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 High Court hearing

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DAY ONE IN THE HIGH COURT    02.06.2016

DAVID GODDARD’S ONE MAN SHOW
The first day of the High Court proceedings in respect of the judicial review of the KDC and NRC rates belonged to David Goddard QC, legal counsel acting for both councils.

He took main stage, ran the proceedings, patronised the Judge and explained to her what she had really intended by her declaration in her interim judgement. He lectured her incessantly on the finer, hair-splitting point of law and the latest development in administrative law.

We all heard that the Court’s declaration of unlawfulness in respect of the NRC rates was virtually meaningless. That unlawful did not mean invalid, that null and void were no longer in vogue and the concept of ultra vires had long been abandoned. It was a lesson in legal semantics that threatened to put everyone in the courtroom to sleep.

He argued that local authorities should not be held responsible for unlawful rates because rectifying them would create administrative inconvenience for the NRC and an unbearable financial burden that would have to be borne by all ratepayers.

He argued the unarguable. He suggested that the unlawful errors in the rates of the NRC should be validated under an obscure provision of the Judicature Amendment Act because they were “technical irregularities” when in fact Duffy L had already declared them to be grave and serious errors.

He seemed to overlook the elephant in the room. The Court had already held that the NRC rates are unlawful. The only question before the Court was whether the NRC rates should be formally quashed, and whether the Court should make an order for their refund.

It is unclear what the Court will do. If it applies the law then it will proceed to quash the NRC rates. But the High Court has a broad discretion in applying the law in judicial review cases and the courts in New Zealand have shown themselves to be sympathetic to putting local authorities into a special category.

A refund of the rates is unlikely. The Court appeared to take the view that a separate claim for restitution would have to be brought to allow the Court to make an order for the NRC to refund the rates.

The option of replacing the unlawful rates by going through the rating process again was discussed. This is a remedy provided for in the LGRA but so far it has not proved very popular. Validating legislation is the option of choice, but that option may not be available politically with an election looming.

The parties were invited to make written submissions to the Court in respect of the replacing rates option.

Whatever the outcome the NRC has serious problems. It not only has to come to terms with the unlawfulness of its rates for the Kaipara district, but its rates for the Far North and Whangarei districts also suffer from the same defects. The High Court decision is not binding on those other rates but it is a persuasive precedent if anyone wishes to challenge them.

The KDC escaped without any further findings against it. Under the interim judgment the Court declared that the KDC had acted unlawfully in assessing the NRC rates, in adding penalties to the NRC rates, and in recovering NRC rates on its behalf. That means that its actions in recovering rates from mortgagees of ratepayers was unlawful because it misled the mortgagees into believing that it had the authority to recover the NRC rates on behalf of the NRC. All legal actions taken by the KDC on behalf of the NRC were also unlawful.

If you want to see David Goddard QC in full flow have a look at this video.

David Goddard QC

DAY TWO IN THE HIGH COURT   02.06.2017
David Goddard was not present, and it showed. Duffy J was far more open and impressed everyone with her understanding of the legal issues. She grasped and pursued legal arguments with impeccable logic. She was not afraid to challenge legal counsels’ submissions, and often asked counsel to tell her the authority that they were relying on for any submission that sounded hollow.

Duffy J

The case being heard was the High Court appeal from the District Court case where the KDC and the NRC sued Bruce and Heather Rogan for arrears of rates.

The KDC issued proceedings against over 100 ratepayers, most of whom have now paid, and also sought recovery from many more through their mortgagees. There are about five other stayed District Court cases which are awaiting the decision in the Rogan test-case.

The basic argument presented by the Rogans was that they were prepared to pay lawful rates but the rates assessment notices and rates invoices were non-compliant with the LGRA and therefore did not create the liability to pay rates. They argued that liability for rates arises only where those documents are delivered to them in the correct legal format.

The LGRA sets out in selections 45 and 46 a list of all matters that must be clearly identified in the documents. Some of the matters in the documents were wrongly described and some was simply omitted.

David Neutze from Brookfields represented the KDC and the NRC. He had a tough day at the office trying to justify all the defects in the rates assessment notices and rates invoices.

David Neutze

Section 60 LGRA

This was the backbone of the councils’ case

Section 60 is the main mechanism that local authorities employ to deflect any allegation of rating irregularities. If a ratepayer complains about lawful rates the local authority will respond that the ratepayer is legally bound by section 60 to pay the rates and the only way to challenge them is by applying for judicial review in the High Court.

The argument goes on that if the ratepayer does not apply for judicial review then section 60 states that the ratepayer may not defend a claim for recovery of the rates in the District Court.

That was what was argued in the Rogans’ case in the District Court, and that was the basis on which Judge de Ridder gave judgment to the KDC and NRC.

This interpretation of section 60 is widely accepted by local authorities (naturally), by lawyers acting for local authorities (naturally), and by the judiciary (sadly). Fortunately this was the first High Court case where section 60 was seriously in issue and the Court was exposed to detailed legal argument on its real meaning by Jeremy Browne acting for the Rogans.

Jeremy Browne

The wording of section 60 is hard to follow. But what is clear is that the words used do not convey the meaning generally adopted. There is no obligation to apply for a judicial review except on one particular ground. And there is certainly no prohibition on a ratepayer defending an action in the District Court for recovery of rates.

Duffy J was quick to accept this and challenged David Neutze to explain the generally adopted meaning. He argued that the previous legislation (repealed by the LGRA) prohibited any challenge to rates on the grounds of invalidity and that was the purpose of section 60. The Judge dismissed that on the basis that Parliament had deliberately excluded such extreme language in the current legislation. If it had meant to retain the status quo then it would have used appropriate words.

The Court also discussed the fundamental principle of law that a person has the right to defend any claim in court. It canvassed case law that states that the jurisdiction of the court to hear a claim can only be excluded by explicit language. In addition the NZ Bill of Rights states that where there are two interpretations of a provision, the one to be preferred is the one that favours the rights of the individual.

No District Court jurisdiction

Counsel for the NRC and KDC then argued that only the High Court could hear claims challnging the decisions of local authorities. The basic principle in administrative law is the presumption of validity. That means that all decisions of a local authority are deemed to be lawful until a court of competent jurisdiction decides otherwise.

A court of competent jurisdiction is the High Court or above.

The reason behind such a bizarre principle is that the complexities of administrative law are best dealt with in the higher courts, (Others suggest that District Court judges do not have the ability to rule on such complex matters.)

It is absolutely clear that a decision of a an administrative body such as a local authority cannot be challenged directly in the District Court, but judges in New Zealand have quite readily accepted challenges to the lawfulness of administrative decisions where the challenge is used as defence to legal proceedings. This is called collateral attack or collateral challenge.

The two councils argued that collateral attack should not be permitted in this particular case. But that was always a struggle given the fundamental right to defend a claim in court.

A provision in the LGRA appeared to clinch the argument. Section 63(3) states:

(3) A court constituted under the District Court Act 2016 has jurisdiction to hear and determine proceedings under this Act for the recovery of rates, whatever the amount of the debt involved.

If the ratepayer is precluded from defending such an action, as proposed by the two councils, then there can be no proceeding and no hearing. It is clear, therefore, that the section 63(3) of the LGRA anticpates that a ratepayer is entitled to defend a claim for rates arrears in the District Court.

The Court also appeared to warm to the view that the Rogan’s defence was not based on administrative law principles but that they were simply requiring the two councils to prove that the debt claimed was due and payable, which is the standard procedure in actions to recover debts. The councils were therefore required to show that they had complied with the LGRA in their rates assessment notice and their rates invoices.  Not as a matter of administative law, but simply to prove the debt was owing.

Downstream effects of the Court’s declaration of unlawfulness of the NRC rates.

In its interim judgment the High Court declared the rates of the NRC to be unlawful. It therefore followed that all subsequent steps in the rating chain were unlawful. If the rates are unlawful they cannot be assessed against individual properties, rates assessment notices and rates invoices cannot be sent out, and naturally there can be no penalties on unlawful rates.

Counsel for the Rogans took issue with the rates assessment notices and rates invoices delivered to the Rogans. The KDC and the NRC issued joint documents as they are allowed under the LGRA. The problem is that the NRC part of the document was unlawful so it polluted the whole of the document. The documents are only allowed to include valid rates but of course they included the unlawful rates of the NRC.

A crucial issue is that the “total amount payable” in the documents must be correct to comply with sections 55 and 56 of the LGRA. However the amount payable on the Rogan’s documents (and all ratepayers) included unlawful rates of the NRC which were not payable.

The LGRA resolves this problem by making it compulsory where there is such an error for replacement documents to be issued. It sounds pretty simple. But in the previous hearing counsel for the KDC and NRC advised that that course had not been followed because the penalties charged would fall away. The KDC wanted its pound of flesh and would go to any lengths and cost to get it.

Severance

Counsel for the two councils doggedly argued the doctrine of severance. Where part of a document is unlawful the courts will in certain situations allow the unlawful part to be severed so that the remaining part is lawful.

It sounds simple: cut out the unlawful part relating to the NRC and you are left with the lawful part relating to the KDC.

The problem in this instance is that the documents in question are statutory instruments that create the liability for rates. They have to be compliant in all respects with all the correct information clearly identified. That also applies to any part that remains after severance.

A close examination of the documents established that the lawful information (relating to the KDC) is so intermingled with the unlawful information (relating to the NRC) that the two could not be separated. Severance was not therefore possible.

Another factor is that a rates invoice has to be delivered to the ratepayer in the correct form at least 14 days before there is an obligation to pay the rates. That means that any severed invoice would have to be delivered to the ratepayer before any liability to pay the rates was created. That did not happen.

And that was about it. Those were the main legal issues that were discussed but of course there is no guarantee that they will actually form the basis of the Court’s decision. We learned from the Heath J hearing that what is said in court can have little bearing on the final outcome.

We also do not know how long it will be before the judgment is issued.

What we do know is that if the Rogans win the appeal then the High Court will almost certainly refer the case back to the District Court for a re-hearing. The decision in the lower court was based solely on the meaning of section 60 and the defects in the rating documents was not fully argued. It is therefore appropriate that the District Court has the opportunity to assess the defence raised by the Rogans.

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