COLIN JAMES BROCKELSBY & ORS v WAIKATO REGIONAL COUNCIL & ORS [2002] NZCA 160 (10 July 2002)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca117/01

	between	Colin james brockelsby & ORS
		Appellants

	and	WAIKATO REGIONAL COUNCIL
		Respondent

ca195/01

	between	RODNEY NEIL RITCHIE LUXTON
		Appellant

	and	WAIKATO REGIONAL COUNCIL
		Respondent

Hearing:	12 and 13 June 2002
Coram:	Tipping J Anderson J Glazebrook J
Appearances:	M A Muir for Appellants Brockelsby & Ors H Rennie QC and P J Ryder-Lewis for Appellant Luxton R A Dobson QC and K G Parker for Respondent
Judgment:	10 July 2002

judgment of the court delivered by TIPPING J

Introduction

[1] These two appeals were heard together as they raise overlapping issues. Both Morris J and Fisher J in the High Court dismissed challenges by the various appellants to the validity of a differential rate made by the respondent, the Waikato Regional Council (the Council).At a meeting on 26 August 1999 the Council resolved, pursuant to the Rating Powers Act 1988 (the RPA), to "make a separate rate on a differential basis as set out in Schedule A".The rate was made for the "purposes of maintaining the Piako River scheme" and was for the year commencing 1 July 1999 and ending 30 June 2000.It was made on the area system of rating and was levied on all rateable property within the Piako River Scheme Separate Rating area, as defined on an identified plan.Schedule A set out what were described as "Layers" of the rate which had been made.Each layer had its own internal differentials.

[2] The first layer was described as the Tidal Flooding Direct Benefit Layer within which there were three internal differentials on a dollar per hectare basis described as TF1, TF2 and TF3.The second layer was called the River Flood Direct Benefit Layer.It had seven internal differentials, each having the prefix RF.The third layer was called the Indirect Benefit Layer with three internal differentials having the prefix IND.The fourth layer was called the Contributor/Alleviator Layer in respect of which there was five internal differentials each having the prefix C.The fifth layer was called the Drainage Direct Benefit Layer.It had nine internal differentials each with the prefix D.There was also a Residential/Commercial/Industrial Direct Benefit Layer and a Deferred Layer, neither of which directly features in the case.The total revenue to be collected from "all differentials" was $1,303,713.75.

[3] Put globally the appellants represented by Mr Muir challenged the C1, C2 and C3 aspects of the rate together with the D9 aspect.Mr Luxton, represented by Mr Rennie QC, challenges the D7 and D8 aspects also.The challenges are based on the premise that the Council's rating decision was unlawful for failure to comply properly with certain statutory requirements, and for irrationality.Before examining those issues, we will describe the factual background, but only to the extent necessary to put the legal challenges in sufficient context.It is also important to state at the outset that proceedings for judicial review, as these are, do not amount to a general appeal from the decision of the Council.It is the lawfulness of the Council's decision which is in issue, not its general fairness or its appropriateness in other respects.

Background circumstances

[4] The case concerns the catchment of the Waihou, Piako and Waitoa Rivers which drain the Hauraki Plains.Before human intervention the low lying parts of the catchment were an estuarine swamp, very prone both to flooding and tidal incursions from the sea.Some of the land is actually below sea level.The plains were gradually drained to produce farmland but drainage and flooding problems remained.The then Hauraki Catchment Board promoted further work in what was called the Piako River Improvement Scheme No. 6.Substantial money including Government subsidies was spent on capital works from 1958 to 1979. The scheme was funded in part by rates.By the mid 1990s the Council, which had taken over the functions of the Catchment Board, considered that the earlier rating classifications had become outdated.Maintenance costs were increasing, more land was becoming intensively farmed, and Government subsidies had been abolished in 1989.Increased funding from ratepayers was required. An asset management plan for the scheme was developed during 1995 and 1996 and adopted in 1997.The plan involved an increase of income of nearly 100%.

[5] The proposal was that this increase be made up of changes to existing classifications where appropriate, an expansion of the total rating area, and a general rise in the scheme rates.The Council had held public meetings from 1996, had established a special sub-committee, and had engaged extensive professional assistance.Very substantial consultation took place and the Council undertook a considerable amount of work before the ultimate proposal started to crystallise.It involved what was called a "three cost centre regime", involving tidal flooding protection, river flooding protection and drainage outlet.These three "cost centres" came to be reflected in the TF, RF and D aspects of the rate earlier mentioned.

[6] The relevant river catchment rises in its upper reaches to heights above sea level which have led the appellants, who farm in these higher areas, to the understandable view that their land does not benefit directly from the scheme and also does not materially contribute to the problems the scheme is designed to avoid or reduce.Hence they contend they should not have to pay any aspect of the rate in question.Their legal challenge was based on a number of grounds to which we now turn.

The nature of the rate

[7] At the heart of Mr Muir's argument, which was supported by Mr Rennie, lay the proposition that the Council had made three rates not one.Thus he argued that in the C aspect of the rate, the Council had made a separate rate based solely on contribution to the need for the work and this it had no power to do.Our earlier method of expression, whereby we have referred to the rate in the singular, indicates that we do not accept this argument.We now give our reasons.

[8] The point requires an examination of Sections 40 and 41 of the RPA which are in the following terms:

40 Catchment Board separate rates

(1) Subject to this section, a Board may, for the purpose of undertaking any specified work or providing any service for the benefit of all or part of the district, or of contributing to any such works or services, from time to time by resolution make and levy separate rates.

(2) Such a rate may be made--

(a) Where, in the opinion of the Board, the work or service will benefit the district as a whole, on every separately rateable property in the district; or

(b) Where, in the opinion of the Board, the work or service will benefit only part of the district, on every separately rateable property within the part of the district so benefiting.

(3) Such a rate may be made and levied as a uniform rate or on a differential basis--

(a) On the land value or the capital value of every rateable property within the district or part of the district; or

(b)On the area system,--

over the whole or part of the district in accordance with sections 41 and 79 to 93 of this Act.

41 Differential rates

(1) In adopting a differential rating system in terms of sections 79 to 93 of this Act in accordance with section 40(3) of this Act, a Board shall take account of--

(a) The benefits that are, in the opinion of the Board, likely to accrue, directly or indirectly, to any property from the work or service in respect of which the separate rate is to be made; and

(b) The extent to which the characteristics or the use of any property, or any actions of its occupier, are, in the opinion of the Board, likely to either contribute to or alleviate the need for the work or service concerned.

(2) Where the rate is in respect of works for the protection of land from flood or erosion or for the conservation of soil or the management of water, a Board shall, for the purposes of subsection (1) of this section, give consideration to,--

(a) In relation to direct benefit,--

(i) The likelihood, frequency, depth, and severity of flooding and erosion; and

(ii) The likelihood, frequency, and extent of damage to land and the improvements to the land; and

(iii) The improvement of drainage; and

(iv) The need for water management generally,--

in relation to the actual and potential uses of the land and by reference to the advantages accruing from the works concerned and the responsibility for their care and maintenance:

(b) In relation to indirect benefit--

(i) The establishment or preservation of economic units of land; and

(ii) The protection or establishment of water, sewerage, drainage, electrical, gas, and other services and of works, services, and amenities to which rates from the land may be applied; and

(iii) The protection or establishment of communications and of any other property, service, or amenity within or benefiting the land.

[9] Section 40 gives the Council, as the successor to the Catchment Board in question, the power to make and levy separate rates.This is in contrast to the power to make a general rate given by s 39.A separate rate may be made and levied for a specified work.Such a rate may be made where, in the opinion of the Council, the work will benefit the district as a whole or part of the district.The Council validly formed the requisite opinion.At this stage the question of benefit is focused on all or some of the district rather than on a specified property or properties.The separate rate may be uniform or, as here, on a differential basis.If the separate rate is made on a differential basis the Council must take account of benefits in terms of s41(1)(a) and contribution in terms of s41(1)(b).Section 41(2) expands on the concepts of direct and indirect benefit.Although paragraphs (a) and (b) of s41(1) are linked with the word "and", we do not regard them as necessarily being cumulative in the sense of contribution issues having to be parasitic on benefit issues, as it was put during argument.Benefit and contribution are distinct and analytically separate issues and they may, as here, be addressed separately.

[10] Furthermore, and crucially, we do not regard the Council as having made more than one rate.Although there were different aspects of the works for which the rate was made, we consider that in terms of s40(1) it was all the same work.A single rate was being made to fund a single specified work.We cannot accept the argument advanced that the Council made three rates, one for each of the cost centres.The Council did not purport to make more than one rate.Rather it purported to make a single rate with a complex series of differentials analysed as layers within which there were further differentials. In the circumstances we consider the legal effect of the Council's actions was a single rate on a differential basis to fund a single specified work, namely the maintenance of what it called the Piako River Scheme.As the Council neither in fact nor in law made a separate rate limited to the contribution aspect of s41(1), there is no call to assess whether it had any power to make a rate focused solely on that issue.We therefore reject the submission that the rate was invalid on that basis.Mr Dobson was correct in his submission that the Council struck only one rate in respect of which contribution to the need for the work was one of the differential elements.

Part VIIA of the Local Government Act 1974

[11] Part VIIA was introduced into the Local Government Act (the LGA) in 1996. It is headed "Financial Management".Mr Muir argued that the Council was legally required to address the relevant Part VII matters as a separate exercise and in advance of addressing itself to RPA issues.This sequential approach had not in counsel's submission been followed by the Council and hence its ultimate rating decision was vitiated by error of law.We reject this submission because we cannot accept its underlying premise.The Council had to address in a proper manner the relevant aspects of Part VIIA but it was not obliged to do so in the manner suggested by the appellants.Such would not be consistent with the evolving nature of the kinds of decision the Council had to make and the inter-dependent nature of some of the RPA and LGA issues - see for example the express reference to the RPA in s122F(b) of the Local Government Act and the potential need to consider other enactments evident from s122C(1).

[12] In this respect we agree with both Fisher J and Morris J that the inter-relationship between the LGA and the RPA contemplates a concurrent rather than a sequential approach.The Council may and will usually adopt a single process of reasoning rather than two discrete processes.Provided all necessary matters have been addressed, the sequence in which they are addressed is highly unlikely to be material.The crucial point is that during the process leading up to the passing of the ultimate resolution to make the rate, the Council was required to take account of the necessary LGA and RPA criteria. We are satisfied on the evidence that the Council did so and we cannot therefore accept this challenge to its decision.In agreement with Fisher J and his reasons, we reject the contention that the Council's compliance with the LGA requirements was retrospective and illusory on account of its having had a preconceived end in sight.

The contributor issue

[13] The appellants argue they have not materially contributed to the need for the work and the Council therefore had no power to assess them as contributors. This issue turns on the correct interpretation of s41(1)(b) of the RPA which, for ease of reference, we set out again:

41(1) (b) The extent to which the characteristics or the use of any property, or any actions of its occupier, are, in the opinion of the Board, likely to either contribute to or alleviate the need for the work or service concerned.

To broadly similar effect is s122F(d) of the LGA.

[14] We agree with Mr Dobson that the words "characteristics" and "use" in s41(1)(b) take their colour from the context and purpose of the section.The appellants say that the comparison the Council made between the present pastoral condition of their land and its earlier natural state does not justify the view that they have contributed to the need for the work.They point out that their land drains naturally onto the lower land and it is gravity which brings the rainwater which falls on their land onto the lower land in times of flood.It should be mentioned here that the amount of contribution is not in issue on this argument.What is in issue is whether it was open to the Council to take the view that the appellants contribute at all within the true scope of s41(1)(b).

[15] We agree with Mr Dobson that, consistently with his more general submission, the concepts of the characteristics and the use of any property must for s41(1)(b) purposes be viewed from the point of view of the need for the work.The work is necessary because of the flooding problems in the lower part of the catchment.We do not consider a narrow view should be taken of the words "characteristics" and "use" in their context.The section is not concerned with legal or moral fault or blame.It is concerned with giving power to Councils to rate people when the use or the characteristics of their properties contributes to the need for the work.The concept of use does not necessarily imply a historical contrast.It is equally capable of signalling a contrast between what the land is being used for against other uses to which it might be put and which would involve a smaller or no contribution to the need for the work.The concept of alleviation with which contribution is contrasted has a similar connotation.

[16] We agree with Mr Dobson that a relevant characteristic of the appellants' land is that it drains naturally in such a way as to contribute to the need for the work.Its current use also materially contributes.In our view therefore the Council committed no error of law nor was it acting irrationally when it formed the opinion that s41(1)(b) applied to the appellants' properties.We do not endorse every aspect of what appears to have been the Council's reasoning process but its conclusion was open as a matter of law and was not in our view an irrational one.

The direct benefit layer

[17] This discussion applies both to the D9 classifications and to those under D7 and D8.The argument for the appellants is that it was irrational for the Council to come to the view that the appellants' land enjoyed a direct drainage benefit from the works in question.The appellants' viewpoint is understandable because the drainage of their land is not enhanced in any tangible way by the works to whose funding they are required to contribute by the D aspect of the rate.It is therefore hard for them to see how they can be said to obtain a direct drainage benefit from the work.

[18] This is the only aspect of the case which has given us any concern as to whether the Council may have acted unlawfully.In the end, however, we are persuaded by Mr Dobson's argument that the Council was entitled to regard the appellants as deriving a direct benefit, not in any ordinary sense, but by dint of s42(2)(a)(iv) of the RPA which implicitly expands the ordinary connotation of the expression "direct benefit".It requires the Council in relation to direct benefit to give consideration to the need for water management generally in relation to the actual and potential uses of the land.

[19] In its August 1999 publication about the adoption of its new rating system for the Piako River Scheme, the Council observed that there were many swampy gullies and drained flats situated in the low hills which benefited from the scheme.Although the line of reasoning adopted by the Council was subtle and initially difficult to grasp, Mr Dobson pointed out that it was related to the potential use of the land comprising these gullies and drained flats.The land owners may be constrained in such potential uses by a less efficient drainage system lower down.Hence it can be said, as Mr Dobson submitted, that there was a need for water management generally in relation to the potential uses of these parts of the land in question.

[20] The amount involved in the D9 aspect of the rate is only some $13,000. The D9 category is defined in the Council's Special Order as:

Rateable land elevated sufficiently above scheme outlets to allow drainage by gravity discharge but which nevertheless receives a low degree of drainage benefit as a result of being able to freely discharge drainage water on to lower lying areas which themselves are highly dependent upon scheme outlets.

[21] The Council acknowledged that D9 properties do not require the scheme in order to drain.They will discharge water on to lower situated land irrespective of the existence of the scheme.But the scheme provides the only means by which lower situated properties can accommodate the discharge from higher areas.The Council adopted its consultants' view that the D9 land nevertheless derived drainage benefit from the maintenance of the scheme outlets "by virtue of the constraints that would be imposed upon it in the absence of the scheme".In its August 1999 Report the Council stated:

It is the maintenance by the scheme of the whole river system from the foreshore to its uppermost tributaries that enables the river to carry all of the catchments' water safely down to the sea under most conditions without any serious adverse effects and to continue to do so despite the ongoing development of the catchment.The main difference between D9 and the other drainage differentials is that in the D9 area this is the only factor recognised.

[22] Although we consider the Council's decision in respect of the D9 differential was at the limits of permissible reasoning, we are not persuaded that it was outside those limits.Nor do we consider the D7 and D8 differentials were outside those limits.Hence the Council's decision to adopt the D7, D8 and D9 differentials has not, in our view, been shown to be unlawful.

[23] It was not irrational for the Council to determine that some direct benefit accrued to the D7, D8 and D9 properties from the maintenance of the scheme.That benefit lay in an element of enhancement of the land's potential. It will be recalled that potential uses of the land are relevant in this context by dint of s42(2)(a)(iv) referred to in paragraph [18] above.The amount of direct benefit may have been very difficult to measure but it was conceptually recognisable.In the D9 category it was the only aspect of direct benefit recognised and was reflected in the lowest level of differential in dollar terms.While the Council's approach may reflect the extreme extent of the concept adopted, we find ourselves unable to hold that its D9 (and a fortiori its D8 and D7) differential decisions were irrational.

Conclusion

[24] For the reasons given both appeals are dismissed.The appellants in CA117/01 are to pay the respondent costs in the sum of $8,000 plus two-thirds of its disbursements, to be approved if necessary by the Registrar.The appellant in CA195/01 is to pay the respondent costs in the sum of $4,000 plus one-third of its disbursements.Those disbursements are to include the reasonable travel and accommodation expenses of second counsel.

Solicitors

Bell & Graham, Matamata, for Appellants CA117/01

Bartlett Partners, Wellington, for Appellant CA195/01

Tompkins Wake, Hamilton, for Respondent