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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
DUNEDIN REGISTRY
CIV-2009-412-352
BETWEEN BASIL WALTER WALKER
Plaintiff
AND OTAGO REGIONAL COUNCIL
Defendant
Hearing:
4 June 2009
Appearances: Plaintiff in person
Mr A J Logan for Defendant
Judgment: 11 June 2009 at 2.30
pm
JUDGMENT OF LANG J
[on application for judicial review]
This judgment
was delivered by me on 11 June 2009 at 2.30 pm, pursuant to Rule 11.5
of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors:
Ross Dowling Marquet
Griffin, Dunedin
Copy to:
Mr B W Walker, Queenstown
WALKER V OTAGO REGIONAL COUNCIL HC DUN CIV-2009-412-352 11 June 2009
[1]
The Dunedin City Council ("DCC") has signed into a contract with a
construction company to build a new sporting stadium in Awatea
Street, Dunedin.
Before the DCC made that commitment it obtained confirmation from the Otago
Regional Council ("ORC") that the ORC
would contribute the sum of $37.5 million
towards the cost of building the stadium. The ORC made that decision on the basis
that
it would borrow all of the funds necessary to make the contribution. It proposes
to repay those borrowings, at least in part, by
means of rates levied upon ratepayers
throughout the Otago region over the next 15 years.
[2] In this proceeding Mr Walker challenges
the validity of the ORC's decision
to support the DCC's stadium project. The statement of claim that he has filed
mounts a wide-ranging
attack upon that decision. Many of the issues that Mr Walker
raises amount to attacks upon policy decisions that the ORC and DCC
have made.
The formulation of policy, however, falls squarely within the province of elected
bodies such as the DCC and ORC. Such
decisions are not generally amenable to
review by the courts unless they can be shown to be unlawful.
[3] Mr Walker also contends,
however, that the ORC has acted unlawfully
because it has failed to comply with its obligations under s 97 of the Local
Government
Act 2002 ("the Act"). As a result, he argues that the Court has the
necessary jurisdiction to quash the Council's decision to support
the stadium project.
[4] The OCR accepts that its decision is amenable to review by the Court on this
ground. It maintains,
however, that it has complied with all of its obligations under
the Act, and that it has therefore acted lawfully throughout.
[5]
Before dealing with the substantive issues that the proceeding raises it is
necessary to deal with a preliminary issue, namely
the standing of Mr Walker to
bring the present proceeding.
Standing to sue
[6] Mr Walker is an undischarged bankrupt. He
does not own or lease any land
in his own name within the Otago region. For this reason he does not currently pay
rates to either
the DCC or the ORC. As a result, he will not be required to contribute
to the cost and repayment of the ORC's borrowings. It can
therefore be argued that
the ORC's decision will not detrimentally affect Mr Walker and that, as a
consequence, he lacks the necessary
standing to bring the present proceeding.
[7] When I raised this issue at the beginning of the hearing, counsel for the ORC
advised me that his client did not wish to have the case determined on the basis of
the issue of standing. It preferred the application
for review to be dealt with on its
merits.
[8] The courts have, in any event, adopted a flexible approach in relation to
standing in recent years: See eg Oggi Advertising Ltd v Auckland City Council
[2005] NZAR 451 at 457 (Harrison J).
[9] Moreover, the decision that the ORC has made will have ramifications for
ratepayers within its region
for 15 years. Mr Walker advised me during discussion
on this point that he proposes to purchase several properties immediately upon
his
discharge from bankruptcy. He did not explain how he proposed to achieve that
object given his current status as a bankrupt and
I did not question him on it. I took
the view, however, that a person in Mr Walker's position could conceivably become
a ratepayer
within the next 15 years. He would then be required to pay rates to the
ORC and would thereupon become liable to contribute to the
repayment of the
ORC's borrowings. I therefore accept that Mr Walker may potentially be required to
contribute to the repayment of
the Council's borrowings.
[10] For that reason, had it been necessary to decide the matter on the basis of
standing, it is
likely that I would have concluded that Mr Walker has sufficient
standing to bring the proceeding.
[11] In order to appreciate
the issues that the proceeding raises, it is necessary to
have regard to the statutory framework that governs the activities of the
ORC.
The statutory framework
[12] The ORC is constituted pursuant to the provisions of the Act. Section 3 of
the Act is important
in the present context because it describes the purpose of the
Act. It provides as follows:
3 Purpose
The purpose
of this Act is to provide for democratic and effective local
government that recognises the diversity of New Zealand communities;
and,
to that end, this Act--
(a) states the purpose of local government; and
(b) provides a framework
and powers for local authorities to decide
which activities they undertake and the manner in which they will
undertake them; and
(c) promotes the accountability of local authorities to their communities;
and
(d) provides for local authorities to play a broad role in promoting the
social, economic, environmental,
and cultural well-being of their
communities, taking a sustainable development approach.
[13] Section 21 of the
Act provides that local government in New Zealand is to
consist of regional councils and territorial authorities. Every part of New
Zealand
that is within the district of a territorial authority (such as a District or City Council)
must also be within the region
of one or more regional councils.
[14] Section 12 of the Act provides local authorities with their status and powers.
Importantly
for present purposes, section 12(2) provides as follows:
(2) For the purposes of performing its role, a local authority
has--
(a) full capacity to carry on or undertake any activity or
business, do any act,
or enter into any transaction; and
(b) for the purposes of paragraph (a), full rights, powers, and
privileges.
[15] Section 12(2) is, however, subject to the other provisions of the Act. It is
also subject to all
other enactments and to the general law: s 12(3). In addition, s
12(5) requires a regional council to exercise its powers under the
section wholly or
principally for the benefit of all or a significant part of its region, and not for the
benefit of a single district".
[16] Section 93(1) of the Act requires every regional council to have a long-term
council community plan ("LTCCP") that is
to remain in force for a minimum period
of ten years. Section 93(6) prescribes the purpose of such a plan in the following
terms:
(6) The purpose of a long-term council community plan is to--
(a) describe the activities of the
local authority; and
(b) describe the community outcomes of the local authority's
district
or region; and
(c) provide integrated decision-making and co-ordination of the
resources of the local authority;
and
(d) provide a long-term focus for the decisions and activities of
the local authority;
and
(e) provide a basis for accountability of the local authority to the
community;
and
(e) provide an opportunity for participation by the public in decision-
making processes on activities
to be undertaken by the local
authority.
[17] The LTCCP must be replaced every three years. The regional council
must
adopt each new plan before the commencement of the first year to which it relates: s
93(3).
[18] Before it adopts any
LTCCP the council must engage in the special
consultative procedures set out in s 83 of the Act. In summary, these require the
council
to prepare a proposal for public consultation. It must then publicly notify the
proposal and invite, receive and hear submissions
on it.
[19] Section 96(1) provides that the effect of the LTCCP is to "provide a formal
and public statement of the [regional
council's] intentions in relation to the matters
covered by the plan".
[20] It is open to the regional council to amend an LTCCP
after it has been
adopted. In that event it must prepare and issue a proposal setting out the proposed
amendments and to undertake
the same consultative procedures that it must follow
before it may adopt a new plan.
Mr Walker's argument
[21] Mr Walker's
argument in the present case is based on an assertion that the
Council has failed to comply with the provisions of s 97 of the Act.
The relevant
parts of that section are as follows:
97 Certain decisions to be taken only if provided for in long-term
council community plan
(1) This section applies to the following decisions of a local authority:
(a) a decision to alter significantly the intended level of service
provision for any significant
activity undertaken by or on
behalf of the local authority, including a decision to
commence or cease any such activity:
...
(d) a decision that will, directly or indirectly, significantly
affect
the capacity of the local authority, or the cost to the local
authority, in
relation to any activity identified in the long-
term council community plan.
(2) A local authority
must not make a decision to which this section
relates unless--
(a) the decision is explicitly provided
for in [its] long-term
council community plan; and
(b) the proposal to provide for the
decision was included in a
statement of proposal prepared under section 84.
...
[22] Section
97(2) prohibits a regional council from undertaking a "significant"
new activity, or making a decision that will "significantly affect
the costs of the local
authority in relation to any activity", unless both the plan and the proposal that led to
the adoption of
the plan provide explicitly for the activity and the incurring of costs
in relation to the activity.
[23] The terms "significance"
and "significant" are defined by s 5 of the Act as
follows:
significance, in relation to any issue, proposal, decision,
or other matter that
concerns or is before a local authority, means the degree of importance of
the issue, proposal,
decision, or matter, as assessed by the local authority, in
terms of its likely impact on, and likely consequences for,--
(a) the current and future social, economic, environmental, or cultural
well-being of the district or
region:
(b) any persons who are likely to be particularly affected by, or
interested in, the issue, proposal, decision, or matter:
(c) the capacity of the local authority to perform its role, and the
financial and other costs of doing so
significant, in relation to any issue, proposal, decision, or other matter,
means that the issue, proposal, decision,
or other matter has a high degree of
significance
[24] Against that statutory framework it is now appropriate to describe
the events
that have given rise to the present proceeding.
The events that have given rise to the present proceeding
[25]
For many years Carisbrook Stadium has been the home of the Otago
representative rugby team. The Highlanders Super 14 franchise has
also used the
stadium regularly for its home matches. Carisbrook, as it is generally known, has
also hosted numerous international
rugby matches between touring international
teams and either the Otago or New Zealand representative teams.
[26] By 2003 it
had become clear that Carisbrook needed significant
refurbishment and redevelopment if it was to continue to fulfil its function
as a venue
for major rugby matches. As a result, a working party was established to consider
possible options. In October 2005 that
project was handed over to the Carisbrook
Stadium Trust.
[27] In early 2007 the Trust produced a report recommending construction
of a
new multi-purpose facility away from Carisbrook. The report also canvassed a range
of other options, including the progressive
redevelopment of the existing Carisbrook
Stadium and the development of a new stadium on the existing Carisbrook site.
[28] The
DCC ultimately opted to support the concept of replacing Carisbrook
Stadium with a new multi-purpose and fully roofed stadium that
was to be located on
Awatea Street, between Logan Park and the Otago Harbour.
[29] The Trust was obviously aware from the outset
that it would not be possible
for the DCC to fund the construction of the new stadium without external support.
For that reason the
Trust approached several parties, including the ORC, with a
request for contributions towards the cost of building the new stadium.
It sought a
contribution from the ORC in the sum of $37.5 million.
[30] The ORC appreciated that a contribution of this magnitude
would be a
significant new activity for the council in terms of s 97 of the Act. It also accepted
that the amount of funding that
the trust sought was significant. As a result, the
ORC concluded that it would need to amend its current LTCCP in order to provide
for the new activity and expenditure within the plan. The ORC had adopted its
current plan in 2006. That plan made provision for
the Council's activities for the
decade between 2006 and 2016.
[31] In April 2007 the ORC and the DCC undertook a joint survey
of Otago
ratepayers in order to obtain feedback regarding their views of the proposed new
stadium. When the ORC later released its
proposal to amend the 2006 2016 plan,
the proposal stated that 52.5 per cent of ratepayers within the region supported the
concept
of a new stadium in Awatea Street. Responses apparently varied between
districts from 66 per cent in support of the proposal in the
Queenstown Lakes
District to 54 per cent in opposition to the proposal in Waitaki.
[32] The ORC was also required to obtain agreement
from all of the territorial
local authorities within its region that it could undertake the proposed new activity.
By June 2007 it
had received agreement from the DCC, the Clutha District Council,
the Queenstown Lakes District Council and the Central Otago District
Council. The
Waitaki District Council initially declined to give its agreement, but later
reconsidered its position and provided
its agreement in January 2008.
[33] The Council then issued a proposal in which it set out a proposed amendment
to the 2006-2016
plan. The amendment included within the LTCCP the new activity
of partly funding the proposed Awatea Street Stadium by providing a contribution of
up to $37.5 million towards
construction works.
[34] The proposal to amend the 2006 2016 LTCCP set out details of the
proposal to build the new stadium,
including the manner in which the project was to
be funded. The proposal referred to the fact that the ORC had been asked to provide
a contribution of up to $37.5million. It stated that, if the ORC made the contribution
that the Trust sought, it would borrow the
full amount in instalments with the first
instalment being borrowed in July 2009. The proposal said that the borrowings
would be
repaid over a period of ten years, and that rating to service and repay the
loans would be spread evenly over that ten year period.
[35] After receiving, hearing and considering submissions in relation to the
proposed amendment, the ORC adopted it at a meeting
of the Council on 25 June
2008. In doing so, it adopted a recommendation contained in a resolution passed at a
meeting of the Council's
Finance and Corporate Committee that had been held on 11
June 2007. The Council resolution adopting the amendments was as follows:
2. The Amendment to the 2006-16 Long Term Council Community
Plan in respect of the Awatea Street Stadium
proposal, incorporating
the recommendations of the Finance and Corporate Committee
meeting of 11 June
2008, be adopted ...
[36] At the meeting of the ORC's Finance and Corporate Committee on 11 June
2008 the following resolution
was passed:
2) Committee recommends that Council undertake the proposed new
activity of part funding of
the proposed Awatea Street Stadium:
a) If, and only if, on or before 2 February 2009 the Carisbrook Stadium
Trust, as agent for the Dunedin City Council, can provide the Otago
Regional Council with documentary evidence
of a bona-fide and
viable construction tender for the proposed Stadium for a
guaranteed maximum price of not
more than $165.4 million
inclusive of all construction related consultants fees, and
b) Final brief standards will be to
at least the standards detailed in
brief to the design team as described in the Progress Report dated
17 March 2008 from
the Carisbrook Stadium Trust.
c) The Dunedin City Council will:
i) confirm that it will be the ultimate owners of the
public
facility, and
ii) provide necessary independent assurance of project
management and cost
control, and
iii) confirm it will manage ratepayer (including Otago Regional
Council ratepayer) financial input
to the project and provide
the audit and financial controls appropriate to assure
prudent use of public funds.
d) The Stadium must have a roof, thereby making it a regional asset;
e) The Otago Regional Council contribution will be capped
at a
maximum of $37.5 million, and the Dunedin City Council [will] be
responsible for $85 million of funding.
f) Any
external funding available for the purposes of reducing
ratepayer contributions (from other than the above identified
sources
and levels of funding), will be discussed and sharing agreed
between the Otago Regional Council and the Dunedin City Council.
g) There be Council confidence, based on progress documentation of
fund raising commitments secured, that the private sector
funding
programme is on track to meet its objectives.
h) Funding contributions from the Otago Regional Council for the part
funding of the Awatea Street Stadium will not commence before:
i) the site is cleared for construction, and
ii) site establishment works for construction have been
completed, and
iii) permanent on-site construction
works have commenced
iv) the funding to be advanced during the term of the
construction programme, targeted generally to the timing of
the costs of the roof
construction.
i) Any external funding available for the purposes of reducing ratepayer
contributions (from other than the
above identified sources and levels
of funding), will be discussed and sharing agreed between the Otago
Regional Council
and the Dunedin City Council.
[37] Clause 2)a) required the Trust, as agent for the DCC, to provide the ORC
with documentary evidence
of a "bona fide and viable construction tender for the
proposed Stadium with a guaranteed maximum construction price of $165.4 million
inclusive of all construction related consultants fees". The Trust was to provide that
evidence on or before 2 February 2009. At
an extraordinary meeting of the Council
on 11 February 2009 a majority of the members of the ORC resolved to proceed with
the proposal
on the basis that they were satisfied that this condition had been met.
[38] Members were concerned, however, about a shortfall
in private sector
funding for the project. In addition, the Community Trust of Otago had confirmed
that it was only able to commit
the sum of $7 million by way of contribution to the
project rather than $10 million as earlier envisaged. As a result, the
Council
resolved, again by a majority, to confirm a new activity of part funding of the
proposed new stadium on the following terms:
1. the part funding be provisionally entered at $37,500,000 in
Council's draft 2009-2019 LTCCP,
2. the funding be scheduled in accord with conditions h) and i) of
Council's resolution of 25 June 2008,
3. the funding be reduced by the relevant quantum appropriate to
determination under condition i) of Council's
resolution of 25 June
2008,
4. the funding be conditional on fulfilling conditions b) to i) of
Council's resolution of 25 June 2008 except in regard to the
Community Trust of Otago contribution which
is now set at
$7,000,000,
5. the funding be conditional on assurance acceptable to Council by 2
March 2009, of a likely government or other sources capital
contribution of $15,000,000 to help meet the
shortfall of private
sector capital funding,
6. the Dunedin City Council will raise and secure suitable
loan finacne
of $24,893,598 to offset the shortfall of private sector capital
funding prior to Stadium
opening,
7. the Dunedin City Council will meet an additional $3,000,000 capital
contribution to meet
the shortfall of that sum due to the Community
Trust of Otago reducing its expected contribution from $10,000,000
to a confirmed contribution of $7,000,000.
8. In the event that any one of the conditions above is not
met, this
resolution is void.
[39] This is the decision that Mr Walker challenges in the present proceeding,
because
it is the current operative decision of the ORC that has committed it to
contribute to the stadium project.
[40] At a further
extraordinary meeting held on 3 March 2009 a majority of
Council members was satisfied that the Government had agreed to provide
the sum
of $15 million in order to partly cover a shortfall in private sector funding. On that
basis the Council passed a resolution
to prepare the proposal for the 2009 2019
LTCCP incorporating the new activity of part funding the proposed Awatea Street
Stadium
in accordance with the resolution that the Council had passed on 11
February 2009.
[41] By this stage the Council was also satisfied
that the DCC was committed to
obtaining bridging finance of approximately $24 million in order to cover the
balance of that shortfall.
Similarly, the DCC had confirmed that it would provide the
sum of $3 million in order to make up the difference between the amount originally
to be provided by the Community Trust
of Otago and the amount that the CTO
ultimately agreed to provide.
[42] The ORC has now released its proposed LTCCP for 2009
2019 for public
consultation. It must adopt the new plan no later than 30 June 2009 so that it is in
force before the existing
plan expires at midnight on that date. The Council is
currently engaged in public consultation regarding the new plan and expects
to be in
a position to adopt it in the last week of June 2009. The proposed plan carries
forward the activity of supporting the stadium
project that was introduced into the
2006 2016 LTCCP by the amendment that the Council adopted on 25 June 2008.
[43] The ORC
also proposes to pass its rating resolutions for the 2009 2010
financial year by 1 July 2009. These will contain a component relating
to the costs
of funding the ORC's contribution to the stadium project.
[44] Following the meeting on 9 March 2009 the ORC advised
the DCC on 11
March 2009 of its commitment to contribute up to $37.5 million towards the stadium
project.
[45] On 20 April 2009
the DCC resolved to enter into a contract for the
construction of the stadium. It did so, however, on the basis that any such contract
was conditional upon a favourable outcome being achieved in litigation brought by
Stop the Stadium Inc. In that litigation the plaintiff
sought judicial review of the
DCC's decision to enter into a contract for the construction of the new stadium.
[46] After the
proceedings by Stop the Stadium were dismissed by Chisholm J on
24 April 2009, the DCC entered into a contract for the construction
of the stadium
with Hawkins Construction Limited on 27 April 2009.
[47] On the same date the ORC sent the DCC a letter containing
a schedule of
payments. This showed that the first instalment of the ORC's contribution to the
stadium project would be paid in August
2009. Significantly for present purposes,
the letter confirmed that the proposed payments would not be made until conditions
h)(i),(ii)
and (iii) of the ORC's resolution dated 25 June 2008 had been met.
[48] Preliminary site work has commenced. The work that has
been done to date
is summarised in an affidavit sworn by M Philip Harland, the Chief Executive of the
DCC, in support of the ORC's
opposition to Mr Walker's application for judicial
review:
14. Since the execution of the contract, the main contractor
has been
progressing site establishment. Fencing is being erected around the
site, temporary access
provisions are being put in, services have
been terminated and establishment of a temporary power, water and
telecom supplies for the duration of the contract has been
progressed.
15. Critically, the demolition
and piling contract packages have been let
with demolition now underway with a focus on the area where the
main south stand is to be located as the structure is on the critical
path programme. Buildings have been
decommissioned and a
number of buildings where the south stand is to be located have now
been demolished.
The test piling works will commence on site
within the next two weeks with the eight test piles currently being
manufactured. The structural steel package will be let imminently
which will see the manufacturing of
the steel work commencing.
The contractor is also now reviewing the electrical package.
16. From an administrative
perspective, the public roads on the site have
now been stopped and the titles are being amalgamated into one.
17. Since early May the construction has been progressing steadily and
consequently the City Council will
become liable for the first
payment claim on the project in early June.
[49] Against that factual and statutory background I now turn
to consider the
principal challenge that Mr Walker advances to the ORC's decision to support the
stadium project. His principal argument
is that the ORC's decision to contribute to
the costs of building the new stadium is in breach of the provisions of s 97 of the
Act.
Has the Council acted in contravention of s 97 of the Act?
[50] Mr Walker bases his argument on this point upon the following
allegations:
a) The ORC is in breach of s 97(2)(a) and (b) of the Act because it has
failed to explicitly
provide for critical aspects of the decision in its
proposal to amend the 2006-2016 plan, in the amendments that were
eventually adopted in relation to that plan and in its proposed 2009-
2019 plan.
b) It
is also in breach of the same provisions because it has failed to
explicitly disclose in those documents the impact
of GST upon the
contribution that the ORC is to make to the project.
Failure to disclose the true cost of the contribution
[51] Mr Walker's argument on this point is that the ORC has consistently told
ratepayers that its contribution to the project
will be capped at $37.5 million. The
proposal to amend the 2006-2016 plan and the final amendment to that plan both
contain that
claim. The proposed 2009-2019 plan carries it forward. Mr Walker
contends that the ORC has failed in all of its documents
to disclose the interest that it
will be required to pay (and thereafter recover from ratepayers) as a result of the
funds that it
will need to borrow in order to pay the contribution.
[52] Mr Walker says that the reality of the situation is that the ORC will
be
required to pay considerably more than $37.5 million once interest is factored into
the equation. As a result, ratepayers will
also be required to pay considerably more
than $37.5 million to service and repay the borrowings. He argues that the
documents
that the ORC has produced in relation to both the 2006 2016 and the
2009 2019 plans do not make that fact explicit.
[53]
Section 97(2)(a) and (b) of the Act applies to all significant decisions and the
ORC's decision to partly fund the construction of
the stadium is a significant
decision. Those sections prohibit any regional council from making a significant
decision unless the
decision is explicitly provided for in its current LTCCP and
unless the proposal to provide for the decision was included in a statement
of
proposal prepared under s 84 of the Act. Mr Walker argues that the ORC's decision
to carry on the activity of making the contribution
to the stadium project has been
made in contravention of s 97(2)(a) and (b). The breach arises because the ORC
failed to explicitly
refer to the effect of interest in its proposal to amend the current
LTCCP and in the amendment that it ultimately adopted in relation
to that LTCCP.
The proposed 2009 2019 LTCCP perpetuates the breach.
[54] This argument ignores the fact, however, that the ORC
has consistently
advised ratepayers of the fact that it intended to borrow all of the funds that it
required to make the contribution.
It has also advised them of the likely cost of that
borrowing, and of the fact that it will meet the costs of the borrowing at least
in part
by rates to be levied on ratepayers within its region.
a) The proposal to amend the 2006-2016 plan
[55] The proposal
advised ratepayers that:
(i) the ORC would borrow the full amount of the contribution, with
borrowing commencing
in July 2009; and
(ii) borrowings would be repaid over a term of ten years; and
(iii) the ORC had given consideration
to repaying the borrowings over 20
years, but this option resulted in an additional interest expense of
approximately $15 million and was therefore not considered prudent;
and
(iv) no assessment had yet been
made as to the source of borrowings, but
the interest rate on the borrowings was estimated to be 8% per annum
over the term of the loans.
[56] The proposal confirmed that the contribution would be targeted generally
towards the
construction of the roof, so that borrowings would occur as follows:
July 2009 $10,000,000
July 2010 $17,500,000
July 2011 $10,000,000
[57] The proposal also confirmed that the ORC would make lump sum
repayments on the borrowings by means of three dividends in the
sum of $5 million
each that it would receive from Port Otago Limited in June 2012, June 2013 and
June 2014.
[58] Importantly,
the proposal contained two spreadsheets in which the interest
incurred by the borrowings was shown as an expense from the 2009/10
year to the
2015/16 year.
b) The amendment to the 2006-2016 plan
[59] The amendment that the ORC ultimately adopted
in respect of the 2006-2016
plan contained virtually the same information as had been contained in the proposal.
The only alterations
were that the amendment in its final form estimated the likely
interest rate payable in respect of the borrowings at 9% per annum.
It also extended
the time frame within which the borrowings were to be repaid from ten years to 15
years. Again, two spreadsheets
clearly showed the interest to be paid in respect of
the borrowings as an expense.
c) The proposed 2009-2019 plan
[60] The proposed plan contains much of the same information as was contained
in the proposal to amend the 2006-2016 plan and
the final amendment to that plan.
There are only two changes of any substance in the proposed plan. First, the
estimated
interest rate has now been reduced to 8% per annum. Secondly, the
proposed plan now provides for the dividends from Port Otago Limited
to be
received in four differing amounts between 2012/13 and 2015/16. As a result of the
changes in timing and quantum of the dividends,
the ORC proposes to have resort to
capital reserves. These will be used to make up the shortfall in funds required to
cover costs
and repayments during the period between 2010/11 and 2013/14. The
ORC proposes to repay the funds employed using capital reserves
in full, together
with interest.
[61] Once again, however, interest costs are included as an expense in a
spreadsheet that forms
part of the information provided in relation to the stadium
project.
Conclusion
[62] The above analysis demonstrates that,
from the outset, the ORC's documents
have expressly referred to the fact that the ORC's contribution to the stadium project
is to
be fully funded by borrowings. They also expressly refer to the fact that the
borrowings will attract interest of between eight and
nine per cent per annum. The
likely cost of interest has also been depicted in the spreadsheets included within each
document.
Ratepayers also knew, because they were expressly told in the
documents, that the ORC intended to recover a significant proportion
of the cost and
repayment of the borrowings by using its rating powers.
[63] In those circumstances I reject Mr Walker's assertion
that the ORC's
documents do not explicitly refer to the question of interest. The ORC's decision to
support the stadium project is
therefore not unlawful on this ground.
The impact of GST
[64] Mr Walker's argument on this point is that the ORC's documents
fail to
explicitly describe the impact that GST will have upon the Council's contribution to
the project. He contends that they
fail to disclose that the actual cost to the Council
will be $37.5 million plus an additional 12.5 per cent of that sum by way of
GST.
[65] The evidence does not explain how, if at all, GST will impact upon the
contribution that the ORC is to make to the stadium project. I am not at all sure that
the contribution
will, in fact, attract GST because the ORC is not paying for goods or
services of any description. Mr Walker endeavoured to argue
that the contribution
will amount to payment for a financial service, but I am not sure that that submission
is correct. If it is,
the contribution would in any event be exempt from GST.
[66] Council for the ORC advised me from the Bar that the contribution
is to be
paid "exclusive of GST (if any)". He was unable to advise me, however, as to how
the contributions would be treated by either
the ORC or the DCC for GST purposes.
[67] I take the view that the answer to this issue lies in the fact that the ORC is a
"registered
person" for the purposes of the Goods and Services Tax Act 1985. As a
result, it will be entitled to claim a GST input tax credit
equivalent to the amount of
any output tax that it may be required to pay. I therefore take the view that, other
than in relation
to the timing of payments, GST will have no effect on the amount
that the ORC is ultimately required to pay. It will only be required
to pay a net sum
of no more than $37.5 million.
[68] All of the Council's documents show the ORC's contribution to the stadium
project as being nett of GST. The amounts to be recovered through rating levies, on
the other hand, are shown as being GST inclusive.
The ORC contends that both of
these accounting methods conform with generally accepted standards of accounting
practice. It points
to the fact that Audit New Zealand was required to audit the
proposed amendments to the 2006 2016 plan and the proposed 2009 2019
plan.
Its report in relation to the latter confirms inter alia that:
The forecast information has been properly prepared
on the basis of the
underlying information and the assumptions adopted and the financial
information complies with
generally accepted accounting practice in New
Zealand.
[69] In the absence of any evidence to suggest that the ORC has
adopted incorrect
accounting methodology in dealing with the issue of GST I do not accept that any of
the plans misrepresents the
position so far as GST is concerned. I do not accept that
the ORC will ultimately pay more than $37.5 million because, even if it
is required
to pay GST on the contribution, it will be able to recoup that payment by claiming an
input credit of an equivalent amount.
The ORC's documents are therefore correct to
describe the contribution as being nett of GST.
[70] Mr Walker has not established
that the ORC is in breach of s 97 of the Act
under this ground either.
[71] Before leaving the topic of GST I record that Mr
Walker endeavoured during
the hearing to suggest that the ORC might be adversely affected in terms of GST in
another way. He contended
that the ORC may be liable for GST when the Trust
eventually transfers the land and stadium to the DCC-owned trading organisation
that is ultimately to own the land and operate the stadium. I fail to see how the ORC
could have any liability for GST in this context
because it is not the current owner of
the land and never will be. The transfer of the stadium from the Trust to a DCC-
owned trading
organisation will therefore be of no consequence at all to the ORC.
Has the ORC otherwise acted lawfully in supporting the stadium
proposal to
date?
[72] I include this as an issue because Mr Walker contended that, even putting to
one side the specific issues
that I have dealt with, the ORC has been acting
unlawfully in continuing its support for the stadium proposal.
[73] His submissions
on this point appear to be based on the premise that the
Council has not yet adopted its 2009 2019 plan and, until it does, it
cannot
undertake any activity that is related to its support of the stadium proposal.
[74] This submission fails to recognise
that on 25 June 2008 the ORC adopted the
proposed amendment to the 2006 2016 plan that related to the new activity of
providing funding for the construction
of the stadium. Once it adopted that
amendment, the ORC had the ability to undertake that activity. Even now, however,
the ORC has not actually made any of the payments that will comprise its
contribution towards the costs of constructing the stadium.
The first of those
payments will not be made until after the ORC has adopted its 2009 2019 plan. It
will only be able to
carry on the activity of contributing to the cost of building the
new stadium if it adopts a plan that makes provision for that activity
to be continued.
[75] All of the ORC's actions to date have therefore been authorised by the
amendment that it adopted to the
2006 - 2016 plan on 25 June 2008. For this reason
I do not accept Mr Walker's submission that the ORC has been acting unlawfully
to
date because it has acted generally outside the authority given to it by the Act.
[76] These conclusions are, in my view,
sufficient to dispose of Mr Walker's
claim. They deal with the only issues that he raises that I consider to be within the
power
of the Court to adjudicate upon. For the sake of completeness, however, I
propose to refer to some of the other matters that Mr Walker
has raised.
Other issues
The resolution dated 1 February 2009 is void because conditions have not been
satisfied
[77] Mr
Walker argued that several of the conditions that the ORC imposed in its
resolution dated 11 February 2009 have not been met.
As a consequence, he
contended that that resolution is now, according to its own terms, void. He relied for
this submission
upon the fact that clause 8 of the resolution provided that, if any of
the other conditions were not met, the entire resolution would
be void.
[78] As counsel for the ORC pointed out, however, the ORC has accepted that
some of the conditions listed in the resolution
dated 11 February 2009 have now
been satisfied. By way of example, it accepted on 9 March 2009 that the
Government had promised
funding to the extent of $15 million in order to partially
offset the shortfall in private sector capital funding. Similarly, the
DCC has also
confirmed that it will obtain bridging finance of just under $25 million to meet the
balance of that shortfall. It
has also agreed to meet the shortfall in funding from the
Community Trust of Otago.
[79] To the extent that conditions have yet
to be satisfied, counsel for the ORC
submitted that the contract remains conditional upon certain events occurring. By
way of example,
the ORC is entitled to insist (in terms of clause b) of the resolution
dated 25 June 2008) that final brief standards will be to
at least the standards detailed
in the Progress Report dated 17 March 2008 from the Carisbrook Stadium Trust.
The ORC will also be
entitled to withhold making any payments until construction
has reached the stage prescribed by clause h) of the resolution dated
25 June 2008.
[80] I accept this submission. The ORC has not yet parted with any money in
terms of the arrangement that it has
reached with the DCC. It is entitled to insist that
agreed terms be adhered to by the DCC. In the event that that does not occur,
the
ORC has the absolute right to withhold making any payment. I do not accept that
the evidence supports Mr Walker's submission
that one or more of the conditions set
out in the resolution has not been met so that the entire resolution is void
The stadium
project cannot be completed in the manner that was proposed
[81] Mr Walker's statement of claim contains the following omnibus
allegation:
Subsequent events have made it impossible to proceed with the proposed
stadium on the basis previously
consulted on to the public of Otago
[82] The statement of claim then lists several factors that are said to support Mr
Walker's
contention that it is now impossible for the stadium project to proceed in
the manner that was originally envisaged. Many of these relate, however, to matters
that only affect the position
of the DCC as the primary funder of the project.
[83] It is clear that the DCC has now been required to assume responsibility
for a
greater proportion of funding than was originally envisaged. This has occurred
principally by virtue of increased land costs,
the shortfall in the amount to be
obtained from funding in the private sector and the Community Trust of Otago
making a smaller financial
contribution than was originally envisaged. Mr Walker
also believes that there is now a degree of uncertainty regarding the extent
to which
the University of Otago will be involved in the project. In addition, the DCC alone
is potentially exposed to any overrun
that may occur in relation to the cost of
building the stadium.
[84] Whilst the amount of the contribution to be made by the
DCC may have
changed from what was originally envisaged, the same cannot be said for the ORC.
Its position remains exactly the same
as it has been from the outset. It will be
contributing a maximum of $37.5 million regardless of what happens to other
contributors
or to the ultimate cost of the project. It will be borrowing the funds to
enable it to make its contribution and it will be meeting
the cost of both interest and
capital repayments largely from rates that it will levy to ratepayers within its region.
The extent
to which (and also the manner in which) the ORC is to participate in the
stadium project therefore remains exactly the same today
as it has always been.
No guarantee that the project can be completed
[85] Mr Walker also objected to the fact that the ORC
was effectively making a
gift or donation to the construction project when there is no guarantee that it can
even be completed. The
answer to this submission lies in the fact that it will be the
DCC's obligation to complete the project. There is nothing in the
evidence to
suggest that the DCC will not have the ability to complete the project whatever the
ultimate cost to its ratepayers might
be. The DCC has also limited its exposure to
cost overruns to some extent by entering into a contract that has a Guaranteed
Maximum
Price.
Failure to share the monies to be received form the Government
[86] Mr Walker argued that the $15 million that the Government
is to provide
ought to be shared between the ORC and the DCC so as to reduce the cost of the
project for ratepayers. This reflects
an agreement that had been reached in 2008
between the DCC and the ORC. That agreement was expressly recognised by
clause
2)i) of the resolution of the ORC's Finance and Corporate Committee that the
ORC adopted on 25 June 2008. It was further confirmed
in clauses 3 and 4 of the
resolution that the Council passed at the extraordinary meeting that it held on 11
February 2009. The
agreement was to the effect that funds that were available to
reduce costs to ratepayers should be shared between the two councils
so as to
achieve that object.
[87] Mr Walker submitted that the DCC has made it clear that it does not propose
to share these
monies with the ORC. Instead, it proposes to use the funding that it
receives from the Government to meet construction costs. As
a result, Mr Walker
contended that the ORC's conditions have not been met and that the resolution dated
4 February 2009 is now void.
[88] It is quite clear, however, that the Government has agreed to provide the sum
of $15 million in order to assist the DCC
to bridge the shortfall in funding from the
private sector. It is not providing the funds so as to reduce the burden of the project
on ratepayers generally. The funds that the Government is to provide cannot,
therefore, be described as funds that are "available"
for sharing between the two
councils in terms of the agreement that they have reached. Instead, those funds are
required in their
entirety to meet the costs of construction.
Suitability of Otago Rugby Football Union as anchor tenant
[89] Mr Walker made submissions regarding the suitability of the Otago
Rugby
Football Union as an anchor tenant at the new stadium. He also made submissions
regarding the likely impact of the project
on the Union.
[90] Those submissions ignore the fact that the ORC will not have any
involvement with, or liability in respect
of, the ongoing operation of the stadium
complex. That responsibility will ultimately rest with the DCC-owner trading
organisation
that will own and administer the stadium. Issues relating to the ORFU
are not matters that affect the position of the ORC.
The
burden on ratepayers outside Dunedin City
[91] Finally, Mr Walker placed considerable emphasis upon the fact that
ratepayers
from areas outside Dunedin City are being asked to contribute to the cost
of a facility that they may never use. He argued that
this constituted a "dangerous
precedent for ratepayer funding", and that the Court should intervene to prevent an
injustice occurring.
Given the passion with which Mr Walker advanced this
argument at the hearing, I suspect that it might lie at the heart of his
opposition to the
ORC's decision to assist in funding the stadium project.
[92] I accept without reservation that this may be
a significant issue for some
ratepayers who live in areas outside Dunedin City. They may well feel aggrieved at
the fact that they
are being asked to fund a project that they believe will be of little or
no direct benefit to them. I have no doubt that there will
also be people who live
within Dunedin City itself who share the same view.
[93] In the end, however, the decision to contribute
to the cost of building a new
stadium in Dunedin is a policy decision that the ORC had the necessary power to
make. Only time will
tell whether the new stadium will provide benefits to the
whole of the Otago region as the ORC believes or whether, as Mr Walker
clearly
believes, it will prove to be a facility that city dwellers alone will enjoy. For present
purposes, however, there is no
jurisdiction for the Court to disturb the decision that
the ORC has made.
Conclusion
[94] The application for judicial review
of the Council's decision is dismissed.
Discretion
[95] The conclusion that I have reached means that I am not required to
consider
whether to exercise my discretion in favour of or against the granting of relief. In
case I am wrong regarding the matters
to which I have referred, however, I propose
to briefly consider this issue.
[96] Had I reached the conclusion that any significant
aspect of the Council's
decision to contribute to the stadium project was unlawful, I would have granted
relief to the applicant.
It is likely that that relief would take the form of orders
preventing the ORC from commencing payments to the DCC until such time
as the
ORC had regularised the irregularity that rendered its conduct unlawful.
[97] Had I reached the conclusion that the ORC
had erred in some other way but
that its conduct was not unlawful, I would have exercised my discretion against
granting relief.
I would have adopted that approach for several reasons.
[98] First, Mr Walker has known for a considerable time that the ORC
intended to
support the stadium project. He must also have been aware that that support was
vital to the DCC's plans. The DCC has
made it clear from the outset that it cannot
proceed with the proposal unless it receives a contribution from the ORC. Mr
Walker
has also presented submissions to the ORC regarding the stadium issue in
response to its public notification of the proposed 2009
2019 LTCCP. In addition,
Mr Walker was obviously well aware of the earlier proceeding by Stop the Stadium
Inc in which it sought
to prevent the DCC from proceeding with the stadium project.
All of these matters have also been the subject of very significant
publicity within
the Otago region.
[99] It would, in my view, have been a simple matter for Mr Walker to have filed
the present proceeding in sufficient time for it to have been heard at the same time as
the proceeding filed by Stop the Stadium Inc. Had he done so, the DCC could have
protected itself by ensuring that it did not enter
into an unconditional contract for the
construction of the stadium until this proceeding had been determined. As matters
stand, the
DCC has now entered into a binding contract that contains very significant
penalties for delay or cancellation by the DCC. In addition,
work has already
physically commenced and has now to some extent caused irreparable damage in the
form of buildings that have been
demolished.
[100] The delay in filing the present proceeding, coupled with the likely effect on
third parties, would have persuaded
me that relief should be denied even if Mr
Walker had been able to point to some irregularity in the process that the ORC has
adopted
in supporting the stadium project.
Costs
[101] There is no reason why costs should not follow the event. The ORC is
therefore
entitled to costs on a category 2B basis together with disbursements as
fixed by the Registrar.
Release from undertakings
[102]
The ORC is now released from the undertakings that it gave to the Court on 6
May 2009 pending determination of this proceeding.
Lang J
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URL: http://www.nzlii.org/nz/cases/NZHC/2009/700.html