Council of Social Services in Christchurch/Otautahi Inc v Christchurch City Council HC Christchurch CIV 2008-409-001383
[2008] NZHC 1842
•25 November 2008
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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2008 409 001383
BETWEEN COUNCIL OF SOCIAL SERVICES IN CHRISTCHURCH/OUTAUTAHI INCORPORATED
Applicant
ANDCHRISTCHURCH CITY COUNCIL Respondent
Hearing: 30 September 2008
Appearances: C Hlavac and J Caldwell for Applicant
T C Stephens and M M Webb for Respondent
Judgment: 25 November 2008
JUDGMENT OF CHISHOLM J
A. Application for judicial review granted.
B. In due course there will be a declaration that Council’s decisions are invalid and the decisions will be quashed.
C.In the meantime the parties are to consider the precise form of the order that should be made by the Court.
D. Applicant entitled to costs.
E. If agreement as to the quantum of costs cannot be reached counsel are to submit memoranda.
COUNCIL OF SOCIAL SERVICES IN CHRISTCHURCH/OUTAUTAHI INCORPORATED V CHRISTCHURCH CITY COUNCIL HC CHCH CIV 2008 409 001383 25 November 2008
INDEX
Introduction [1] Background [4] The Application For Review/Council’s Response [14] Issues [19] The Local Government Act 2002 ` [22] Council’s Policy On Significance [31] Did The Council Assess All Reasonably Practicable Options
In Accordance With s 77(1)? [43] Argument for Applicant [44] Council’s Response [48] Discussion [50] Did The Council Obtain And Give Consideration To Views
And Preferences In Accordance With s 78(1)? [68] Applicant’s Submissions [69] Council’s Response [72] Discussion [78] Did The Council Comply With The Requirements Of s 80 In RelationTo Inconsistencies? [99] Argument For Applicant [100] Council’s Response [102] Discussion [103] Legitimate Expectation [106] Discretion [111] Result [115]
Introduction
[1] At a meeting on 27 March 2008 the Christchurch City Council resolved to:
“Increase rents for all existing City Housing Tenants (with the exception of Whakahoa Village tenants) by 24% per week, commencing from the beginning of the first rental period in July 2008 and for all new tenancies beginning on or after 1 May 2008.”
On the motion of five councillors the Council reconsidered that decision at an extra- ordinary meeting on 28 April 2008, and affirmed it.
[2] In this application for judicial review the applicant seeks a declaration that both those decisions are invalid on the grounds that the Council failed to comply
with a number of mandatory procedural requirements when arriving at the decisions. In particular the applicant contends that the Council failed to apply one of its own policies and also failed to adhere to the procedural obligations imposed by the Local Government Act 2002. The applicant does not, however, seek to mount a substantive challenge to the decisions.
[3] For its part the Council contends that its decisions were of an entirely orthodox nature and that they were made in accordance with the procedural obligations resting on it. The Council maintains that it has been wrestling with the issue of rent increases for the last five years and that before the decisions were made it carefully assessed all relevant options and took into account all other relevant matters. And it contends that even if there were procedural deficiencies in relation to the first decision (which is denied), any such deficiencies were cured by the second decision.
Background
[4] For the last 70 years the Council has provided low cost residential accommodation for low income residents within Christchurch. Today the Council is New Zealand’s second largest provider (after Housing New Zealand) of social housing. It has 2,649 rental units which represents approximately 7% of the Christchurch rental market.
[5] Every year the Council reviews the rents for its housing portfolio. From
1997 to 2003 these annual reviews did not result in any rent increases.
[6] Following the enactment of the Local Government Act, and during 2003, the Council developed an Asset Management Plan for its housing portfolio. A pre- existing policy that the Council’s housing portfolio should be self-funding was carried forward into that Plan. That year the annual review of rents resulted in an increase of between 10% and 40%, and it was decided that thereafter there should be an annual adjustment of rentals in accordance with the Consumer Price Index (CPI).
[7] Rent increases in 2004 and 2005 were in accordance with the CPI (1.6% and
3% respectively). However, during the processes leading up to both those reviews Council officers noted that construction costs (which impact on maintaining, refurbishing and replacing the housing stock) were significantly higher than the CPI and that if this trend continued it might be necessary to review the inflation factor.
[8] Although an 18% rent increase was recommended by officers for the 2006 review, the Council decided to restrict the adjustment to the CPI increase. But the Council decided that henceforth authority would be delegated to the General Manager, Community Services, to adjust rentals in accordance with the Capital Goods Price Index – Residential Buildings (CGPI) which corresponded more closely to the cost of owning and operating the Council’s housing stock.
[9] In 2006 the Council also developed a Social Housing Strategy which, in broad terms, provided a long term strategy for the Council’s involvement in social housing. One of the identified goals was to ensure that the Council’s housing portfolio was financially self-funding and sustainable. The Strategy was released for public consultation in November 2006 and was ultimately adopted by the Council in May 2007.
[10] The General Manager of Community Services increased rents in 2007 by
5.1% which reflected the CGPI increase.
[11] By early 2008 extensive modelling by Council officers indicated that a 24% increase (plus future annual adjustments in accordance with CGPI) would be necessary if the housing portfolio was to operate on a sustainable basis. This modelling had identified an upcoming $50 million expenditure spike in 2015 which reflected that by that time a substantial number of the housing units would reach 40 to 50 years of age and would require considerable expenditure. Affordability modelling indicated that all but a dozen tenants could afford the increase. Council officers recommended the 24% increase. After considering various options the Council resolved on 27 March 2008 by nine votes to four to increase the rents by
24%.
[12] Following that decision five councillors signed a notice of motion for the resolution passed on 27 March 2008 to be revoked, replaced by a 5% increase, and for other options to be investigated. On 28 April 2008 that motion was lost by seven votes to six.
[13] Subsequently the Coalition for Fair Rents lodged a complaint with the Ombudsman alleging that the Council had failed to follow the decision-making requirements of the Local Government Act and that it had been provided with flawed and inadequate information. The Chief Ombudsman concluded that inadequacies in the information provided to the Council for its March meeting had been resolved by the time the Council confirmed its decision in April.
The Application For Review/Council’s Response
[14] The applicant was incorporated in 1979. Its objectives include the promotion of communication, liaison and co-operation between statutory and non-statutory agencies, local authorities and individuals within the social service system. Essentially it is a representative body with representatives from various sector groups. It acts as an advocate for the provision of social services in Canterbury and regularly makes submissions to both central and local government.
[15] An affidavit sworn by Sharon Torstonson, the executive officer of the applicant, is before the Court. Ms Torstonson deposes that she first became aware of the proposed 24% rent increase a couple of days before the Council’s meeting on 27
March 2008. She attended that meeting and was extremely concerned by the outcome and the lack of consultation.
[16] After the meeting she was responsible for co-ordinating the group known as the Coalition for Fair Rents. Subsequently she presented information to councillors and Council officers and spoke at the second Council meeting. In her affidavit Ms Torstonson traverses various topics including failure to consult, impact of the decisions, and failure to identify and assess options. Her evidence is supplemented by various documents in an agreed bundle comprising over 900 pages.
[17] For the Council a detailed affidavit has been sworn by Catherine McDonald, the Council’s Community Support Manager since 2006. She has responsibility for the Council’s social housing portfolio. Her evidence is supplemented by exhibits to her affidavit and various other documents included in the agreed bundle.
[18] The background to the Council’s involvement in social housing is traversed by Ms McDonald. She also discusses the rent review decisions prior to 2008, including the issues facing the Council, options considered, consultation, and the steps taken by officers and the Council. This is followed by a detailed account of the
2008 rent review process, again with reference to issues, options, consultation, and steps taken. Following that Ms McDonald discusses the steps taken by the Council to ensure compliance with the requirements of the Local Government Act, the issue of “significance”, whether the Council’s Long Term Council Community Plan needed to be changed, consistency of the decision increasing rents with the Council’s plans, and the complaint to the Ombudsman.
Issues
[19] Although the statement of claim advances seven grounds of review there is an element of overlapping. It seems to me that the primary issues are whether the Council failed to:
(i)Identify and assess all reasonably practicable options in terms of s 77(1) of the Local Government Act.
(ii)Obtain and give consideration to the views and preferences of persons likely to be affected in terms of s 78(1).
(iii)Comply with the requirements of s 80 in relation to any inconsistencies between the two decisions and the Council’s Long- Term Community Plan.
(iv) Honour the legitimate expectation, if any, of affected parties.
Underlying all but the last issue are allegations that the Council failed to comply with the relevant provisions of the Local Government Act.
[20] It is not disputed that when arriving at its decisions the Council exercised statutory powers of decision in terms of the Judicature Amendment Act 1972 and that the Court has jurisdiction to entertain the application. As the Supreme Court recently observed in Unison Networks Ltd v Commerce Commission [2008] 1 NZLR
42:
“[51] Public bodies must exercise their statutory powers in accordance with the statutes which confer them. If they make decisions that are outside the limits of their powers they abuse them. The courts control any misuse of public power through judicial review.”
If it is established that the Council has erred in the exercise of its statutory powers there is, of course, a discretion whether or not to grant relief.
[21] Before considering the four issues listed in [19] above it is desirable to set the scene by outlining the relevant provisions of the Local Government Act and then considering whether the Council complied with its “significance” policy.
The Local Government Act 2002
[22] Although this Act confers greater flexibility on local authorities than the earlier Local Government Act, this is balanced by comprehensive provisions requiring transparency and accountability in the decision-making process: Reid v Tararua District Council (High Court, Wellington Registry, CIV 2003-454-615, 8
November 2008 Ellen France J) at [142]; Neil Constriction Ltd & Ors v The North Shore City Council [2008] NZRMA 275 at [19]. The decision-making process utilised by the Council when it arrived at the two decisions under review lies at the heart of this case.
[23] A comprehensive regime governing decision-making by local authorities is included in Part 6 of the Act. For present purposes ss 76 – 80 are of particular importance. By and large the obligations resting on local authorities by virtue of these sections are expressed in strong mandatory terms. Although some relaxation is allowed in the case of less important decisions, the obligations relating to significant
decisions are stringent. No doubt the statutory objective is to enhance the quality of the decision-making process by ensuring that local authorities arrive at fully informed decisions by way of an open and transparent process.
[24] Section 76(1) is the anchor. It provides that every decision made by a local authority must be made in accordance with such of the provisions of ss 77, 78, 80, 81 and 82 as are applicable. The only exception is that compliance with ss 77 and 78 is subject to judgments made by local authorities under s 79. Underscoring the clear statutory intent of compliance is subs (3)(a) which specifies that a local authority must ensure that its decision-making processes promote compliance with subs (1), and subs (3)(b) which specifies that in the case of a “significant” decision the local authority must ensure, before the decision is made, that subs (1) has been appropriately observed.
[25] Under s 77(1)(a) a local authority must, in the course of the decision-making process, seek to identify “all reasonably practicable options for the achievement of the objective of a decision” and assess those options by reference to a number of statutory criteria specified in paragraph (b) of subs (1). This section is subject to s 79. The first ground of review arises from this section.
[26] Community views and the preferences of persons likely to be affected by, or having an interest in, decisions taken by local authorities must be taken into account in terms of s 78:
“78 Community views in relation to decisions
(1) A local authority must, in the course of its decision-making process in relation to a matter, give consideration to the views and preferences of persons likely to be affected by, or to have an interest in, the matter.
(2) That consideration must be given at—
(a) the stage at which the problems and objectives related to the matter are defined:
(b) the stage at which the options that may be reasonably practicable options of achieving an objective are identified:
(c) the stage at which reasonably practicable options are assessed and proposals developed:
(d) the stage at which proposals of the kind described in paragraph (c) are adopted.
(3) A local authority is not required by this section alone to undertake any consultation process or procedure.
(4) This section is subject to section 79”.
Significantly the views and preferences must be considered at each of the four stages of the decision-making process specified in subs (2) and a belated global approach is unacceptable. The second ground of review arises from this section.
[27] Sections 77 and 78 have to be construed in the light of s 79 which provides a degree of flexibility for local authorities to determine how they should comply with the two earlier sections:
“79 Compliance with procedures in relation to decisions
(1) It is the responsibility of a local authority to make, in its discretion, judgments—
(a) about how to achieve compliance with sections 77 and 78 that is largely in proportion to the significance of the matters affected by the decision; and
(b) about, in particular,—
(i) the extent to which different options are to be identified and assessed; and
(ii) the degree to which benefits and costs are to be quantified; and
(iii) the extent and detail of the information to be considered; and
(iv) the extent and nature of any written record to be kept of the manner in which it has complied with those sections.
(2) In making judgments under subsection (1), a local authority must have regard to the significance of all relevant matters and, in addition, to—
(a) the principles set out in section 14; and
(b) the extent of the local authority's resources; and
(c) the extent to which the nature of a decision, or the circumstances in which a decision is taken, allow the local authority scope and opportunity to consider a range of options or the views and preferences of other persons.
…”.
Thus the significance of the decision is pivotal and local authorities are required to take this into account when deciding how to comply with ss 77 and 78. At one end of the spectrum are routine decisions of low significance which will not require a detailed investigation of all reasonable practicable options or an in-depth consideration of views and preferences. At the other end of the spectrum are important decisions of high significance where the converse applies.
[28] Section 79 needs to be read in conjunction with the definitions of
“significance” and “significant” which appear in s5:
“significance, in relation to any … decision … means the degree of importance of the … decision … as assessed by the local authority, in terms of its likely impact on, and likely consequences for,—
(a) the current and future social, economic, environmental, or cultural well- being of the district or region:
(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter:
(c) the capacity of the local authority to perform its role, and the financial and other costs of doing so
significant, in relation to any issue, proposal, decision, or other matter, means that the issue, proposal, decision, or other matter has a high degree of significance”.
Section 14(1)(a)(i), which requires a local authority to conduct its business “in an open, transparent, and democratically accountable manner”, and s 90 which requires every local authority to adopt a policy in relation to the significance of proposals (to be discussed shortly), also need to be kept in mind.
[29] Section 80 applies if a decision is significantly inconsistent with any policy adopted by the local authority or a plan required by the Local Government Act:
“80 Identification of inconsistent decisions
(1) If a decision of a local authority is significantly inconsistent with, or is anticipated to have consequences that will be significantly inconsistent with, any policy adopted by the local authority or any plan required by this Act or any other enactment, the local authority must, when making the decision, clearly identify—
(a) the inconsistency; and
(b) the reasons for the inconsistency; and
(c) any intention of the local authority to amend the policy or plan to accommodate the decision.
(2) Subsection (1) does not derogate from any other provision of this Act or of any other enactment”.
The third ground of review revolves around this section.
[30] Finally, s 82 provides a comprehensive set of principles in relation to consultation. Local authorities are required to consult with persons who will or may be affected or have an interest in the decision. Those principles are to be observed in such manner as the local authority considers, in its discretion, to be appropriate in any particular instance. In exercising that discretion the local authority must have regard to the nature and significance of the decision.
The Council’s Policy On Significance
[31] Section 90 requires local authorities to adopt a policy setting out their approach to determining the significance of proposals and decisions:
“90 Policy on significance
(1) Every local authority must adopt a policy setting out—
(a) that local authority's general approach to determining the significance of proposals and decisions in relation to issues, assets, or other matters; and
(b) any thresholds, criteria, or procedures that are to be used by the local authority in assessing the extent to which issues, proposals, decisions, or other matters are significant.
(2) The policy adopted under subsection (1) must list the assets considered by the local authority to be strategic assets.
…”.
In this case the Council’s policy on significance is contained in its Long Term Council Community Plan, which, in terms of s 93, is a compulsory statutory document. The applicant contends that the Council failed to turn its mind to this policy when it arrived at its decisions in March and April 2008.
[32] The Council’s Long-Term Community Plan covers a period of 10 years from
1 July 2006. It describes a “significant decision” as one that has a high degree of significance either in terms of its impact on the wellbeing of Christchurch and/or persons likely to be affected by or with an interest in that decision and/or the costs to or the capacity of the Christchurch City Council to provide for the wellbeing of the city. The assets listed by the Council as strategic assets include the land and buildings owned by the Council for its rental housing.
[33] Criteria that will be considered in determining the significance of a decision are explained in the Long-Term Community Plan:
• “The magnitude of the decision in terms of its net cost to the Council. Most major spending decisions should be made in the context of the LTCCP or Annual Plan, so decisions involving unidentified and unbudgeted expenditure should receive at least as much scrutiny as they would have received if they had been included in the LTCCP or Annual Plan. For guidance, budget decisions involving more than $5 million in capital expenditure or more than $1 million in operating costs will usually be regarded as significant.
• The extent to which the options identified (including the ‘do nothing’ option where appropriate) have radically different effects in terms of, amongst other things: their costs, their benefits, the extent to which they impact on members of the community and which members they impact upon. The greater the variation, the greater the degree of significance.
• The extent to which the matter under consideration is controversial within the community.
• The reversibility test. The more difficult it is to reverse a decision, in general, the greater its significance. A decision which leads to a final outcome has greater significance than one where the outcome can be largely reversed in a different form.
• Precautionary principle. Where the significance of a matter being considered, or a decision being made is unclear, then the council will err on the side of treating the issue as of more, rather than less, significance.
• Practicality. The Act provides for the Council to take into account the circumstances under which a decision is taken and what opportunity there is to consider a range of options or the views and preferences of other people. In circumstances in which failure to make a decision urgently would result in loss of opportunities which are assessed as
able to contribute to achieving the communities [sic] outcomes, then the Council will tailor its decision processes to allow as much evaluation and consultation as is practicable while achieving the timeline required.”
It is stated that the degree of importance to be attached to each criterion will be considered decision by decision and that a high level of significance in one or more of the criteria may or may not result in the decision itself being assessed as having a high level of significance.
[34] Because the Council’s policy for determining the significance of decisions is important to more than one ground of appeal, it is appropriate to determine at the outset whether there was any error in the Council’s approach to this topic. It is not disputed that although earlier drafts of an officers’ report to the Council before the meeting on 27 March 2008 discussed the issue of significance, there was no mention of the matter in the report that finally went to the Council before it considered the recommendation to increase rents by 24%.
[35] This can be contrasted with reports to the Council before the 2004 and 2005 rent reviews which specifically alerted the Council to the issue of significance. The
2004 report of the Community and Leisure Committee, which was adopted by the Council, drew attention to s 90 of the Local Government Act and to the Council’s policy on significance. After stating
“… the rent review needs to be assessed as to whether it qualifies as a significant matter”
the report listed the criteria in the Council’s policy and recorded that “on face value” two of the matters could qualify as significant but the degree of controversy and impact was likely to depend on the size of the rent increase. The Council agenda for the 2005 rent review meeting was in virtually identical terms.
[36] That format was also carried through into an early draft of the report to the Council for the 2006 rent review when the recommended increase was 18%. However, while the agenda report that went to the Council noted that as a whole the land and buildings were a strategic asset and that community services were a significant asset in terms of the Council’s policy on significance, it did not state that the proposed rental increases were significant. Ms McDonald deposed that this was
because the consensus amongst officers was that the degree of significance was “not such as to trigger any special obligations under the Local Government Act”.
[37] With reference to the 2008 review Ms McDonald explained that there was no reference to significance in the report that went to the Council:
“147. … because the consensus amongst officers was that the reference to significance was not required.
148. If an officer’s report does not expressly mention the subject of significance, it is not uncommon for a councillor at a Council meeting to ask about the subject, particularly if there are reservations around the council table about the proposed decision. Councillors are trained about the decision-making provisions of the Local Government Act 2002. I do not recollect the issue being raised at either the
27 March 2008 or 28 April 2008 meeting and, in my view, the absence of any comment is essentially confirmation that the officers’ assessment of significance was accepted by the elected Council.”
Presumably this means that there was no need to mention the issue of significance in the officers’ reports and that the Council was entitled to proceed on the basis that the recommendation to increase rents by 24% did not involve a significant decision in terms of the Council’s policy or in terms of the Local Government Act. There are several problems with that proposition.
[38] First, it is inconsistent with the Council’s own internal decision-making guide. Amongst other things, the checklist for reports seeking decisions expressly states that significance should be judged on a scale of low, medium or high, rather than just “significant” or “not significant”, and that the level of significance should be judged using the guidelines set out in the policy. This is consistent with s 79. In this case an assessment of the significance of the decision was an important prerequisite to the Council’s judgment about how it should comply with s 77 (considering all reasonably practicable options) and s 78 (considering the views and preferences of people likely to be affected or interested).
[39] Second, Mr Stephens argued that the significance or otherwise of the decision was a judgment for the Council to make and the Council’s judgment in this case was not an irrational one. In other words, the Court should stay out of the matter. However, as the Supreme Court pointed out in Unison Networks Ltd v Commerce Commission:
“[53] A statutory power is subject to limits even if it is conferred in unqualified terms. Parliament must have intended that a broadly framed discretion should always be exercised to promote the policy and objects of the Act. These are ascertained from reading the Act as a whole. The exercise of the power will be invalid if the decision-maker “so uses his discretion as to thwart or run counter to the policy and objects of the Act” …”.
Local authorities are required to adopt policies on the significance of decisions to ensure that they adopt a predicable and structured approach, in accordance with their policy, when determining the extent to which a decision is significant. And the reference in s 79(2) to s 14 highlights the importance of transparency which is lacking in this case. It is not possible to say whether the Council even turned its mind to the issue of significance. This does not accord with the underlying policy and objective of the Local Government Act.
[40] Third, if, contrary to my belief, the Council did in fact turn its mind to the issue of significance, it must have proceeded on the basis that the rent review decision was not significant. Had the proposed increase been in accordance with the CGPI, which represented the existing policy, that conclusion would have been unexceptional. But the proposal to increase rents by 24% is an entirely different matter. Once an increase of that magnitude is assessed against s 90, the definition of “significance”, and the Council’s significance policy, the increase could not have been anything other than significant.
[41] It concerned the Council’s social housing stock of 2,649 rental units which had been identified by the Council as a strategic asset. According to City Housing Rent Review Report of 2008, the recommended increase would generate an additional income of $2.7 million per annum. Multiplied over the years this would amount to a very substantial sum. The recommended increase of 24% was a significant departure from the Council’s existing policy (had the increase been in line with that policy it would have been 2.3%). Regardless of the Council’s affordability modelling and the likely availability of a housing supplement for a large percentage of the tenants, there was bound to be an impact on the tenants who were on low incomes. Given the extent of the proposed increase, the matter was undoubtedly controversial within the community, as was illustrated by the subsequent events. And there is no indication that the Council applied the precautionary principle by erring on the side of treating the issue as of more, rather than less, significance. In
short, had the Council adopted the general approach to determining the significance of decisions laid down by its own policy (as it was obliged to do by virtue of s 90) the inevitable conclusion would have been that this was an important decision of considerable significance.
[42] In my view the Council’s approach to the issue of significance was fundamentally flawed from the outset.
Did The Council Assess All Reasonably Practicable Options In Accordance
With s 77(1)?
[43] Before determining this issue it is helpful to summarise the argument on behalf of the applicant and the Council’s response.
Argument For Applicant
[44] Under s 77(1)(a) the Council was obliged to identify all reasonably practicable options for achieving the objective of the decision and it was obliged to assess those options against the various designated yardsticks. While s 79 provided some discretion as to how to achieve compliance with s 77, the Council was obliged to take into account the significance of the decision and the paramount principle of transparency and accountability applied to the exercise of that discretion. Those factors required the Council to explore and assess the full range of options.
[45] Contrary to those obligations the Council and its officers approached the question of funding the housing portfolio on a one dimensional basis. The only option that was ever seriously considered was by how much the rents should increase. Failure to explore other options such as borrowing or Government funding reflected that Council officers had fallen into the trap of defining the problem on the basis that it was “inadequate rental income” rather than the wider problem of “insufficient funds for ongoing maintenance” that needed to be addressed.
[46] Rather than identifying and assessing all reasonable practicable options, the Council effectively confined itself to the three alternatives proffered by Council officers: the 24% increase; a rate of inflation increase; or no increase. From an
early stage Council officers had firmly decided to favour the 24% increase with the result that they effectively ruled out any other option, notwithstanding that other options existed. Other plausible options were: Government funding (in conjunction with a rate of inflation increase); low interest loans from Government; and one-off funding from rates. Despite clear directions on several occasions there had been a persistent failure to approach Central Government about funding.
[47] In any event options considered in respect of earlier rent reviews are irrelevant to the question whether in terms of s 77 the Council identified and assessed all relevant options for the 2008 review. Nor did informal exploration of options at the instance of councillors immediately before the 27 March meeting and between that meeting and the meeting on 28 April meet the statutory requirements because the decision-making process requires options to be developed and explored “at the outset – not at the moment of decision or after the decision has been made”.
Council’s Response
[48] By the time the Council came to deal with the matter in 2008 the question of funding the actual cost of operating the Council’s social housing portfolio was not a new issue. Council had been considering the funding of social housing over the past five years and during that process extensive stakeholder and community consultation had been undertaken. This involved an exhaustive identification and assessment of options involved.
[49] Contrary to the applicant’s allegations, the following options were considered by the Council:
(a) Do nothing: although this option was put forward to the Council, it did not constitute a realistic possibility.
(b)Differing degrees of rent increase: the option of increasing rents was put forward in accordance with the CGPI (it was also available to the General Manager, Community Services, by delegated authority). Although the option of increasing rents by CPI was not expressly put
forward by officers, it was nevertheless discussed in detail by the Council after being raised by the Labour candidate for Christchurch Central and in a petition signed by 117 tenants. A deputation to the meeting on 27 March 2008 put forward a proposal to increase rents by approximately 2.5% and the subsequent notice of motion put forward by the five councillors proposed a 5% increase. Phased increases were also considered.
(c) Borrowing: This was considered at the housing working party meeting on 3 March 2008. It was rejected because any loans would have to be paid back by tenants if the housing portfolio was to remain self-funding. That problem had already been identified in the Council’s Housing Asset Management Plan. The possibility of borrowing was also raised at the councillors’ workshop held on 25
March 2008.
(d)Funding from Central Government: From 2003 there were ongoing discussions about the possibility of funding from Central Government, this possibility having been identified in the Council’s Housing Asset Management Plan. In 2006 there was consensus that the Council should approach Central Government and the following year the Council provided a written submission to the Commerce Select Committee during its inquiry into housing affordability, including an indication that Council would be seeking Central Government funding. Subsequently the former Mayor spoke to the Prime Minister about funding and received an indication that no funding would be available. The possibility of funding from Central Government was discussed again at the Housing Working Party meeting on 3 March 2008.
(e) Obtaining funding from other sources: This was considered at the meeting of the working party on 31 March 2008. There were, however, no parties interested in providing funding for the maintenance of existing units. A meeting with the Canterbury
Community Trust on 18 April 2008 did not produce any results. And the Council could not seek further funding from the Energy, Efficiency and Conservation Authority because all practicable energy efficient measures, short of rebuilding the housing stock, had been taken.
In summary, the applicant has failed to identify any reasonably practicable option that has been overlooked.
Discussion
[50] Unlike s 78, which specifies that views and preferences are to be considered at four specified stages of the decision-making process, s 77 is open-ended as to when the reasonably practicable options need to be identified and assessed. I accept that this can be an evolving process provided, of course, that the options are identified and assessed before the decision is made. In my view Mr Hlavac’s submissions that the options considered at rent reviews preceding the 2008 review are automatically irrelevant goes too far.
[51] The other matter that needs to be kept in mind when considering whether the Council correctly applied s 77 is that it was only required to identify “reasonably practicable” options. Inevitably this involves an exercise of judgment by the local authority and the Court cannot be expected to intervene where the judgment reached by the local authority about whether an option was reasonably practicable was open to it.
[52] Having considered the evidence and submissions relating to this ground of review, I have concluded that the inquiry can be narrowed to the option of approaching Central Government for assistance (this option is quite distinct from any indirect assistance from Government through payment of the accommodation supplement to eligible tenants). I am satisfied that all other reasonably practicable options were properly identified and assessed by the Council.
[53] The suggestion that there should be an approach to Central Government for funding appears to have first arisen during the 2006 rent review. Notes of the seminar meeting held on 18 April 2006, which was attended by the Mayor and ten councillors, record:
“An approach needed to be made to Central Government for funding, particularly that of capital. In this regard, local MPs should be asked to put forward the Council’s case.”
A few days later the Council increased the social housing rents by $2.10 per week and delegated authority to the General Manager, Community Services, to make future adjustments in accordance with the CGPI. At that stage the possibility of formally approaching Central Government does not appear to have been carried any further.
[54] In June 2007 the Council published its Social Housing Strategy which included an objective of entering into funding partnerships with other providers including Central Government. The same month the Council presented its submission to the Commerce Select Committee inquiring into housing affordability. This submission noted that more than 50% of the Christchurch housing stock was constructed more than 30 years ago and that replacement would require significant planning ahead. It said that the Council “is undertaking work to support a bid for a significant contribution of $100 million from Central Government to upgrade and improve the quality of the housing stock”. Again there does not appear to have been any formal approach.
[55] Ms McDonald’s affidavit indicates that there had also been discussions between Council officers about approaching Central Government for assistance:
“111. I am aware that the former Mayor of Christchurch, Garry Moore, spoke to the Prime Minister about funding for Christchurch social housing while he was still Mayor. (Mr Moore was Mayor between 1998 and 2007; he did not stand at the
2007 election). Since leaving office last October, Mr Moore has been engaged by the Council to work on an approach to Central Government. He has spoken with the Minister of Housing regarding the Council’s desire for central government funding and he has also had discussions with the Chief Executive and senior staff at the Housing New Zealand Corporation.
112. All indications received by Mr Moore and by Council officers from Central Government politicians and officials prior to the 27 March 2008 and 28 April 2008 meetings were that Central Government is unlikely to provide any funding for
maintaining existing complexes. Funding is, however, available for the provision of additional housing to meet the needs of the Christchurch community (and was obtained for the Whakahoa complex which I have mentioned in paragraph 101 above).”
She also recorded that after an officers’ presentation to a Housing Working Party meeting on 3 March 2008 officers were asked to obtain further information in relation to various matters including the potential for approaching Central Government for funding. Notes of that meeting indicate that an approach to Central Government for funding “is currently being formulated by council officers”.
[56] At the Council meeting on 27 March 2008 the Council received a deputation from David Close, a former councillor. He expressed his concern at the 24% increase and the manner in which the accommodation supplement was being relied on by officers to mitigate a rent increase. He expressed the view that such an approach might compromise the Council’s prospects of obtaining Central Government funding. He advocated an increase of approximately 2.5% and expressed the view that councillors needed further information.
[57] After the Council reached the rent review item on the agenda and the motion that rents be increased by 24% had been seconded, an amendment to the effect that the issue of housing rents be referred back to the housing working party was lost. Following that a further amendment proposed that the following be added:
“That the Council urgently approach the Government to seek financial support for the ongoing maintenance and provision of the Council’s social housing.”
That amendment was carried by nine votes to four and, as already mentioned, the motion as amended was carried. When the five councillors brought their notice of motion seeking to overturn the decision reached on 27 March they recorded in their motion that the Council had not yet made a formal application to Government for funding.
[58] In response to a letter from Ms Torstonson seeking clarification on various matters the Mayor of Christchurch, Bob Parker, wrote on 30 April 2008:
“Council remains committed to the provision of social housing in a rates independent way as it has done since the 1930’s. Council has been aware that there would be a shortfall of
funding for renewals and replacement of existing stock for some time. In 2006 Council was asked to increase rentals by 18% to ensure there was enough income to cover renewals and replacement. Council at that time voted against the increase. As a result some renewals work, like insulation of existing units, has been slowed down due to lack of funding.
If Council were successful in receiving monies from central government the implications on the current rent increase would depend on what Council was given the money for. Current indications are that Council may get money for increasing the supply of Social Housing but not for renewals and replacement.
As stated at the Council meeting, Council has approached Central Government for assistance through the submissions process and through other contacts with key individuals since. We are currently working through all the information required for a detailed proposal to ensure that Government has the necessary information to be able to support our request. It must be remembered that Council may receive no money from Central Government at all. As stated earlier, indications are that it would not be for refurbishment and there is no guarantee of success. It may also be a lengthy process – Wellington City Council’s approach to Central Government was a five year process.
At the present time our only option around funding our housing portfolio is through rentals. Our Social Housing is rates independent and this was reinforced through the Social Housing Strategy last year. Council has increased our provision of housing by 105 units in the last 10 years and is looking at working in partnership with others to continue to increase our provision in the coming years to address the changing needs of the community we serve.”
It appears from this letter that at the time of writing the Council was still working on a detailed proposal to Central Government.
[59] All of this indicates that while there have been numerous proposals about approaching Central Government for funding, there had not in fact been any formal approach prior to the decision increasing rents by 24% or between that decision and the decision confirming the increase. The issue is whether this means that the Council failed, in terms of s 77, to properly assess the option of seeking Government assistance.
[60] It is first necessary to consider whether that option was a “reasonably practicable option” in terms of the section. This expression is not defined in the Act. Clearly the Council has always seen the possibility of funding from Central Government as a live option. It was consistently mentioned and the Council’s resolution of 27 March 2008 to urgently seek financial support from the Government for ongoing maintenance as well as the provision of housing was obviously based on the premise that, despite the feedback from the former Mayor and Council officers (and also the indication in Mayor Parker’s letter), it was still worth making the approach. Clearly it was, and is, a live option. And there was, of course, a direct
link between any Government funding and the rent increase that would be needed to achieve the Council’s objective of a self-sustaining social housing portfolio.
[61] I am therefore satisfied that in all the circumstances the option of Government funding was a “reasonably practicable option” in terms of s 77(1). Indeed, the Council’s argument in this Court appears to have proceeded on the basis that it was an option that needed to be considered.
[62] Given that conclusion it becomes necessary to determine whether the Council discharged its statutory obligation under s 77(1)(b) to:
“(b) assess [the Government funding option] by considering—
(i) the benefits and costs of [that] option in terms of the present and future social, economic, environmental, and cultural well-being of the district or region; and
(ii) the extent to which community outcomes would be promoted or achieved in an integrated and efficient manner by [that] option; and
(iii) the impact of [that] option on the local authority's capacity to meet present and future needs in relation to any statutory responsibility of the local authority; and
(iv) any other matters that, in the opinion of the local authority, are relevant”.
Because a significant decision was involved it was not open to the Council to undertake a rudimentary assessment of those matters. To the contrary, a thorough analysis was required.
[63] Until the Council received a formal response from Central Government it was always going to be handicapped in its ability to undertake a meaningful analysis of the potential impact of Government funding on the recommended rent increase of
24%. Without that information it could not accurately assess the benefits and costs of the option, the extent to which it would influence community outcomes, and the potential impact on the Council’s underlying objectives of providing a self- sustaining social housing portfolio, as required by s 78(1)(b).
[64] In other words, the decision to adopt the recommended increase was not in conformity with the statutory regime. That regime was designed to ensure that the Council identified all reasonably practicable options and assessed them in terms of
s 77(1)(b) before arriving at a significant decision. Until all reasonably practicable options had been properly assessed a decision would be premature.
[65] While it appears to have been the view of officers that there would be “serious consequences” if the 24% increase was delayed (higher rents in the future or lower levels of service), this needs to be kept in perspective. The reality was that to a large extent the 24% increase reflected the 2015 spike of $50 million that had been exposed by modelling. Otherwise it might have been expected that the existing policy of a GCPI increase would have been adopted. Given the timeframe of the spike it must have been feasible for the Council to have delayed the extreme option of a 24% increase in favour of a CGPI increase (or something similar) until the impact, if any, of the Government funding option had been clarified.
[66] I also accept Mr Hlavac’s submission that the issue to be determined by the Council appears to have been defined too narrowly by Council officers. Rather than being inadequate rental income, the real problem was insufficient funding for maintenance and other costs associated with the housing portfolio. Had the matter been approached on this wider basis the issue of Government funding would probably have assumed greater significance in the decision-making process than it did.
[67] I am satisfied that the first ground of review has been made out.
Did The Council Obtain And Give Consideration To Views And Preferences In
Accordance With s 78(1)?
[68] Again the parties are well apart on this issue and I will summarise their arguments before determining the matter.
Applicant’s Submissions
[69] Notwithstanding that the 24% rent increase was a highly contentious and will significantly affect a large number of people, the Council only paid lip service to s 78. This is particularly significant where the decision involved a departure from the previously agreed CGPI increase. It was exactly the sort of decision that
required s 78 to be “robustly complied with” and the Council to consider the views and preferences at the four distinct stages referred to in subs (2). There was no evidence that the views and preferences of those affected or interested were obtained or taken into account at any of the four stages.
[70] Deputations to the Council meetings on 27 March 2008 and on 28 April 2008 could not satisfy the requirements of s 78. Those deputations were at the last moment and only expressed the view of the individuals speaking at the meetings. They could not be clearly seen as falling into the category of a person affected or interested in the decision in any particular way. Shortcomings in the process adopted by the Council could not be cured by a last minute consideration of a narrow band of views.
[71] The Council also appears to have made a conscious decision not to seek the views of the parties affected on the basis that general views of the community about social housing were adequate. This was fundamentally wrong and the error lies at the heart of the application for review. It would have been possible for the Council to have obtained the views of tenants in a number of ways: calling for written submissions or emailed responses at the required requisite stages; instructing officers to specifically raise the issues with tenants when discharging other duties; sampling; forming a focus group to assess views and preferences.
Council’s Response
[72] The Council has an in-depth understanding of the views and preferences of the Christchurch community regarding the Council’s social housing portfolio, including its views and preferences about increasing rents to provide for its funding. This understanding had been held throughout the course of the decision-making process leading to the 2008 rental increases. The Council’s approach to the issue demonstrates that it had regard to those views and preferences.
[73] In particular, the Council has provided social housing in Christchurch on a major scale for the past 70 years. It has been making policy about its social housing portfolio since 1938, as well as owning and managing the portfolio. There has been
contact with tenants on a day to day basis, social service organisations, and Central Government agencies, on matters affecting tenants’ welfare. The Council was familiar with all relevant issues and understood the views and preferences of the stakeholders connected with the activity.
[74] Added to that the Council had the benefit of its experience in undertaking a rental increase to a comparable level in 2003 (10% to 40%). Following that rent increase the Council received letters from tenants on the subject and responded to those letters. In subsequent years it continued to deal with tenants and stakeholders. And at the same time as the 2003 rent review the Council produced its Asset Management Plan which identified key stakeholders concerned with the Council’s social housing portfolio and included the contents of a tenants’ survey conducted in the preceding year.
[75] During the nine months preceding the 2008 rent review the Council published its Social Housing Strategy, which was over a year in the making and involved extensive consultation. The purpose of the Strategy was to provide a clear direction for the Council’s involvement in the provision of social housing, to improve relationships with, and understanding of, other providers in housing, and to identify the resourcing and capability issues the Council needed to address in implementing the strategy. After the Strategy was released on 6 November 2006 there was public consultation until 28 February 2007 which involved extensive presentations and publicity, and submissions were sought. Of the 116 submissions received, 45 were from the Council’s social housing tenants and 43 were from community-based organisations. So by the time the 2008 rent review began the Council had the benefit of a fresh strategic document which was the product of extensive stakeholder and community consultation.
[76] The way the Council approached the 2008 rent increase decision-making process demonstrates that it considered the views and preferences of all affected or interested persons. It was apparent from the modelling considered by councillors that the Council assessed whether the rent increases were affordable for the different categories of tenants. And the options considered by the Council demonstrated that the Council had regard to the differing views and preferences within the community.
[77] Section s 78 needs to be kept in perspective. It does not, of itself, require consultation. All that is required is that the views and preferences are to be given consideration. The process adopted by the Council ensured compliance with that statutory requirement.
Discussion
[78] Before a local authority can give meaningful consideration to the views and preferences of affected and interested persons it must, of course, obtain those views. It is for the local authority to consider how this should be achieved on a decision by decision basis. That process alone does not, however, require the local authority to undertake any consultation process or procedure: s 78(3).
[79] Apart from requiring the views and preferences of affected and interested persons to be considered, s 78(2) requires consideration to be given to those views and preferences at four stages of the decision-making process: when the problems and objectives are defined; when options are identified; when options are assessed and proposals developed; and when proposals are adopted. It can be inferred from this stringent requirement that Parliament attributed considerable importance to the views and preferences of affected or interested persons and considered that they might influence the decision-making process at one or more of those stages.
[80] It must be beyond argument that the Council’s tenants represent a discrete category and are at the forefront of people likely to be affected by, or have an interest in, any proposal to increase rents by 24%. It follows that the Council was obliged to reconsider their views and preferences at each of the four stages specified in s 78(2). Given that this was a significant decision, there was no possibility of those requirements being relaxed. Genuine consideration at each of the four stages was required.
[81] As to the first stage, the evidence indicates that the underlying problems and objectives concerning the Council’s social housing operation were defined in 2003 by the Housing Asset Management Plan, which was described as a “new beginning”, and the rent review. By that time it was clear that the previous policy
of not increasing rents at annual reviews was unsustainable and that rent increases were inevitable if the housing development fund was to be self-sufficient in the sense that there was to be no recourse to rates. Counterbalancing that objective was the Council’s desire to keep rents at affordable levels.
[82] Tenants were identified as one of the key stakeholders in the Asset Management Plan. It was recorded that the Council’s knowledge of “customer expectations” was based on:
“- Informal meetings with tenants.
- Feedback from Council welfare and housing offices.
- Analysis of tenant service requests and complaints.
- Consultation via the Annual Plan process.
- Customer satisfaction surveys.”
In 2002 there had been a survey of tenants and the results in relation to satisfaction with the units, complexes, and service levels, were summarised in the Plan.
[83] Although there was no specific reference to the views and preferences of tenants in the report that went to the Council before it decided to increase rents by between 10% and 40% in 2003, it is clear that a thorough analysis had been undertaken and with the benefit of the information that had been gathered the Council was well placed to assess the views and preferences of tenants at that time. Immediately following the rent review the Council’s knowledge of the views and preferences of its tenants was supplemented by the letters it received from them. So there can be no real issue that the requirements of s 78(2)(a) were met.
[84] When it came to the 2004 rent review the policy of an annual increase in line with the CPI was already in place. There is no specific reference in the reports to the Council about the views and preferences of tenants and the evidence does not suggest that any particular attention was paid to that matter.
[85] The following year there was, for the first time, specific reference to the views and preferences of persons likely to be affected or having an interest. When assessing each of the three options that were being put before the Council the report stated:
“Views and preferences of persons affected or likely to have an interest:
This report has been prepared based on Council Policy, along with information from previous rent reviews, and detail provided by City Housing.”
There being no indication to the contrary in Ms McDonald’s affidavit or in any of the other documentation before the Court, it can be safely inferred that there was no specific attempt to update the views and preferences of tenants for the 2005 review.
[86] Exactly the same statement was included in the report to the Council for the
2006 review. By that time the need to increase rents at a rate higher than the CPI had been identified. The Council decided, however, to hold over the report to enable it to be referred to a workshop of all elected members. As a result of the workshop the officers’ report was revised but the statement concerning views and preferences remained unchanged. Again there is no suggestion that there was any attempt to update the views and preferences of the tenants.
[87] In 2006 the Council also resolved to form a working party to review other funding options and it began working on its Social Housing Strategy. Although the strategy involved public consultation between 6 November 2006 and 28 February
2007, this consultation involved key social housing providers and related supporting agencies on what they saw as the challenges in the social housing sector and what roles the Council should play in addressing them: para 1.6.4. While an estimated 45 submissions came from tenants, it is apparent from the consultation analysis summary that these were not directed towards the tenants’ views or preferences in relation to rent increases.
[88] This brings us to the 2008 rent review. That year reports to the Council used exactly the same wording in relation to the views and preferences of affected or interested persons as had been used in the 2005 and 2006 reports. Again there is no
indication in the documentation before the Court or Ms McDonald’s affidavit that there was any specific attempt to update the views and preferences of tenants.
[89] The day before the Council meeting on 27 March 2008 Brendon Burns, the Labour candidate for Christchurch Central, sent an email which was copied to the Mayor and all councillors:
“Dear Mayor Bob and councillors, tomorrow you meet to consider proposals for a 24 percent rise in council housing unit rents.
I have been asked to make public comment and having spoken to some tenants, as a courtesy wished you to first be alerted to my views.
I ask you to consider limiting the increase to be broadly in line with inflation.
While the Government’s Accommodation Supplement will provide for much of the rise, members of the community who can least afford a rent increase will still be affected.
I understand that council is juggling its wish to keep out of ratepayers’ pockets while providing for long term improvements and renewal of its social housing stock. I know council flats that remain un insulated and that there is a wish by council to rectify that and provide for later redevelopment.
Council’s calculations of a 24 percent average increase in rentals take into account the fact that the Accommodation Supplement will provide for more than two-thirds of the increase.
That said, the current proposal will still mean a one-off increase in rental for some of the least well-off in our community of between $5.40 and $9 or more a week. That’s a lot in one go for pensioners and beneficiaries in council social housing. In some instances it would test the boundaries of the council’s yardstick affordability measure of 30 percent of gross income.
Council tenants faced a 5.1 percent increase last year and I ask councillors to consider limiting increases at around the inflation rate.
I acknowledge that you as councillors do remain committed to providing social housing and that it’s no easy task to maintain social housing while caring for some of the most vulnerable in our community.
I hope you are able to balance those interests in your deliberations.”
While Mr Burns said that he had been asked to make public comment and had spoken to some tenants, he specifically stated that they were his views. It follows that not a lot of weight can be attributed to that letter when it comes to considering the views and preferences of the tenants.
[90] At the meeting on 27 March 2008 Councillor Broughton tabled a petition signed by 117 tenants which asked the Council to restrict any increase in rents to the CPI level. While that petition would go some distance towards satisfying the Council’s obligations in relation to the final stage at which views and preferences had to be considered (s 78(2)(d)), it could not remedy the failure of the Council to consider the views and preferences of tenants at the two earlier stages. I will return to this shortly.
[91] Between the meeting on 27 March 2008 and the meeting on 28 April 2008 there appears to have been a good deal of interaction between officers and councillors. Letters were also received from tenants requesting clarification about the rent increase, expressing dissatisfaction about it, and raising various other matters. One letter supported the increase. It also appears that there might have been direct contact by some councillors with tenants. But again these events were incapable of remedying the omission to consider the views and preferences of the tenants at the two middle stages of the decision-making process.
[92] At the meeting on 28 April 2008 the Council heard from Peter Johnstone, an accountant associated with the Coalition for Fair Rents, who challenged the affordability model used by the Council and claimed that it differed from that used by other bodies. Reverend Jim McKenna, a city housing tenant, told the Council that a 24% increase would result in his rent increasing by $66 per fortnight and that he had no guarantee of receiving any support via the accommodation supplement. He expressed the view that the rent increase, combined with increases in other areas, would seriously impact on the wellbeing of the Council tenants. Sharon Torstonson claimed that even those who qualified for the accommodation supplement were likely to face an increase of $6 to $7 per week which, given other recent increases in the cost of living, would cause hardship. She said the Coalition had been contacted by a number of tenants who did not receive the accommodation supplement.
[93] This history illustrates that although the Council discharged its statutory obligation to consider the views and preferences of tenants at the first stage, and also went some distance towards doing so at the fourth stage, it patently failed to consider those views at the two middle stages. I do not accept that it was open to the Council
to rely on the views and preferences that had been initially gathered during 2003 without attempting to update those views when it began considering the 2008 rent review.
[94] The main reason for that conclusion is that by 2008 the circumstances were different. It was only when modelling before the 2008 review was undertaken that the anticipated $50 million spike in 2015 was identified. This was the trigger for the recommended 24% increase, which was a radical departure from the existing policy of CGPI increases. This large percentage increase also came on top of the rental increases since 2003 and on top of any other increases in the cost of living that tenants were experiencing by 2008. All of those matters provided an essential context for any views or preferences that tenants might wish to express in relation to the 2008 rent review. Without that 2008 context any views and preferences earlier expressed would not necessarily hold good. And the prevailing circumstances in
2008 might well have encouraged some tenants to express views and preferences when they might not have wished to do so in 2003.
[95] Under those circumstances the Council was obliged to make some attempt to ascertain the views and preferences of the tenants in the context of the 24% increase proposal that was on the table. While it was for the Council to determine how this should be done, there was no suggestion that it was impossible for the views and preferences of tenants to be updated. Indeed, Mr Hlavac provided a number of practical suggestions about how this could have been achieved.
[96] Mr Stephens argued that the Council was entitled to carry forward its institutional knowledge. In some situations that is undoubtedly permissible. But here there are compelling factors that ruled it out. First, the statutory scheme specifies that views and preferences are to be considered at four discrete stages. Second, the significant change in circumstances between the time that the institutional knowledge was initially gathered and the time that the decision was made. Third, during the intervening period there had been local body elections and a new Council was considering the 2008 review.
[97] Finally, it is necessary to address the argument that even if there were deficiencies in the first decision, those deficiencies were cured by the second decision. I do not accept that proposition. The complete failure to apply s 78(2)(b) and (c) could not be remedied by the second meeting. In any event it could hardly be said that the views and preferences of tenants were before the second meeting in a way that achieved the statutory objective of an informed decision-making process.
[98] This ground of review has also been made out.
Did The Council Comply With The Requirements Of s 80 In Relation To
Inconsistencies?
[99] It is common ground that there were inconsistencies between the Council’s decision increasing the rents and the rental forecast contained in the Council’s Long- Term Community Plan. But the parties differ about the implications.
Argument for Applicant
[100] In relation to the provision of social housing the Council’s Long-Term Community Plan states that in years 4 to 10 the Council would continue “as for previous years”. This is inconsistent with the decision to increase rents by 24%. Also the table of revenue and expenditure for the 10 year period from 2006 indicates that the housing operation will run at a deficit throughout and the 2015 spike is not identified. Again this is inconsistent with the break-even situation contemplated by the decision.
[101] Given these significant inconsistencies the Council was required by s 80 to identify the inconsistencies, the reasons for them, and any intention to amend the Plan to accommodate the decision. The Council failed to do so. Moreover, there was an effective “amendment” to the Long-Term Community Plan and the Council should have formalised that amendment via the Special Consultative Procedure as required by s 93(5).
[102] The inconsistency does not carry any legal consequences because it was not a significant inconsistency in terms of s 80. Even if it was, that section expressly contemplates that the inconsistency can remain without the Plan having to be changed.
Discussion
[103] Applying the definitions of “significance” and “significant” in the Act it is difficult to avoid the conclusion that the decision of the Council to raise rents by
24% was significantly inconsistent with the Long-Term Community Plan. Whereas the Plan indicated the social housing operation would operate at a deficit, the 24% increase was expressly designed to avoid that situation and ensure that the operation was self-sustaining. Added to that, the projected operating cost for 2014/15 and
2015/16 did not give any indication that there would be a very substantial spike in the order of $50 million. To the contrary, the figures for those years ($17,209,000 and $17,098,000 respectively) were only slightly above the preceding years.
[104] But while I accept s 80 applied, I do not accept that this obliged the Council to amend its Plan by way of the Special Consultative Procedure. Neither s 80 nor s 93 requires that outcome. Section 80(1) only requires the Council, when making its decision, to identify the inconsistency, the reasons for it and “any intention of the local authority to amend the policy or plan to accommodate the decision”. While the Council arguably complied with the first two requirements, there is no suggestion at all that it complied with the third requirement. But the implications are not as far reaching as asserted by the applicant.
[105] This ground of review has been made out. However, it is largely of a technical nature.
Legitimate Expectation
[106] This topic can be determined relatively briefly.
[107] In the statement of claim it is pleaded that the Council breached the applicant's legitimate expectation in the following ways:
“(a) The Council had, on repeated occasions, stated that rent in respect of its social housing would be increased at no more than the Consumer Price Index.
(b) Rents in respect of the Council’s social housing have historically increased by an amount no more than the Consumer Price Index.
(c) In the circumstances the affected parties (i.e. the tenants of the Council’s City Housing) had a legitimate expectation that the existing practice/policy in respect of rent increases would not be departed from without hearing those affected.
(d) The Council gave no opportunity to be heard to those who were affected.”
By the time the matter was argued the applicant’s stance had been modified, no doubt by virtue of the absence of an evidential base for the allegation pleaded in (a).
[108] The applicant’s argument at the hearing came down to two main propositions: first, that the Long-Term Community Plan provided assurances that there would be a continuation of the present system and that there would not be any substantial change in that policy without consultation; second, that the Council’s decisions in relation to rent reviews over the four preceding years gave rise to a legitimate expectation that that practice would continue and that if there was to be any change the tenants would be consulted.
[109] I agree with Mr Stephens that the evidence falls well short of establishing that the Council has ever made a promise or gave an assurance that is capable of supporting a legitimate expectation. Given that s 80 contemplates that decisions can be inconsistent with a Long-Term Community Plan, the Plan cannot provide the necessary foundation for the applicant’s argument. And it would be reading far too much into the rent review decisions over the preceding four years for them to give rise to a legitimate expectation.
[110] This ground of review fails.
[111] Having concluded that the three grounds of review have been made out, it is necessary to decide whether the Court should exercise its discretion in favour of relief. The starting point is that where a claimant demonstrates that a public decision-maker has erred in the exercise of its power, the claimant is entitled to relief: Air Nelson Limited v Minister of Transport [2008] NZAR 139. There has been no delay or other disentitling conduct by the applicant who is effectively representing the tenants.
[112] To the extent that the Council failed to properly assess the significance of its decision to increase rents by 24%, failed to properly consider the implications of the Government funding option, and failed to give proper consideration to the views and preferences of the tenants, the tenants have been substantially prejudiced. Had the required decision-making process been undertaken the Council may well have arrived at a different decision.
[113] The relief sought in the statement of claim was, first, a declaration that both decisions were invalid, second, orders quashing them, and, third, an order that the Council engage in the Special Consultative Procedure, or engage in consultation, and that it otherwise comply with the provisions of the Local Government Act. However, by the time of the hearing the applicant had reconsidered the third component and decided that the 24% increase should be replaced by an increase in accordance with CPI.
[114] I accept that it is appropriate for relief to be granted and there will in due course be a declaration that both decisions are invalid. There will also be an order quashing them. But I have decided to delay making formal orders until the parties have had an opportunity to confer about the precise form of the order. If the parties agree that the order proposed by the applicant is appropriate I will make that order.
[115] The application for judicial review is granted. In due course a declaration that the decisions made by the Council on 27 March 2008 and 28 April 2008 are invalid will issue. At that time those decisions will also be quashed. In the meantime the parties are to confer about the precise form of the order. If the parties are able to agree a memorandum should be submitted. On the other hand, if there is disagreement a telephone conference will be convened. Hopefully this aspect can be resolved within a reasonably short time, say two weeks.
[116] The applicant is entitled to costs. Although it is my preliminary view that these should be on a 2B basis, I am prepared to receive memoranda if either party wishes the matter to be formally determined.
Solicitors: Young Hunter, Christchurch for Applicant
Simpson Grierson, Wellington for Respondent
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