Nelson Gambling Taskforce Incorporated v Nelson City Council HC Nelson CIV 2010-442-368

[2011] NZHC 1070

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2010-442-368

UNDER  the Judicature Amendment Act 1972

IN THE MATTER OF     an application for reivew of a decision of the Nelson City Council under section 102 of the Gambling Act 2003 and section 83 of the Local Government Act 2002

BETWEEN  NELSON GAMBLING TASKFORCE INCORPORATED

Plaintiff

ANDNELSON CITY COUNCIL First Defendant

ANDTRILLIAN TRUST Second Defendant

Hearing:         25 August 2011

Counsel:         L Acland and C Morice for Plaintiff

C M Owen for First Defendant
D G Collecutt for Second Defendant

Judgment:      7 September 2011

JUDGMENT OF SIMON FRANCE J

NELSON GAMBLING TASKFORCE INCORPORATED V NELSON CITY COUNCIL HC NEL CIV 2010-

442-368 7 September 2011

Introduction

[1]      This case concerns a challenge to the validity of the process leading up to changes the Nelson City Council made to its Gambling Policy in 2010.

[2]      The  Gambling  Act 2003  required  every  territorial  authority  to  adopt  a gambling policy (“the Policy”) in relation to pokie machines.  The Act also requires that Policy be reviewed every three years.  Nelson City Council adopted its Policy in

2004, and then reviewed it in 2007.

[3]      The 2007 review is described in the Council’s evidence as being a “very comprehensive one”.  Obviously the Gambling Policy was a new thing when put in place in 2004, and the 2007 review was the first opportunity to see how it was working. The Council commissioned a Social Impact Assessment, interested persons were involved, and changes were made.

[4]      The next review was in 2010 and is the subject of these proceedings.  Having consulted with interested persons, the Council decided it would recommend one change to the existing Policy.  The Policy presently capped the number of machines at 301, and the proposal was to reduce that to 269.

[5]      A Gambling Policy is  subject to what  is called the “special  consultative procedure” set out in s 83 of the Local Government Act 2002.  That means that when initially adopting the policy, and when subsequently amending or replacing it, this special process must be followed.   The challenge brought in this case is that the Council failed to do that, and as a consequence significant amendments were made with inadequate consultation.

Facts and legislative scheme

[6]      There are two strands running throughout what happened.  First, there is the obligation to review the policy each three years.  The Gambling Act 2003 is silent on what that involves.  Instinctively one would imagine the intensity of review will vary

from review to review, influenced no doubt by how extensive the last review was.[1]

Second, there is the requirement that any changes to the Policy follow a particular process.  Conceptually, that is a separate matter because one could imagine reviews leading to no changes.

[1] Having regard, of course, to any applicable requirements in the Local Government Act 2002.

[7]      What the Council did first was to consult with persons and groups it knew were interested in the topic.  This was in order to assess how these groups felt the

2007 Policy was working in practice.   It received a number of suggestions which included:

(a)       reducing the overall cap on machines;

(b)relaxing location rules which limited the proximity of pokie machines to ATMs, kindergartens, schools and playgrounds;

(c)       separating  out  the  policies  applicable  to  TAB  venues,  and  pokie machines;

(d)      allowing relocation of machines; and

(e)       adopting recommendations made by an Australian Commission.

[8]      The Council officer involved decided that overall the Policy seemed to be working, and given it had been thoroughly done in 2007, it could run for another three years.  However, reducing the cap seemed a step that would reflect what was happening naturally.  So a single amendment was decided upon, namely reducing the cap from 301 to 269.

[9]      As noted, the legislation requires a particular process when amendment is intended.   The basic requirement is that the Council has to prepare and publish a

“Statement of Proposal”.

[10]     The  format  of  the  statement  of  proposal  is  dictated  by  the  proposed amendments. Section 87(2) of the Local Government Act 2002 provides:

... the statement of proposal is

(a)      if a policy is proposed to be adopted, a draft of the proposed policy;

and

(b)      in any other case, a detailed statement of the proposal.

[11]     So when “adopting” a policy, what is to be done is to publish the draft policy. However,  when  amending  a  policy,  what  is  needed  is  a  detailed  statement  of proposal, which is defined in s 87(3) as requiring the reasons for the proposal, and an analysis of options.

[12]     What Nelson City Council did was somewhat of a hybrid.   Its statement of proposal began:

The Gambling Act 2003 requires Territorial Authority’s to develop a Class 4 and TAB venue policies and to review them three yearly.  The Council last reviewed its Gambling Policy in 2007 and it’s due for renewal again in 2010. (Class 4 gambling is the term used to describe non-casino gaming machines, known as pokies).

[13]     The document then carried on to provide a description of the current Policy, and accurately identified two key areas as being:

(a)      the siting of venues within the city boundaries;

(b)the number of machines allowable within the city and within each venue.

[14]     The document then continued:

2.        Changes to Policy

Only one substantive change has been made to the attached draft policy  and  that  is  reducing  the  cap  on  the  number  of  gaming machines from the current 301 to 269.   Agencies involved with problem gambling have requested a lowering of the cap and 269 is the number of machines that can legally operate in Nelson as at February 2010.

[15]     This was the first reference to a “draft policy”.   The rest of the document

need not be commented upon other than:

4.        Consultation

The draft policy is now open for comment and submissions will be received up to 4.00 p.m. on Monday, 3 May 2010.

The dispute

[16]     The Council received 17 submissions.   Eleven commented only on the cap reduction.  Six went further and advocated for wider changes.  Of the six, five were from people or groups already engaged in some way with the industry.  The sixth person wanted to be, in that he was the owner of land on which a pub was situated. The landowner urged changes to the proximity rules so his site would be eligible to host gaming machines, and he could then tenant it.

[17]     A Hearing Panel received the submissions, heard from those who wanted to present material orally, and reached its recommendations.  The changes it proposed went well beyond anything intimated by the statement of proposal, and instead in an opposite direction. The Hearing Panel recommended:

(a)      the cap on machine numbers be reduced, but not by as much as the amendment suggested;

(b)the prohibition on siting machines within 100 metres of ATMs be removed;

(c)      the  prohibition  on  siting  machines  within  100 metres  of  schools, playgrounds and kindergartens be changed so that the only limit was if the site was “immediately adjacent” to a school, playground, or kindergarten;

(d)the policies relating to TAB venues and gaming machine venues be separated.[2]

[2] It can be noted that several of these issues had been raised with the Council in its initial consultation (see [7] above). They were not, however, included or adverted to in the statement of proposal.

[18]     The applicants say these changes could not be made unless contained in a detailed statement of proposal as required by s 87(2)(b).   The Council says that because it attached a draft policy, its actions were governed by s 87(2)(a) and so it did not have to detail any particular amendments.  Further, the context of the three yearly review, and the attaching of the whole policy, put the whole policy up for consideration.  It submitted that the wording of the statement of proposal made this clear.

Decision

[19]     I have no doubt that the amendments made to the Gambling Policy, other than the change in the maximum number of machines, did not comply with the statutory consultation requirements.

[20]     The starting point is determining which process was applicable.  The Council believed it was the statement of proposal process applicable to “adopting” a policy, as  set  out  in  s 87(2)(a).    It  seems  to  have  thought  this  in  part  because  of  the overarching context of a compulsory three yearly review of the gambling policy and in part because it attached a draft policy.

[21]     Section 101(1) of the Gambling Act 2003 says that a territorial authority must “adopt”  a  gambling  policy  within  six  months  of  the  Act  coming  into  force. Section 102(1)  then  says  that  in  “adopting”  a  policy,  the  special  consultative procedure must be used.  Sections 102(2), 102(4) and 102(5) are instructive:

(2)      A policy may be amended or replaced only in accordance with the special consultative procedure ...;

(4)       A territorial authority must, as soon as practicable after adopting, amending or replacing a policy, provide a copy of the policy to the Secretary.

(5)      A territorial authority must complete a review of the policy within

3 years after the policy is adopted ... (my emphasis).

[22]     Just focussing on the scheme outlined by the Gambling Act 2003, it seems that the legislature contemplated an initial policy being “adopted”, and thereafter being either amended or replaced.   In all cases the special consultative procedures apply.

[23]     Taking  that  apparent  scheme  across  to  the  Local  Government Act 2002, where the special consultative procedures are found, one then finds in s 87(2) a corresponding  division,  with  a  procedure  set  out  for  when  a  policy  is  being “adopted”, and a different procedure for other situations.  It is difficult to see why the obvious correlation between s 101 of the Gambling Act 2003 and s 87(2) of the Local Government Act 2002 does not apply.   In 2004, when a policy was first established, the Council was adopting a policy, and s 87(2)(a) applied.  Thereafter, changes were to occur either by way of amendment or by way of a replacement policy, and s 87(2)(b) applied.

[24]     In reality, which of s 87(2)(a) or (b) is used will probably not substantively matter as long as what occurs reflects the plain intent of the legislature.   The legislative scheme I have described, with respect, makes sense. What is being said is that when you first do it, give people a copy of the whole policy so they can see it.  It is a first policy so there is a blank canvas, and there is no established position being altered.[3]    However, thereafter, what matters to people is what you are proposing to change and so a detailed statement of proposal focussing on the changes is required. Consistent  with  the  fact  that  there  is  an  existing  policy,  whether  amending  or

[3] That is not to say explanations may not be required.

replacing it, the requirement is to give notice of:

(a)       the proposed changes;

(b)      the reasons for the changes;

(c)       what alternatives to the changes are reasonably available.

[25]     The Council’s approach would seem to produce unexpected results.  On its reasoning, although in this case people had their attention drawn only to the question of the number of machines, they should have nevertheless made submissions supporting all aspects of the policy.  This would be so even though, as far as they knew, no one was thinking about any other changes.  The waste of effort for both submitters and the Council involved in the Council’s approach tells against its correctness.

[26]     If one stands back here, keeping in mind what the purposes of the special consultative procedure are, it is plain, I suggest, that the process has misfired.   I suspect it has come about because the Council either wrongly thought a review must involve a statement of proposal, or it tried unsuccessfully to combine the two processes. Whatever the reason, the following course was taken:

(a)      the Council gave notice that it was reviewing the Policy because it had to.   It identified the key policy areas of the Policy, but said as regards these we propose only one change, and that is to cut back on the number of machines;

(b)on any reading this is a status quo proposal, with a tweaking that has the effect of tightening the Policy;

(c)      without any further attempt to comply with the special consultative procedure, the Council ultimately, however, decided to significantly loosen the Policy.  In the key policy area of where machines could be sited, it removed one of the controls, and reduced the other so much in scope as to be likely to seldom be operative.

[27]     The special consultative procedure required by the legislation would have little worth if this process was found to be compliant.  In my view the Council has over-estimated the utility, and legal effectiveness, of attaching a draft policy.  The proposition that, just by doing that, it has given sufficient notice to the world of any change that might be made to the Policy is untenable.  It is even more so when it is realised it is not really a new draft policy at all; it is just the old one with one figure changed.

[28]     I do consider, however, that the change to the maximum number of machines has largely been made in accordance with the statutory scheme.  A change in the number of machines was clearly flagged.  The fact that the actual change in numbers was different from that proposed is simply an event to be anticipated as part of a consultation process.  It is not a requirement to give notice of the actual change; it is a requirement to give notice of the area of intended change, and the way in which the Council at that stage thinks it should be changed.  Input from submitters may alter its

thinking, as it seems to have done here.[4]

[4] There are issues as to whether s 87(3) was fully complied with, but these will be addressed under relief.

[29]     Accordingly, I am of the view that all the amendments made by the Council, other than arguably the change to maximum number of machines, were not done in accordance  with  the  statutory  process  for  change.    The  requirements  of  ss 83,

87(2)(b) and 87(3) of the Local Government Act 2002 were not followed.

[30]     Before turning to relief, I comment on one other aspect of the Council’s submissions.  It was put to me that Councils would be placed in a difficult position if I concluded there was non-compliance here.  The suggestion seems to be that one would end up in a never ending circle of giving notice of changes, and retaking submissions, as thinking developed through the consultation process.

[31]     I  do  not  consider  there  is  validity  in  this.    This  is  just  a  process  that miscarried.  It was not expected that the Hearing Panel would recommend such wide

ranging changes.  When it did, the assessment of what was consequently required

was wrong, but these things happen.  I do not see the case as much of a precedent because I would be surprised if similar errors happened frequently.

[32]     For  this  reason  I  am  not  willing  to  comment  more  widely.    Whether  a statement of proposal has sufficiently flagged and explained subsequent amendments will depend on the particular case.  No doubt such assessments will take account of both the aims of the special consultative procedure, and the need to avoid never- ending cycles of notice and consultation.  This case, in my view, does not engage the margins, and is thus a poor vehicle for any broader comment.

Remedy

(a)      A third party is affected

[33]     Soon  after  the  new  policy  was  confirmed  by  the  Council,  Trillian Trust applied for a territorial consent under it.  The application related to the site that had been the subject of specific submission to the Council during the hearing process by the land owner.  It is common ground that prior to the changes in policy, the consent would not have been given as the site was within 100 metres of both a playground and a kindergarten.  Under the new policy the site was not “immediately adjacent” to

either,[5] and so the consent was issued.

[5] The applicants challenge this.

[34]     Armed with its territorial consent, Trillian Trust then applied to the Secretary of Internal Affairs for a venue licence and this was issued on 1 October 2010.  It is a venue licence that actually authorises machines to be operated at a particular site.  I do not know when the pokie machines actually went in pursuant to that licence, but they are now operating and have been for some time.

[35]     Trillian Trust claims status as an affected innocent third party and asks the

Court to decline the plaintiff relief.   Alternatively it asks the Court to decline to cancel the consent it obtained.

[36]     Before considering relief, there is a related  separate issue.   The plaintiff contends that a playground across the road is “immediately adjacent” to the site and so the consent was wrongly issued under the new policy.  The Council argue it is not a point amenable to judicial review as it is just a question of fact.

[37]     My simple view is that the plaintiff’s point is untenable.  It seeks to argue that “immediately” is superfluous, that the real test is “adjacent” and that “adjacent” can have a meaning wider than “abutting”.  I see no reason to suppose “immediately” is superfluous  and  consider  it  must  have  been  used  to  qualify  adjacent  and  to emphasise that immediacy of proximity is the intended concept.  The playground is not immediately adjacent – it is across two footpaths, and a Nelson street and is a little way into a park.   The second defendant’s submissions say the playground is

28 metres away.  The consent was correctly issued in accordance with the amended policy.

(b)      Factors affecting relief

(i)        NATURE OF BREACH

[38]     My assessment that what occurred is a significant breach will be obvious from what I have already said.  I see it as significant in three ways.  First, there is no compliance at all with s 87(2)(b) and 87(3).  Second, the statement of proposal that was issued is (unintentionally) misleading when one looks at the changes that did occur.  The purport of the announced amendment was to tighten the policy in one small way, and otherwise leave it alone.  The effect of what was actually done is to significantly weaken controls on where machines may be sited.  Third, a Gambling Policy is a matter of keen social interest.  It is not surprising that Parliament required the special consultative process to be used.   People have strong views about the topic.

(ii)        DO THE CONSULTATION STEPS THAT WERE TAKEN AMELIORATE THE PROBLEM?

[39]     The Hearing Panel which broadened the range of amendments asked  the

Council officers to bring its recommendations to the attention of people who had

expressed  an  interest.    This  was  done  in  three  ways.    First,  a  letter  was  sent essentially to the same people who were consulted in the initial stages of the review. This is around 75 people or groups.   The letter set out the proposed changes, and concluded:

The Hearing Panel has asked staff to write to everyone who has expressed an interest in the policy review process, to ensure you are aware of the changes proposed.  Council is expected to consider the recommendations of the Panel at its meeting on 3 June.   If you do have any questions about the Panel’s recommendations or the process don’t hesitate to ask me.

[40]     Second, a notice was put in a fortnightly bulletin called “Live Nelson”.  This was the publication where the statement of proposal had originally been notified. The extract in the bulletin advised of the Hearing Panel recommendations.   It concluded:

Next Steps

The Hearing Panel will report the changes proposed to Council at its 17 June meeting for approval.

[41]     Unfortunately the Council meeting was later changed, and the matter in fact came up at the 3 June meeting, before another “Live Nelson” was published.  Also, elsewhere in the Live Nelson bulletin it was noted that the Gambling Policy was “Closed for Submissions”.

[42]     The third step was that the Council officer contacted some people she thought might have an interest.

[43]     It may on another occasion be a nice question as to whether non-compliance with s 83 could be remedied by alternative processes.  It is clear, however, that these measures could not do so.  The letter to “stakeholders” did not invite submissions, and its tone is not encouraging of further participation.  It reads like a fait accompli. The Live Nelson bulletin extract advises of the wrong meeting date, and anyway tells people that the matter is “Closed for Submissions”.   Finally, the number of persons personally contacted was small.

[44]     Together these three steps do not in any way comprise a substitute for the processes required by the Act.   In reaching that conclusion I have thus far only

commented on the notification process.   That ignores the other major deficiency, namely that the reasoning behind the changes has not been articulated, nor have any alternatives been explained.  Why, for example, is “immediately adjacent” the new test rather than some distance less than 100 metres?  Likewise, why not proximate, or adjacent, or whatever other term one might use?  And why, of course, a change at

all?[6]

(iii)     DELAY

[6] This is not to comment on the merits of the proposal. It just notes the type of information and explanations that s 87(3) contemplates people will be provided with.

[45]     The second defendant suggested that the applicant had delayed in bringing proceedings.   The new Policy was confirmed in early June 2010.   Trillian Trust applied for consent on 22 June and received it on 30 June.  Yet proceedings were not filed until mid-September, so approximately four months after the new policy was confirmed by the Council.

[46]     One would like these things done as speedily as possible, but, of itself, I do not see the period that elapsed before the filing of proceedings as significant.  There needs to be a reasonable time allowed for thinking through the position, discussing options with the Council, and then deciding on whether to take the step of litigation.

[47]     As regards Trillian Trust’s position, it sought consent within three weeks of the new policy being confirmed.  It would be unlikely that proceedings such as these would be filed before that time, or before the grant of the consent a week later.  The second significant date, however, is the obtaining of a venue licence from the Secretary of Internal Affairs (31 October).

[48]     The present proceedings were certainly filed prior to that date.  That means that  when  choosing  to  act  on  the  venue  licence  and  install  the  machines,

Trillian Trust knew that a challenge to the policy was in place.

[49]     As noted, the second defendant filed no evidence.   I do not therefore have any information as to what costs were incurred and at what stage.  I assume that prior to proceedings being filed there had already been costs incurred, and that after the proceedings  were  filed,  greater  costs  were  probably incurred.    However,  in  the absence of evidence, and given that the proceedings were filed prior to the venue licence being obtained and acted on, I do not see delay as particularly significant as regards Trillian Trust’s position.

(iv)      SHOULD TRILLIAN TRUST’S POSITION PREVENT THE GRANT OF RELIEF IN RELATION TO THE

POLICY?

[50]     Prejudice to an innocent third party is a recognised factor to have regard to when considering relief.  Although this particular site was within the contemplation of those  involved  in  the decision  making process,[7]  Trillian Trust  itself  was  not involved in the Policy processes at all.  Although obviously it was ready to proceed quickly with an application for the site, it is fairly regarded as an innocent third party.

[7] It was specifically referred to during Council deliberations. And, as noted, the owner of the site was the advocate for the change to the particular rule.

[51]     Mr Collecutt submitted that I should also have regard to the interests of the landlord and the pub operator, who will be affected by any cancellation of the venue licence.   I accept the concept at a broad level, but note those persons have been served with the proceedings and chosen not to be involved.  The relief sought in the pleadings expressly includes cancellation of the territorial consent, so they could have put evidence in had they chosen.

[52]     Further,  and  equally  importantly,  I  am  not  here  dealing  with  the  venue licence.  It seemed to be assumed at the hearing before me that cancellation of the prior territorial consent would give the Secretary of Internal Affairs a discretion whether to review the issue of the venue licence.   No specific provisions to this effect are cited in the written submissions, and it is not apparent to me from the

legislation that this is the case.  The Gambling Act 2003 lists a number of specific

changes that a venue operator must draw to the attention of the Secretary, but this is not one of them.

[53]     The existence of a territorial consent is a pre-condition to obtaining a venue licence (s 67(1)(f)).   It will also be a requirement for when the licence is renewed (s 72(4)).    Otherwise,  not  surprisingly,  the Act  does  not  appear  to  address  the question of a territorial consent being cancelled.  It would hardly have been thought to be a situation of sufficiently common occurrence to merit addressing.

[54]     The position as I see it, therefore, is that cancellation of the licence will not immediately affect the venue licence, which is not  anyway the subject of these proceedings, and which was validly issued at the time it was issued.  Even if it were the  case  that  cancellation  of  the  territorial  authority  consent  would  trigger  a discretion in the Secretary of Internal Affairs, the discretion would be his.  The Court should not deny otherwise appropriate relief to the plaintiff so as to remove that discretion.

[55]     I accordingly conclude that the situation of the third party, Trillian Trust, is not such as to mean that the normal relief that would flow from procedural errors of this significance should not be granted.   In particular, Trillian Trust knew of the challenge before it  gave effect to its venue licence by installing machines,  and cancellation of the consent does not result in automatic loss of the venue licence. Further, Trillian Trust has chosen not to provide me with any evidence as to the impact the loss of this venue licence (if that is what ultimately happened) would have on it.  It needs to be understood in this regard that the Trust is an operator with numerous sites throughout New Zealand.  The impact on it of the loss of a venue licence is not to be equated, especially without evidence, to what the loss might be to the parties more immediately connected to the particular venue.   Finally, the Gambling Policy is a social policy of significance, and the changes which authorise this  particular  consent  were  not  properly  made.    In  my  view  the  wider  public interests prevail.

(f)       Other matters

[56]     One other matter was touched on.  When the plaintiff and others raised their concerns with the Council, an offer was made to place the issue before the incoming Council to see if it would agree to conduct an early review.[8]

[8] The timing of the issue, and therefore this offer, was such that local body elections were imminent. Accordingly, the best offer that could be made was to put the matter before the incoming Council.

[57]     I do not consider it tells against relief that this offer was rejected.  There was no certainty of outcome.   The offer might not have led to anything and the delay highlighted by the second defendant would have become much longer.   Further, if the new Council decided to act, it would mean that the next review took place against the background of the changed 2010 policy.  This means the Council would avoid the discipline inherent in s 87(3) of the Local Government Act 2002 of having to articulate the reasons for the 2010 changes, and of identifying what other alternatives exist.

[58]     Finally, I return to the deficiencies in the statement of proposal as regards the proposed change to the number of machines.   The deficiencies relate to the articulation of alternatives, and arguably also to the articulation of reasons. As to the latter, the statement of proposal said that the change was proposed because agencies involved with problem gambling had requested it.  If that was the only reason, then s 87(3) would be satisfied.   The evidence filed suggests there was, as one would hope, more to it than that.  It seems the numbers were decreasing anyway, and I infer that, with the closing of sites, the new figure represented what was now practically possible.  As for identifying alternatives, the statement of proposal was silent as to what options there might be.  To be fair, however, in this limited area the alternatives

would seem to be only no change, or some other figure.

[59]     Overall, the deficiencies are not such that, standing alone, I would exercise my discretion to invalidate this amendment.  The basic notice obligation was met, albeit not as well as it should have been.   Although I am invalidating other amendments, that does not seem a good enough reason in itself to invalidate this one as well.  Accordingly, I decline relief in relation to the amendment to the number of machines.

Conclusion

[60]     The plaintiff is entitled to its relief.  I declare that the amendments made to the Gambling Policy in 2010, other than the change to the maximum number of machines, were invalid.  They came about following a process which did not comply with statutory requirements and which deprived the public of both the information it should have had as well as the correct opportunity to have input into the process.

[61]     I  also  declare  that  the  consent  given  under  the  policy  to  the  second respondent is consequently invalid.  Although properly issued under the now invalid policy, it was not a consent that would have been permitted under the 2007 policy.

[62]     Finally, I note for the avoidance of doubt that this judgment concerns only the validity of the amendments.  It says nothing about the status of the 2010 review.

[63]     The plaintiff is entitled to costs.  If agreement cannot be reached memoranda may be filed.

Simon France J

Solicitors:

L Acland, Bamford Law, Nelson, email:  [email protected]

C M Owen, Duncan Cotterill, Nelson, email:  [email protected]
D G Collecutt, Barrister, Auckland, email:  [email protected]