Timaru District Council v Minister of Local Government
[2023] NZHC 244
•21 February 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV 2021-485-641
[2023] NZHC 244
IN THE MATTER OF an application for declarations under the common law and/or the Declaratory Judgments Act 1908 AND IN THE MATTER OF
the rights and democratic governance role of local government in New Zealand
BETWEEN
TIMARU DISTRICT COUNCIL
First Plaintiff
WHANGĀREI DISTRICT COUNCIL
Second PlaintiffWAIMAKARIRI DISTRICT COUNCIL
Third Plaintiff
AND
THE MINISTER OF LOCAL GOVERNMENT
First Defendant
THE SECRETARY FOR LOCAL GOVERNMENT
Second Defendant
Hearing: 7 and 8 June 2022 (further memoranda on 15, 16 and 30
November 2022 and 6 December 2022)
Counsel:
J E Hodder KC, B K McLay and D T Haradasa for Plaintiffs
M G Colson KC, B A Davies and B T Haddleton for Defendants
Judgment:
21 February 2023
JUDGMENT OF MALLON J
TIMARU DISTRICT COUNCIL v MINISTER OF LOCAL GOVERNMENT [2023] NZHC 244 [21 February 2023]
Introduction [1]
Background: the status quo [5]
Introduction [5]
The LGA [6]
Waimakariri District Council [18]
Whangārei District Council [22]
Timaru District Council [26]
Background: drinking water reforms [29]
Havelock North Drinking Water Inquiry [29]
Taumata Arowai [33]
The Water Services Act 2021 [36]
Background: Three Waters reforms [37]
Three Waters proposals and process [37]
Council opposition [57]
Department of Internal Affairs’ response [69]
Water Services Entities Act 2022 [75]
Declarations sought [81]
Declaratory jurisdiction [82]
Respective positions [82]
Declaratory Judgments Act [84]
Assessment [87]
Discretion [93]
Issues [93]
Fundamental common law values and principles [95]
Democratic accountability as a core value of the law [108]
Compensation for deprivation of property rights as a core value [124]
Principle of non-interference in legislative process [146]
Not informative in any event [168]
Summary on discretion [181]
Result [182]
Introduction
[1] This proceeding raises the question of the court’s proper role when contentious reform through legislation is to take place. The reform concerns water infrastructure assets – those that provide drinking water, wastewater and stormwater services (the Three Waters) – that are owned and operated by local councils. The Government intends through legislation to implement significant reforms to the way these Three Waters services will be provided to local communities.1
1 This was the position when the hearing took place. Recently, the Prime Minister has announced the reforms are to be reviewed – see for example “PM announces Cabinet reshuffle” RNZ
< To that end the Water Services Entities Act 2022 has been enacted and comes into force by 1 July 2024.2 Pursuant to the Act, four new water services entities (WSEs) are established that will be responsible for the operation and supply of the Three Waters services. Further legislation is intended that will transfer the Three Waters infrastructure assets presently held by local councils to WSEs.
[3] The Three Waters reforms are supported by some councils but not others. The three councils who have brought this action – the Timaru, Whangārei and Waimakariri District Councils (the Councils) – are amongst those who do not support them. They seek declarations concerning democratic local governance and ownership of the Three Waters infrastructure assets. They include declarations: that it is an important and longstanding principle and feature of democratic governance of New Zealand at community and local level that local infrastructure assets and related services are owned and provided by local councils; and that local councils’ rights in relation to infrastructure assets include exclusive possession, use, control and management of them and compensation if the assets are removed from them by legislation.3
[4] The Crown opposes the claim for declaratory relief. It says the declarations sought relate to “principles” of local government rather than legal rights and the court’s declaratory jurisdiction relates only to the latter. It also says there are factors that weigh heavily against the granting of what is discretionary relief. Principally those factors are that the declarations sought improperly seek to influence Government policy and the legislative process and that they are of no utility.
Background: the status quo
Introduction
[5] The Three Waters assets throughout New Zealand are currently owned and managed either directly by councils or by council-controlled organisations.4 They do so pursuant to the Local Government Act 2002 (the LGA) under which local councils exist and operate. As the Councils put it, while that is the current statutory
2 Water Services Entities Act 2022, s 2(2)(b).
3 See [81] for the declarations that are sought.
4 Council-controlled organisations are companies or entities where one or more local authorities have 50 per cent or more of the voting rights. See Local Government Act 2002, s 6.
background, it represents some 150 years of evolution of local government in New Zealand.
The LGA
[6]The purpose of the LGA is as follows:
3 Purpose
The purpose of this Act is to provide for democratic and effective local government that recognises the diversity of New Zealand communities; and, to that end, this Act—
(a)states the purpose of local government; and
(b)provides a framework and powers for local authorities to decide which activities they undertake and the manner in which they will undertake them; and
(c)promotes the accountability of local authorities to their communities; and
(d)provides for local authorities to play a broad role in promoting the social, economic, environmental, and cultural well-being of their communities, taking a sustainable development approach.
[7]The LGA also states the purpose of local governance as follows:
10 Purpose of local government
(1)The purpose of local government is—
(a)to enable democratic local decision-making and action by, and on behalf of, communities; and
(b)to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.
[8] Local councils5 have full capacity to carry out any activity or business.6 They must exercise their powers “wholly or principally for the benefit of the district”.7 Section 14 sets out principles that local councils must adhere to in performing their role. They include:
5 The provisions discussed apply to all territorial authorities. I have referred only to local councils (that is, district and city councils) as they are the relevant territorial authorities for present purposes.
6 Section 12(2)(a).
7 Section 12(4).
(a)conducting its business “in an open, transparent, and democratically accountable manner”;8
(b)when making a decision, taking into account “the interests of future as well as current communities”;9
(c)providing opportunities for Māori to contribute to their decision- making processes;10
(d)actively seeking to “collaborate and co-operate with other local authorities and bodies to improve effectiveness and efficiency with which it achieves its identified priorities and desired outcomes”;11 and
(e)ensuring “prudent stewardship and the efficient use of its resources in the interests of its district or region, including by planning effectively for the future management of its assets”.12
[9] Section 17 permits a local council to transfer one or more of its responsibilities to regional authorities.13 The terms and conditions must ensure “effective provision for any affected co-governance or co-management arrangements that are established by legislation … and that are between local authorities and iwi or Māori organisations”.14 A local council cannot agree to transfer a responsibility “unless it is satisfied, following consultation under section 82, that the benefits of the proposed transfer to its district … will outweigh any negative impacts of the proposal.”15
[10] In assessing these benefits and negative impacts, a local council must have regard to the following matters:16
(a)whether the transfer will promote—
8 Section 14(1)(a)(i).
9 Section 14(1)(c)(ii).
10 Section 14(1)(d).
11 Section 14(1)(e).
12 Section 14(1)(g).
13 Section 17(2).
14 Section 17(3A).
15 Section 17(4).
16 Section 17(4A).
(i)better fulfilment of the purpose of local government:
(ii)productivity improvements within local authorities and districts or regions:
(iii)efficiencies and cost savings:
(iv)assurance that the local authorities concerned have the resources necessary to enable them to effectively perform or exercise their responsibilities, duties, and powers:
(v)effective responses to the opportunities, needs, and circumstances of the affected area:
(vi)enhanced effectiveness, efficiency, and sustainability of local government services:
(vii)better support for the ability of local and regional economies to develop and prosper:
(viii)enhanced ability of local government to meet the changing needs of communities for governance and services into the future:
(b)the scale and probability of the potential benefits of the transfer to users of local government services:
(c)the financial, disruption, and opportunity costs of implementing the proposed transfer at the proposed time:
(d)the consequences and risks of not implementing the proposed transfer at the proposed time:
(e)existing communities of interest, and the extent to which the proposed transfer will maintain linkages between communities (including iwi and hapū) and sites and resources of significance to them.
[11] Nothing in s 17 limits the ability of a local council to delegate the exercise of any responsibility to another local council or enter into an agreement with another local council for the performance of any activity or function.17
[12] Section 17A requires local councils to review the cost-effectiveness of current arrangements for meeting the needs of communities within their district “for good- quality local infrastructure, local public services, and performance of regulatory functions”.18 Such a review must consider “options for the governance, funding and
17 Section 17(9).
18 Section 17A(1).
delivery of infrastructure, services and regulatory options”.19 These include arrangements where responsibility for governance and funding is exercised by the local council and delivery is exercised by another person or agency; or where responsibility for governance and funding is delegated to “a joint committee or other shared governance arrangement” and responsibility for delivery is exercised by another person or agency.
[13] Section 78 requires local councils, when making decisions, to consider the views or preferences of persons likely to be affected or to have an interest in the matter. Section 82 sets out principles for consultation. Section 101 requires local councils to manage revenues, expenses, assets, liabilities, investments and financial dealings “prudently and in a manner that promotes the current and future interests of the community”.
[14] Section 101B requires local councils to have 30-year infrastructure strategies.20 Their purpose is to identify significant infrastructure issues for the council over the 30-year period and the principal options for managing those issues and implications of those options.21 The strategy must outline how the council intends to manage its “infrastructure assets” taking into account the need to:22
(a)renew or replace existing assets; and
(b)respond to growth or decline in the demand for services reliant on those assets; and
(c)allow for planned increases or decreases in levels of service provided through those assets; and
(d)maintain or improve public health and environmental outcomes or mitigate adverse effects on them; and
(e)provide for the resilience of infrastructure assets by identifying and managing risks relating to natural hazards and by making appropriate financial provision for those risks.
19 Section 17A(4).
20 Section 101B(1).
21 Section 101B(2).
22 Section 101B(3).
[15] Infrastructure assets include existing or proposed assets to be used for water supply, sewerage treatment and disposal of sewage, stormwater drainage, flood protection and control of works and the provision of roads and footpaths.23
[16] Part 7 of the Act provides specific obligations relating to water and sanitary services, parks and reserves and endowment properties, and public libraries.24 This includes, under s 125, the council informing itself about the access that each community in its district has to drinking water services (including public health risks relating to this) and assessing the wastewater and sanitary services (with the purpose of assessing, from a public health perspective, the adequacy of these services).25 Section 130 requires a local council to “continue to provide water services and to maintain its capacity to meet its obligations”.26 To fulfil its obligations the local council must:27
(a)not use assets of its water services as security for any purpose:
(b)not divest its ownership or other interest in a water service except to another local government organisation:
(c)not lose control of, sell, or otherwise dispose of, the significant infrastructure necessary for providing water services in its region or district, unless, in doing so, it retains its capacity to meet its obligations:
(d)not, in relation to a property to which it supplies water,—
(i)restrict the water supply unless section 193 applies; or
(ii)stop the water supply unless section 25 of the Water Services Act 2021 applies.
[17] This does not prevent a local council from transferring a water service to another local government organisation.28
23 Section 101B(6)(a).
24 Section 123.
25 Sections 125 and 128. There are further provisions about these assessments.
26 Section 130(2).
27 Section 130(3).
28 Section 130(4)(a).
Waimakariri District Council
[18] Waimakariri District Council (Waimakariri) covers an area north of Christchurch, and contained by Pegasus Bay, the Waimakariri River, the Putekeraki Range and the Hurunui District. The land area is 225,500 ha and the population is 64,700, most of whom live in urban centres in the east of the district.29
[19] The Waimakariri District Council owns and manages its water assets. It provides drinking water and stormwater services to 52,000 people and wastewater services to 45,000 people in its district. Its water infrastructure assets are valued at
$602 million. Most of this infrastructure is relatively new (less than 30 years). Daniel Gordon, Mayor of Waimakariri, says the Council prides itself on its infrastructure record.
[20] Its infrastructure strategy covers the period 2021 to 2051. It anticipates high population growth – around 13,000 and 100,000 additional residents by 2030 and 2050 respectively. Its strategy includes its vision for providing for a fast-growing district and renewing its infrastructure in a timely manner. In addition to its infrastructure strategy, it has a 10-year long term plan and a financial strategy. In preparing its long term plan, the Council proactively engaged with its community by talking to residents, holding meetings and discussing matters with its partners, including Ngāi Tūāhuriri. It received 161 submissions and made changes to its plan as a result of those submissions.
[21] These three documents guide its management of its Three Waters assets for the benefit of its community. They include having separate accounts to ring-fence funding to be put towards water asset renewals with sustainable funding for current and future generations. The Council’s systems and processes are rated AA+ by Standard and Poor’s and AA by the Local Government New Zealand Excellence Council MARK programme.
29 As at 2020.
Whangārei District Council
[22] The Whangārei District Council (Whangārei) covers the south eastern Northland Region, extending from Langs Beach (at the southern end of Bream Bay) to Bland Bay in the north and Nukutawhiti in the west. It covers 270,000 hectares and has a population of 99,400.30
[23] Whangārei owns and manages its water assets. It provides drinking water and stormwater services to about 60,000 people and wastewater services to about 60,500 people in its district. Its water infrastructure assets have a book value of
$700 million and a replacement value of $1.2 billion. Sheryl Mai, the former mayor of Whangārei, says these assets are in good condition and fit for purpose.
[24] Following community wishes to prevent wet weather sewage spills into the Whangārei Harbour, Whangārei invested in multi-million dollar projects in the years following 2009. This included sewerage scheme and upgrades or installing pump, storage or treatment stations. It involved a total expenditure of approximately
$45 million at various locations. It has meant that the Council rarely needs to close beaches for swimming.
[25] Replacement of other ageing infrastructure has also been ongoing while keeping rates rises to a manageable level. Significant additional expenditure is likely as early as the 2022–2023 year to meet the Government’s new regulatory standards.
Timaru District Council
[26] Timaru District Council (Timaru) is a local authority in the South Canterbury region covering 2,737 km2. It is defined by the Rangitata and Pareora rivers with the district stretching along the South Canterbury coastline. The population in 2018 was 49,296 and it is expected to increase by a few hundred by 2028. Timaru’s Three Waters assets have a depreciated replacement cost value of $440.3 million. The affidavit evidence focuses on Timaru’s drinking water assets.
30 As at June 2021.
[27] Timaru owns and operates 11 water supply schemes. These are made up of five urban and six rural schemes spread across a large geographic area. Nigel Bowen, Mayor of Timaru, says that Timaru carries out detailed planning management of these assets and that decisions are made in the context of the Council’s wider strategic objections and well-being outcomes for its communities. He gives the example of enabling more housing being an important priority and that, as part of this, the Council is ensuring that water supply to new subdivisions meets the relevant standards and needs of the new communities.
[28] Mayor Bowen explains that Timaru’s communities have been investing in its water assets since before 1900. They are paid for and maintained using a mixed funding model of rates, metering for commercial users, developers vesting assets in the Council and financial contributions made under the LGA.31 Rates and user charges (the primary funding for Timaru’s Three Waters services) are set in consultation with the community. There is also consultation on the Council’s strategic direction.
Background: drinking water reforms
Havelock North Drinking Water Inquiry
[29] The background to drinking water reforms, which are part of the Government’s Three Waters proposals, was a major outbreak of campylobacteriosis in Havelock North’s drinking water in August 2016. An estimated 5,500 of the town’s 14,000 residents became ill with campylocteriosis, 45 of whom were subsequently hospitalised. The outbreak also possibly contributed to three deaths and continuing health consequences for some residents. This outbreak shook public confidence in the fundamental service of providing safe drinking water.32
[30] The Government established the Havelock North Drinking Inquiry. The Inquiry found that the likely source of the outbreak was sheep faeces, with heavy rainfall inundating paddocks and causing contaminated water to enter one or more bores. The Inquiry found that several parties with responsibility for the water supply
31 Mr Bowen estimates that in the past 20 years central government funding totalled $7.5 million, which he compares with the value of those assets of $440 million.
32 Report of the Havelock North Drinking Water Inquiry: Stage 1 (May 2017) at [1]–[2].
in Havelock North – the District Council, drinking water assessors and the Regional Council – failed to adhere to the high levels of care and diligence necessary to protect public health and to avoid outbreaks of serious illness. Had these failures not occurred a different outcome from the outbreak may have resulted.33 The Inquiry also received credible evidence that complacency was common within New Zealand’s drinking water system.34
[31] The Inquiry recommended that six fundamental principles of drinking water safety be promulgated and used to inform recommended reforms.35 The recommended reforms included establishing a drinking water regulator. The regulator’s responsibilities would include administering the licensing and qualifications of suppliers, and standards and practices of water suppliers and others.36
[32] The Inquiry also considered there to be a compelling case for establishing dedicated and aggregated suppliers to improve compliance, competence and accountability. It said the Government should make a decisive and definitive assessment of whether to mandate or persuade suppliers to establish aggregated and dedicated water suppliers. It said the risks to drinking water and the severity of their consequences provided a significant part of the social policy justification for the necessary regulatory regime.37
Taumata Arowai
[33] In accordance with the Inquiry recommendation, the Taumata Arowai – the Water Services Regulator Act 2020 was enacted. This Act came into force on 1 March 2021.38 It established Taumata Arowai (the water services regulator).
33 At [9]–[10].
34 Report of the Havelock North Drinking Water Inquiry: Stage 2 (December 2017) at [21].
35 At [26]. The principles were: a high standard of care must be embraced; protection of source water is of paramount importance; maintain multiple barriers against contamination; change precedes contamination; suppliers must own the safety of drinking water; and apply a preventive risk management approach.
36 At [441] and [444].
37 At [514]–[515].
38 Taumata Arowai – the Water Services Regulator Act 2020, s 2. The Act (except ss 10(b) and 11(e)) came into force on this date. Section 10(b) was brought into force by Order in Council on 15 November 2021. Section 11(e) came into force on 6 November 2021.
[34]Taumata Arowai’s objectives are to:39
(a)protect and promote drinking water safety and related public health outcomes; and
(b)effectively administer the drinking water regulatory system; and
(c)build and maintain capability among drinking water suppliers and across the wider industry; and
(d)give effect to Te Mana o te Wai, to the extent that Te Mana o te Wai applies to the functions and duties of Taumata Arowai; and
(e)provide oversight of, and advice on, the regulation, management, and environmental performance of drinking water, wastewater, and stormwater networks; and
(f)promote public understanding of the environmental performance of drinking water, wastewater, and stormwater networks.
[35] Its functions include:40 providing leadership on and monitoring of drinking water safety and regulation and the environmental performance, management, and regulation of drinking water, wastewater and stormwater networks; developing standards and compliance rules; and building and maintaining the capability of drinking water suppliers to fulfil their regulatory responsibilities.
The Water Services Act 2021
[36] The Water Services Act 2021 was enacted on 4 October 2021. Most of its sections came into force on 15 November 2021.41 Its main purpose is to ensure that drinking water suppliers provide safe drinking water to consumers by providing regulatory and risk management frameworks and other mechanisms.42 Amongst other things, this Act imposes duties on water suppliers to be registered and to ensure that the drinking water supplied by the supplier is safe, complies with drinking water standards and is of sufficient quantity.43 There are also drinking water emergency powers vested in Taumata Arowai.44
39 Section 10.
40 Section 11(1).
41 Water Services Act 2021, s 2(1)(a). Section 58 was brought into force by Order in Council on 1 March 2022. Sections 138, 141(c) and (d), 144, 146(1)(c), 147 and 148 will come into force on 4 October 2023.
42 Section 3.
43 Sections 21–23 and 25.
44 Subpart 9.
Background: Three Waters reforms
Three Waters proposals and process
[37] At around the same time as the Inquiry, the Government began a Three Waters review to consider how to improve the regulation and supply arrangements to better support New Zealand’s prosperity, health, safety and environment. This review raised concerns about the effectiveness of the regulatory regime for Three Waters, and the capability and capacity of water services providers.
[38] In response to the Government review and the Inquiry, following a Cabinet committee meeting on 3 June 2020, Hon Nanaia Mahuta, the then Minister of Local Government, announced a programme for Three Waters reform on 8 July 2020.
[39] As part of the policy work underpinning the proposed reform, a report was commissioned from the Water Industry Commission for Scotland (the Scottish water industry regulator). Its analysis was that significant investment was likely required over the next 30 years – in the order of $120 to $185 billion nationally – to ensure New Zealanders had access to safe drinking water and that wastewater and stormwater networks achieved good environmental outcomes. It considered there was the potential for significant efficiency gains over time from aggregating water services providers. Scenarios ranging from one to four water services entities were considered to provide the greatest opportunities for scale efficiencies and related benefits compared with the present position.
[40] The analysis of the Water Industry Commission for Scotland was independently reviewed by two consulting firms (Farrierswier and Beca). Deloitte was also instructed to analyse the effects of the proposals on the economy and affected industries. Amongst other things, Deloitte concluded that every region was expected to be positively impacted by the proposals in terms of GDP and employment growth. AON was instructed about insurance considerations with the proposals. Standard & Poor’s was instructed to assess potential credit rating implications for the Government and local councils.
[41] On 14 December 2020, the Cabinet Business Committee noted and agreed several matters about the reform programme including that it currently involved a voluntary approach. Councils would be asked to decide to participate in the new service delivery system in late 2021. The decision would be in the form of an “opt out” approach under which all councils would be included in one of the new water service delivery entities by default unless they decided not to continue to participate. Central government would provide councils with detailed proposals and supporting information ahead of the decision-making window.
[42] On 14 June 2021 Cabinet met and agreed a number of points on the reforms. The Cabinet minutes record that a significant level of investment across the country would be required over a sustained period. The minutes record agreement that the arrangements would involve taking over the assets and service delivery for the Three Waters that were currently held and provided by local authorities. Scale was critical to success. Cabinet agreed that there would be four draft WSEs that would be responsible for the water assets and service delivery in their specified geographical areas and their boundaries.
[43] Cabinet also noted that achieving the full benefits of the reform required comprehensive participation and there were risks to achieving this under a voluntary “opt out” approach. If councils opted out, all communities would not benefit from the reforms, the potential to achieve efficiencies was reduced, a “patchwork quilt” of infrastructure providers within catchments would be created and the effectiveness of economic regulation would be reduced. Cabinet agreed that there would be a legislated “all-in” approach. This new approach would be announced in September 2021 following a “short period of socialising the policy proposals and package with the local government sector”. The “all-in” approach would continue to be the approach in the event that discussions failed to reach a sufficient level of support.
[44] A media release from Minister Mahuta dated 30 June 2021 announced this proposal. The release referred to the 67 councils that provide most of the country’s Three Waters services and said that in too many cases they were ineffective, inefficient and not fit for purpose. Underinvestment was said to have left a legacy of impending costs and poor services for future generations. It was estimated that New Zealand
needed to invest between $120 billion to $185 billion to maintain safe, sustainable and environmentally appropriate Three Waters infrastructure over the next 30 years. This was said to be costs that most local councils could not shoulder on their own. Fatalities from bacteria in drinking water, broken sewer pipes, poorly treated wastewater running into streams and rivers, no-swim notices at beaches, regular boil-water notices and lead contamination were said to be the effects of a system in crisis. The proposals were said to provide savings to households, grow New Zealand’s GDP by $14 billion to $23 billion over the next 30 years and generate 5,850 to 9,260 full time jobs.
[45] On 13 July 2021 the Crown signed a heads of agreement with the New Zealand Local Government Association Incorporated (LGNZ). LGNZ represents the national interests of local government but, as recorded in the agreement, it does not bind its members and individual local authorities can take a different position from LGNZ. The agreement recorded that LGNZ and the Crown had worked collaboratively to consider the interests of central and local government in relation to the Three Waters proposals and wished to continue to do so. They acknowledged that the Three Waters proposals would affordably and sustainably address the water services delivery objectives over the next 30 years. They also acknowledged that it would require “all- in” participation of local authorities to do so. LGNZ committed to supporting, endorsing and promoting the proposals.
[46] A “frequently asked questions” document was issued in about October 2021.45 This included the following:
Is the government taking assets off of communities?
The Government is not confiscating, buying or selling assets. Councils will continue to collectively own the water services entities providing services for their district, on behalf of their communities.
Communities will retain an influence on three waters assets and services through their council and through other consumer and community interest forums.
The reforms are about shifting the day-to-day operation and management of the water services from councils to dedicated water entities, which will mean a better, safer, more cost-effective way of ensuring that our communities have good-quality water services for generations to come.
45 The document is not dated.
How can communities be sure these assets will not be privatised?
Continued public ownership of these water services is a bottom line for the Government. The safeguards against future privatisation the government is writing into legislation go above and beyond the current safeguards (or lack of).
These safeguards ensure communities will be the ultimate guardians of public ownership with any future proposal for privatisation requiring 75 per cent of votes in favour in a public referendum.
Additionally, any surpluses would have to be reinvested in water services to address significant infrastructure deficits, making the entities an unattractive proposition for investors. The involvement of iwi/Māori, with councils, in the strategic oversight and direction of the entities will enhance these protections.
The new water authorities will exist to ensure safe, affordable, resilient and environmentally responsible supplies of water services for their communities rather than to turn a profit.
…
What has changed as a result of council feedback?
The feedback from councils through the 8-week engagement period helped identify areas for refinement of the new entities – such as in the area of representation and accountability.
The Government continues to work in good faith with local government to refine the outstanding details of the reforms design and will establish three technical reference groups, similar to the Stormwater Technical Working Group, that will include, iwi, industry and local government experts. These groups will help refine the reform proposals with regard to oversight and accountability; rural supplies; and the resource management interface.
This further work will be conducted within the government’s reform bottom lines of good governance, partnership with mana whenua, public ownership and operational and financial autonomy.
[47] Cabinet met on 18 October 2021. The minutes record that Cabinet agreed to proceed with the legislated “all-in” approach to the reforms. Cabinet noted that other options and models had been suggested by councils but none of them would deliver the comprehensive range of benefits and outcomes sought for all New Zealanders, or would not deliver them without significant financial implications for the Crown and taxpayers. Cabinet also noted that the need to consider the collective interest of all New Zealanders outweighed the desire to accommodate the interests of individual councils and communities through a voluntary process.
[48] A working group was to be established. The Cabinet minutes record that its purpose was to consider issues relating to representation, governance and accountability for the four new entities. It was also to recommend to the Minister an alternative design that sought to address the concerns of a number of local authorities about the proposals to achieve greater buy-in from them, while remaining consistent with the government’s reform objectives and bottom lines.
[49] The Working Group was comprised of an independent chairperson, nine iwi/Māori representatives and nine Mayors drawn from each of the regions that were to be the geographic boundaries of each of the four new entities. The Working Group was provided with a draft Water Services Entities Bill and considered views from the local government sector.
[50] The Explanatory Note to the draft Bill provided to the Working Group described the proposed WSEs as a new public service delivery model. Each WSE would be a body corporate collectively owned by the territorial authorities in its service delivery area. A WSE would have a two-tier governance structure. This would involve an independent and competency-based board and a regional representative group (RRG). Each RRG would consist of no fewer than six regional representatives and an equal number of territorial authorities and mana whenua representatives. The WSE board would be the governing body of the WSE. Appointments and removals to the board would be made by a committee that was part of the RRG. The WSE would have to establish a consumer forum for gathering consumer views and engaging with its consumers. The Minister would have a role in overseeing and managing the Crown’s interests in and relationship with the WSE.
[51] The Working Group reported in March 2022. In its report, the Working Group noted that certain matters were outside the scope of the Three Waters reforms and were therefore also outside the scope of its work. This included ownership of water (including unresolved issues relating to iwi/hapū rights and interests), resource management and the Resource Management Act 1991 reform, and the purpose and role of local government and how it may be impacted by the proposed reforms.46
46 Recommendations from the Working Group on Representation, Governance and Accountability of New Zealand Water Services Entities (7 March 2022) at 13–14.
[52] Under the heading “Key reflections”, the Working Group report set out a list of matters about which it had a “deeper understanding” as a result of discussions. These included:47 the significant opportunity the Three Waters reforms presented for transformational change; “[t]he role of democratically elected local authorities in relation to placemaking, achieving outcomes for communities and strategic planning for communities, and the need for this role to be accommodated within the governance structure”; the need for an intergenerational solution and the important role the Crown has to play in fixing the historic degradation of assets; the need for WSEs to raise significant debt and the implications of this on how the governance arrangements operate; and “[t]he need for the community to have clear lines of accountability and the ability to input into the priorities of the WSEs”.
[53] The Working Group recorded its strong belief that transformational change to New Zealand’s approach to management was required. It made several recommendations for changes to the proposed Bill that:48
… better ensures that water assets (and the entities that will own them) stay in public ownership, and that as their kaitiaki and stewards, iwi and council will be able to exert the necessary influence over them. …
[54] It agreed with a co-governance model for the WSEs. It considered co- governance principles should be strengthened. It recommended that each RRG have co-chairs – one council representative and one iwi/hapū representative. All RRG decisions, to be prescribed in the Bill, would require consensus decision-making with the ability for the co-chairs to move to a 75 per cent majority vote.49
[55] It referred to the concerns from many in local government and the community about public ownership, the risk of privatisation and loss of local voice. Its recommendations in response to these concerns were:
(a)Strengthening community ownership of assets through a public shareholding structure where councils hold shares on behalf of their communities (one share for each 50,000). As shareholders, councils
47 At 15–16.
48 At 10.
49 At 31.
would have the right to vote on any proposal for the WSE to be sold or privatised. Councils would have to agree unanimously for an asset to be sold. Other than this, the shares would be non-voting and not confer other decision-making rights. This would mean that the role and operation of RRGs would not be disturbed, all other decision-making rights would continue to be shared between the RRG and the WSE board, and matters that a conventional company might reserve to shareholders for decision would instead be reserved to the RRGs.50
(b)The Bill should provide for RRGs to have a minimum of 12 and a maximum of 14 representatives on the RRG with bespoke arrangements for the Northern WSE. Those bespoke arrangements would involve 14 members with 50:50 Council and iwi/hapū representatives, including four Auckland Council representatives, four Tāmaki Makaurau iwi/hapū representatives, one representative each from the Northern Councils and three iwi/hapū representatives from Te Tai Tokerau;
(c)In addition to the RRG input through the WSE Statement of Strategic and Performance Expectations, the Bill should provide for the RRG to approve the strategic direction in the WSE’s Statement of Intent. The WSE would report twice a year to the RRG in delivering the strategic outcomes in those documents. This was to make the WSE more accountable to the RRG and its communities.51
(d)Establishing advisory groups (referred to as sub-regional representative groups or sub-RRGs) to strengthen the role of the RRGs and to enable a “local voice” to be heard in the large entities. The sub-RRGs would follow the same co-governance principles of RRGs and be aligned to sub-regions. They would be responsible for agreeing regional strategic priorities using inputs that could include Te Mana o te Wai statements, directions from regulators, local community priorities within regions as
50 At 27–29.
51 At 6 and 35.
outlined in council strategic documents, and alignment with the Resource Management Act.52
[56] Cabinet considered the Working Group’s recommendations at a meeting on 19 April 2022. It agreed to the key aspects of the recommendations discussed above as well as other recommendations made by the Working Group.
Council opposition
[57] Although LGANZ and the Working Group were in favour of the reforms, other councils were not. The Mayor of Auckland (then Phil Goff) was a member of the Working Group. His office issued a minority report for Auckland Council that expressed dissent with some of the views in the Working Group’s report. Auckland supported the Government’s desire to achieve change in the delivery of water services but had concerns related to the proposed governance and accountability arrangements.
[58] Auckland’s view was that these arrangements were “too far removed from the community and democratic accountability”. While the recommended changes were an improvement, Auckland would still be left as “a minority voice on governing and holding accountable those who deliver water services despite providing 93 per cent of the new Water Services Entity’s assets.” Auckland felt “penalised by losing control and accountability over [its] services because of the shortcomings of some other local authorities”. Auckland considered that it had the economies of scale and operated effectively so that a one size fits all approach did not suit its needs.
[59]The minority report further said:
Democratic accountability, through elected representatives, to people who funded the water infrastructure in Auckland valued at many billions of dollars, and who continue to pay for its operation, is critical. It is not appropriate to cede control over this infrastructure to other councils and mana whenua and to remove existing accountability to Aucklanders through elected representatives.
[60] Auckland also considered there had been inadequate analysis of the benefits and costs of transferring the storm water functions to a new WSE. It sought a deferral
52 At 4 and 40–41.
of this until further work was undertaken. It considered stormwater to be intrinsically linked to the land use planning function of councils and more detailed consideration needed to be given to the implications of this function being transferred. It considered it would make sense to allow the WSEs to focus on the massive tasks of amalgamating and delivering water and wastewater services in the first instance.
[61] The Councils’ affidavits have similar concerns but from the perspective of councils smaller than Auckland. Mayor Bowen says Timaru supports improvements in regulation to ensure safe, reliable and affordable Three Water services for all New Zealanders. However, it has serious concerns about the ownership, governance and accountability arrangements for the WSEs. Timaru considers the reforms overlook the importance of council ownership and control of the Three Waters assets to the local community who funded them.
[62] Timaru considers that through local democracy the community can influence council decisions about the assets and in turn contribute to the four well-beings set out in s 10(1)(b) of the LGA. He notes that residents are able to and do engage directly with the Council about issues. For example, when there was a discolouration issue with the drinking water, the Council was able to respond immediately to address it. Residents and other relevant community representatives also contribute to the strategic direction for the development of the Three Waters assets through consultation on the Council’s Long-Term Plan. Decisions are guided by community views. For example, as a result of community views obtained through consultation, the Pleasant Point water is chlorinated but the Geraldine water is not.
[63] Timaru is concerned at the multiple degrees of separation between its communities and the board of the multi-regional WSE under which there will be no direct Council control nor democratic accountability of the WSE Board back to the Council’s communities. Timaru would be one of the 23 territorial authorities represented by the RRG (which would have an equal number of territorial authority representatives and Ngāi Tahu representatives) with that Group in turn appointing board members. Timaru would be competing with many other authorities, with the risk that issues important to the community it represented would be diluted and left without meaningful representation. The interests of areas with larger populations,
such as Christchurch, were likely to be prioritised and Timaru’s community would not be able to vote out members of the Board if they did not agree with the Board’s decisions.53
[64] Ms Mai agrees with the concerns described by Mr Bowen. Whangārei have built their Three Waters assets, managed them and prepared them for their replacement for more than 100 years. Ms Mai says the local system is well run and has delivered good results and the benefits to Whangārei from the reforms are unclear.54
[65] Whāngarei commissioned its own analysis which was critical of the Government’s analysis. Proposals that assumed Whangārei would not invest in improving its Three Waters infrastructure if it opted out of the proposals were viewed as unfair to Whangārei given the new standards that would be imposed by Taumata Arowai and Whangārei’s record of investment. Whangārei also joined with 28 other councils (representing 43 per cent of the 67 territorial authorities in New Zealand) in presenting an alternative approach, with different funding and accountability mechanisms, to ensure that councils would make changes to their Three Waters infrastructure to meet government expectations.
[66] Whāngarei is concerned that the reforms involve taking Whangārei’s assets without fair compensation. Ms Mai says the Government has not acknowledged that the assets are being appropriated and has simply said that the Council will continue to “own” the assets, or that the councils will collectively own them, or that they will remain in public ownership. However, Ms Mai says they are left without any control of the assets. She refers to the Government’s pledge that no council will be left worse off by the reforms but Whangārei’s commissioned analysis is that the funding offered will leave it worse off. Whangārei considers it will be cross-subsidising other councils that have not sufficiently invested in their infrastructure.
53 As Mr Hodder KC puts it, they would have to hope that the Government gets voted out if they are not happy with the way in which Timaru’s assets are being managed. They cannot vote out the WSE. Accountability at the local level is lost.
54 She refers to the Government commissioned Water Industry Commission for Scotland which placed the Whangārei District Council in the top 25 per cent for the performance of its Three Waters assets.
[67] Waimakariri shares the concerns of Timaru and Whangārei about the reforms. Mayor Gordon’s affidavit refers to community consultation on the Government’s Three Waters proposals carried out in 2021. A large response was received with 95 per cent of respondents of the view that Waimakariri should opt out of the proposals. The most common reasons were that: the assets had been built and operated locally by people who understood the area; the proposals would not give the community a strong voice in the services provided; and Waimakariri would end up cross-subsidising others. The Council agreed with these concerns.
[68] Mayor Gordon says Waimakariri has a strong connection with its community that was particularly forged during repairs following the Canterbury Earthquakes. The loss of local and responsive decision-making power and community influence is a major concern for Waimakariri with the large WSE that will replace it. Over the last 20 years Waimakariri has invested over $100 million in its Three Waters infrastructure. Its long term plan provides for $282 million in capital investment over the next 30 years. This figure contrasts with the Department of Internal Affairs (DIA)’s estimated figure, based on the average for the country, of $1 billion which Waimakariri considers does not take into account its particular circumstances. Waimakariri is concerned it will be forced to subsidise other areas. Waimakariri considers the proposed “no worse off” funding is inadequate.
Department of Internal Affairs’ response
[69] Michael Lovett is the Deputy Chief Executive of the Local Government branch of the DIA. He has had overall responsibility for delivery of the Three Waters reform programme. He refers to the engagement with stakeholders throughout the process. For example, prior to the June 2021 decisions, there had been a period of around one year during which the Government was working with local government, industry and iwi. This included a local government roadshow, workshops, webinars and technical advisory groups. There was also the two-month engagement period in August and September 2021 which involved over 150 meetings and engagements with councils, iwi, industry bodies and other stakeholders. Mr Lovett says that concerns raised during this process will be addressed at later stages of the policy design process.
[70] Mr Lovett says that, in general terms, local government has funded infrastructure assets. However, central government subsidies have also contributed to Three Waters schemes in several districts. This includes:
(a)a Ministry of Works’ Rural Water Supply Grants Scheme in place between 1968 and the late 1980s under which a grant of up to 35 per cent of the cost of constructing rural water supply works was available and utilised (for example, $2.988 million was granted in 1985–1986 and $4.38 million was granted in 1986–1987);
(b)around $272 million in subsidies was distributed between 1970 and 1990 for local authorities to upgrade water supplies and sewerage treatment schemes;
(c)between 2002 and 2010 a Sanitary Works Subsidy Scheme funded sewerage treatment upgrades and water supply fluoridation for small communities (for example Whangārei received $7.81 million towards a pressure sewerage system);
(d)between 2005 and 2015 a Drinking Water Assistance Programme provided $96.5 million to small communities to improve their drinking water;
(e)central government emergency recovery funds are likely to have been used to restore wastewater, water and possibly stormwater infrastructure in may districts, including in Waimakariri following the Christchurch earthquakes;
(f)the Provincial Growth Fund provided the Far North District Council with $2 million to establish temporary water supplies following a drought in February 2020; and
(g)as part of the Covid-19 Infrastructure Investment Fund, Cabinet approved $210 million towards flood protection projects.
[71] As to compensation for the “taking” of the Councils’ Three Waters infrastructure assets, Mr Lovett says this transfer (of assets and liabilities) is expected to leave local authorities in a stronger long-term financial position. This is because they will not have to fund the significant and increasing level of investment required to provide Three Waters’ services. He also says that the councils own the assets on behalf of their residents. After the transfer of them to the WSEs, the WSEs will own the assets on behalf of the same residents.
[72] Mr Lovett explains the financial package that is to underpin the reform process. It includes a “no worse off” component of up to $500 million. This is for stranded costs (overheads that are unable to be transferred to new entities or avoided in the short term) and financial stability. A $2 billion “better-off” component is to be used for outcomes associated with sustainability, climate change resilience, housing development and growth, and community wellbeing. This financial package is not intended to compensate local councils by providing the funding equivalent of the value of their water services assets.
[73] Mr Lovett acknowledges the concerns that some councils will be cross- subsidising those who infrastructure assets are less well maintained. However, Cabinet has decided the significant financial, operating and capital efficiency gains that the reforms will unlock for even the most efficient councils outweigh any cross-subsidisation issues.
[74] As to the status quo, Mr Lovett notes that the Three Waters proposals are just one part of broader proposed changes that may impact on local government. He refers to the Government having instigated an independent review into the Future for Local Government. Factors driving that review include that current local government structures were designed many years ago, councils are facing general fiscal challenges, there have been significant technological and societal changes since the LGA was enacted, and the calls from Māori and the Waitangi Tribunal to provide for the Treaty relationship in local government.
Water Services Entities Act 2022
[75] On 2 June 2022 the Water Services Entities Bill 2022 was introduced.55 This was to establish the four publicly owned WSEs. The Bill set out the ownership, governance and accountability arrangements for the WSEs and for transitional arrangements. The WSEs would commence delivery of services on 1 July 2024.
[76] As stated in the Explanatory Note, this was part of comprehensive reforms to water services with further legislation to follow. That further legislation would include providing for the transfer of assets and liabilities from local authorities to the new WSEs. Establishing the WSEs was to pave the way for improved, effective and efficient management of water services delivery and infrastructure so that New Zealanders would have access to safe, reliable and affordable drinking water, and wastewater and stormwater services that meet their environmental and cultural expectations.56
[77]The Bill as introduced:
(a)Defined water services as meaning services relating to water supply, wastewater and stormwater.57
(b)Set out the objectives of the WSEs.58 They included delivering water services and related infrastructure in an efficient and financially sustainable manner and acting in the best interests of present and future consumers and communities.
(c)Set out the functions of the WSEs.59 These included providing safe, reliable, and efficient water services in its area and any incidental, related or consequential functions.
55 Water Services Entities Bill 2022 (136-1).
56 Water Services Entities Bill 2002 (136-1) (Explanatory note) at 1.
57 Clause 6 (definition of “water services”).
58 Clause 11.
59 Clause 12.
(d)Provided for the WSEs to be a body corporate and to be “co-owned” by the territorial authorities in its area with shares allocated to each territorial authority owner based on the population of its district (one share for every 50,000 people in its district).60
(e)Provided for the establishment and membership of RRGs.61 Each RRG was required to have no fewer than 12, and no more than 14, representatives made up of an equal number of territorial authorities and mana whenua representatives. The RRG’s role was to include appointing and removing board members, participating in the process for setting the WSE’s strategic direction and performance expectations and reviewing the performance of the entity.62 It was also to carry out its role wholly or mostly for the benefit of all the communities in the WSE’s service area.63 Decisions made by a RRG were to be made by consensus or by 75 per cent majority.64
(f)Provided that the constitution of a WSE may establish one or more regional advisory panels (with each panel to have an equal number of territorial authority and mana whenua panel members) whose role was to provide advice to a RRG about that group’s performance or exercise of its duties, functions or powers in a particular geographic area in the service area of the WSE.65
(g)Provided that the board of a WSE was its governing body and that all decisions relating to the WSE’s operation must be made by or under the authority of the board.66
60 Clauses 15 and 16.
61 Subpart 4.
62 Clauses 27 and 28.
63 Clause 29.
64 Clause 30.
65 Clauses 45 and 46.
66 Clauses 56–59.
[78] At the Select Committee stage,67 a majority recommended that the Bill be passed with recommended amendments.68 Those amendments included changes to the governance and accountability provisions and other changes intended to provide greater local voice and decision-making. These included:
(a)enabling the number of territorial authorities represented on the RRGs to be 12 or greater;69
(b)requiring WSEs’ constitutions to contain procedures to enable or support effective decision-making by the RRGs;70
(c)adding additional competencies for Board and Board appointment committees of network infrastructure industries, public health, the environment, perspectives of consumers and communities and perspectives of local government;71
(d)including examples of specific advice that regional advisory panels might advise on, namely on statements of strategic and performance expectations, asset management plans, funding and pricing plans and the infrastructure strategy;72
(e)a rewording of the collective duty on regional advisory panels to a requirement to take into account (when performing or exercise their duties, functions and powers):73
67 At the time of the hearing before me, the Bill had just been introduced. In view of the amendments made at the later stages of the Bill’s passage ultimately into legislation parties were given an opportunity to make further submissions if they wished to do so. Both parties advised that the amendments did not alter their respective positions but for different reasons. I have set out the key changes for completeness in setting out the background in which the declaratory orders are sought.
68 Water Services Entities Bill 2020 (136-2) (Select Committee report).
69 At 27.
70 At 47.
71 At 30.
72 At 33.
73 At 34.
(i)that they should perform or exercise them wholly or mostly for the benefit of all consumers and communities in the WSE’s service area;
(ii)the diversity of consumers and communities; and
(iii)the interests of present and future consumers and communities;
(f)a requirement that WSE constitutions have procedures for ensuring that appointed representatives achieve equitable and reasonable representation of metropolitan, provincial and rural authorities;74
(g)a requirement for independent auditing of a WSE’s statement of intent, requiring annual reports to be published no later than four months after the end of a financial year and taking extra steps to ensure that the report is appropriately available to interested people;75 and
(h)requiring that a WSE must not enter into a major transaction unless it is approved by the WSE’s RRG.76
[79]The Select Committee report set out the minority views:
(a)The National Party members opposed the passage of the Bill. They had concerns about the process for considering submissions on what was a complex and controversial Bill. They noted that the Committee received 88,383 submissions (ranking among the highest number of submissions in the history of the New Zealand Parliament) but heard only 227 oral submissions and there was only a short window for providing submissions.77
74 At 47.
75 At 78 and 84.
76 At 90.
77 At 24.
They also noted that opposition was most notable in the submissions from councils. Many of them were opposed to the lack of ownership rights for territorial authorities. This was concerning because communities had paid for the assets over generations and preferred their ownership be vested in democratically accountable authorities. They considered that the four WSEs would not be democratically accountable.78
The National party members were concerned that there was not a sufficient argument for the removal of the ownership of water assets, that the WSEs had a complicated bureaucracy that kept communities from decision-making, that the WSEs could not be truly representative of smaller communities and that there was co-governance at every level which had not been clearly justified.79
Further concerns were that there was only provision for mana whenua to submit Te Mana o te Wai statements when there were other relevant groups whose voices on water quality should be heard and that alternative reform models had not been truly considered.80
(b)The Green Party wished to see councils retaining real ownership of water assets and infrastructure with WSEs required to give effect to relevant parts of councils’ long-term plans. It strongly supported co- governance. It considered stormwater management should remain with territorial authorities because of its close connection with urban development, land and natural hazard planning and management, and roading. It believed that, in reforming water services, economies of scale must be balanced with maintaining catchment boundaries, as well as local knowledge, community connection and responsiveness. It considered that water services entities should be at the minimal level of
78 At 25.
79 At 25–26.
80 At 27.
regional amalgamation, with some adjacent regions required to combine for effective economies of scale.81
(c)The ACT party opposed the Bill. ACT was unconvinced that the proposed centralised model would result in better outcomes for communities. Centralisation was cited as a requirement to improve water quality but it was rendered unnecessary by a water quality regulator having already been established. ACT also considered the complex and divisive co-governance model was unnecessary and made the reform objectives more difficult to achieve. Alternative models had been proposed and had more widespread support from communities and councils.82
[80] The Water Services Entities Act was enacted on 14 December 2022. It included the amendments recommended in the Select Committee report.
Declarations sought
[81]The following declarations are sought:
ALocal government is an important and longstanding component of the democratic governance of New Zealand.
BImportant and longstanding principles and features of the democratic governance of New Zealand at local community level include the following:
(a)local infrastructure assets are owned and/or controlled, and related services are provided, by local Councils (local councils);
(b)local councils are responsive/and democratically accountable to their communities for their ownership, stewardship and
81 At 28–31.
82 At 33 and 35.
decision-making in relation to local infrastructure assets and related services;
(c)local councils owe (or may owe)83 fiduciary-like obligations to their communities; and
(d)local government infrastructure assets have generally been wholly or materially funded as a result of rates or charges or rentals paid by generations of persons (including businesses) located in their communities.
CThe Councils’ rights of ownership in relation to infrastructure assets include the following:
(a)the exclusive ability to prevent others from interfering with such assets;
(b)the exclusive possession or control of such assets;
(c)the exclusive ability to manage and operate, and/or enter into contracts in relation to, such assets;
(d)the exclusive ability to modify or replace the assets (and to dispose of redundant or surplus assets);
(e)the exclusive ability to use such assets (excluding assets within the scope of s 130(3) of the LGA) as security for borrowing; and
(f)the exclusive entitlement to receive full, fair and objectively independently assessed compensation for any infrastructure assets removed by legislation from the ownership (in particular, the rights of ownership outlined in (a)–(e) above) of such assets.
83 A possible amendment suggested on behalf of the Councils at the hearing.
Declaratory jurisdiction
Respective positions
[82] The first issue is whether there is jurisdiction to grant the declaratory relief sought. The Crown says there is not jurisdiction for the relief sought in the proposed declarations that are A and B above.84 It says the declarations sought are abstract and general statements of legal principles relating to the nature of local government and the nature of the rights attaching to the Councils’ infrastructure assets. It says that declarations are available for declaring legal rights but not for “components”, “principles” and “features” of local government that are the subject of relief sought. It says there is no relevant dispute about legal rights nor any controversy about the construction or validity of the LGA or any other existing stature.
[83] The Councils submit that declarations are not confined to legal rights. It says the court also has jurisdiction to declare the law subject to the discretion not to do so if the declaration is purely academic. It submits that the law includes core values and principles. It says it is the court’s role to say what those core values and principles are and there does not have to be a dispute before it can do so. It says the court can do so where declaratory relief on the law matters or has some practical utility. It says the court has jurisdiction to grant the claimed declaratory relief under the Declaratory Judgments Act 1908 and under its inherent jurisdiction. The Councils invoke both jurisdictions.
Declaratory Judgments Act
[84]Section 2 of the Declaratory Judgments Act provides:
No action or proceeding in the High Court shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the said Court may make binding declarations of right, whether any consequential relief is or could be claimed or not.
[85]Section 3 provides:
84 At [81] above.
Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any legislation … or
Where any person claims to have acquired any right under any such legislation
…
such person may apply to the High Court … for a declaration …
[86] Section 9 provides that a declaration may be given in anticipation of any act not yet done or an event that has not yet happened. Section 10 provides that the jurisdiction is discretionary. Section 11 provides that jurisdiction to grant a declaration is not excluded by the fact that the court has no power to give any other relief in the matter.
Assessment
[87] The Councils submit that there is jurisdiction for its claimed declaratory relief under s 3 at least in respect of the declarations sought as to their property rights (proposed declaration C above).85 The Councils correctly make the point that the jurisdiction is not to be narrowly interpreted.86 They say that s 3 provides jurisdiction for their claim to have acquired property rights under the LGA that the proposed Three Waters reforms will alter. They correctly also say that the jurisdiction does not depend on there being an existing dispute or lis.87
[88] The Councils submit that s 2 also provides jurisdiction for the declaratory relief sought in A, B and C above.88 They say that case law establishes that this provides “stand-alone” jurisdiction,89 distinct from and wider than the s 3 jurisdiction,90 and that it is a “catch-all provision” permitting the court to make a declaration not covered by s 3 directly.91 They say that all three declarations relate to declarations of “legal” rights. The say the proposed declaration C relates to existing property rights held by
85 At [81] above.
86 Mandic v Cornwall Park Trust Board [2011] NZSC 135, [2012] 2 NZLR 194 at [5]–[9] and [82].
87 At [9] and [82].
88 At [81].
89 Attorney-General v Taylor [2018] NZSC 104, [2019] 1 NZLR 213 at [97].
90 Association of Dispensing Opticians NZ Inc v Opticians Board [2000] 1 NZLR 158 (CA) at [13].
91 Matamu v Si’tia [2016] NZHC 2516 at [71], citing Johnston v Johnston [1991] 2 NZLR 608 (HC); Simpson v Whakatane District Court (No 2) [2006] NZAR 247 (HC); and Ambrose v Attorney- General [2012] NZAR 23 (HC).
the Councils (and other local councils). They submit the proposed A and B declarations relate to fundamental constitutional rights of the electorate.92
[89] I agree that Attorney-General v Taylor confirms that s 2 provides “stand-alone” jurisdiction for declarations of legal rights.93 The case involved a claim for a declaration that legislation prohibiting prisoners from voting was inconsistent with the right to vote affirmed in the New Zealand Bill of Rights Act 1990.94 The Attorney- General submitted that the declaration sought was outside the proper judicial function because it was “advisory” only and no further consequential relief was available. This was rejected. As it was put in the judgment of Ellen France and Glazebrook JJ, a “formal declaration of the law and, in particular, of the effect of the 2010 Amendment on the respondents’ rights and status” was available even when there was no lis.95 This was “consistent with the usual function of the courts”.96
[90] Wade and Forsyth’s Administrative Law describes the essence of the declaratory jurisdiction as stating “the rights or legal position of the parties as they stand”.97 Lewis’ Judicial Remedies in Public Law says the jurisdiction is “extremely broad”98 and that the courts are “prepared to grant declarations to give general guidance on matters of public law where there is a real need to do so”.99 Woolf and Woolf’s The Declaratory Judgment states that “[a] declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs”.100 It discusses the increasing scope and availability of the remedy that is now reflected in the United Kingdom Civil Procedure Rules that have amended the wording from “declarations of rights” to simply “declarations”.101 It says “[i]t can
92 At [81] above.
93 Attorney-General v Taylor, above n 89, at [97] per Elias CJ.
94 New Zealand Bill of Rights Act 1990, s 12.
95 Attorney-General v Taylor, above n 89, at [53].
96 At [53].
97 Forsyth, Ghosh and Wade Wade and Forsyth’s Administrative Law (12th ed, Oxford University Press, Oxford, 2022) at 483.
98 Clive Lewis Judicial Remedies in Public Law (5th ed, Sweet & Maxwell, London, 2014) at 249.
99 At 261.
100 Lord Woolf and Jeremy Woolf The Declaratory Judgment (4th ed, Sweet & Maxwell, London, 2011) at [1-01].
101 At [2-08], [2-26] and [9-03].
now be safely said that even if a particular action for declaratory relief only involves hypothetical issues this does not deprive the court of jurisdiction”.102
[91] The proposed declaration C above103 more directly seeks a formal declaration of law and, in particular, the Councils’ infrastructure property rights and status under the LGA.104 The first two proposed declarations (A and B above)105 are less directly about legal “rights” but are sought to establish that there are important constitutional law principles affecting the Councils and their communities that would be altered by the Three Waters reforms. Taking a broad view of the s 2 jurisdiction, I proceed on the basis that the declarations are conceivably within the Attorney-General v Taylor formulation.106 The issues the Crown raise in opposition to them are better addressed under the s 10 discretion rather than as a matter of jurisdiction.
[92]As it was put by Cooke P in Re Chase:107
As to jurisdiction, s 2 of the Declaratory Judgments Act is amply wide and in my view should not be restricted by interpretation: provided always that it is read together with s 10, which expressly states that the declaratory jurisdiction is discretionary. …
Discretion
Issues
[93] The Crown’s opposition to the grant of declaratory relief can be summarised as follows:
(a)the declarations claimed are abstract propositions that do not accurately or fully state the statutory legal position under which local government operates;
102 At [4-36], and going on to explain that it might be refused as a matter of discretion rather than jurisdiction.
103 At [81] above.
104 Attorney-General v Taylor, above n 89, at [53].
105 At [81] above.
106 It is therefore unnecessary to consider the court’s inherent jurisdiction.
107 Re Chase [1989] 1 NZLR 325 (CA) at 333.
(b)the purpose of the declaratory relief is to influence the reform process that, as a matter of comity, the court should not permit; and
(c)the declarations lack utility because, to the extent they accurately state the current legal position, the Government (and in turn Parliament) are aware of those matters and the sovereignty of Parliament means that reforms that alter the current legal position are able to be made.
[94] In responding to the first of these issues, I will address the concept of unwritten constitutional or fundamental common law principles. I will then focus on these principles as they relate to the declarations as framed. I will then proceed to consider the second and third issues.
Fundamental common law values and principles
[95] The Councils say that the law by which we are governed includes fundamental core principles and common law values such as the principle of legality. They refer to Fitzgerald v R as a recent example of the courts recognising this.108 That case concerned the “three strikes” regime in the Sentencing Act 2002. That regime included a provision requiring that the maximum sentence be imposed on the defendant’s third strike offence.109 The statutory provision imposing that mandatory requirement did not state that it was expressly subject to the right not to be subject to a disproportionately severe sentence.110 Nevertheless, the Supreme Court held that the statutory provision did not require the maximum sentence to be imposed if that sentence would be breach this right.111
[96] In reaching this view the Court referred to the “principle of legality”. The Chief Justice described this as:112
… a common law principle of statutory interpretation which exists independently of the Bill of Rights, to protect and uphold certain rights and
108 Fitzgerald v R [2021] 3 NZSC 131, [2021] 1 NZLR 551.
109 Sentencing Act 2002, s 86D.
110 The right affirmed in s 9 of the New Zealand Bill of Acts 1990.
111 Fitzgerald v R, above n 108, at [139] per Winkelmann CJ, [250] per Glazebrook J and [219] per O’Regan and Arnold JJ.
112 At [51].
values that the common law has identified as fundamental or as having a constitutional nature.
[97]Arnold and O’Regan JJ also referred to this principle. They went on to say:
[209] Examples of fundamental values protected by the common law presumptions are individual freedom, property rights, the right of access to the courts and the solicitor/client privilege. …
[98] Their judgment discusses that, when interpreting statutory provisions, courts use interpretative techniques to give effect to these presumptions even when they arguably cut across the apparent legislative purpose. They explain that the courts do so because of the “fundamental nature of the freedoms protected by the presumptions.”113 They give some examples and then conclude on this point:
[215] To summarise, in the cases discussed, apparently unrestricted general words were not sufficient to displace presumptions reflecting core legal values. In each instance, the effect of the Court’s decision was to limit the general statutory language by making it subject to an unexpressed qualification that protected the relevant core value. To render the core value inapplicable, the statutory language had to address that value explicitly.
[99] The Crown submits that Fitzgerald was about presumptions of statutory interpretation. It submits that it was not about substantive common law rights that are capable of engaging the court’s declaratory jurisdiction. I accept that the Court in Fitzgerald was discussing a statutory interpretation principle. However, it is an interpretation principle that recognises that there are, as the Chief Justice put it, “certain rights and values that the common law has identified as fundamental or as having a constitutional nature” or,114 as Arnold and O’Regan JJ put it, “fundamental values” or “core values” protected by the common law.115
[100] The examples of these core values that are referred to by Arnold and O’Regan JJ come from Burrows and Carter Statute Law in New Zealand.116 The author describes them as “truly fundamental” values and principles that “have been at the heart of our legal system since time immemorial”.117 The author also makes the
113 At [209].
114 At [51].
115 At [217] and [218].
116 Ross Carter (ed) Burrows and Carter Statute Law in New Zealand (6th ed, LexisNexis, Wellington, 2021) at 431–436.
117 At 432.
point that the values do not hold still. They “may become stronger or weaker as time goes by, and they may become increasingly qualified by other considerations”.118 The author gives the “clear example [of] the old value attaching to private property” having in recent times being “much attenuated by the requirements of control of land in the public interest”.119
[101] The United Kingdom Supreme Court discussed the concept of “fundamental principles of … constitutional law” that are “developed by the common law” in R (Miller) v Prime Minister.120 The case involved a challenge to the decision about when to prorogue Parliament (that is, in effect to put Parliament into recess) – a decision made by a prerogative power exercised by the Crown. The Court held that the power had been exercised unlawfully because the date for the recess frustrated Parliament’s ability to carry out its functions regarding the United Kingdom’s withdrawal from the European Union.
[102]In reaching this view, the Court said:121
[38] Nevertheless, every prerogative power has its limits, and it is the function of the court to determine, when necessary, where they lie. Since the power is recognised by the common law, and has to be compatible with common law principles, those principles may illuminate where its boundaries lie. In particular, the boundaries of a prerogative power relating to the operation of Parliament are likely to be illuminated, and indeed determined, by the fundamental principles of our constitutional law.
[103] The Court went on to note that the United Kingdom does not have a single written Constitution. It does, however, have a constitution established over time “by common law, statutes, conventions and practice”.122 It “includes numerous principles of law, which are enforceable by the courts in the same way as other legal principles”.123 The “legal principles … include constitutional principles developed by the law”.124 Examples of these principles were: that the law of the land cannot be
180 At [66].
181 At [60].
claims rights short of a challenge to the particular decisions to transfer the specified properties.
[154] In reaching this view, the Supreme Court discussed the scope of the principle of non-interference in Parliamentary proceedings. There were two non-controversial propositions as to the principle: first, a court would not make an order to prevent the introduction of a Bill to the House of Representatives; and secondly, the courts should not try to “dictate, by declaration or a willingness to award damages or any other form of relief, what should be place before Parliament”.182
[155] Beyond these matters, there were questions about its exact scope. The Court considered it was not necessary to “resolve the exact metes and bounds of the principle” in the present case.183 It went on to sound a “note of caution” about its application to decisions that were “somewhat distant” from the examples of a Minister’s decision to introduce a Bill to the House or from debate in the House.184 The principle was regarded as a corollary of the implied right to freedom of expression in parliamentary proceedings. The Court said that this suggested a temporal link to what occurs in the House was necessary.185 It also said:186
… It would be overbroad to suggest that the fact a decision may, potentially, be the subject of legislation would always suffice to take the advice leading up to that decision out of the reach of supervision by the courts. That would be to ignore the function of the courts to make declarations as to rights.
[156] In the present case the parties discussed other authorities but for present purposes the key authority is Ngāti Whātua Ōrākei. In the context of proposed reforms that are contentious it is, however, worth noting that the principle of non-interference is not about the courts avoiding claims that concern subjects that are politically controversial. As it was put in R (Miller) v Prime Minister:187
[31] … almost all important decisions made by the executive have a political hue to them. Nevertheless, the courts have exercised a supervisory jurisdiction over the decisions of the executive for centuries. …
182 At [36], quoting Te Runganga o Wharekauri Rehohu Inc v Attorney-General [1993] 2 NZLR 301 (CA) at 308.
183 At [46].
184 At [46].
185 At [47]. The Court contrasted this with the broader position taken by the Court of Appeal in Milroy v Attorney-General [2005] NZAR 562 (CA).
186 At [46].
187 R (Miller) v Prime Minister, above n 120.
…
[34] … if the issue before the court is justiciable, deciding it will not offend against the separation of powers …
[157]In the present case, Mr Hodder, in his oral submissions for the Councils, said:
There has been a careful attempt to avoid infringing on the principles laid down in the Ngāti Whātua Ōrākei decision of the Supreme Court, so there is no challenge to anything that Parliament is going to do. There never was a question of challenging Parliamentary sovereignty but there are questions that still are matters that we say are justiciable …
[158] The Three Waters reforms are the impetus for the proceeding but the declarations that are sought have been framed without reference to them. The declarations state general propositions that the Councils say require clarification in light of what it says is the Crown’s apparently different understanding of them. They say the difference is important for other local authority assets in the future.
[159] While it is the case that the proposed declarations refer to “local infrastructure assets” generally, it is also the case that the declarations are intended to include the Three Waters infrastructure assets. These assets are not excluded in the proposed declarations and that is intentionally so. The very point of the declarations is said to be to ensure that Parliament is informed of the important rights and principles addressed in the claimed relief. It is said that Parliament ought not to be proceeding with the legislation without being properly informed of the important rights addressed by the declarations.
[160] This submission for the Councils relies on the following passage of Lord Hoffman in R v Secretary of State for the Home Department, ex parte Simms, cited with approval by the Supreme Court in Fitzgerald v R:188
Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights. … The constraints upon its exercise by Parliament are ultimately political, not legal. But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full
188 R v Secretary of State for the Home Department, ex parte Simms [2000] 2 AC 115 (HL) at 131 (emphasis added); and Fitzgerald v R, above n 108, at [52] per Winkleman CJ and at [208] per Arnold J.
implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.
…
[161] The Councils rely in particular on the italicised words. Mr Hodder put it this way:
So how is the legislature and indeed the society properly informed about core legal values. Well, the answer is this court does that. This is the court that does it every day of the week in applying the law in particular cases, in deciding cases, in issuing judgments in cases, and in those also included in the declaratory jurisdiction. … Well it means that there is an idea underlying the role of the courts based on the idea that both the legislature and voters are properly informed about core legal values and erosions of them. That’s why Lord Hoffman says ‘Parliament must squarely confront what it is doing’, not to be done quietly or by subterfuge or through a cloud of dust. It is to be done squarely and openly. And so that avoids the problem that he notices in the second half of that proposition, the risk that those rights might pass unnoticed in the democratic process. And then also in recognition that there must be accepting the political cost. What that all boils down to is that if a government in this country proposing legislation and the Parliament that is going to enact it or not, needs to be properly informed about what it is doing in terms of rights. Not only that, but the population needs to be properly informed on what is being done because otherwise they can’t impose a political cost should that be what the electorate wishes to do. So it is about having appropriate information when these issues arise. If none of those things happen, if Parliament doesn’t know what is going on and the electorate doesn’t know what is going on in terms of rights, then the formula which Lord Hoffman is explaining doesn’t work. That is why it is fundamental to the principle of legality. That is why if you go through that process, it is not only legal, it is legitimate. It is legitimated by the democratic process itself being properly informed and in play. Absent that, there is a problem. There isn’t a compliance for the values that underpin society. And that is why it is important that there be proper attention paid at all stages to the idea of the core values and the rights that are in issue.
[162] Applying these submissions to the present case, the Councils are concerned that the core values concerning local government democracy and property rights that are the subject of its proposed declarations will be eroded by the Three Waters reforms and that this has not been confronted by the Government in proposing them.
[163] In my view, however, the Councils’ submission seeks to take Lord Hoffman’s comments in Simms to a different stage of the legislative process – that is, while the legislation is before the House rather than after it has been enacted and must be interpreted by the court in a case before it. Simms was concerned with generally
worded legislation pursuant to which secondary legislation was issued that limited the right to freedom of expression.189 The House of Lords held that general powers of decision-making conferred by statute were presumed to have been enacted subject to fundamental civil liberties.190 Simms was therefore about interpreting legislation once enacted.
[164] Where the fundamental principles are the rights and freedoms affirmed in the New Zealand Bill of Rights Act, the presumption referred to by Lord Hoffman is expressly incorporated in that Act.191 The legislative process under that Act also has a mechanism for bringing Parliament’s attention to any provision of a Bill, on its introduction, or as soon as practical after its introduction, that appears to be inconsistent with the fundamental rights and freedoms affirmed by the New Zealand Bill of Rights Act.192 A declaration of inconsistency might be sought from the court if Parliament enacts legislation that appears to unjustifiably limit a right or freedom affirmed in that Act.193 However, I am unaware of a case in which declaratory relief has been granted that legislation before the House is inconsistent with the fundamental rights and freedoms affirmed in that Act, or inconsistent with fundamental common law values, in order to inform the House of that alleged inconsistency, where the legislative mechanisms for doing so have failed or there is disagreement with the view provided to the House through those mechanisms.194
189 R v Secretary of State for the Home Department, ex parte Simms, above n 188. The context was restrictions that prison officials put on media visiting prisoners. Legislation enabled the Home Secretary to make rules for the regulation and management of prison. Pursuant to this power, rules were issued that made provision for prisoners to correspond with journalists. These rules further provided that visits by journalists in their professional capacity should generally not be allowed and where, exceptionally, they were permitted, the journalist would be required to give an undertaking not to use the interview for professional purposes except as permitted by the governor of the prison (amongst other restrictions). This was not ultra vires in itself but the policy to impose an indiscriminate ban in reliance on the legislative provisions was unlawful.
190 At 132.
191 New Zealand Bill of Rights Act 1990, s 5.
192 Section 7. Sections 5 and 6 of the Act provide further protections to the freedoms and rights affirmed in the that Act.
193 For example, Attorney-General v Taylor, above n 89; and Make It 16 Inc v Attorney-General
[2022] NZSC 47.
194 For example, the Councils here express surprise at the 19 April 2022 Cabinet paper that says there are no human rights at issue. Comalco Power (New Zealand) Ltd v Attorney-General [2003] NZAR 1 (HC) and Westco Lagan Ltd v Attorney-General [2001] 1 NZLR 40 (HC) are examples where the High Court did not grant anticipatory relief for anticipatory breach of contract to be effected through legislation that was before the House.
[165] More importantly, in terms of the authoritative guidance provided in Ngāti Whātua Ōrākei, I am not persuaded that the court should grant declaratory relief during the legislative process of the kind that is sought here. The legislative process is already underway. The Water Services Act has been enacted. The Explanatory Note to the Bill that brought in that Act said that further legislation would provide for the transfer of assets and liabilities from local authorities to the new WSEs. The declaratory relief sought has too close a temporal link to the intended legislative process as to make that appropriate. That temporal link together with the underlying purpose of the relief sought puts it within the spirit of the second accepted aspect of the principle of non-interference referred to in Ngāti Whātua Ōrākei, namely, that the courts should not try to “dictate, by declaration or a willingness to award damages or any other form of relief, what should be placed before Parliament”.195
[166] The Councils seek to bring themselves within what Ngāti Whātua Ōrākei regarded as permissible because the Councils have other infrastructure assets, such as roads, that are not subject to the legislative process. This is not, however, similar to the ongoing rights in Ngāti Whātua Ōrākei for which declaratory relief was available. The settlement of iwi and hapū Treaty claims has been an ongoing process over many years. The settlement that triggered the claim to the court was merely one aspect of that process. Declaratory relief would settle relevant principles that would be engaged in further settlement processes that would take place in one form or another. If the Government were to propose taking further infrastructure assets from councils, it can be expected that there will be an opportunity for input into the proposals. In the event that any such possible proposals raised legal issues, the court’s assistance is potentially available, subject to that assistance being somewhat distant from a decision to introduce a Bill in the House or from debate in the House.
[167] I conclude that the declaratory relief sought here infringes the principle of non- interference in the legislative process.
195 Refer [154] above.
Not informative in any event
[168] The Crown submits that the declarations have no utility because Cabinet was well aware of the matters that they seek to address. The Councils disagree. Their argument that the declaratory relief will play an informative role is in part based on the statement of defence to the pleadings. Specifically, the Councils plead that:
Local government is an important and longstanding component of the democratic governance of New Zealand.
[169] The statement of defence admits this is a general principle but says that a pleading as to the features that are important and longstanding components of democratic governance is “too vague and not explicit enough” to plead to.
[170]Further, the Councils plead that:
The Councils own, operate, control and make decisions about infrastructure assets in and for their communities, and are democratically accountable to those communities for the quality and management of such assets.
[171] The Councils say this should be beyond dispute such that the statement of defence should have responded with a simple “the paragraph is admitted” pleading. Instead the Crown’s response is lengthy. It appears intended to make the following points:
(a)the LGA provides a statutory framework which governs the way in which local authorities own, operate, govern and/or control infrastructure assets to varying degrees;
(b)under the statutory framework, ownership of local infrastructure assets goes hand in hand with the provision of local services; and
(c)the Councils are democratically accountable to their respective communities for the quality and management of the local infrastructure assets.
[172]Further, the Councils plead:
The Councils’ rights of ownership in relation to infrastructure assets include the following:
the exclusive ability to prevent others from interfering with such assets;
the exclusive possession or control of such assets;
the exclusive ability to manage and operate, and/or enter into contracts in relation to, such assets;
the exclusive ability to modify or replace the assets (and to dispose of redundant or surplus assets);
the exclusive ability to use such assets (excluding assets within the scope of s 130(3) of the LGA) as security for borrowing; and
the exclusive entitlement to receive full, fair and objectively and independently assessed compensation for any infrastructure assets removed by legislation from the ownership (in particular, the rights of ownership outlined above) of such assets.
[173] The statement of defence responds to this with a lengthy pleading that appears intended to make the following main points:
(a)the legislative framework places restrictions on the Councils’ ownership rights which include that it cannot use its water services assets for security, nor divest its ownership or other interest in a water service except to another local government organisation, nor lose control or dispose of any of the water infrastructure assets unless it retains its capacity to meet its obligations; and
(b)as the rights are conferred by statute, they may be modified or removed from time to time.
[174] I do not accept that the Crown’s statement of defence shows that those responsible for the reforms and, in turn, Parliament does not understand the importance of local government to the democratic governance of New Zealand, nor that compensation should be paid when property is expropriated but subject to Parliament’s legislative power to decide not to pay compensation (which it might decide to do for policy reasons). As I read it, the statement of defence is intended to convey that Parliament can amend the particular statutory functions presently
conferred on local government. It is also intended to convey that the statutory framework imposes obligations and restrictions on local councils that own the infrastructure assets that ownership of private property does not.
[175] In addition to the pleading point, the Councils refer to the apparent lack of understanding about the loss of democratic accountability and the deprivation of ownership rights that the reforms entail in the documents leading up to the legislative reforms. For example, the Councils refer to the late 2021 “frequently asked questions” document referred to above.196 This stated that the Government was not “confiscating, buying or selling assets”, that the councils would “collectively own” the WSEs that would supply the services, and the WSEs and communities would “retain an influence on Three Waters assets and services”. The Councils note that there is no mention that Councils will no longer have effective control over their assets and, in that sense, will be deprived of their assets. Nor, the Councils say, is there a recognition that community influence is lost without effective control of the assets.
[176] The Councils also refer to the Cabinet paper from the Minister of Local Government dated 19 April 2022.197 This paper refers to the proposed “collective ownership of water services entities by the territorial authorities in the service area” and a concern that “this form of ownership does not provide a tangible relationship between communities and their local water services entity that is well understood by the public”. The Minister’s proposed response to this concern was to adopt the Working Group’s recommendation that “ownership of each entity by local communities is best expressed through a direct shareholding interest in the entity”. The Minister also proposed to accept the Working Group’s recommendation that the purpose of the shareholding was as an additional protection against privatisation. The Councils submit that this fails to recognise that the shareholding interest does not provide any ownership rights for the Councils other than that the assets will stay in public ownership.
[177] The Councils also refer to the DIA Disclosure Statement dated 10 May 2022. Its stated purposes included to identify “the presence of certain significant powers or
196 At [46] above.
197 At [56] above.
features in the Bill that might be of particular Parliamentary or public interest and warrant an explanation.” It set out the “significant legislative features” of the Bill in question and answer format. It included:
(a)“Does this Bill contain any provisions that could result in the compulsory acquisition of private property?” which was answered “no”.
(b)“Does this Bill affect rights, freedoms, or impose obligations, retrospectively?” which was answered “no”.
(c)“Does this Bill contain any provisions (other than those noted above) that are unusual or call for special comment?”. This referred to the requirement for a new form of public body as existing company, trust and crown entity models did not have the required legal structure. It noted that the WSEs “will have a level of independence from both the Crown and territorial authority owners”.
[178] The Councils note that the question in (a) addresses only private ownership rather than the ownership presently held by local authorities. They say it is misleading because of this. Similarly, the question in (b) addresses only retrospective affects. It does not address the rights of ownership presently held by the local authorities. Nowhere does it address the change to local democratic accountability in respect of the Three Waters services.
[179] I accept that these documents do not directly acknowledge that local councils will lose central incidents of ownership that they presently hold, nor that local councils’ ability to control the use of their assets will be materially diluted through the WSE governance structure, and nor that local democratic accountability for the provision of the Three Waters services in local communities is essentially lost. However, it does not follow that the Government, and in turn Parliament, is unaware of this. The proposals are directed to a new model for delivering Three Waters services in response to what is regarded to be a significant Three Waters infrastructure challenge. It is intended that legislation will provide for the transfer of assets and
liabilities from local authorities to the new WSEs. It is clear that the Government intends different governance arrangements. It is also clear that it has made amendments to proposals to seek to provide a degree of community engagement and community influence albeit not what currently exists under the LGA. It has proposed a funding package but has deliberately decided that this is not intended to compensate local councils for the value of the infrastructure assets. It has made those decisions reflecting that the Three Waters assets will remain in public ownership (albeit a different kind of public ownership) for the benefit of all communities and reflecting the significant costs that will be involved in the future to have appropriate Three Waters infrastructure assets in the next 30 years.
[180] Moreover, the Select Committee minority report explicitly refers to both the removal of territorial authorities’ ownership rights of assets and the changed governance arrangements, under which the WSEs will not be democratically accountable to their communities. Auckland’s dissenting view to the Working Group’s report referred explicitly to the loss of democratic accountability to those who have funded the assets. The evidence filed in this proceeding also raises these points. If the intended legislation to transfer the Three Waters assets to the WSEs proceeds, it will be doing so armed with all of this information.
Summary on discretion
[181] I conclude that the declarations should not be granted. They are expressed in general and abstract terms that deprive them of usefulness. They do so in an attempt to avoid infringing the principle of non-interference with the legislative process but they are unsuccessful in this aim. The impetus for them and their real point is to use the court process to influence the legislative process that is underway. This is contrary to the court’s proper role as discussed by the Supreme Court in Ngāti Whātua Ōrākei. I am also not persuaded the declarations serve a useful purpose. The general principles or features of local government and property rights that are to be the subject of declaratory relief are known to Parliament in any event. The legislative reforms can proceed if the Government wishes to proceed with them, and a majority of the House votes in favour of the legislation that gives effect to them. This is not contrary to
fundamental legal principles of our law. Rather, it reflects that Parliamentary sovereignty is a fundamental principle of our law.
Result
[182] The application for declaratory relief is dismissed. Whether declaratory relief should be granted is a question of jurisdiction and discretion. In this case, it is factors that go to the court’s discretion that made declaratory relief inappropriate here. The conclusion on these factors is set out at [181] above. Although relief is declined, it is undoubtedly the case that the Three Waters reforms will alter the role that local government has historically held in the provision of Three Waters services and this has major significance for our communities. Whether that is desirable is of course for Parliament. The Parliamentary process is there to ensure that the important issues at stake are carefully considered. It is not the court’s role to interfere in that.
[183] If there is any issue as to costs, counsel are to file brief memoranda within three weeks of the date of this judgment.
Mallon J
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