Mangawhai Ratepayers' and Residents' Association Inc. v Kaiparadistrjct Council

• Jurisdiction: New Zealand
• Judge: Heath J
• Judgment Date: 25 July 2014
• Neutral Citation: [2014] NZHC 1742
• Docket Number: CIV 2013-488-152
• Court: High Court
• Date: 25 July 2014

Between

Mangawhai Ratepayers' and Residents' Association Inc

Plaintiff

and

Kaipara District Council

Defendant

[2014] NZHC 1742

CIV 2013-488-152

IN THE HIGH COURT OF NEW ZEALAND

WHANGAREI REGISTRY

Declarations following unsuccessful application for judicial review challenging a decision made by the defendant to enter into contracts for the development, construction, operation and financing of the Mangawhai Wastewater Scheme as well as subsequent rating decisions designed to raise money to repay the borrowed funds — effect of the Kaipara District Council (Validation of Rates and Other Matters) Act 2013 which retrospectively validated the decisions found to be in breach of the Local Government Act 2002 (LGA) — plaintiff sought an interim injunction that would, pending determination of the appeal, prohibit the defendant from taking enforcement action against any ratepayers to recover past rates set and assessed in relation to the Mangawhai Wastewater Scheme — whether a supplementary judgment on the question whether the defendant could lawfully rate in the future to raise funds to meet the relevant debt could be made — whether interim relief should be granted pending appeal — whether the Council was entitled to levy rates in the future to meet obligations falling due under a loan agreement that was entered into originally in breach of Part 6 LGA but was to be regarded as valid and enforceable because of its status as a protected transaction — whether indemnity costs should be awarded under r14.6(4)(a) High Court Rules (HCR) (increased costs and indemnity costs — party had acted vexatiously, frivolously) or r14.6(4)(j) HCR (other reason).

Counsel:

M S R Palmer QC for Plaintiff

D J Goddard QC and E H Wiessing for Defendant

Counsel:

M S R Palmer QC, Wellington

K R M Littlejohn, Auckland

D J Goddard QC, Wellington

JUDGMENT (NO. 4) OF Heath J

CONTENTS

The issues	[1]
Background	[6]
First issue: The lawfulness of future rating decisions	[14]
Second issue: Should interim relief be granted pending appeal?	[20]
Third issue: What form should the declarations take?	[36]
Fourth issue: What order as to costs should be made?
(a) The competing contentions	[39]
(b) Does r 14.6(3)(a) apply?	[44]
(c) Does r 14.6(3)(f) apply?	[45]
Fifth issue: Should leave to apply for further directions be reserved?	[55]
Result	[60]

The issues

1 On 3, 4 and 5 February 2014, I heard a substantive application for judicial review brought by Mangawhai Ratepayers' and Residents' Association Inc (the Association) against Kaipara District Council (the Council). The application challenged decisions made by the Council to enter into contracts for the development, construction, operation and financing of (what has become known as) the Mangawhai Wastewater Scheme, 1 as well as subsequent rating decisions designed to raise money to repay the borrowed funds. The question whether the rates were validly struck was at the heart of the Association's case.

2 Judgment was reserved. It was delivered on 28 May 2014. 2 While I found against the Association on the central rating question, I was prepared to make declarations about the invalidity of other decisions of the Council that were in issue. However, I indicated that I would hear further from counsel before making orders that could be sealed. 3 To assist, I offered some provisional views on the form of declarations that I was prepared to make, and questions of costs. I also invited counsel to identify any issues on which they considered I had heard oral argument with which I had not dealt. To facilitate prompt disposition of outstanding issues, I

directed the Registrar to allocate a case management conference on the first available date after 20 June 2014. 4

3 Before that telephone conference was held, the Association filed an appeal against my decision. By the time the conference was held, on 2 July 2014, an application for interim relief had been filed in order to prevent the Council from collecting the impugned rates, pending determination of the Association's appeal to the Court of Appeal.

4 A fixture was allocated for 18 July 2014, so that I could hear from counsel on five outstanding issues:

• (a) Should I give a supplementary judgment on the question whether the Council could lawfully rate in the future to raise funds to meet the relevant debt?

• (b) Should interim relief be granted pending appeal?

• (c) What form should the declarations take?

• (d) What order as to costs should be made?

• (e) Should leave to apply for further directions be reserved?

5 Following the 18 July 2014 hearing, I reserved my judgment for delivery in writing this week.

Background

6 For present purposes, it is unnecessary to do more than summarise the essential findings made in my judgment of 28 May 2014. Readers who are interested in gaining a more complete understanding of the issues should refer to that judgment. 5

7 The Association challenged the validity of decisions made by the Council between 2005 and 2007 to enter into agreements for the development, construction, and operation of the Mangawhai Wastewater scheme. As in my earlier judgment, I refer to those agreements (respectively) as the EcoCare and Modification 1 agreements. 6 It also alleged that loan contracts entered into to provide funds to pay for the development and rates levied to enable the loans to be repaid were unlawfully made, 7 and were unenforceable.

8 The Association's judicial review application was filed in March 2013. After disposition of an application by the Council to strike out part of the claim, 8 a fixture was allocated for the substantive proceeding during the week of 3 February 2014. On 10 December 2013, after the hearing date had been confirmed, Parliament enacted the Kaipara District Council (Validation of Rates and Other Matters) Act 2013 (the Validation Act). The Validation Act had its genesis in a Local Bill that had been promoted by the Council at a time proximate to the issue of the proceeding.

9 Enactment of the Validation Act changed the shape of the Association's case considerably. Its impact was discussed at a telephone conference held on 19 December 2013, following which I gave directions about the way in which the case would proceed. 9 As a result of those directions, a third amended Statement of Claim was filed on 13 January 2014. At a case management conference on 16 January 2014, I determined the issues with which I would deal at the February hearing. I said: 10

[5] I direct that the hearing will encompass:

• (a) the first cause of action;

• (b) the second and third causes of action, subject to these qualifications in respect of the alternative claims for relief set out at page 14 of the third amended statement of claim:

  • (i) As part of the para I claim for relief, I shall hear legal argument in respect of the Court's ability to make a declaration about the legal position that would have pertained but for validating legislation. If that point were determined in favour of the Association, I shall consider separately whether a declaration should be made.

  • (ii) In respect of paras K and L, Mr Palmer confirmed that the issue was linked to the Council's actions in promoting the validating legislation, so that the issue could be treated as one of law without the need for the council to provide additional evidence. Mr Goddard QC, for the Council, was concerned about the possibility of a determination being made on a factual issue to which the Council has not responded. The issue will be dealt with on the basis of “promotion” alone. If anything more than the mere fact of “promotion” becomes a live issue at trial, I will give an opportunity to the Council to file additional evidence before that issue is resolved. For the avoidance of doubt, this applies also to the claim for public law damages and to the relief sought in para N.

• (c) So far as the fourth cause of action is concerned, the argument will be limited to whether the validating legislation precludes a challenge to the relevant rates. To the extent that the fourth cause of action may require additional evidence, I will hear from the Council at the hearing on whether time is required for further evidence to be provided before a decision can be given on the issue.

10 There were two levels at which the Association's amended case required consideration: 11

• (a) The first involved questions of interpretation. These concerned the powers of the Council to enter into contracts to develop and finance the infrastructure project and (potentially conflicting) obligations to its creditors and ratepayers. The relevant statutes included the Local Government Act 2002, the Validation Act, the Local Government ( Rating) Act 2002 and the Receiverships Act 1993. Among other things I had to decide whether the Validation Act operated to enable the Council to collect historical rates that it purportedly validated

  allowed future rates to be struck to meet any debt incurred in breach of relevant statutes.

• (b) The second was constitutional in nature. The Association sought an order that the Validation Act was inconsistent with s 27(2) of the New Zealand Bill of Rights Act 1990 (the Bill of Rights). 12 It was contended that the Validation Act had inappropriately removed the Association's ability to seek meaningful relief in its extant judicial review application. If that argument were right, what were the consequences? Could, for example, public law compensation 13 be awarded against those who promoted the Local Bill that became the Validation Act?

11 I found that the EcoCare and Modification 1 agreements were entered into in breach of the relevant provisions of...