010] HCA 1 at [98]-[100].

    23. See Land and Environment Court Act 1979 (NSW), s 20(2).

    24. Ku-ring-gai Council v Garry West as Acting Director-General of the Office of Local Government [2016] NSWSC 442. (The description of the defendant was erroneous – see fn (6) above.)

Relevant factual and procedural circumstances

25. The purpose of this outline of the background circumstances is to identify sufficiently the bases of the complaints that the delegate failed to give proper consideration to the effect of excising from the Hornsby Shire area that part located south of the M2 Motorway, and the alleged failure to accord the appellant procedural fairness. The outline will also provide a basis for considering the claim by the appellant for access to certain KPMG studies which were said to underpin the financial assessment of the proposal and in respect of which the government claimed immunity from production on the basis of secrecy or confidentiality (public interest immunity).

(a)   relevant parties – delegation

26. The proposal the subject of the proceedings was “made by” the Minister. A letter from the Minister to the Acting Chief Executive, dated 6 January 2016, attached a list of proposed amalgamations and boundary changes, which proposals had been initiated by him. He stated:

“By this letter I am referring these proposals to you pursuant to [s 218F(1)] of the Act for examination and report in accordance with section 218F of the Act, and I look forward to receiving your reports in due course.”

27. The attached list identified 35 “merger proposals” divided into the categories “metropolitan proposals” (of which there were 15) and “regional proposals” (of which there were 20). Several proposals involved parts of particular areas. The present proposal (inaccurately), was not so identified, being described as “Hornsby Shire and Ku-ring-gai councils”.

28. Whether the Minister anticipated receiving the reports of the Acting Chief Executive personally is not clear. However, on the same day, the Acting Chief Executive exercised what purported to be an instrument of delegation pursuant to s 745(1) of the Local Government Act. Mr Garry West was identified as the delegate in respect of two proposals, one being “Hornsby Shire (part) and Ku-ring-gai”, the other being “Hawkesbury City and The Hills Shire (part)”. A separate delegate was given functions relating to Parramatta City (part) and Hornsby Shire (part). The evidence did not specifically identify whether the latter proposal involved the part of the Hornsby Shire south of the M2 motorway, although that seems likely.

29. While the Departmental Chief Executive has power to delegate “to any person” any of the Chief Executive’s functions “under this Act” (other than the power of delegation) it is by no means clear that the concept of delegation extends to conferring functions on persons outside the government. Section 745(2) permits a delegate to “subdelegate to a person employed in the Department any function delegated by the Departmental Chief Executive if the delegate is authorised in writing to do so by the Departmental Chief Executive.” The concept of delegation, at least in a legal context, is generally understood as a conferral of authority on a subordinate within a hierarchical structure. That meaning is strongly supported by the terms of subs (2), which are not consistent with the delegate being someone outside the department.

27. This matter was potentially of importance for three reasons. First, there may be a question as to whether, and if so how, ss 263, 264 and 265 bind a delegate who is not a government officer or employee. Secondly, there may be a question as to the scope of this Court’s exercise of its supervisory jurisdiction. Although the proceedings were brought against the first respondent “in his capacity as delegate of the Acting Director-General [sic] of the Office of Local Government”, it is by no means clear whether those are words of limitation and whether the Court could now make an order directing Mr West to do anything at all, subject to the potential for enforcement by proceedings for contempt, if the order were not complied with. Thirdly, Mr West’s decision was not treated as a decision of the Acting Chief Executive, who was not a party to the proceedings and, in a formal sense, will not be bound by the result.

28. These important questions were not addressed, the parties being content to assume both that the relevant provisions of the Local Government Act bound the conduct of Mr West and that any order of this Court would be effective.

(b)   nature of the proposal

32. Given the disparate nature of the functions conferred on the Chief Executive, it is necessary to identify the specific proposal with respect to which the function of examination and report was given to the delegate. The relevant document, entitled “Merger Proposal” and dated January 2016 contained 18 pages. It ended with an appendix identifying “the factors that a delegate must consider under section 263 of the Local Government Act (1993) when examining a proposal.” It then identified the section references in the proposal itself where each criterion was addressed. The parts of primary importance were to be found in the Executive Summary under the headings “Introduction” and “Impacts, Benefits and Opportunities”. The section headed “Introduction” commenced:

“This is a proposal by the Minister for Local Government under section 218E(1) of the Local Government Act (1993) for the merger of Hornsby Shire and Ku-ring-gai local government areas north of the M2. This merger proposal sets out the impacts, benefits and opportunities of creating a new council.”

33. A footnote to the first sentence of this passage recognised that what was in fact being created was a new local government area, which was to be, for simplicity, referred to as a new council. The introduction concluded with the following statement:

“The new council includes only the part of Hornsby Shire north of the M2 Motorway.”

34. Beyond the acknowledgment that it was not the whole of the Hornsby Shire area which was to form the new area, there was nothing in the proposal indicating that any examination was required of the excision of the land south of the M2. Indeed, the passages set out above were inconsistent with any such suggestion. Although the Minister argued that there was an implied requirement to examine and report on the alteration to the southern boundary of Hornsby Shire, there was no textual basis for that submission in the proposal. Nor was there any reference to the fact that the amalgamation could not take place until the Hornsby Shire area had been reduced by an alteration to its boundaries. The nature of the proposal was one involving an amalgamation within the terms of s 218A of the Local Government Act.

(c)   financial advantages and disadvantages

35. The introduction to the proposal referred to the fact that it had been “informed by four years of extensive council and community consultation and is supported by independent analysis and modelling by KPMG.” The summary then noted the “range of benefits and opportunities” that had been identified for the proposed merger. The summary continued:

“Analysis by KPMG shows the new council has the potential to generate net savings to council operations. The merger is expected to lead to around $70 million in net financial savings over 20 years. Council performance will also be improved with a projected 34 per cent increase in annual operating results achieved within 10 years. [25] This means that there will be a payback period of three years after which the merger benefits will exceed the expected merger costs.

The analysis also shows the proposed merger is expected to generate, on average, around $6 million in savings every year from 2020 onwards. Savings will primarily be from the removal of back office and administrative functions; streamlining of senior management roles; efficiencies from increased purchasing power of materials and contracts; and reduced expenditure on councillor fees. [26]

The NSW Government has announced a funding package to support merging councils which would result in $20 million being made available should the proposed merger proceed.”

25.    Operating results refer to the net financial position after subtracting total expenditure from total revenue in a given financial year. (Footnote in original.)

26.    NSW Government (2015), Local Government Reform: Merger Impacts and Analysis, December. (Footnote in original.)

36. The Minister acknowledged that the document referred to in the second footnote, the main title of which was “Merger Impacts and Analysis”, was a “long form document” prepared by KPMG, which had not been made available publicly, or to the delegate or to the appellant. The Minister acknowledged that there was no other apparent source for the information contained in the passage set out in the proposal. Although a short version of the “Merger Impacts and Analysis” document had been publicly released (and was before the Court), the long form of the document had not (and was not). However, the short form document suggests that the long form document addressed, on a case-by-case basis, the “Long-Term Financial Plans” for the councils involved in specific amalgamations. [27]

    27.    Merger Impacts and Analysis, 2015 KPMG, pp 4 and 6.

37. The reason for the failure to release the document was the claim for what is sometimes described as “public interest immunity”, which is (relevantly) dealt with in s 130 and s 131A of the Evidence Act 1995 (NSW). One ground of the appeal was directed to the refusal of the primary judge to order production of that document and a related document, entitled “Implementation of Local Government Mergers: Business Case”, also prepared by KPMG and collectively called “the KPMG documents”.

38. The passage set out above was relevant in a further respect. It formed the primary basis for the appellant’s complaint that it had been denied procedural fairness in the conduct of the examination and reporting by the delegate. In short, as the underlying material had not been produced, the appellant had been denied an opportunity to respond to the figures and underlying KPMG analysis on which a major aspect of the proposal was founded.

39. This point was expressly raised with the delegate. In a written submission dated 28 February 2016, the appellant argued:

“There is no case for the proposed merger of Ku-ring-gai Council with part of Hornsby Shire Council on financial grounds. Rather, it would be to the detriment of the residents and ratepayers of both council areas.”

40. The first of a number of “key points” set out following that statement was a summary of the figures contained in the passage from the merger proposal noted above. The next key point complained that “[t]he forecast savings cannot be verified as there is no detailed business case available to support the Merger Proposal.” The appellant quoted chartered accountants BDO, which it had briefed to advise it, who said that the merger proposal “does not contain sufficient information for us to conclude on the merits of merging the two councils.” [28] The appellant then said that it had “requested the full KPMG report” and had been told that it should rely on the document contained on the government website. The appellant reiterated its position that “there is no detailed business case available to justify the proposed merger” [29] and continued: [30]

“The absence of detailed supporting information by KPMG, or any other such business case, is entirely unsatisfactory as it is not possible for anyone (including the NSW Government and the Delegate) to check the accuracy of the underlying data, test the assumptions or assess the reasonableness of the conclusions.”

28.    Submission, p 12.

29.    Submission, p 13.

30.    Submission, p 14.

41. It may be seen that this last submission contained three propositions, one of which was false. The first proposition was that it, Ku-ring-gai Council, was unable to check the accuracy of the underlying data or test the assumptions because it did not have the information. That was, in substance, a claim of procedural unfairness. The second proposition was that the government could not check the data and assumptions, apparently because it did not have the information. Depending on what was encompassed by the term “the NSW Government”, that proposition was apparently wrong and inconsistent with the rest of the appellant’s case, namely that the facts and figures set out in the proposal were based on information available to the government, but not to anyone else. That complaint must be put to one side.

42. The third complaint was that the delegate was unable to check the accuracy of the data, test the assumptions or assess the reasonableness of the conclusions. That was, in substance, a complaint that the purported examination undertaken by the delegate did not satisfy the terms of the statute because he was unable to have regard to, in the sense of examining, the financial advantages of the amalgamation as presented by the government in the merger proposal.

43. Procedural unfairness was alleged on a further basis. That was described as the availability to the delegate of material provided by KPMG in a private briefing to which neither the appellant, nor its residents and ratepayers, were privy. The briefing took place on 14 January 2016 and was revealed as a result of the production of a document entitled “Local Government Merger Proposals – Overview of assumptions underpinning financial modelling – briefing to delegates”, dated 14 January 2016. That document set out in global form the benefits from the merger proposals, together with the financial costs. The figures were illustrated by reference to one proposed amalgamation (not being that involving the present parties).

44. Apart from the long form of the analysis prepared by KPMG and not released, a “technical paper” described as “Outline of Financial Modelling Assumptions for Local Government Merger Proposals”, dated 19 January 2016 and said to be “[p]repared for the NSW Department of Premier and Cabinet”, was released. This document stated that KPMG had been engaged by the Department of Premier and Cabinet “to prepare independent modelling of the potential financial impacts of selected council mergers.” [31] The document indicated the source of the data relied on, parts of which were State-wide, but other parts of which, referred to as “[c]omparator and jurisdictional analysis/merger business cases”, [32] indicated that there was material specific to particular councils.

    31.    Technical paper, p 2.

    32.    Technical paper, p 3.

45. At a meeting between the delegate and councillors and officers of the appellant, on 19 January 2016, one issue raised by Council was referred to as “KPMG report.” The “Council Meeting Notes” had the following material in respect of that issue: [33]

“Mr West explained that the Delegates were briefed on the financial assumptions applied in the KPMG report. He understands that it will be available for Council. … Council re-iterated their request to see the report. Cr Elaine Malicki, conveyed that this was not a fair situation not having the report released?”

Consideration of area south of M2 Motorway

33.    Meeting Notes, p 2.

(a)   case at trial

46. Before the primary judge, the appellant submitted that the delegate had erred in failing to take account of a mandatory consideration, identified as “submissions relating to impacts associated with the [excision] of the areas of Hornsby south of the M2 Motorway”, which contained approximately 20,000 ratepayers and was part of the present Hornsby Shire local government area. This factor was said to be relevant to pars (a), (b), (d) and (f) of s 263(3) of the Local Government Act.

47. The primary judge accepted, correctly, the premise on which this ground was based, namely that each of the mandatory factors set out in s 263(3) related to “the whole of each of the existing local government areas that are the subject of the proposal, even when, as is here the case, it is proposed to excise an area from one of them.”[34] The primary judge then considered the passages in the report of the delegate which referred to the area south of the M2 concluding, however:[35]

“None of these matters dealt with the impact on the residents and ratepayers of the area south of the M2 Motorway and now excised and incorporated in the enlarged Parramatta City Council, except in a tangential fashion. The impact on those residents and ratepayers was mandated to be considered by s 263(3)(a).”

34. Ku-ring-gai (LEC – final) at [142].

35. Ku-ring-gai (LEC – final) at [153].

48. The judge further concluded:[36]

“In failing to do so, he misapprehended a significant element of what was required of him by s 263(3). It follows that, in this regard, his examination and reporting process miscarried.”

36. Ku-ring-gai (LEC – final) at [156].

49. The primary judge further noted, correctly on the basis of his reading of the statute, that both this delegate, and the other delegate who was required to consider a merger of the excised portion of Hornsby Shire with the Parramatta City Council area, would have to consider the effects of the two proposals on the excised area. He might have added that, consistently with this conclusion, the other delegate would also have had to consider the effect of the excision on the whole of Hornsby Shire.

50. On one view, the element of duplication and the possibility of inconsistent conclusions should have led to the conclusion that these two proposals could not be isolated from each other and given to separate decision-makers for examination. The Minister’s response was that these difficulties could be resolved at a later stage, because the Minister had power to recommend to the Governor that the proposal be implemented or decline to make that recommendation. [37] Whilst that may proffer a practical solution to inconsistent recommendations, it would almost certainly mean that the whole process would have to start again, unless the government abandoned it. More importantly, it does not address the underlying legal premise, namely that “area” means the whole of a local government area and not just part of an area, and that (although the primary judge did not specifically address this point) there cannot be an amalgamation of fewer than two whole local government areas under s 218A. Further, the primary judge, adopting the language of the appellant’s submissions, appears not to have identified what was meant by “excision” in the statutory context of the separate functions of amalgamation and alteration of boundaries.

    37. Local Government Act, s 218F(7) and (8).

51. Despite identifying jurisdictional error, the primary judge nevertheless declined to grant relief because, by the time the proceedings came on for hearing before him, the Local Government (City of Parramatta and Cumberland Councils) Proclamation 2016 (made on 12 May 2016), had given effect to the “excision”. [38] The assumption appears to have been that, had he set aside the decision of the delegate, the matter would have to be remitted for further consideration, which would have been an exercise in futility because, the excised area having been removed, the current proposal would be approved. That would be because, what should have been considered and was not, no longer could be considered, so that the formerly invalid examination would now be valid.

    38. Ku-ring-gai (LEC – final) at [166].

(b)   Minister’s challenge to finding as to delegate’s reasons

52. As will be explained below, the reasoning of the primary judge with respect to relief cannot be accepted. It is desirable, however, to deal first with the Minister’s contention challenging the conclusion that the delegate did not properly consider the effects of the proposal on the area of Hornsby Shire south of the M2. Rather, the Minister contended, [39] the delegate did give proper consideration to the area south of the M2, as appeared from his report.

    39.    Amended notice of contention, 9 February 2017, par 4.

53. As the primary judge (and the Minister) correctly noted, there were a number of references in the delegate’s report to the part of Hornsby Shire south of the M2. First, in considering what was described as “background”, the delegate referred to an earlier proposal by Hornsby Council itself, which included an expansion of its existing boundaries, beyond the merger of the whole of its existing area with that of Ku-ring-gai. The delegate then noted that the Hornsby Shire Council was opposed to the current proposal, “particularly given the potential loss of the part of Hornsby south of the M2 Motorway to Parramatta”. [40] Later in the report, when considering an analysis provided by KPMG to Hornsby Shire Council in 2014, the delegate noted that “option 3” considered at that time was equivalent to the current merger proposal. [41] Using that material, the delegate obtained “significant comfort that the projected performance improvements are credible and achievable.”

    40.    Delegate’s report, p 5.

    41.    Delegate’s report, p 17.

54. However, that was not a rejection of the proposition that the new area would be better off with the inclusion of the area south of the M2; nor did it consider the benefits to the area south of the M2 in giving effect to the current proposal. That is apparent from the further statement in relation to the submission by Hornsby Shire Council to the delegate, summarised in the following terms: [42]

“The submission shows that the excision of the area south of the M2 Motorway from the proposed Hornsby/Ku-ring-gai council would see the council at least $6.4 million per annum worse off (in years 1-3) or at least $5 million worse off (from year 4 onwards) than if the two whole councils were merged. Such an impact would negate the projected savings in the Government’s Hornsby/Ku-ring-gai merger proposal as well as the funding that has been promised by the Government to assist with the merger costs of the councils.”

42.    Delegate’s report, p 10.

55. Secondly, the delegate identified the main submissions from residents within the Ku-ring-gai area, which included concerns regarding the financial impact of the loss of the area south of the M2 on the financial viability of a new council. [43] That material may be dealt with in company with the next point.

    43.    Delegate’s report, p 12.

56. Thirdly, although there were references to the impact of the exclusion of the area south of the M2 in respect of other issues, the underlying point was the financial impact of the so-called “excision”. [44] Accordingly, the clearest indication of how the delegate dealt with that issue derived from his conclusions with respect to the first topic in his report, namely financial advantages and disadvantages. The delegate commenced that section by noting the concerns expressed with respect to the KPMG analysis and modelling, confirming his understanding that it operated at a “broad level”. [45] He accepted statements by KPMG and the government that the estimated benefits were “conservative”. Then, dealing with the financial impact of loss of the area south of the M2, the delegate concluded that “the operating result has already been accounted for in the merger proposal.” [46] As a fact, that conclusion was not challenged and probably was not open to challenge. As a conclusion, it did not indicate examination of the desirability of the excision for the residents and ratepayers of the area south of the M2; nor did it examine the benefits and disadvantages of the excision from the standpoint of the ratepayers and residents north of the M2 and within the Ku-ring-gai area.

    44.    See, eg, par 5.6.1, dealing with Hornsby Shire Council’s submissions in respect of services and facilities.

    45.    Delegate’s report, p 9.

    46.    Delegate’s report, p 14.

55. Fourthly, in dealing with the second criterion identified in s 263(3), namely “community of interest and geographic cohesion”, the delegate concluded: [47]

“The area south of the M2 Motorway is the subject of another merger proposal, therefore while the issues and concerns are noted it would be expected they would primarily be considered in that report.”

47.    Delegate’s report, p 20, par 5.2.4.

58. Reading the report as a whole, that conclusion fairly sums up the delegate’s approach to this issue: it cannot be said that he was inconsistent in that approach. Thus, in summarising the community submissions under the heading “Attitudes of residents and ratepayers” the delegate stated: [48]

“At the public inquiry the majority of people spoke against the merger proposal, this is also reflected in submissions. However, it must be indicated that while the majority of submissions were opposed to Hornsby (part)/Ku-ring-gai merger proposal approximately a quarter were against excising of the areas of Hornsby south of the M2 Motorway. As these are subject to another merger proposal their detail is not summarised below.”

48.    Delegate’s report, p 24, par 5.4.3.

59. An analysis of the delegate’s reasons demonstrates that the primary judge was correct in concluding that the delegate had eschewed any assessment of the merits of the excision of the area south of the M2 Motorway. It is understandable that he did so: the merger proposal, as described above, neither required nor permitted such an examination. For these reasons, the Minister’s contention to the contrary must be rejected.

60. A further way of testing whether the delegate did in fact give consideration to the effect of the merger proposal on the area south of the M2 would be to ask what finding might have been expected had such consideration been given. The short answer is that, acting rationally, the delegate could not have recommended that the proposal proceed. That is because, as the delegate correctly noted, the fate of the area south of the M2 was, at the time of the delegate’s report, the subject of another merger proposal. [49] The outcome of the examination of that proposal was not then known. It could have declined to recommend that the area south of the M2 in Hornsby Shire be incorporated into Parramatta City. Had it done so, and had the Minister accepted that recommendation, approval of the Hornsby/Ku-ring-gai proposal would have left the residents and ratepayers south of the M2, formerly in Hornsby Shire, without a local government area and without a council. That possibility was an unacceptable outcome which could not be excluded. On the other hand, if that possibility were disregarded, a decision approving the Hornsby/Ku-ring-gai proposal might be seen to dictate a result with respect to the Parramatta City proposal regardless of the view of the merits of the incorporation of the area south of the M2 into Parramatta City. That too would be an unacceptable outcome. A third foreseeable possibility would have been that the delegate considering the Parramatta City proposal would do precisely what the present delegate did and presume that the fate of the excised area would be fully considered by the other delegate. That again would be an unacceptable outcome.

    49.    Delegate’s report, par 5.2.4.

61. It follows that, had the delegate properly considered the position of the area south of the M2, the only reasonable decisions could have been (a) to defer concluding his examination and report on the Hornsby/Ku-ring-gai proposal until the other proposal had been determined, or (b) to recommend to the government that neither proposal be examined and reported on, otherwise than by one delegate having functions with respect to the alteration of the boundary as well as the two amalgamation proposals. The fact that neither approach, nor anything like them, was referred to in the delegate’s report is powerful evidence for the proposition that he did not consider that the function of examining the boundary alteration had been conferred on him.

(c)   whether relief futile

62. First, it should be said that this is not a true case of futility. It is not like the case where a person challenges the refusal of his or her application for an appointment to office, in circumstances where another person has been appointed and cannot be removed to make way for the thwarted applicant. [50] The merger proposal has not yet been acted upon, nor, subject to one qualification, has any factual circumstance changed which would prevent the proposal being re-examined and acted upon, if the Minister thought appropriate.

    50. See, with respect to an application for mandamus, The King v The Public Service Commissioner for the Commonwealth of Australia; Ex parte Killeen (1914) 18 CLR 586 at 590 (Griffiths CJ) and 592 (Isaacs J).

63. The qualification is that there may need to be a new proposal, restating the boundaries in the present proposal, but against a background in which the “excision” has already taken place and is, it can be assumed, beyond challenge. That circumstance may require a new amalgamation proposal, with two consequences. First, because it will affect the whole of the Hornsby Shire area (as now defined, following the boundary alteration) with the whole of Ku-ring-gai, the proposal will fit squarely within s 218A. Secondly, because it will no longer be necessary (or appropriate) to have regard to the possible consequences for the area south of the M2 Motorway, which was originally within the Hornsby Shire area, the outcome may not be the same.

64. There may be cases in which a decision-maker has come to a conclusion which is unreviewable, but, taking into account an irrelevant consideration has then adopted the reverse position. The court may set the decision aside on the basis that an irrelevant consideration has been taken into account, but remit the matter with a direction that the applicant is entitled to the relief sought. [51] By parity of reasoning, it may be said that where the decision-maker erred by failing to take into account a mandatory consideration, but in circumstances where, if the matter were remitted that consideration would no longer be available, relief should be refused. That would be so on the basis that the decision which was challengeable on a particular ground would be unchallengeable once that ground became immaterial.

    51. Chen Shi Hai v Minister for Immigration and Multicultural Affairs (2000) 201 CLR 293; [2000] HCA 19 at [42].

65. It is not necessary to determine whether that reasoning is valid. It is sufficient to note that the decision made by the delegate in fact took into account effects relevant to the area south of the M2, although not by way of examining the whole of the matter which should have been examined. However, if the decision were to be made again now, that material would not be relevant. It might seem illogical to require the decision to be made again if the material which must now be excluded worked uniformly against acceptance of the proposal. Thus, if the considered effects failed to prevent the proposal being approved, their absence can only strengthen the conclusion already reached. However, to make that assumption is to undertake an assessment of the nature of the material and its necessary effects. While it may seem likely that the same result would be reached on reconsideration by the same delegate, that conclusion does not follow as a matter of law, but rather by making certain assumptions about the assessment of the material, which are not open to a court exercising the supervisory jurisdiction of this Court.

66. Finally, if the flawed examination can be redone properly, relief should be granted which would allow that to happen. Once the decision has miscarried, it is not appropriate to remit the matter to the same delegate in order to seek to retain the benefit of findings reached in the course of the earlier flawed assessment. [52] There are a number of reasons for that, two of which have particular pertinence in the present case. First, it cannot be assumed that, if the examination and the inquiry were undertaken again, the material put before the delegate would be the same. That is because the objection based on public interest immunity should have been rejected (as discussed below) and any fresh examination will need to be undertaken by reference to additional material. Secondly, it cannot be assumed that the matter would or could go back to the same delegate for re-examination of the merger proposal. That is in part because it may be assumed that the “delegation” has expired. It is also, in part, because of the doubts raised above as to whether a delegation to a person outside the public service is valid.

    52. Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518; [2003] HCA 11.

(d)   conclusions

67. For these reasons, as well as those given by Sackville AJA, the primary judge, (a) was correct in concluding that there had been jurisdictional error on the part of the delegate in failing to take account of the effects of the merger proposal for the area south of the M2, but (b) erred in failing to grant relief, namely, setting aside the decision of the delegate.

Access to KPMG documents

68. Grounds 5 and 6 in the summons in the Land and Environment Court alleged a denial of procedural fairness in the delegate’s failure to provide it with the KPMG documents and the information supplied by KPMG in the briefing of delegates. Ground 3 alleged procedural unfairness in the failure of the Department of Premier and Cabinet to provide the KPMG documents to either the appellant or the delegate. Ground 4 alleged a constructive failure on the part of the delegate to fulfil his statutory function in circumstances where he did not have access to the KPMG documents, on the basis that he was then unable to examine and report on a critical aspect of the merger proposal, namely the suggested net financial advantages, not having access to the basis of the calculations. The notice of appeal complained that the primary judge had failed to address ground 4. [53]

    53.    Notice of appeal, ground 9.

69. The question whether the delegate could properly fulfil his function, absent the KPMG documents, is, in a sense, antecedent to any question of procedural fairness in relation to the appellant. Thus, if the examination function could not properly be undertaken absent those documents, the question of procedural unfairness would not arise. On the other hand, if the inquiry could properly be conducted absent the underlying financial documents, there may nevertheless be a question of procedural unfairness in depriving the appellant of the opportunity to challenge the financial assertions of the government by reference to the underlying calculations. Further, the right of the government to withhold the documents even if they were required, by maintaining public interest immunity, is antecedent to both questions. It is convenient to deal with the issues in the logical order suggested.

Public interest immunity

70. On 8 January 2016 the appellant sought access to the KPMG documents under the Government Information (Public Access) Act 2009 (NSW). The KPMG documents [54] were said by the Director of the Department of Premier and Cabinet to have been “prepared for submission to Cabinet and submitted to Cabinet regarding proposed local government reforms.” Access was refused on the basis that they constituted “Cabinet information” for the purposes of cl 2(1)(b) of Sch 1 to the Government Information Act. [55]

    54.    Records 4 and 5 in annexure B to the response to the application for access.

    55.    Letter, 25 February 2016, Director, Premier & Cabinet, to Ku-ring-gai Council.

71. Having failed to obtain the KPMG documents prior to the completion of the delegate’s report, the appellant issued notices to produce in the court proceedings, addressed to “NSW Department of Premier & Cabinet” and to the Minister for Local Government. The first notice was treated as having been directed to the proper officer of the Department, since identified as the Secretary. On 29 April 2016 objection was taken to each notice to produce and orders were sought pursuant to ss 130 and 131A of the Evidence Act for the Secretary and the Minister to be excused from producing the documents on the ground that it would be “injurious to the public interest to produce [them].” The objections were upheld by the Land and Environment Court. [56]

    56.    Ku-ring-gai (LEC – final) at [78]-[79].

72. In the proceedings in the Land and Environment Court, the appellant joined both the “NSW Department of Premier & Cabinet” (not a juristic person) and the Minister for Local Government as the second and third defendants respectively. Grounds 1 and 2 challenged the refusal of the Department to produce the KPMG documents. As noted above, ground 3 alleged procedural unfairness on the part of the proper officer in refusing to provide the KPMG documents to the appellant and to the delegate, and ground 4 alleged a constructive failure on the part of the delegate to carry out his delegated function in the absence of the KPMG documents. In his final judgment, the primary judge stated that the matter had been determined adversely to the appellant and that ground 1 was “without foundation.”[57] These findings were challenged in ground 3 of the notice of appeal.

    57. Ku-ring-gai Council v Mr Garry West [2016] NSWLEC 62 (Moore J).

73. In support of the objection, the Secretary relied upon an affidavit of General Counsel for the Department, Mr Paul Miller. Mr Miller stated that the KPMG documents: [58]

“can be classed as falling within the following categories:

(a)   documents brought into existence for the purpose of preparing a submission to Cabinet (including drafts of documents);

(b)   documents which were provided to Cabinet and which would disclose the substance of matters considered and discussed by Cabinet;

(c)   documents which relate to the framing of government policy at a high level; and

(d)   materials on which the decision-making processes of Cabinet were based.”

58.    Affidavit of Paul Miller, 29 April 2016, par 8.

74. Mr Miller described in some detail the Cabinet process. The affidavit continued:

“24   KPMG was engaged by the New South Wales Government in 2015 to provide certain advice on local government reform across the State. Two of the documents over which the public interest immunity claim is made are documents prepared by KPMG as part of this engagement.

25   The matters with which the documents referred to above are concerned are current, controversial matters concerning generally the amalgamation of a number of local government areas in this State. The controversy in relation to the amalgamation of local government areas is ongoing. No final decision has been made concerning the proposed amalgamation of Hornsby [sic] and Ku-ring-gai Councils.”

75. The affidavit then identified the two documents now in dispute as having been “prepared by KPMG” and having been “submitted by the relevant Minister to Cabinet.” [59] The affidavit further noted that the long form of the merger impacts and analysis document was substantially longer than a published form of the document and was “a substantially different document”. [60]

    59.    Affidavit, par 26.

    60.    Affidavit, pars 28 and 29.

76. The notice of objection relied on s 130 and s 131A of the Evidence Act. Section 130 relevantly states:

130   Exclusion of evidence of matters of state

(1)   If the public interest in admitting into evidence information or a document that relates to matters of state is outweighed by the public interest in preserving secrecy or confidentiality in relation to the information or document, the court may direct that the information or document not be adduced as evidence.

…

(4)   Without limiting the circumstances in which information or a document may be taken for the purposes of subsection (1) to relate to matters of state, the information or document is taken for the purposes of that subsection to relate to matters of state if adducing it as evidence would:

(a)   prejudice the security, defence or international relations of Australia, or

(b)   damage relations between the Commonwealth and a State or between 2 or more States, or

(c)   prejudice the prevention, investigation or prosecution of an offence, or

(d)   prejudice the prevention or investigation of, or the conduct of proceedings for recovery of civil penalties brought with respect to, other contraventions of the law, or

(e)   disclose, or enable a person to ascertain, the existence or identity of a confidential source of information relating to the enforcement or administration of a law of the Commonwealth or a State, or

(f)   prejudice the proper functioning of the government of the Commonwealth or a State.

(5)   Without limiting the matters that the court may take into account for the purposes of subsection (1), it is to take into account the following matters:

(a)   the importance of the information or the document in the proceeding,

(b)   if the proceeding is a criminal proceeding—whether the party seeking to adduce evidence of the information or document is a defendant or the prosecutor,

(c)   the nature of the offence, cause of action or defence to which the information or document relates, and the nature of the subject matter of the proceeding,

(d)   the likely effect of adducing evidence of the information or document, and the means available to limit its publication,

(e)   whether the substance of the information or document has already been published,

(f)   if the proceeding is a criminal proceeding and the party seeking to adduce evidence of the information or document is a defendant—whether the direction is to be made subject to the condition that the prosecution be stayed.

77. That section only applies if the appellant could rely upon the KPMG documents at the trial and sought to tender them in evidence. As the appellant did not have the documents, it could not seek to tender them and the occasion for the Court to direct that the documents not be adduced as evidence did not arise. As was noted in the joint reasons of Gleeson CJ, Gaudron and Gummow JJ in Esso Australia Resources Ltd v Commissioner of Taxation, [61] dealing with the analogous provisions relating to legal professional privilege, the provisions do not apply to ancillary process because no question of adducing evidence arises at that stage. [62] It was for this reason that the Secretary called in aid the terms of s 131A of the Evidence Act, which relevantly provides as follows:

131A   Application of Part to preliminary proceedings of courts

(1)   If:

(a)   a person is required by a disclosure requirement to give information, or to produce a document, which would result in the disclosure of a communication, a document or its contents or other information of a kind referred to in Division 1, 1A, 1C or 3, and

(b)   the person objects to giving that information or providing that document,

the court must determine the objection by applying the provisions of this Part (other than sections 123 and 128) with any necessary modifications as if the objection to giving information or producing the document were an objection to the giving or adducing of evidence.

61. (1999) 201 CLR 49; [1999] HCA 67 at [21].

62. Referring with approval to the judgment of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277 at 279.

78. The term “disclosure requirement” is defined to include a notice to produce. [63] Sections 130 and 131A both appear in Pt 3.10. Counsel for the Minister agreed that one “necessary modification” of s 130 must be to place in the scale weighed against the public interest in preserving secrecy or confidentiality, the public interest in the production of the document to the party issuing the notice. That modification is necessary because the basis upon which documents must be produced extends beyond that on which a document may be admitted into evidence. [64]

    63. Evidence Act, s 131A(2)(e).

    64. State of New South Wales v Public Transport Ticketing Corporation [2011] NSWCA 60 at [9] (Allsop P, Hodgson JA and Sackville AJA agreeing).

252. In the alternative, Mr Kennett submitted that the Delegate’s findings that the Merger Proposal had a number of specific financial advantages were drawn directly from the Merger Document, which in turn relied on the KPMG Documents. The Delegate had declined to engage with criticisms of the assertions in the Proposal. Consequently, the Delegate failed to perform his statutory task of “examining” the Proposal. Another way of characterising the error was to say that the Delegate had failed to give any proper, genuine or realistic consideration to the financial advantages or disadvantages of the Proposal.

Principles

255. It is common ground that the Delegate was obliged to afford procedural fairness to Ku-ring-gai, notwithstanding that he conducted only the first stage of a three stage statutory process. As Spigelman CJ observed in South Sydney, [127] a council has a “distinct interest in matters associated with its boundaries” (and indeed in its survival) and a report at the first stage has an impact on the entire process. In South Sydney, the Minister referred the proposal to the Boundaries Commission for examination and report and not to the Chief Executive, but Mr Williams did not suggest that this is a material difference for present purposes. [128]

     127. South Sydney at [39]-[41]. See also at [243], [254] (Mason P).

     128. It was accepted in Woollahra (CA) that the rules of procedural fairness applied to a delegate of the Chief Executive: Woollahra (CA) at [136]-[150].

256. The content of the obligation to afford procedural fairness depends on the circumstances of the case, the nature of the inquiry and the subject-matter being addressed. [129] It also depends on the terms of the statute under which the decision-maker operates. [130] The duty to afford procedural fairness may be more extensive if the exercise of a statutory power “singles out individuals by affecting their interests in a manner substantially different from the manner in which the interests of the public at large are affected”. [131]

     129. South Sydney at [254] (Mason P, Ipp AJA agreeing), citing National Companies and Securities Commission v News Corporation Ltd (1984) 156 CLR 296; [1984] HCA 29 at 319-320 (Mason, Wilson and Dawson JJ).

     130. Kioa v West (1985) 159 CLR 550; [1985] HCA 81 at 633 (Deane J).

     131. Kioa v West at 620 (Brennan J).

257. As a broad principle, a decision-maker ordinarily must give a person individually affected by a decision an opportunity to deal with adverse information that is “credible, relevant and significant to the decision to be made”. [132] Not all potentially unfavourable material before a decision-maker answers this description. [133] Moreover, the nature of the decision-maker’s task may impose limits on the extent of any obligation to afford an opportunity to address adverse information.

     132. Kioa v West at 629 (Brennan J).

     133. Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88; [2005] HCA 72 at [16]-[17] per curiam.

258. In South Sydney, for example, the Court rejected a submission that the Boundaries Commission was obliged to give the affected council an opportunity to see and comment on all “adverse material” before the report was finalised. Mason P observed that an obligation of this kind would “[convert] the examination and report stage of the process into a full-blown adversarial trial”. [134] His Honour also said that to posit a right for all “affected” persons to see all “adverse” submissions would be unworkable. [135]

     134. South Sydney at [251].

     135. South Sydney at [267].

259. Mason P quoted a passage from an article by MC Harris, which was also quoted with approval by Beazley P in Woollahra (CA). [136] The passage suggests that the “true rule”:

“is that generally it will be inappropriate to require an investigative tribunal to inform the subject of the way in which its mind is working or to put to or to inform them of any tentative views it has formed. Provided they have been properly informed as to the nature and subject matter of the investigation or inquiry and have been afforded a proper opportunity to be heard in respect of the main issues forming the focus of the tribunal’s concern (the ‘critical issues or factors’ requirement) then natural justice ought, as a general proposition, to be taken as satisfied. Any other general rule along the lines earlier discussed would make the work of investigative tribunals at least as ‘intolerably protracted’ as it would if applied to the working of adjudicative bodies.”

136. MC Harris, “Fairness and the Adversarial Paradigm: An Australian Perspective” (1996) Public Law 508 at 522-523, quoted in South Sydney at [256] and Woollahra (CA) at [139].

260. In South Sydney,[137] Mason P was “inclined to the view that the [Boundaries] Commission was bound to give directly affected councils a reasonable opportunity to address [the] statutory issues” identified in s 263(3) of the LG Act. In Woollahra (CA), Beazley P said that in her view the obligation on the delegate in that case was “no greater” than that identified in South Sydney. [138]

     137. South Sydney at [243].

     138. Woollahra (CA) at [147] (Beazley P, Bathurst CJ and Ward JA agreeing).

The present case

261. The Delegate in the present case was required by s 263(3)(a) of the LG Act to consider the Merger Proposal having regard to the financial advantages or disadvantages to the residents and ratepayers of the areas concerned (relevantly Hornsby and Ku-ring-gai). To assess Ku-ring-gai’s procedural fairness argument, it is necessary to explain the role played by the KPMG Documents in the Delegate’s consideration of the financial factors identified in s 263(3)(a).

262. The Merger Document asserted that the merged council would have the potential to generate net financial savings of about $70 million over 20 years and would be likely to produce a variety of other efficiencies. The assertions were set out in some detail in the Minister’s Foreword, the Executive Summary and in the body of the Merger Document. [139] The Merger Proposal itself cites the KPMG Documents as the source of the financial projections.

     139. See at [161]-[162] above.

263. Ku-ring-gai lodged its submission with the Delegate on 28 February 2016. It had been advised three days earlier by the Director of the Department of Premier and Cabinet that its request for access to the KPMG Documents had been refused on the ground of public interest immunity. [140] Ku-ring-gai’s submission to the Delegate forcefully contended that unless it had access to the “supporting information” compiled by KPMG, it was impossible for it to check the accuracy of the data or the reasonableness of the assumptions underpinning conclusions reached by KPMG and the Minister. [141]

     140. See at [70] above.

     141. See at [40]-[41] above.

264. Ku-ring-gai’s submission was followed by its letter of 10 March 2016 to the Delegate. In this letter, Ku-ring-gai claimed that it was impossible to make a fully informed submission about the Merger Proposal unless it (and presumably the Delegate) had access to the KPMG Documents. As noted earlier, the letter also warned the Delegate that if he proceeded further without the KPMG Documents he would be denying procedural fairness to Ku-ring-gai.

265. As Beazley P pointed out in Woollahra (CA), neither the Chief Executive nor his or her delegate has any investigative function or powers that authorise compulsory interrogation or inquiry. [142] However, the LG Act does not prevent a delegate from seeking further information from any source that the delegate considers appropriate. [143]

     142. Woollahra (CA) at [107].

     143. Woollahra (CA) at [107].

266. Despite receiving Ku-ring-gai’s letter, there is no evidence that the Delegate made any request to the Chief Executive or to the Department of Premier and Cabinet to produce the KPMG Documents over which the claim of public interest immunity had been made. It is common ground that the Delegate, at the time he prepared the Delegate’s Report, did not have access to the KPMG Documents or to the analysis recorded in those Documents. He therefore could not have taken into account any material in the KPMG Documents adverse to Ku-ring-gai’s interests other than the financial projections recorded in the Merger Document. Of course, the Merger Document and other public documents were available to Ku-ring-gai.

267. The Delegate’s Report (Section 5.1) in substance restated the potential financial benefits of the Merger Proposal claimed in the Merger Document. The Delegate correctly attributed the source of these projections to the “KPMG analysis”, a reference to the KPMG Documents.

268. The Delegate summarised the grounds on which Ku-ring-gai disputed the claims made by the Minister in the Merger Proposal, but made no mention at that point of Ku-ring-gai’s complaint about being denied access to the KPMG Documents. However, the Delegate referred in some detail to the analysis produced by KPMG for Hornsby in May 2014, which considered a number of options including a merger of Hornsby (excluding Hornsby South) and Ku-ring-gai. The Delegate expressed the view that the analysis prepared for Hornsby provided “significant comfort that the projected performance improvements are credible and achievable”.

269. In the Conclusion to Section 5.1, the Delegate adverted to “the concerns that particularly relate to the KPMG analysis and modelling”. The Delegate did not address those concerns directly, other than to record an understanding that “analysis and modelling is high level, and the discount rate applied is conservative”. The Delegate added that both KPMG and the State Government believed that the “benefits are conservative estimates”.

270. Ku-ring-gai and the Delegate were clearly at odds as to what was required of the Delegate in performing the obligation imposed on him by s 263(3)(a) of the LG Act. Ku-ring-gai’s position was that the Delegate was obliged to examine the KPMG Documents to ascertain whether they supported KPMG’s assessment of projected savings, an assessment that the Minister adopted in the Merger Document. Ku-ring-gai wished to have the opportunity to scrutinise the detailed analysis underpinning KPMG’s published projections in order to make its own assessment of the projections. The Delegate’s view was that access to the KPMG Documents was unnecessary for him to discharge his statutory obligation. He took this view, at least in part because he considered that the KPMG analysis undertaken for Hornsby supported the Minister’s projected financial benefits flowing from the Merger Proposal.

271. The critical issue that Ku-ring-gai wished to address – and did address – in its submission and in the letter of 10 March 2016 was whether the Delegate could perform his statutory function without gaining access to the KPMG Documents and without allowing Ku-ring-gai to undertake its own analysis of the reasoning underpinning KPMG’s assumptions and projections. In its submission and in the letter, Ku-ring-gai took the opportunity to put its case forcefully. Ku-ring-gai did so in the knowledge that the Delegate was disposed to take a different view of his role, but argued that it was essential for the KPMG Documents to be produced. There is no suggestion that Ku-ring-gai was denied the opportunity to say everything it wanted on this issue.

272. When making its submission to the Delegate, Ku-ring-gai was aware that its request for access to the KPMG Documents had been denied by the Director of the Department of Premier and Cabinet on the ground of public interest immunity. In its submission, Ku-ring-gai put to the Delegate, implicitly if not explicitly, that he should take steps to obtain access to the KPMG Documents. The submission did not identify what steps the Delegate should take, in the absence of powers to compel the production of documents, but Ku-ring-gai could have addressed that question had it wished to do so. It was also implicit in Ku-ring-gai’s submission that if the Delegate did not obtain the KPMG Documents and did not examine KPMG’s analysis of projected benefits, he should not endorse the Minister’s assessment of the projected benefits of the Merger Proposal.

273. The Delegate took note of the concerns expressed by Ku-ring-gai. However, he did not take any steps to obtain the KPMG Documents and proceeded on the basis that they were not required for him to perform his task in conformity with the statute. Nor did he accept that he could not endorse the Minister’s claim that the Merger Proposal would lead to substantial financial benefits. In effect, the Delegate rejected Ku-ring-gai’s submission.

274. In taking this course, the Delegate did not rely on any material adverse to Ku-ring-gai other than documents in the public domain. [144] The Delegate and Ku-ring-gai had the same material available to them. In rejecting Ku-ring-gai’s submission as to how he should proceed, the Delegate may have put himself at risk of failing to comply with the requirements of s 263(3) of the LG Act, an issue that is addressed later in this judgment. [145] The absence of the KPMG Documents might also have affected the cogency of the Delegate’s analysis of the financial advantages of the Merger Proposal. But in my view, the Delegate’s decision to reject Ku-ring-gai’s submission and to proceed to make his recommendation without having access to the KPMG Documents did not involve a denial of procedural fairness.

     144. I leave to one side the information provided to the Delegate in the Delegate briefing.

     145. See [276]-[293] below.

275. The conclusion does not depend on determining, one way or another, Ku-ring-gai’s challenge to the claim of public interest immunity made in respect of the KPMG Documents. Regardless of the outcome to that challenge, Ku-ring-gai had the opportunity to put its case to the Delegate and was not denied procedural fairness.

Examination and report

276. Ku-ring-gai’s argument advanced in the alternative to its procedural fairness claim was not developed in detail. However, it essentially rested on the contention contained in Ground 7 of the Summons that the Delegate did not give proper, genuine or realistic consideration to the financial advantages or disadvantages of the Merger Proposal, as required by s 263(3)(a) of the LG Act. That the Delegate was obliged to give such consideration to the financial advantages or disadvantages of the Merger Proposal receives some support from an observation of the High Court in a very recent case that:[146]

“the term ‘consider’ imports an obligation to give proper, genuine and realistic consideration”.

146. Bondelmonte v Bondelmonte [2017] HCA 8 at [43] per curiam. The comment was made in relation to a statutory provision requiring the Family Court to consider, in determining the best interests of the child, any views expressed by the child (Family Law Act 1975 (Cth) s 60CC(3)(a)).

277. The Court cited the judgment of Gummow J in Khan v Minister for Immigration and Ethnic Affairs (Khan)[147] in support of this proposition. Khan involved s 5(2)(f) of the Administrative Decisions (Judicial Review) Act 1977 (Cth), which provides a ground of review where a decision involves “an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case”. In that context, Gummow J said that:[148]

“what was required of the decision maker, in respect of each of the applications, was that in considering all relevant material placed before him, he give proper, genuine and realistic consideration to the merits of the case and be ready in a proper case to depart from any applicable policy.”

147. [1987] FCA 457; (1987) 14 ALD 291.

148. Khan at [25].

278. The High Court in Bondelmonte v Bondelmonte did not refer to the controversy surrounding the meaning and utility of the expression “proper, genuine and realistic consideration”. [149] Nor did their Honours refer to the warning in Minister for Immigration and Citizenship v SZJSS [150] against the formula being used to encourage a court exercising powers of judicial review to slide into impermissible merits review. [151] Nonetheless the observation indicates that a decision-maker obliged by statute to consider a particular aspect of a proposal may have to do more than simply adopt untested assertions made by a proponent of the proposal.

     149. See, for example, Belmorgan Property Development Pty Ltd v GPT Re Ltd [2007] NSWCA 171; 153 LGERA 450 at [76]-[77] (Basten JA); A Poukchanski, “Considering ‘Proper, Genuine and Realistic’” (2014) 21 AJ Admin L 201 at 203-204.

     150. (2010) 243 CLR 164; [2010] HCA 48 at [30], [34] per curiam.

     151. Minister for Immigration and Citizenship v SZJSS at [30], [34] per curiam.

279. The obligation of the Chief Executive or a delegate examining and reporting on a Ministerial merger proposal depends on the terms of the governing legislation. In this case, ss 263(1) and (3)(a) of the LG Act required the Delegate:

• to examine and report on the Minister’s Merger Proposal; and

• when considering the Merger Proposal, to have regard to any financial advantages or disadvantages of the Merger Proposal to the residents and ratepayers of Hornsby and Ku-ring-gai.

280. It is necessary to construe ss 263(1) and 263(3) of the LG Act taking into account the statutory context. In this respect, it is significant that the Governor’s power to amalgamate two or more areas can be exercised only if a merger proposal has been dealt with in accordance with Div 2B of Part 1 of Chapter 9 (s 218D). The first stage of this process, once the Minister has made a merger proposal, is that it must be referred to the Boundaries Commission or to the Departmental Chief Executive “for examination and report” (s 218F(1)).

281. The Minister has a choice whether to refer the merger proposal to the Boundaries Commission or to the Chief Executive for examination and report. But in either case s 263 of the LG Act applies to the examination of the merger proposal (s 218F(2)). Thus the Boundaries Commission or the Chief Executive (as the case may be) must hold a public inquiry for the purpose of exercising the statutory functions in relation to the merger proposal (s 263(2A)). Those statutory functions include considering the merger proposal having regard to the factors identified in s 263(3).

282. There are several indicators that when the Boundaries Commission conducts the “examination” of a merger proposal it is to form its own judgment on the factors it is required to take into account and on the merits of the proposal itself. The first is the composition of the Boundaries Commission. It is a statutory body comprising a Ministerial nominee (chairperson with a casting vote), a Departmental nominee of the Chief Executive and two nominees from a panel selected by the Local Government and Shires Association of New South Wales (ss 261(1), (2), (4), 262(1) of the LG Act). The purpose of referring a proposal for “examination and report” to a statutory body which includes members independent of government must be to enable the body to form its own view of the relevant factors and of the proposal itself. This conclusion is supported by the statutory entitlement of a member of the Boundaries Commission to issue a dissenting report. [152]

     152. LG Act Sch 2 cl 12.

283. Secondly, the requirement that the Boundaries Commission hold a public inquiry indicates that it is required to take into account the views expressed at such an inquiry, insofar as they are relevant to the factors listed in s 263(3) of the LG Act. There would be little point in holding a public inquiry if the views expressed by residents and ratepayers and the councils affected could simply be ignored because they cast doubt on the merits of the merger proposal. The natural meaning of the expression “to examine and report on any matter … referred” (s 263(1)) in this context is that the Boundaries Commission must make its own assessment of the factors it is required to take into account by s 263(3).

280. Thirdly, each of the factors identified in s 263(3) of the LG Act is capable of independent evaluation and assessment by the Boundaries Commission. This is the case, for example, with the financial advantages or disadvantages of the merger proposal (s 263(3)(a)) and the attitudes of residents and ratepayers of the areas concerned (s 263(3)(d)). No doubt the Boundaries Commission’s assessment of these factors will be heavily dependent on the information provided to it by way of submissions or otherwise and by the resources available to it. Nonetheless, it is the Boundaries Commission’s own assessment which the legislation requires.

281. While the Minister can elect whether to refer a proposal to the Boundaries Commission or to the Chief Executive, the nature of the statutory task cannot vary according to the election made by the Minister. The statutory task to be performed by the Chief Executive is no different to the statutory task to be performed by the Boundaries Commission. The nature of the functions to be performed cannot be changed if the Chief Executive chooses to delegate his or her functions to another person, whether within or outside the Department.

282. As it happens, this analysis is consistent with the statement in the joint press release of the Premier and the Minister on 18 December 2015. [153] The press release stated that the process set out in the LG Act “will provide an objective assessment of the merger benefits and impacts”. Of course, a Ministerial press release cannot control the meaning of legislation, but the promise of an objective assessment reflects a natural reading of the statutory language.

     153. See above at [153].

283. For these reasons, the Delegate in the present case had to exercise his own judgment when considering the advantages or disadvantages of the Merger Proposal to the residents and ratepayers of Hornsby and Ku-ring-gai. If the Delegate simply adopted uncritically the Minister’s claims in the Merger Document as to the financial advantages of the Merger Proposal and ignored submissions and readily available credible information casting doubt on these claims, he would not have complied with his statutory obligations.

284. This, however, is not what the Delegate did. He considered whether the savings and efficiencies claimed by the Minister were “credible and achievable” by reference to the analysis conducted by KPMG on behalf of Hornsby. The Delegate concluded that KPMG’s analysis provided “significant comfort” that the projected savings were “credible and achievable” and “realistic although potentially conservative”. Ku-ring-gai has not suggested that it was not open to the Delegate to rely on this material in forming his view or that he denied procedural fairness to Ku-ring-gai by doing so.

285. In determining whether the Delegate discharged his statutory functions, the question is not whether the Delegate correctly interpreted KPMG’s analysis or whether the analysis was sound. Nor can this Court be concerned with the merits of the Delegate’s approach. The only issue for present purposes is whether the Delegate, in considering the Merger Proposal, had regard to its financial advantages or disadvantages to the residents and ratepayers of Hornsby and Ku-ring-gai. Since the Delegate formed his own assessment of the financial advantages or disadvantages of the Merger Proposal, he complied with the obligation imposed by s 263(3)(a) of the LG Act.

286. It was open to the Delegate to request the Chief Executive or the Minister to produce the KPMG Documents so that the Delegate himself and interested parties could scrutinise the analysis. But the Delegate had no power to compel production, even if the KPMG Documents had not been the subject of a claim for public interest immunity. [154] In my view, the Delegate was not obliged, in order to discharge his statutory functions, to seek production of the KPMG Documents. Nor was he obliged to report that he was unable to fulfil his statutory responsibilities unless the KPMG Documents were made available to him and to Ku-ring-gai.

     154. Woollahra (CA) at [107].

287. The position may have been different if the Delegate had no material before him other than the claims made by the Minister in the Merger Document and if the Delegate had made no attempt to assess the plausibility or accuracy of those claims. The statute required him to do more than merely repeat the Minister’s financial projections, given that they were not substantiated by any published material.

288. The Delegate, however, made his own inquiries and obtained material which enabled him to make his own assessment of the reliability of the Minister’s financial projections. No doubt the Delegate’s examination of the financial advantages or disadvantages of the Merger Proposal would have been considerably more thorough and perhaps more convincing had he sought and obtained access to the KPMG Documents. No doubt, too, his task would have been assisted by a critical evaluation of the KPMG Documents by Ku-ring-gai and other interested parties.

289. Nevertheless, the question posed by the LG Act is not whether the Delegate conducted a thorough or convincing examination of the Merger Proposal having regard to the financial advantages or disadvantages to the residents and ratepayers of Hornsby and Ku-ring-gai. The question is whether he examined the Merger Proposal and reported on it having regard to the financial advantages or disadvantages. In my view, the Delegate did so.

290. I add this observation. The expansion of the boundaries of jurisdictional error has perhaps served on occasion to blur the distinction between judicial review of administrative action as a mechanism for ensuring that the decision-maker operates within “the law which determines the limits and governs the exercise of the repository’s power”[155] and review of the merits of a decision. Nonetheless, the distinction is fundamental to Australian administrative law, not least because if judicial review, in the absence of statutory authority, intrudes into the merits of the exercise of administrative power its own legitimacy is put at risk. [156]

     155. Attorney-General for the State of New South Wales v Quin (1990) 170 CLR 1; [1990] HCA 21 at 35-36 (Brennan J).

     156. Attorney-General for the State of New South Wales v Quin at 38.

291. Earlier in this judgment I concluded that the Delegate misapprehended the function he was to perform under s 263(1) and (3) of the LG Act. This error is sufficient to vitiate his report. However, in my respectful opinion whatever view might be taken of the merits of the Delegate’s investigation, his actions and his report did not otherwise exceed the bounds of legality.

The Delegates’ briefing

296. On the evidence before the primary Judge, the Delegates’ briefing did not address matters specific to the Merger Proposal. Insofar as the briefing related to financial projections, it appears to have been directed to the assumptions made by KPMG in its Modelling Assumptions document. [157] These assumptions supported the benefits of council mergers across the state. While the presentation included the supposed benefits of particular proposed mergers, the illustrations did not include the amalgamation of Hornsby and Ku-ring-gai.

     157. See at [158] above.

297. The LG Act does not require all inquiries and discussions by a delegate to be undertaken publicly. A private briefing of delegates as a group does not of itself deny procedural fairness to a council opposed to a merger. A private briefing which emphasises the benefits of the Government’s program may not necessarily encourage a perception that the delegates in attendance will exercise a judgment independent of the Minister or the Chief Executive. But since the briefing did not disclose anything of particular significance to the Merger Proposal, Ku-ring-gai was not denied procedural fairness.

Reasonable notice

298. Ku-ring-gai submitted that the primary Judge should have found that the Delegate failed to give “reasonable public notice” of the inquiry, as required by s 263(2B) of the LG Act. It is enough to say that none of the complaints made by Ku-ring-gai has any substance.

Public interest immunity

299. The issues in the present case can be resolved without any occasion for Ku-ring-gai to have access to the KPMG Documents. Ku-ring-gai’s appeal must be allowed on the ground that the Delegate misapprehended his functions. That conclusion does not depend in any way on the contents of the KPMG Documents or the role they played in the formulation of the Merger Proposal and its examination by the Delegate. Similarly, the issue of futility, which was not pressed by the Minister on appeal, does not depend on the contents of the KPMG Documents. This was the position both at first instance and on the appeal.

300. For the reasons I have given, the resolution of the other issues in the case does not require the production of the KPMG Documents. Whatever their content, they would not materially affect the grounds on which Ku-ring-gai’s contentions on the other issues have been rejected.

301. Accordingly, I do not think it necessary to address Ku-ring-gai’s grounds of appeal challenging the decision of the primary Judge upholding the claim for public interest immunity. If it was necessary to do so, I would uphold the primary Judge’s decision on the ground that there was no substantial public interest in the production of the KPMG Documents to Ku-ring-gai for the purposes of the litigation. This is not to say that in a different forensic context the claim of public interest immunity would necessarily be upheld.

Orders

302. The following orders should be made:

1.   Allow the appeal.

2.   Set aside the orders made by Moore J on 20 September 2016 in the proceedings brought by Ku-ring-gai Council.

3.   In lieu thereof make the following orders:

(1)   Set aside the Report entitled “Examination of a Proposal for the Amalgamation of Hornsby Shire Council (part) and Ku-ring-gai Council” dated March 2016.

(2)   Set aside the document entitled “Comments by the NSW Local Government Boundaries Commission on the Report by the Delegate of the Acting Chief Executive Officer of the Office of Local Government” dated 22 April 2016.

(3)   Order that the Third Respondent (the Minister) pay the costs of the Applicant (Ku-ring-gai) of the proceedings in the Land and Environment Court, other than the costs of the Notice of Motion filed by the Second Respondent (the New South Wales Department of Premier and Cabinet) on 29 April 2016.

(4)   The Third Respondent (Minister) pay the costs of the Appellant (Ku-ring-gai) of the Appeal.

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Endnotes

Amendments

27 March 2017 - [64] second sentence, "irrelevant decision" amended to "irrelevant consideration"

[89] "entitled to same measure" amended to "entitled to the same measure"

22 February 2018 - [205] third bullet point deleted

Decision last updated: 22 February 2018