Council's statutory demand upheld

Tuesday 9 April, 2019

The High Court has declined to set aside a council’s statutory demand for a $415,493.45 debt for development contribution (DC) levy.  The case is reassuring for local authorities.

A Manawatu property development group applied for land use consent to develop a warehouse and distribution centre in 2014.  Palmerston North City Council granted a consent subject to the payment of DCs.  A building consent and then subdivision consents followed – always on the understanding that the original DC was payable.  Relevantly, the Council then agreed to recalculate (to the developer’s advantage) the DC on the basis the subdivision consent had come first rather than last in the process.  Notwithstanding the Council obliging this recalculation request, the developer then objected to the DC through the Local Government Act 2002 (LGA) procedure, and obtained a moderate reduction.  Payment was still not forthcoming in May 2018, and so the Council issued a statutory demand.  The developer then applied to the High Court to have the demand set aside.   

The case was heard by Associate Judge Johnston at the end of 2018.  The Court rejected the submission that a council is not able to recover DC levies as debts as “plainly wrong”, pointing to s 252 of the LGA.  This part of the case will accordingly provide councils some certainty when considering pursuing similar debts through the statutory demand procedure (though, as the case suggests, a Council’s ability in that regard should already have been obvious from the LGA).

The case is also notable for how the Court pragmatically dealt with technical arguments seeking to put form over substance.  For example, the developer argued that the DC related to the subdivision consent, but the subdivision never went ahead and so the developer argued the levy should not be payable.  The Court rejected that approach after looking at the actual timeline of events and considering what development had occurred, rather than what had not occurred. Similarly, the Court rejected a submission that the Council had issued its demand against the wrong entity (the developer was in fact a group of entities, one of whom had applied for consent and another of whom was named in the statutory demand).  The Court described the potential to escape liability on that basis as an “injustice”.  The Court found that, because the developer had, in its own name, formally objected to the DC through the LGA procedure, it meant it could not now deny it was the party responsible for paying the DC.

For assistance with DCs please contact Megan Crocket.