Kidd v Southland District Council
[2019] NZHC 1947
•12 August 2019
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2017-425-71
[2019] NZHC 1947
BETWEEN CHARLES EDWARD FRANCIS KIDD
Applicant
AND
SOUTHLAND DISTRICT COUNCIL
Respondent
Hearing: 7 May 2019 Appearances:
S N McKenzie for Applicant
D Laing and E Wiessing for Respondent
Judgment:
12 August 2019
JUDGMENT OF MANDER J
This judgment was delivered by me on 12 August 2019 at 2.15 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: .
KIDD v SOUTHLAND DISTRICT COUNCIL [2019] NZHC 1947 [12 August 2019]
[1] Mr Charles Kidd is the registered proprietor of a residential complex described as a “lifestyle village” situated at Winton. It comprises 27 individual units, each of which is fully self-contained, having their own bathroom and kitchen. The units are rented out mainly to aged single persons.1 Importantly, for the purpose of this proceeding, each unit has its own toilet. Mr Kidd has brought an application for judicial review to challenge the reasonableness of the wastewater rates he is required to pay for the 2016/17 rating year. The rate is based on the number of toilets provided by the residential facility.
[2] The Southland District Council (the Council) is the responsible local authority. It set the rates for the 2016/17 year and included, as it had for previous years, a targeted rate for wastewater or sewage. This targeted rate was set on a differential basis, using three categories of land use. For properties classified as “Residences” the wastewater rate was calculated on the basis of a single fixed amount, being the full charge of the district wastewater rate per rating unit sited on the property.2 The full charge of the district wastewater rate was set at $364.97 (GST exclusive). For “Vacant land” the district wastewater rate was set at half the full charge, $182.49 (GST exclusive). For “All other property” the rate was set on the basis of a fixed amount, being the full charge of $364.97 (GST exclusive) per “pan or urinal”; essentially per toilet.
[3] Mr Kidd’s lifestyle village falls into the category of “All other property”. Mr Kidd does not dispute the Council’s authority to set targeted rates on a differential basis for wastewater services, nor does he contest the classification of his residential facility as falling within the category of “All other property” for rating purposes. However, he maintains the Council’s decision to set the targeted rate for “All other property” on the basis of a charge on each toilet is unreasonable. The lifestyle village has 30 toilets, each of which attracts the full charge. This results in a total wastewater rate for the property of $10,949.10 (GST exclusive).
1 In December 2007, the Council granted a resource consent to Mr Kidd to construct and operate a resthome. More recently the property has been advertised as providing motel accommodation and short and long-term accommodation for all ages.
2 That being the separately used or inhabited part of a rating unit (SUIP).
[4] Mr Kidd seeks an order setting aside the wastewater rate for the 2016/17 rating year, and a direction that the Council reconsider its methodology for calculating the wastewater rate and that it make a fresh determination.
Mr Kidd’s complaint
[5] In support of his argument that the Council’s decision to apply a full charge on each toilet is unreasonable, Mr Kidd submitted that such a method of calculation favours other properties similar to his that provide less facilities to its occupants. He argued that wastewater produced by a rating unit should be quantified on the basis of the number of people occupying the residential facility rather than the number of toilets situated on the property. Essentially, Mr Kidd argues that the wastewater rate should be set on a basis that accords with the demand the property places on the wastewater system and not the number of toilets provided to its residents.
[6] In support of this argument, Mr Kidd gave evidence of what he maintained were two similar facilities providing similar resthome services where, because of the provision of much fewer toilets, the wastewater rates were considerably less despite the residential facility having a similar number of occupants. Mr Kidd provided two examples:
(a)The Country Rose Resthome, Winton, which has approximately 28 rooms and a similar number of occupants to his lifestyle village. Because of the provision of only five toilets, the wastewater charges in 2016 amounted to $2,098.55 (GST inclusive).
(b)The Wyndham and Districts Community Resthome has 23 beds. Because of the provision of only six toilets, the wastewater charges in 2016 amounted to $2,518.26 (GST inclusive).
[7] Prior to completing the development of the lifestyle village, Mr Kidd assessed the rates for at least one of these resthomes because he considered it to be a property that was comparable to the type of facility he was building. He maintains that by providing “better services to the aged”, namely by providing private toilet facilities for each resident, he is being penalised by the Council’s wastewater rate formula
despite housing a similar number of occupants who would be placing no greater demand on the wastewater system than the other resthomes that provide fewer toilet facilities.
Standard of review
[8] In bringing his application for review, Mr Kidd acknowledged the strict approach that has been taken to the review of rating decisions on the grounds of unreasonableness. In Wellington City Council v Woolworths New Zealand Ltd (No 2) and Waitakere City Council v Lovelock, the Court of Appeal recognised the broad fiduciary duty of a local authority to act responsibly towards ratepayers, but also emphasised the need to extend deference to the exercise of discretionary powers by local authorities charged with making rating decisions within a political framework in accordance with their statutory planning and financial management obligations.3 As a result, the test for impugning rating determinations on the grounds of unreasonableness was held to be a stringent one which will only permit a court to intervene when the local authority decision is irrational or unsupportable in the true Wednesbury sense. In order to succeed, the ultimate decision would have to be “perverse” or “absurd”, in the sense that it is a decision that Parliament could not have contemplated an elected council making.4
[9] The appropriateness of applying the traditional strict test of Wednesbury unreasonableness that was applied in Woolworths and Lovelock has been the subject of considerable evaluation by the courts. Mr Kidd sought to rely upon authorities that have recognised a moderated approach to the question of unreasonableness and which have set a less demanding standard which does not require meeting the high threshold of “irrationality”. These approaches often involve considerations of whether the decision is supported by reasoned justification or raises questions of proportionality while still taking care not to embark on a true “merits-based” review of the decision in issue.5 4
3 Wellington City Council v Woolworths New Zealand Ltd (No 2) [1996] 2 NZLR 537, [1996] NZAR 348 (CA); Waitakere City Council v Lovelock [1997] 2 NZLR 385, [1997] NZAR 492 (CA).
4 Waitakere City Council v Lovelock, above n 3, at 399 and 401; Wellington City Council v Woolworths New Zealand Ltd (No 2), above n 3, at 552.
5 See Watson v Chief Executive of the Department of Corrections [2015] NZHC 1227 at [25]-[30].
[10] The need to calibrate the intensity of review according to the nature and subject matter of the case has been recognised for some time. In Wolf v Minister of Immigration, Wild J remarked that he:6
[47] ... consider[ed] the time has come to state – or really to clarify – that the tests as laid down in GCHQ and Woolworths respectively are not, or should no longer be, the invariable or universal tests of “unreasonableness” applied in New Zealand public law. Whether a reviewing court considers a decision reasonable and therefore lawful, or unreasonable and therefore unlawful and invalid, depends on the nature of the decision: upon who made it; by what process; what the decision involves (ie its subject matter and the level of policy content in it) and the importance of the decision to those affected by it, in terms of its potential impact upon, or consequences for, them. This is a rather long-winded way of saying, as Lord Steyn so succinctly did in Daly: “In administrative law context is everything.”
[11] As Wild J acknowledged in Wolf, the “universal” application of a single Wednesbury test, or the need to adjust the intensity of judicial review according to the circumstances and context of the case had been recognised long before Woolworths. In reviewing the varied approaches taken by the courts, the rationale for applying the “full blown” or “stringent” Wednesbury test in a rating situation, as articulated by Richardson P in Woolworths, was cited without demur by Wild J:7
... there are constitutional and democratic constraints on judicial involvement and wide public policy issues. There comes a point where public policies are so significant and appropriate for weighing by those elected by the community for that purpose that the Courts should defer to their decision except in clear and extreme cases. The larger the policy content and the more the decision- making is within the customary sphere of those entrusted with the decision, the less well equipped the Courts are to reweigh considerations involved and the less inclined they must be to intervene.
[12] It is indisputable that different standards of review will apply in different contexts. Notable examples include challenges to decisions that impinge on an individual’s rights that have led to disproportionate outcomes or are unreasonably oppressive, or where the improper balancing of relevant considerations give rise to an error of law.8 Other situations may involve the importing of a statutory test of “reasonableness” against which a decisionmaker’s approach is able to be measured by
6 Wolf v Minister of Immigration [2004] NZAR 414, (2004) 7 HRNZ 469 (HC) at [47].
7 At [48](b), citing Wellington City Council v Woolworths New Zealand Ltd (No 2), above n 3, at 546.
8 Philip A Joseph Constitutional and Administrative Law in New Zealand (4th ed, Thomson Reuters, Wellington, 2014), at [24.5.2(2)]; Conley v Hamilton City Council [2007] NZCA 543, [2008] 1 NZLR 789 at [54] per Hammond J.
reference to the purposes of the particular Act. For example, where the decision- making power is expressly qualified by what the decisionmaker may “reasonably consider” to be necessary.9 In such situations the legislation itself provides a standard of reasonableness against which the decisionmaker’s actions may be reviewed.
[13] However, in local authority rating cases I am unable to perceive any movement away from judicial restraint. The conclusions of the Court of Appeal in Woolworths remain apposite:10
Rating is essentially a matter for decision by elected representatives following the statutory process and exercising the choices available to them. The breadth and generality of the empowering provisions applying to territorial authorities and affecting the general rate and differential rating (in contrast with user charges and special purposes authorities), make it clear that rating was not intended to be a calculation of benefits and allocation of the incidence of rates by reference to the outcome. The very complexity and inherent subjectivity of any benefit allocation for these specified outputs points away from using relative benefit as a definitive criterion.
[14] In the course of argument, I was not taken to any authority which suggested these considerations were other than applicable to the circumstances of the present case. While the standard of unreasonableness will vary depending upon the subject matter and context of the decision the subject of scrutiny, and a court will find itself less restrained where a decision-making power has been qualified by the governing statute, or where the nature or the subject matter of the decision, perhaps one involving civil and political rights, requires the standard of unreasonableness to be adjusted, I am satisfied the test for impugning rating determinations by local authorities on the grounds of unreasonableness remains a stringent one. I am fortified in that view by more recent decisions of both the Court of Appeal and this Court that have taken a cautious approach to challenges to local authority decision-making by applying a test for unreasonableness that accords with Woolworths and Lovelock.11
9 See Canterbury Regional Council v Independent Fisheries Ltd [2012] NZCA 601, [2013] 2 NZLR 57 at [22]; Quake Outcasts v Minister of Canterbury Earthquake Recovery [2017] NZCA 332, [2017] 3 NZLR 486 at [72], [76] and [77].
10 Wellington City Council v Woolworths New Zealand Ltd (No 2), above n 3, at 552.
11 Mangawhai Ratepayers and Residents Association Inc v Kaipara District Council [2015] NZCA 612, [2016] 2 NZLR 437 at [90] and [101]; Carter Holt Harvey Ltd v North Shore City Council [2006] 2 NZLR 787 at [105]; Associated Churches of Christ Church Extension and Property Trust Board v Auckland Council [2014] NZHC 3405, [2015] NZRMA 113 at [52] and [53]; Okahu Haulage Inc v Auckland City Council [2010] NZAR 82 at [15]; Goulden v Wellington City Council [2006] 3 NZLR 244 at [59]; and Whakatane District Council v Bay of Plenty Regional Council [2009] 3 NZLR 799 at [147].
[15] In Mangawhai Ratepayers and Residents Association v Kaipara District Council, the Court of Appeal acknowledged the willingness of the courts to ensure rating decisions by local authorities are made in accordance with the powers conferred on them by Parliament.12 Miller J, in delivering the decision of that Court, observed that the right to judicial review of local authority borrowing and rating decisions was long-established and powerful. However, citing Woolworths and Lovelock, the Court differentiated between challenges for illegality, to which the courts will respond readily, and those based on reasonableness. Miller J observed that the courts would not usually intervene in rating decisions on reasonableness grounds.13
Review of rating decisions
[16] In both Woolworths and Lovelock, the Court of Appeal identified the approach to be taken to the review of local authorities’ rating decisions. The first step is to examine the scheme of the legislation and determine the nature and scope of the rating powers and the statutory processes governing their exercise. The next step is to review the relevant facts, including the processes followed by the Council and the decisions in question, to determine whether it has discharged its legal responsibilities. As already observed, in the absence of the Council acting outside its statutory powers, there will be limited scope to find the elected representatives have acted unreasonably in exercising the choices available to them in setting the rates for their district.
[17] While dealing with the earlier legislative scheme and directed to the setting of general rates, the following observations in Woolworths, that were repeated by the Court of Appeal in Lovelock, continue to apply with equal force to the current rating legislation and to targeted rates:14
Reading the statutes together it is obvious that the provisions for making and reviewing rates are to enable the local authority to carry out its statutory functions and to perform the activities which it undertakes for the benefit of its community. The territorial authority has very wide rating powers. The exercise of those powers inevitably affects and is intended to affect the relative incidence of rates on properties within the district.
12 Mangawhai Ratepayers and Residents Association Inc v Kaipara District Council, above n 11, at [90].
13 At [101].
14 Wellington City Council v Woolworths New Zealand Ltd (No 2), above n 3, at 544-545; see
Meridian Energy Company v Wellington City Council [2017] NZHC 48 at [69].
... it may select a combination of rates and charges from a general rate which is specifically for the general purpose of the local authority; to separate rates; to uniform charges; and, at the other end of the spectrum, to specifically focused user-pay charges... There is force in Mr Barton’s submission for the local government association that it is implicit in the scheme of the legislation that a rating system in its diversity remains primarily a taxation system and not a system inherently based on a principle of user pays.
Third, the authority to adopt a differential system for its general rate assumes the entitlement to discriminate as between types or groups of properties. The very concept of differential rates involves casting a heavier burden than justified solely by relative capital values on one sector rather than another.
The legislation contains no express criteria or purpose statement applicable in this case for making the various choices under those three heads. It imposes significant process obligations providing for public participation, openness and accountability in the decision-making. But the substantive decisions are not expressly circumscribed. The legislation proceeds on the premise that the wider substantive judgments are made by the popularly elected representatives exercising a broad political assessment, ...
To confine the acceptable justification for the differentiation to those differences as correspond or are reasonably related to enjoyment of the benefit of services provided by the territorial authority is to ignore the scheme of the legislation and to disregard the breadth of the statutory powers. The legislation permits a territorial authority making those choices which impact on the incidence of rates to make its own judgment as to what is appropriate and equitable. That decision-making is the prerogative of the local authority subject to the statutory limitations and process constraints already referred to
– and to amenability to judicial review.
(Emphasis added)
[18] The Rating Powers Act 1988 and the Local Government Act 1974 were the subject of the Court of Appeal’s analysis in Woolworths. These Acts were the predecessors to the current statutes, the Local Government Act 2002 and the Local Government (Rating) Act of 2002 (Rating Act), which together with the Rating Valuations Act 1995 provide the legal framework by which local authorities source their powers to set, assess, and collect rates. As noted, the Court of Appeal’s observations in Woolworths, which it reiterated in Lovelock, remain apposite to the current statutory scheme within which local authorities must work when making their rating decisions.
The legislative scheme
The Local Government Act 2002
[19] The purpose of local government is “to enable democratic local decision- making and action by, and on behalf of, communities” and “to meet the current and future needs” of those communities for local infrastructure, public services and the performance of regulatory functions, in a way that is efficient, effective and appropriate to present and anticipated future circumstances. It must do so in a way that is most cost effective for households and businesses.15
[20] In carrying out that role, a local authority is subject to a statutory regime which requires compliance with comprehensive planning, financial management and decision-making requirements. This includes the drafting and adoption of a long-term plan (LTP) which must include a revenue and funding policy (RFP) and a funding impact statement (FIS).16 The RFP must describe the local authority’s policies for funding operating expenses and capital expenditure as prescribed in s 103 of the Local Government Act. This includes rates and requires the local authority to show how, in relation to sources of funding identified in the policy, it has complied with s 101(3) of that Act. That section provides as follows:
101 Financial management
(1)A local authority must manage its revenues, expenses, assets, liabilities, investments, and general financial dealings prudently and in a manner that promotes the current and future interests of the community.
(2)A local authority must make adequate and effective provision in its long-term plan and in its annual plan (where applicable) to meet the expenditure needs of the local authority identified in that long-term plan and annual plan.
(3)The funding needs of the local authority must be met from those sources that the local authority determines to be appropriate, following consideration of,—
(a)in relation to each activity to be funded,—
(i)the community outcomes to which the activity primarily contributes; and
15 Local Government Act 2002, ss 10 and 11.
16 Local Government Act 2002, sch 10, cls 10, 15 and 20.
(ii)the distribution of benefits between the community as a whole, any identifiable part of the community, and individuals; and
(iii)the period in or over which those benefits are expected to occur; and
(iv)the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity; and
(v)the costs and benefits, including consequences for transparency and accountability, of funding the activity distinctly from other activities; and
(b)the overall impact of any allocation of liability for revenue needs on the community.
[21] Section 101(3) provides local authorities with the discretion to determine an appropriate funding source for their activities following consideration of the mandatory factors listed. Notably, those considerations include the overall impact of the allocation of liability for revenue needs, and provides a local authority with the discretion to modify how its activities will be funded by taking into account the effects of the allocation of liability on the wider community. That allows for the exercise of political discretion in a local authorities’ decision-making of the type that was discussed by the Court of Appeal in Woolworths.
[22] Another mandatory requirement which must be included in an LTP is the FIS. That requires the local authority to identify sources of funding, the amount of funds expected to be produced from each source and how the funds will be applied. The specifics of targeted rates are to be set out in the FIS, including categories of rateable land and how liability is to be calculated.17
[23] In addition to the LTP, which must cover a period of not less than 10 consecutive years, a local authority must also have an annual plan which it must adopt before the commencement of the year to which it relates.18 The LTP, while covering a period of not less than 10 consecutive years, only remains in force for three years.19 However, for the first year that an LTP is in force, the financial statement and
17 Schedule 10, cls 15 and 20.
18 Section 95(3).
19 Sections 93(3) and (7).
FIS set out in the LTP is to be regarded as the Annual Plan for that year. Once adopted by a local authority, both the LTP and Annual Plan constitute formal and public statements of the local authority’s intention in relation to the matters covered in the plans, however, they do not represent decisions to act on any of the matters included in the plans.20
[24] Before adopting an RFP, LTP and Annual Plan, decision-making requirements of the Local Government Act must have been complied with.21 These include the local authority having identified all reasonably practicable options for the achievement of the objective of a decision and an assessment of the options in terms of their advantages and disadvantages, and consideration of the views and preferences of persons likely to be affected by, or to have an interest in, the matter.22 Furthermore, depending on the nature of the decision being made, various consultative processes may or must be undertaken by the Council in order to understand the community’s views. In preparing a LTP and RFP consultation is mandatory.23
Local Government (Rating) Act 2002 (Rating Act)
[25]The purposes of the Rating Act include:24
(a)providing local authorities with flexible powers to set, assess, and collect rates to fund local government activities:
(b)ensuring that rates are set in accordance with decisions that are made in a transparent and consultative manner:
(c)providing for processes and information to enable ratepayers to identify and understand their liability for rates.
[26] Under the Rating Act, the term “rate” means a general rate, a targeted rate, or a uniform annual general charge.25 A targeted rate which the wastewater rate represents may be set as a uniform rate, or at a differential rate based upon a categorisation of the rateable land, including the use to which the land is put, and “the
20 Section 96.
21 Section 76(1).
22 Sections 77(1) and 78(1).
23 Sections 93(2) and 102(4)(a).
24 Local Government (Rating) Act 2002, s 3.
25 Section 5.
provision or availability to the land of a service provided by, or on behalf of, the local authority”.26
[27] Targeted rates can only be calculated in accordance with factors listed in sch 3 of the Rating Act and which are identified in the local authority’s FIS.27 The number of water closets and urinals within the rating unit is a factor listed in the Rating Act that can be used to calculate a targeted rate. Other factors include the number or nature of connections from the land within each rating unit to any local authority reticulation system, the number of separately used or inhabited parts of the rating unit, and the extent of provision of any service to the rating unit by the local authority, including any limits or conditions that apply to the provision of the service.
[28] As mentioned, before a local authority can set a rate it is required to issue a LTP and an Annual Plan, each of which must contain an FIS which identifies the sources of funds to be used by the local authority and explains the amount of funds expected to be produced from each source and how the funds are to be applied. In setting the rates for a financial year, the local authority must act in accordance with its LTP and FIS for that financial year unless there is an unforeseen and urgent need for revenue that cannot be met by other means.28 It follows that the local authority’s rating decisions must reflect the details and conclusions reached as a result of processes followed in formulating the LTPs and annual plans, including the FIS and RFP.
The processes followed by the Council in setting the wastewater rate for the 2016/17 rating year
[29] The Council operates 18 wastewater collection treatment systems across its district which consists of more than 30 towns and villages covering a large geographical area of some 30,000 km2. The 18 schemes collect, treat and dispose of wastewater from residential properties, businesses and public facilities, in addition to the collection, treatment and disposal of liquid waste from industrial and commercial premises. The existing 18 schemes service approximately 8,200 of the 20,607 rating
26 Schedule 2 and ss 16 and 17.
27 Schedule 3 and s 18.
28 Section 23.
units in the district, with the remainder being serviced by septic tanks and private wastewater schemes.
[30] Mr Stephen Ruru, the Chief Executive of the Southland District Council, deposed that since 2012 the Council has funded these wastewater schemes on a district-wide basis rather than a scheme-by-scheme basis. Ratepayers therefore pay the costs of running all of the 18 schemes rather than those of the particular scheme that relates to their property. The costs of running the schemes are spread across the district and are recovered through one targeted rate which funds the costs of maintaining wastewater treatment plants, pump stations, reticulation repairs and minor upgrades, including renewals of the respective systems.
[31] The funding required to meet the needs of the delivery of wastewater services across the district was set out in the Council’s 2015 LTP. These were identified as the need to deliver wastewater services in an environmentally responsible manner to meet the environmental standards imposed by both regional planning documents and the National Policy Statement for Freshwater Management. Mr Ruru deposed that additionally the Council was required to respond to new standards relating to the way water, wastewater and stormwater services are managed by central agencies and the need to plan for and implement asset renewal programmes to replace aging infrastructure. Linked to that need was the express requirement to maintain infrastructure that can manage future demand, and ensure that the Council delivers all its services, including wastewater collection, in a financially responsible manner.
[32] The RFP included in the 2015 LTP set out the Council’s policies to fund operating and capital expenditure on Council activities, including the provision of wastewater services. The need for a district-wide targeted rate to fund operating expenditure for wastewater was described by Mr Ruru as reflecting the benefits those connected or able to connect to wastewater services received from the service provided. It is recognised that there is a high degree of private benefit in sewage systems, and that therefore a level of user pays is appropriate. However, it is also noted that wastewater activity provides a wider ongoing public benefit for both the economic development of the region and the maintenance of standards of public health
for residents, businesses and visitors. It is therefore appropriate that capital works and operational costs for all schemes are shared across all users.
[33] These considerations are reflected in the analysis which accompanies the LTP. It notes the legal requirements under the Health Act 1956 and the Local Government Act to maintain the existing wastewater systems, and that:
Wastewater treatment and disposal costs are partially driven by higher environmental standards than in the past, as well as non-human influences such as rainfall. These factors are outside of the control of individuals or groups related to the district. However, human actions or inactions also play a role, and those who are considered to contribute to the need for council to carry out this activity include those creating wastewater in urban areas.
All members of the district have an interest in (and to generate a demand for) a clean, unpolluted environment and the recreational, visual and public health benefits that come from having a managed approach to the treatment and disposal of wastewater.
[34] Having made the decision that targeted rates would continue to be used to fund a high proportion of operating expenditure for wastewater for the 2016/17 rating year, the Council considered the overall impact of the allocations of liability for revenue in relation to individual activities, of which the provision of the wastewater service was one.29 No changes were considered necessary.
[35] On 29 June 2016, after the Council adopted its Annual Plan for the 2016/17 rating year, the Council set its wastewater targeted rate for that year to fund the costs associated with the collection, treatment and disposal of sewage from residential and business properties, and public sanitary facilities serviced by a Council wastewater scheme. As in previous years, the rate was set on a broad differential basis using three categories of land use: “Residences”, “Vacant land” and “All other property”. The details of the wastewater targeted rates were set out in the FIS and the Annual Plan. The factor of liability for rating units falling into the category of “All other property” was the full charge rate per pan/urinal regardless of the use or the occupancy of the property. In setting its differential wastewater rates for properties falling into the “Residential” category, the Council was required by the Rating Act to treat each household as having not more than one water closet or urinal.30
29 As required by s 101(3)(b) of the Local Government Act 2002.
30 Local Government (Rating) Act 2002, sch 3, cl 12, note 4.
[36] As submitted by the Council, the “half charge” for “Vacant land” recognised the fixed costs which the Council incurs in making the wastewater service available to a property despite the fact that the property may not actually be connected or utilising the service. The “full charge” that attaches to the “All other property” category recognised the different demands that non-residential properties can create, as compared to residential properties on the wastewater system. The range of properties is very wide. It followed, in the Council’s submission, that the utilisation of different land uses in formulating the targeted wastewater rates recognised the level of “demand” that can be created by non-residential properties.
[37] Before adopting the 2015 LTP, the Council discharged its consultation obligations. This included the distribution in March 2015 of a consultation document to all households and Post Office boxholders in the district. That document was also made available via a website which included a draft of the FIS in addition to advertisements in public newspapers notifying the public of the consultation being undertaken. Six “drop in sessions” were held across the district to provide members of the public with the opportunity to discuss the proposals in the LTP with Council staff and elected representatives. While submissions were received as a result of this consultation process, none commented on the wastewater funding proposal or the proposed calculation of the wastewater targeted rate. After this consultation process was concluded, the LTP was adopted by the Council at a meeting on 24 June 2015, at which time the RFP was also adopted and the rates for the 2015/16 financial year set.
[38] A similar process was adopted for the draft 2016/17 Annual Plan, which was distributed to all households and Post Office boxholders in the district. Members of the public were able to make online submissions via the Council’s website throughout the consultation period in early 2016. Over 200 submissions were received, which included a number relating to rating and financial issues discussed in the Annual Plan, but, again, none concerned the rates for the wastewater activity.
Conclusions as to process followed by the Council
[39] Nothing has been drawn to my attention about the process adopted by the Council to indicate that it failed to follow the statutory processes required to set the
district’s rates for the 2016/17 rating year. Nor that the Council, in exercising its discretion, failed to properly take into account relevant policy considerations concerning the setting of the differential wastewater rate when deciding to continue with the existing arrangements to fund that activity for the rating year. As was submitted on behalf of the Council, the decision reached in setting the 2016/17 wastewater rate was one made by elected members after reviewing relevant statutory considerations and undertaking an assessment of the overall impact of the allocation of liability for its revenue needs before engaging in public consultation.
[40] Mr Kidd has sought to examine one aspect of the targeted wastewater rate in isolation from a raft of considerations that the Council was required to take into account when making its funding and rating decisions. That included its assessment of the overall allocation of liability for its revenue needs across the district’s rating units. In bringing his application, Mr Kidd did not challenge the Council’s planning and financial management processes that were a necessary prerequisite to the setting of the 2016/17 rates. Nor did he engage with the various policy considerations the Council was required to review and come to conclusions about in the exercise of its political discretion.
[41] In the absence of Mr Kidd identifying any illegality in the process followed by the Council in setting the wastewater rates for the 2016/17 rating year, he must meet the high threshold of review for unreasonableness. A court cannot justifiably intervene in the decision of an elected council exercising its discretionary powers to set its rates after having complied with the required statutory processes of financial planning, management, and consultation unless its determination is one that no local authority could have arrived at. It is to that issue, together with some ancillary matters raised by Mr Kidd in the course of his argument, to which I now turn.
Decision
[42] The Council acknowledged that the setting of the wastewater rate should reflect an element of user pays and that benefits accrue to a property from it being able to dispose of wastewater. In general terms, there is a link between the volume of wastewater discharged from a property and the value of the service to that rating unit.
Mr Kidd seeks to emphasise this aspect, although he did not demonstrate that there is necessarily the same connection between the amount of wastewater discharged from a property and the cost to the Council in providing such a service. In Mr Kidd’s submission properties with the same or similar volume of output should be rated equally, and that, in his case, by adopting a liability factor based on the number of toilets provided by the rating unit he is disadvantaged, at least in comparison with properties with a similar number of occupants using a similar amount of wastewater but which are rated less for that service because they have fewer toilets.
[43] However, a difficulty for Mr Kidd is that his argument is premised entirely on a set of circumstances that are individual to him and of his own making. Mr Kidd chose to construct a residential facility that provided private facilities to its occupants. The Council granted a resource consent to Mr Kidd in December 2007 to construct and operate a resthome consisting of 22 residents’ units and a manager’s unit. Building consents for the resthome and an additional house were granted in January 2009 and February 2011. That development resulted in Mr Kidd’s property having 30 toilets. He now seeks, for the purposes of challenging the wastewater rate, to compare his property with other resthomes or residential complexes which only provide communal toilet facilities.
[44] While an argument is available that there should be a closer correlation between the level of liablity for the targeted wastewater rate and the demand placed upon the wastewater system by the rating unit, that is but one consideration and, in broad terms, simply translates to an allocation of liability based upon the number of occupants residing at the property or using its toilet facilities. Brief reflection on the vast range of properties that may fall into the category of “All other property” and the different nature and frequency of their use of the wastewater system brings into relief the potential difficulties arising from a targeted rate based on the number of people occupying or frequenting a rating unit.
[45] Moreover, the comparison sought to be relied upon by Mr Kidd between his property and other resthomes is open to question. Mr Kidd’s allegation of unreasonableness is premised on him being financially disadvantaged by the rates bill he must pay as a result of the way the targeted rate is calculated. However, Mr Kidd’s
residential village provides fully self-contained individual units, each with its own toilet. It is a fair inference that a premium attaches to the provision of such private facilities compared to the economies of only providing a limited number of communal toilets.
[46] Mr Kidd’s challenge to the reasonableness of the wastewater rate did not extend to providing evidence of being disadvantaged in terms of the ultimate profitability of providing a residential facility that offered private toilet facilities as compared with those resthomes that only offered communal arrangements. Nor did the evidence extend to any comparative financial analysis of Mr Kidd’s lifestyle village and the other properties with which he sought to compare his property, or the respective revenues generated from residents who enjoy private facilities as compared to those who share communal toilets. It is not apparent that Mr Kidd is any more “unfairly or unreasonably” disadvantaged by the way the wastewater rate is calculated for “All other property” than, for example, the proprietor of a hotel or motel that provides private facilities compared with the owner of a hostel whose residence only offers shared bathrooms and toilets. Both are engaged in a commercial endeavour but the cost or value of the accommodation is likely to be significantly different.
[47] The number of toilets to be provided to residents in a residential care facility is determined by the New Zealand Building Code which sets down the minimum number of sanitary fittings required for different types of commercial properties based on the use to which the property is put.31 That legal requirement and the ratepayer’s choice are the two factors which determine the number of toilets to be installed at a rating unit. Both are outside the control of the Council. In Mr Kidd’s case it is not suggested there had been any change in approach by the Council to the way it set its wastewater rates for “All other property” during the period he developed his residential village.
[48] At the heart of Mr Kidd’s challenge is his submission that wastewater should be rated on the basis of the number of occupants at the rating unit, not the number of toilets. However, the Rating Act does not permit wastewater rates to be assessed on a
31 Compliance Document for New Zealand Building Code, cl G1, Personal Hygiene issued by the Department of Building and Housing.
per occupant or volumetric basis. The only rate that can be set on a volumetric calculation is for water supply. Section 19 of the Rating Act permits a local authority to set a targeted rate in accordance with the quantity of water provided by that local authority, either in accordance with a fixed charge per unit of water consumed or supplied, or according to a scale of charges.32 In contrast, neither sch 2 of the Rating Act which lists matters that may be used to define categories of rateable land for the setting of targeted rates, nor sch 3 which provides factors that are permitted to be used to calculate liability for a targeted rate, permits such a rate to be assessed on a per occupant or volumetric basis.33
[49] Rates are assessed on the basis of the characteristics of the rating unit not those of the individual ratepayer, and cannot be determined on the basis of the circumstances of the occupants of the property. It would not therefore be lawful for the Council, if indeed it was practically feasible, to set the targeted rate for wastewater on a per occupant or volumetric basis. That conclusion effectively brings Mr Kidd’s challenge to an end. For completeness, I deal with some secondary issues raised by Mr Kidd, and upon which he sought to place some reliance in presenting his argument.
[50] Mr Kidd referred to a discussion he had with a Mr Raymond Covey, who is employed by the Council as a water and waste asset management engineer. Conflicting affidavits were filed by Mr Covey and Mr Kidd regarding the content of their conversation. Mr Kidd maintained that in the course of a discussion with Mr Covey, Mr Covey stated that the wastewater rate was calculated on a per pan basis because individuals with their own toilets use them more frequently. Mr Kidd argued that such a statement by one of its representatives in justification of the wastewater rate was demonstrably false. Mr Covey denies making such a representation. However, whether he did so or not is irrelevant.
[51] There is no evidence that the suggested view was taken into account by the Council during the decision-making process leading to the setting of the rate for the 2016/17 year or in any preceding or subsequent years. Mr Covey’s conversation with Mr Kidd took place after Mr Kidd had received his rate assessment for the 2016/17
32 Local Government (Rating) Act 2002, s 19.
33 Sections 17 and 18.
year. Mr Covey is not an elected member of the Council, and there is no basis to suggest that the Council in making its decision regarding the wastewater rate proceeded on such an understanding.
[52] A further matter raised by Mr Kidd concerned evidence provided by Mr Ruru regarding the approach taken by other councils around the country to funding wastewater schemes. Mr Ruru does recall in around June 2016 discussing with Mr Kidd that a number of other local authorities set their wastewater rate for commercial properties at 50 per cent of the “standard” charge per pan, rather than the full charge adopted by the Council. This was in the context of indicating to Mr Kidd that this issue, together with other questions relating to the way in which the Council funds its wastewater activity, would be included as part of the Council’s review of the RFP. Mr Ruru also recollected that he told Mr Kidd that ultimately the issue would be a policy decision for elected members to make. The Council subsequently considered a report in November 2017 in relation to the setting of rates for the 2018/19 rating year, which included a discussion of the approach taken by other councils to the setting of a wastewater rate.
[53] Mr Ruru canvassed similar information in his affidavit. However, he did so only for the purpose of giving evidence of the Council’s review of its approach to funding wastewater in the future. Because of the limited nature of the information provided, Mr Kidd was critical of the Council’s reliance on this material. However, he did so under the misapprehension that it was being put forward to justify the methodology used by the Council in setting the wastewater rate for the 2016/17 year. As is apparent from Mr Ruru’s evidence, this information was only assembled and put before the Council for the purposes of informing it of the approach taken by other local authorities when it was considering the wastewater rate for a rating year subsequent to that the subject of the present challenge.
[54] Finally, concerns were raised by Mr Kidd regarding the apparent emphasis placed by the Council on his failure to participate in the consultation process concerning the 2015 LTP and the Draft Annual Plan for 2016/17. Mr Kidd made the point that the consultation process in relation to the 2015 LTP took place in March 2015, prior to when the wastewater charges for his property came to his attention.
While he did not make a submission in relation to the 2016/17 Annual Plan, and he cannot specifically recall the date, he maintains he may have already raised his concerns with Mr Covey before the consultation period ended on 29 February 2016. Mr Kidd was anxious to avoid criticism of not having participated in those consultation processes. He considered that he had made his views about the wastewater rate clear to Messrs Covey and Ruru, and had understood that the issues he had raised were to be reviewed by the Council.
[55] I accept that the Council, when outlining the consultation process regarding the 2015 LTP and the draft Annual Plan for 2016/2017, drew attention to the absence of Mr Kidd’s participation in either process. However, the Council emphasised that the evidence relating to the consultation processes was to highlight the nature of the overall decision-making process of the Council leading to the setting of the wastewater rate and was not per se a criticism of Mr Kidd. The Council was not suggesting the fact of it having consulted on the rate, of itself, altered or affected the reviewability of its decision, but rather the importance of the public consultation process, which demonstrated that the Council’s proposals were tested in a public forum without any adverse comment about the wastewater rate. Further, that the obligation of consultation which was discharged by the Council illustrates the high level public policy nature of its setting of the wastewater rate which included mandatory consultation and the taking into account of the public’s views of what was being proposed.
[56] The Council acknowledged that while it may have been helpful in retrospect to have informed Mr Kidd during the course of its officers’ interactions with him that he could make a submission regarding the setting of the wastewater rate, those staff members were under no legal obligation to do so. It was noted by the Council that Mr Kidd had been specifically alerted to the consultation process relating to the 2018 LTP, but that Mr Kidd did not lodge any submissions. For completeness, I also note the Council’s denial of Mr Kidd’s stance that he was led to believe the Council had accepted there was an issue with the setting of the wastewater rate for “All other property” and that it would be reviewed and rectified. Mr Ruru’s evidence was that he told Mr Kidd that the Council would undertake a review but not that it would necessarily change its approach to accord with Mr Kidd’s view. I accept the Council’s
submission that must be so. Mr Ruru, as an experienced council officer and local authority chief executive, would have been well aware that because he was not the decision-maker he could give no such commitment.
Conclusion
[57] Mr Kidd’s challenge to the lawfulness of the Council’s decision was limited to an allegation of unreasonableness. It was not suggested that the Council failed to weigh all relevant considerations, or had regard to irrelevant factors, nor that it did not consult adequately, or failed to follow the correct statutory procedures and processes in making its rating determination. It is not suggested that the Council acted other than in good faith in exercising its discretion in the interests of the district’s ratepayers.
[58] In assessing the rates to be levied on a property it is not mandatory that there be a strict correlation between the perceived benefits provided to a property and the rates levied. Such a factor takes its place together with other considerations that are to be taken into account by a local authority, including the wider public benefits of providing various services to the community, of which wastewater services is one. Those policy considerations reflect the content of the mandatory planning processes required to be undertaken by the Council before exercising its political discretion. If followed correctly by the Council, there is little margin for the Court to intervene. Because of the nature of such decisions and the character of the body charged with their making, the threshold for review on the grounds of unreasonableness remains high.
[59] Mr Kidd has failed to demonstrate that the Council acted unreasonably in deciding to set a differential targeted rate for wastewater services that imposed a liability for the category “All other property” based on the number of toilets provided by the rating unit. As is apparent from my analysis of the legislation and the processes followed by the Council in reaching its rating decision, I am satisfied the Council, as the responsible elected body, validly exercised its discretion and came to a lawful decision regarding the setting of the differential wastewater rate for the 2016/17 rating year.
Result
[60]The application for judicial review is dismissed.
Costs
[61] In the absence of agreement, leave is reserved to the parties to exchange and file memoranda regarding the issue of costs (not more than four pages).
Solicitors:
Preston Russell Law, Invercargill Simpson Grierson, Wellington
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