Rating powers of local authorities
By: Lucy de Latour, Imogen Edwards
Published: 8/06/2018
The Court of Appeal recently issued its judgment in Northland Regional Council v Kaipara District Council [2018] NZCA 63, being the latest development in a longstanding argument regarding the validity of rates set by the Northland Regional Council (NRC).

By way of background, the High Court issued an interim judgment on the matter back in 2016 (Mangawhai Ratepayers' & Residents' Association Inc v Northland Regional Council [2016] NZHC 2192), declaring certain rates set by NRC to be unlawful.  The High Court found that in order to satisfy the requirements of section 24 of the Local Government (Rating) Act 2002 (Rating Act), the days/dates on which the intended rates of the NRC would become payable need to be stated specifically and explicitly by reference to a calendar date.  Section 24 provides:

A local authority must state, in the resolution setting a rate,–

(a)        the financial year to which the rate applies; and

(b)        the date on which the rate must be paid or, if the rate is payable by instalments, the dates by which the specified amounts must be paid.

NRC's rates resolutions simply provided that:

The dates and methods for the payment of instalments of rates and any discount and/or additional charges applied to the regional rates shall be the same as resolved by the Far North District Council, the Kaipara District Council and the Whangarei District Council and shall apply within those constituencies of the Northland region.
The High Court found that NRC's resolutions for the 2011/2012, 2012/2013 and 2013/2014 rating years were not made lawfully in accordance with section 24.

The other key issue considered in the High Court related to arrangements that Northland Regional Council had with the territorial authorities in the region in relation to rates collection.
 
The High Court held that NRC unlawfully delegated its powers to assess and recover rates, and that the language in section 132 of the Rating Act is not sufficiently broad to permit delegation outside one local authority to persons employed by another local authority.

NRC is certainly not the only local authority to cover the region of multiple territorial authorities.  There are obvious efficiencies for both ratepayers and local authorities in collecting rates in one payment, and while the High Court's decision highlighted the importance of certainty regarding the date of rates collection, it may also have been a source of concern for councils, particularly in respect of the delegation issue.

NRC appealed the High Court's interim and final decisions to the Court of Appeal.  Mr and Mrs Rogan (members of the Mangawhai Ratepayers' & Residents' Association Incorporated (Association)), and the Association cross-appealed the finding that the Kaipara District Council's rates were not unlawful and also sought to support the High Court's finding in respect of the NRC, but on additional grounds.

The Court of Appeal overturned a number of the High Court's findings, relevantly its finding that the assessment of the rates had been carried out by the wrong entity, and that the NRC's contracting out of the assessment function amounted to an unauthorised delegation of a statutory function.  The Court of Appeal also addressed setting rates on a GST inclusive basis, and issues associated with timing errors in penalty resolutions.  However, we have not addressed these further and have instead focused on the issues regarding the assessment of rates below.  

Despite agreeing with the High Court that the rates resolutions breached section 24 of the Rating Act, the Court of Appeal considered that considerations of "common sense and proportionality have a role to play" and accordingly validated the rates resolution pursuant to section 5 of the Judicature Amendment Act 1972.   

The Court also addressed the validity of the penalty resolutions and the failure to state the date of calculation in accordance with section 57 of the Rating Act, which provides that a local authority may by resolution authorise penalties to be added to rates that are not paid by the due date.  Both councils in this case purported to pass various penalty resolutions over the period in question, which the Rogans and the Association unsuccessfully argued were invalid.  The Court of Appeal confirmed that in resolving to apply penalties to unpaid rates, the resolution cannot reserve any discretion to enforce the penalty rate; either a local authority does not have penalties and therefore does not pass a resolution, or a local authority decides to impose penalties and accordingly a resolution is passed and penalties must be added in accordance with a formula.  The only discretion in respect of penalties arises after the penalty is imposed via a rates remission policy, not in the actual resolution.

In terms of the delegation issue, there was no challenge in the High Court to the correctness of the rates assessment; rather the claim was that the rates assessment had been carried out by the wrong entity.  The High Court found that the NRC had unlawfully delegated its statutory function, being the assessment function, to the Kaipara District Council.  

The Court of Appeal took a different view.  Given the assessment of rates is a purely mechanical, mathematical process done by a computer which involves only the application of the rating formula from the local authority's rates resolution to the information relating to individual rating units, the Court of Appeal found that there was no element of discretion or evaluative judgment in producing the figure payable by a ratepayer in respect of a particular rating unit, thus the rule against delegation was not breached.  In reaching this view, the Court of Appeal expressed disagreement with the counter argument, as follows:

[35]       What the argument advanced by the Rogans would effectively mean is that the Regional Council must itself input the data it sends to the Kaipara District Council and at the point where an assessment run is about to take place, the Kaipara District Council would need to contact someone from the Regional Council to come and press the button.  That is patently absurd and in our view highlights the flaws in the argument.  It is also inconsistent with the obligation of local authorities under s 14 of the Local Government Act to save costs and eliminate inefficiencies.
The Court's finding that such an arrangement does not amount to an unauthorised delegation of a statutory function is significant for those regional councils whose rates collection is carried out by multiple territorial authorities, given the obvious efficiencies and cost savings for both ratepayers and local authorities in collecting rates in one payment.
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