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Auckland Council wins right to impose targeted rates on accommodation providers

2 Jun 2023

| Author: Andrea Hilton

Judicial review – reasonableness in context of targeted rate decision – decision-making process required to impose rates – Local Government Act 2002, ss3, 5, 10, 11,12, 14, 77-79, 101 & 102 – Local Government (Rating) Act 2002, ss 13, 16, 17, 18 & 23 and schs 2 & 3, Local Government Act 1974, s122C, Rating Powers Act 1988, s84 – Wellington City Council v WoolworthsAssociated, Associated Provincial Picture Houses Ltd v Wednesbury Corporation

Auckland Council v CP Group & Ors [2023] NZSC 53 [12 May 2023] (Winkelmann CJ, Glazebrook, O’Regan, Ellen France & Williams JJ)

Note: Legislation quoted is as it was on the date of Covid-19.

Auckland Council successfully appealed the Court of Appeal’s setting aside of its decision to impose a targeted rate on accommodation providers for the 2017/18 and 2018/19 rating years. The purpose of the rate was to partially fund the activities of Auckland Tourism, Events and Economic Development (ATEED), a council-controlled organisation that promotes Auckland to visitors.

The Court of Appeal declared the decisions were invalid because the council failed to comply with s 101(3) of the Local Government Act 2002 (LGA) and for unreasonableness.

The council decided to impose the rate, which was a percentage of the affected accommodation providers’ revenue, after consideration of reports containing significant analysis and expert views and various forms of consultation, which started in 2016. The feedback prompted changes to the rating proposal, which had the effect of halving ATEED’s funding, creating rating differentials, including the rate in the rates remission scheme, and providing for an assessment of the inclusion of informal accommodation providers, such as Airbnb, in the future.

Determining the appeal depended on two questions: whether the council met the s 101(3) requirements of the LGA and whether the Court of Appeal was right to not to follow Wellington City Council v Woolworths (Woolworths).

Applicable principles: Purpose of the LGA 2002 in s 3 – local authorities (LA) to provide services to its community – LA determine funding sources that are appropriate – LA must follow proper process – LA required to consider present and future needs – LA has flexibility to set and assess rates – broad range of matters available to define categories of land – Rates must agree with relevant long-term plan and funding impact statement – unequal rates are permitted – LA has discretion to choose rating system – exact equivalence between benefit and rate not required – rating decisions involve imponderables – benefits not defining criterion – some benefit may suffice – overall impact consideration is important – consideration of distribution of benefits is broad-brush exercise – consideration more than box-ticking – judicial review of LA power is statutory interpretation – power must be used – court reluctant to interfere with high policy content decisions – unreasonableness more than apparent unfairness – degree of fluidity and flexibility in local government decision-making – decisions not invalidated by a few wrinkles – rates necessarily impose degree of financial hardship – Woolworths good law – Wednesbury principles.

Held: Appeal allowed. Court of Appeal’s decision is set aside and the High Court’s decision is reinstated. Reasons:

  • The council met the requirements of s 101(3). It turned its attention to the issues raised by the Court of Appeal;
  • the decisions were reasonable;
  • the ability to pass on costs is relevant to s 101 considerations;
  • the council was not “tied” to the assumption that costs could be passed on;
  • Woolworths principles apply to both general rating and targeted rating decisions under the LGRA;
  • a close correlation between rate and benefit is not necessary; only a direct benefit is required; and
  • section 101 considerations capture fiduciary duty in local authority decision-making.

Auckland Council v CP Group Ltd [2023]NZSC 53

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