Frank Newman: Red-faced regional council

The Northland Regional Council (NRC) has got itself into a bit of strife. The High Court has determined that between 2012 and 2016 it illegally collected some $14.4m worth of rates from ratepayers in Kaipara.

Before the High Court was an application for judicial review. In essence it was a challenge that the NRC did not act in accordance with the Rating Powers Act, and as a result the rates were set unlawfully.

The case was taken by the Mangawhai Ratepayers and Residents' Association and Bruce & Heather Rogan. It related to the Kaipara district only, but the NRC rates for Whangarei and Far North districts were set and assessed on the same basis as Kaipara and there is now a compelling precedent for those areas if anyone is minded to challenge the rates. If that were to happen, the amount involved would be close to $100m not $14.4m.

The judgment had some harsh things to say to the NRC:

NRC argues that in essence there is nothing grave about what has occurred and it is of little consequence…However, the fact the same outcomes could have been achieved by the lawful exercise of a public power is no excuse for its unlawful use. Individuals are entitled to be free from suffering unlawful exercise of statutory power, particularly when the power has elements of coercion. That is a fundamental precept in any political society that recognises the rule of law. It is particularly relevant here because ratepayers facing demands to pay invalid rates bear the burden of bringing legal proceedings to establish invalidity.

I reject the suggestion that what occurred was no more than procedural, technical errors. I have already found the NRC acted in good faith and that it may have fallen victim to legislation that was less precise than it needed to be. Nonetheless, the NRC’s error led to it abdicating its statutory responsibilities regarding rates by in effect unlawfully handing them over to the KDC. The plaintiffs, indeed all affected ratepayers, were entitled to have the NRC carry out the statutory role Parliament had given to it.

The judge ordered:

[62] (a) the NRC’s rates for the KDC region for the rating years from 2011/2012 to 2015/2016 inclusive are quashed (set aside); and

(b) the penalties imposed by or on behalf of the NRC for the KDC region for the rating years 2011/2012 to 2015/2016 inclusive are quashed (set aside).

However the judge stopped short of ordering the illegal rates be refunded. On this matter the judge said,

" [56] Further, I note that on previous occasions when unlawfully made rates are at risk of being set aside, validating legislation has been passed to rectify the problem. The problem with the subject rates is widespread and analogous to other circumstances where validating legislation was enacted…when the illegality is widespread…Parliament is best placed to remedy it…This seems to me to be a better approach than what the NRC advocates here."

That is a clear signal to the NRC to go cap in hand to Wellington and ask Parliament to pass special legislation to validate the illegal rates and grant the NRC immunity for its actions.  If they don't receive that immunity (or don't overturn the decision on appeal), the NRC may find itself back in court answering to fresh demands for the illegal rates to be refunded.

One may ask, why does it matter? It matters that council's not only act within the law, but that they act fairly and with a duty of care. Not so many years ago the NRC could have been considered the best managed of the four councils in Northland. To its credit then, it was sharply focused and had a culture of professionalism that put ratepayers first. Nowadays its focus seems to be to please everyone about everything, and exercises might over right.

The court case has cost those taking the action against the NRC some $300,000, of which the Rogans have personally put in $100,000. They are exceptional people and without such righteous folk all-powerful ratepayer funded organisations like local governments would have become even more totalitarian as they already are. Heavens knows how much ratepayers money the NRC has spent on the matter - much more than $300k I suspect as true to form the Council hired expensive top-ranked (“Band 1”) legal counsel to put its case. The NRC should tell us how much their mistake has cost ratepayers and whether anyone will be held accountable, and save the trouble of the question having to be asked under the Official Information Act.

It's time our councillors at the NRC had a serious think about what their organisation has become, and where it is going. That's what they are elected to do. 

Frank Newman writes a weekly article for Property Plus.