Court of Appeal guidance on obligation to pay rates

Tuesday 9 April, 2019

The Rogans were unhappy about having to pay substantially increased rates because of a major cost overrun in the construction of a wastewater treatment plant in Kaipara District.  At the time, they refused to pay rates.  Later, they offered to pay the outstanding rates but not penalties.  They said that the rates assessments and invoices did not comply with the statutory requirements.  Kaipara District Council took recovery proceedings.

The District Court and the High Court had found in favour of the council on the basis that the Rogans’ defence was precluded by s 60 of the Local Government Rating Act 2002 (LGRA).  Section 60 says that a person may not refuse to pay rates on the basis that the rates are invalid unless they bring High Court proceedings to challenge the validity of the rates.  The Court of Appeal disagreed with the lower courts.  It said that s 60 is only concerned with challenges to the validity of the rates themselves, not the validity of the rates assessment or the rates invoice.  The Rogans were, by this stage, not challenging the underlying rates.  

The Court of Appeal went on to observe that one of the principal purposes of the LGRA is to enable councils to rely on the collection of rates from all ratepayers in their districts to fund council activities.  The Court considered that while s 45 requires that councils provide a “comprehensive suite of information” in a rates assessment, errors or omissions do not invalidate the rates assessment.  Similarly, councils are only required to provide an amended rates invoice if the invoice shows the incorrect figure for the rates payable, and the ratepayer remains liable to pay despite the error.  Errors or omissions in the rates assessment and rates invoice do not absolve ratepayers from their obligation to pay rates, and penalties if they fail to do so. 

While the Court of Appeal took a narrower view of s 60 than the lower courts, this decision has the same effect as the decisions of the lower courts in that the Rogans will be required to pay the rates in question as well as penalties.  Both parties will have incurred significant legal costs in these proceedings, however this decision is a positive outcome for councils around the country.  

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