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Kaipara council wrong but deal stays

Justice Paul Heath says the former Kaipara District Council breached the Local Government Act in setting up the $57 million Mangawhai Eco Care wastewater plant. He made a ruling in favour of the Mangawhai Residents and Ratepayers Association receiving indemnity costs.

But he says he has no power to undo the deal. 

In 2006 public consultation documents disclosed a likely cost of about $35.6 million but it ballooned to about $57.7 million of mostly borrowed money by the time the project was completed.

An Auditor-General’s report concludes that by late 2007, the council had lost control of the project.

At that time, the council did not know what was being built, what it would cost, how many properties it would service, how it would be funded, and what legal responsibilities each of the parties” involved in the development and construction processes had, Justice Heath says in his judgment.

None of the elected members or executive officers of the time were available to give evidence at the latest hearing. While the latest proceeding was waiting for a court hearing pending the council pursued its promotion of a Local Bill in Parliament to validate the rates that had been levied for the plant. 

During this period when the council promoted the Bill, it was under control of government-appointed commissioners. 

In December 2013 Parliament enacted the Kaipara District Council (Validation of Rates and Other Matters) Act 2013 (the Validation Act). 

The judicial review application had been set down for hearing on February 3, 2014. 

The council contends that the Validation Act removes this court’s ability to declare unlawful any of the rating decisions to which it applies, and the judge agrees. “In those circumstances, my provisional view is that indemnity costs should be awarded to the association, in respect of all steps taken by it up to and including the end of the hearing in February 2014,” Justice Heath says. 

But he was highly critical of councillors and executives in charge at the time.“At an institutional level, this proceeding has exposed a high degree of incompetence among those who were elected to serve on the council, and their executive officers. 

“At a human level, it has caused a great deal of stress, anxiety and financial hardship to many ratepayers who will now be required to pay rates at a significantly higher level than they might reasonably have expected.  They might also be at risk of a significant capital loss, if they were to sell their properties in an endeavour to avoid continuing costs to meet potentially increasingly higher rates.” 

The Auditor-General report says the council did not grasp the complexity of the public/private partnership arrangement it entered into and the additional project management that this approach requires. The report says it appeared the council thought that using a public/private partnership would make delivery of the project easier because it had few internal resources to run a major infrastructure project. “In fact, using a public/private partnership arrangement is complex and requires significant technical skills beyond those required for a traditional design/construct project,” the Auditor-General report concludes. 

Comments and questions

This whole saga is a disgrace and validating illegal actions sets a chilling precedent.

Another subject so well reported, thank you Mr Hutching.
I despair for the lack of coverage over what in any other country would shake a government and those involved to the core.
Instead we have a bunch of useless and inept politicians who I label at minimum, morally corrupt who voted to retrospectively change the law. NZ is a corrupt country.

Corrupt is a big call. Councils all around the world make both good and poor decisions.

The unfortunate truth is that bad management by councils costs rate payers money.

Even if they had said rate payers were over charged where was the money supposed to come from to repay those over charged? The rate payers? The tax payer?

The issue is a kind of corruption using the law. So what has been done is legal but not moral nor fair nor even just. I totally agree with Anonymous on this.

Does anybody know who were the private parties in the public/private partnership that controlled the deal.
They should be answerable ????

All these rulings and conclusions, but never ever any accountability. Is corruption now legal in New Zealand?

In the absence of this validating legislation, the lender (ABN Amro Bank) would be entitled to appoint a receiver to levy a rate on the land in the Kaipara District (or possibly just the Mangawhai area land) under the Local Government Act (see para [46] etc of the judgment). ABN lent the money on that basis and with the presumption it would not be 'stiffed' if things went haywire - it was not ABN's job to wet nurse the council. The consequence of this 'receivership' would be to take that aspect of rating out of the Council's control.

By validating the 'illegal' acts, the Council (and not he receiver) can collect and control the needed rates collection rather than this being controlled by a receiver. The other benefit of validation would be to avoid complications arising out of 'illegal contracts' as the Council Commissions try and seek redress against those responsible.

Following this validation, I cannot think what the Mangawhai Residents Association hoped to achieve with taking the matter to court. It was not going to 'wipe' the loans, nor was it going to prevent ABN being able via a receiver to impose rates. Ironically the court action has actually aided the Commissioners as they sort things out but has not let the residents off the 'rates' hook.

The councillors and the staff who made these bad decisions should have to pay some of the costs. If there is no personal liability when spending other peoples' money then bad decisions are easy. All local bodies in NZ are in debt because of extravagant spending.

I fail to understand how this disgraceful act has not got every New Zealander shaking in their boots. A government that can with apparent ease legitimise illegal acts. A very very sad day for New Zealand, the precedent is now set, hold onto your hats as it is going to get worse.

It is not a coincidence ABN; or should I say Bank of Scotland have left our shores in our hurry. The have left a trail of destruction, everywhere they have gone.

Its time they locked greedy bank executives up, and throw away the keys. The swaps, public private partnerships and high equity to debt loans need to be regulated out of the system.

We dont need them. If you can afford it, you dont have it. Its that simple.

And its time we got rid of a government, led by an ex bankster, who is still organising these deals at the long term expense of the NZ taxpayer. 'NZ Taxpayer' being the operative word.

The is always inevitably one that crawls out from under the rock playing the politically correct huggy-game having done absolutely zero , in making a stand against this type of abominable behaviour. This is moral corruption (and worse) on a grand scale. It just so happens that this particular crew have been caught with their pants down. It it common knowledge that pursuing and chasing a gravy-train job in local government is a soft option incorporating a cushy salary without the need to have the necessary qualifications or requirements for the position. There is simply no accountability or legal bonding indemnity which protects many industries from such ineptitude and arrogant simpleton behaviour. However (Law ?) does - I might add? industry TAANZ bonding , health ? the list goes on. And here we now have thrust upon the community , a bunch of government-appointed hit-men hell bent on sanctioning the illegal while ignoring any of the legal and moral requirements to consider a community. Simply abhorrent and disgusting.

The role of the Ministry of Local Government in The Kaipara District Council Rates (and other matters ) Fiasco.

The Kaipara District Council Rates (and other matters ) Fiasco is a constitutional crisis that will affect all property-owners throughout NZ.
The ultimate resolution will determine whether NZ is a democratic state which is governed by the rule of law
- or is indeed an arbitrary fascist state, - in which government ministers can ignore their obligation to enforce the Acts in their respective portfolios, - as is their statutory role under the terms of the Ministerial Warrants which they swore Oaths and Declarations to when signing on as temporary agents of The Crown, - confident that they will be protected by the passage of legislation which retrospectively validates the consequences of their refusal to enforce the sections of those Acts.

The Mangawhai Ratepayers have been pleading with the Ministry of Local Government to enforce Section 83 of the Local Government Act but they refused to perform their role.
The role these Ministers played, seems to have escaped our attention and that of our media.

Our judiciary is unable to comment on the way our government pushed through the Validation Bill to pass it into law ( 4/12/2013 ) BEFORE the Judicial Review was held in Whangarei High Court early this February.
The Validation Act was designed to limit the scope of the jurisdiction by the judiciary. It worked.
After Section 117 ( Protected Transactions ) of the Local Government Act, the Kaipara District Council Validation of Rates (and other matters ) Act is New Zealand's 2nd piece of fascist law. It must be rescinded.

Because the Ministers in the National government refused to enforce compliance by the Kaipara District Council and did not ensure that the Officer of the Auditor General carried out due diligence on the proposed loans, they have a natural responsibility and therefore liability for the outstanding debt, regardless of Section 121 of the Local Government Act that says they don't.
Our government have engineered and overseen the dismantling our democratically elected institutions to install commissioners whose role is only to recover money for the banks.
We should be asking ourselves WHY they acted to do what they have done.
Was it just sheer incompetence or did they have an ulterior motive ?
What have they achieved and how is this going to benefit our community, our region, our country and us as New Zealanders ?

Alan Preston

Surely the next step, now that the action of the Council has been judged to be illegal is to pursue the Audit Office who, through their audits, had numerous opportunity to identify the illegality of what the Council was doing and put a stop to it thus minimising the risk to ratepayers. Isn't that the purpose of an audit?
For those Mangawhai ratepayers who think that this judgement will make the debt go away, unfortunately you are very much mistaken. The only real recourse as we see it is to get compensation (and not just an empty apology) from the Audit Office, which unfortunately means that the taxpayer will have to foot the bill.
Regrettably that is the cost of democracy and if elected officials at any level are allowed to get away with it in this case, there is nothing to prevent them from doing the same again which makes this a national issue that all New Zealanders should be incredibly concerned about. This is not just a Mangawhai issue and someone other than just Mangawhai ratepayers should be made accountable for what appears to be an incredibly fragile system.
Given that this is an election year and that this issue cuts to the core of NZ society, there is no better time than now to make those who should be accountable, accountable.

The Local Government Act as written, gave serious powers over ratepayers to their local government.

It also promised protections to the ratepayers against arbitrary and secret actions by their local government.

The fiscal probity of local government was to be overseen by the Auditor General, who audited the books annually. For years, the AG ignored Kaipara ratepayers' protests and questions, issuing official assurances that all was well.

Once things went wrong, Parliament supported the local government's power over the ratepayer, and retrospectively withdrew the ratepayer protections written into the very same law. Overnight, the legal protections that used to exist for Kaipara ratepayers, were declared nonexistent - retrospectively for years into the past. And they hastened to do so before a court could rule on a case based on the ratepayer protections that was already underway.

If we lowly commoners had the power to alter the past that way, I know what I would declare for this Parliament: the last election is no longer valid because the members have betrayed the trust of the people.

No justice is left, only raw power.