LEGAL OPINION ON SECTION 50 LGRA
To: Steve Ruru and Councillors
From: Clive Boonham
Section 50 LGRA
You run into several problems in trying to use section 50 as a basis for charging rates for the first instalment of the new rating year.
The invoice has to be for "not more than 25% of the rates that are payable in the previous year".
The exact words are important.
Meaning of "rate" under the LGRA
The word "rate" when used in the Act is defined under section 5 of the Act as a general rate, a targeted rate, or a uniform annual charge that is set in accordance with subpart 2 of Part 1 of the Act. This is the part relating to the setting of rates.
Jonathan Salter in his report of last year decided that the EcoCare rates and the forestry rates purportedly set for the 2011/12 year (and other years) were not set in accordance with the Act and were therefore illegal.
It is also clear that they were not rates under the Act as defined by section 5 because they were not set in accordance with the appropriate part of the Act.
It is also clear that there are other rates that were set in 2011/12 and previous years that are illegal and cannot be viewed as rates which satisfy the definition of rates under the Act. Examples are the wastewater rates for the rest of Kaipara which are clearly deficient. There may be others.
The "unit of demand" charges which were levied on properties in Mangawhai for four years were not only illegal but they are completely ultra vires because they were levied totally outside the requirements of the Rating Act. They are clearly not rates as defined by the Act.
Illegal rates, ultra vires rates or charges that do not come within the definition of rates cannot therefore be classed as "rates that are payable in the previous year" under section 50.
They cannot therefore be used as a basis for calculating the amount to be paid under section 50.
All illegal or ultra vires rates would have to be deducted from the previous year's rates bill, but this is impossible because it is unclear at this stage which rates are valid and which are not.
Another problem is that of invalid assessments for the 2011/12 year.
Bell Gully found that all the EcoCare assessments for the first three years were invalid. The same applies to the 2011/12 year as well.
The problem is that the notice of assessment is in fact the bill for the rates and it is the delivery of the assessment in the correct legal form that creates the legal obligation to pay the rates (section 44).
The assessment must contain all the information set out in section 45. If it does not, or if it gets some of the information wrong (e.g. invalid rates assessed) then the whole assessment is invalid and there is no legal basis for the payment of the rates.
This relates not only to the invalid rates but to all of the rates included in the invalid assessment.
Because of the errors in so many rates across the district it is therefore likely that most rates assessments for last year will include incorrect information and will therefore be invalid.
If the assessments are invalid then no rates are payable.
So, if no rates are "payable in the previous year", then there is no basis for charging rates for the new rating year.
Clive Boonham 26 June 2012
The Salter report which came out ealier this year found that all the Ecocare rates for the past four years, and the forestry rates were illegal. Here is the relevant extract from the report relating to the legality of the rates and the effect of section 60 LGRA. Council uses section 60 to support its stance that the rates are legal until the court declares otherwise.
22. Section 60 of the LGRA provides:
A person must not refuse to pay rates on the ground that the rates are invalid unless the person brings proceedings in the High Court to challenge the validity of the rates on the ground that the local authority is not empowered to set or assess the rates on the particular rating unit.
23. In my opinion if such proceedings were brought it is highly likely that all the rates identified would be invalidated. In a real sense, the rates cannot be regarded as enforceable by the Council. Therefore the situation is serious and remedial action is requires, assuming that the Council is not disposed to simply refund the rates received.
Matters of relevance
1. The Auditor-General recommended the independent first principles review. She has not taken any further action even though the review was not independent and was not first principles. She has not taken any action in respect of the Council's failure to implement the findings of the review.
2. The Minsiter put the Council "on watch" last year. One of the reasons was the question hanging over the legality of the EcoCare rates. The Minister was keen to see the outcome of the independent review. The Minister, like the OAG, has taken no action in respect of Council's failure to implement the review, as defined by the OAG, or to implement the findings of the review.
3. Council originally agreed with ratepayer representatives the full terms of reference of an independent review and that the findings would be binding. Council reneged on that agreement.
4. It is now accepted practice to avoid the High Court at all costs. Costs and delay are the major factor. Most legal disputes are now settled by mediation or arbitration. It is common practice for an expert to resolve matters in dispute. That is why the OAG recommended an independent review.
5. What is the point of holding a review if the findings are going to be ignored? More money down the drain.
6. The OAG is holding an inquiry into EcoCare. Presumably we are wasting our time. Council will not accept the findings of the OAG inquiry because it is not a decision of the court. According to Steve Ruru, what the Council does is presumed to be legal until declared illegal by the court, and nothing less than the court.
7. Which "court" is Steve Ruru referring to. If the High Court made a decision against Council, would Mr Ruru argue that the decision was not valid because the
Court of Appeal had not decided the issue? And then of course, there is still the Supreme Court to go.
8. The LGRA accepts that an opinion of a barrister or solcitor is a sufficient basis for accepting that rates are invalid. Here is what section 120 says in respect of the replacement of rates:
120 Replacement of invalid rates
(1) A local authority must set replacement rates if a court of competent jurisdiction orders the local authority to do so.
(2) A local authority may decide to set replacement rates if—
(a) it has obtained an opinion from a barrister or solicitor that the rates in question would be likely to be set aside or declared invalid if they were subjected to judicial review by the High Court;
Now isn't that exactly the situation with the Salter report? In fact the wording in the Act is virtually the same as in the Salter report.
When Council attempted to replace some of the Ecocare rates last year in another futile, clumsy and illegal attempt to paper over the cracks, it did so on the basis of legal advice from Bell Gully. No court decision then.
9. I have been saying for many years now that the KDC has created one of the biggest financial and legal shambles ever in local government history in New Zealand. There is layer on layer of illegalities. The EcoCare rates were all illegal. Council tried to fix them with the unit of demand regime. Illegal and ultra vires. Council then tried to fix them with the replacement of rates proposal. Illegal and patheticaly incompetent. Now we have another futile and illegal attempt to pervert the legislation in a desperate grab to keep the monies flowing.
10. When oh when are the watchdogs - the OAG, the Minister and Audit NZ - going to wake up from their sleep and stop this legal chaos? Or do ratepayers have to go to court and waste every one's money to find out what everyone already knows.