Councils challenge to transfer of water services rejected in High Court
Councils challenge to transfer of water services rejected in High Court
Thursday 30 March, 2023
While the Government contemplates the future of ThreeWaters reform, a legal challenge by Timaru, Whangarei and Waimakariri District Councils seeking declarations affecting the transfer of local governance and ownership of water services infrastructure assets to water services entities has been decided by the High Court.
In Timaru District Council v Minister of Local Government [2023] NZHC 244 the Court considered an application for declarations broadly stating:
“that it is an important and longstanding principle and feature of democratic governance of New Zealand at community and local level that local infrastructure assets and related services are owned and provided by local councils; and that local councils' rights in relation to infrastructure assets include exclusive possession, use, control and management of them and compensation if the assets are removed from them by legislation.”
The Court traversed the background to the ThreeWaters reform programme, including consultation leading up to the enactment of the Water Services Entities Act 2022, and its impact on each of the three councils. The Court notes that while LGNZ and many Councils were in favour of the reforms, other councils were not.
Jurisdiction
The Court first dealt with the question of whether the declarations sought were too abstract and general to come within the jurisdiction of the Declaratory Judgments Act 1908. It took the view that in seeking to establish that important constitutional law principles affecting the Councils and their communities would be affected by the Three Waters reforms, they fell within the broad ‘stand-alone’ jurisdiction for declarations of legal rights available under section 2 of that Act.
Discretion
The Court then turned to consider the discretionary nature of its jurisdiction as stated in section 10 of the Declaratory Judgments Act. The Crown opposed the grant of declaratory relief on the grounds that:
- the declarations claimed are abstract propositions that do not accurately or fully state the statutory legal position under which local government operates;
- the purpose of the declaratory relief is to influence the reform process that, as a matter of comity, the court should not permit; and
- the declarations lack utility because, to the extent they accurately state the current legal position, the Government (and in turn Parliament) are aware of those matters and the sovereignty of Parliament means that reforms that alter the current legal position are able to be made.
The Crown argued that while local government is an important and longstanding component of the democratic governance of New Zealand, it is a creature of statute and therefore subject to Parliamentary sovereignty. It submitted that the functions and powers of local government are set out in the Local Government Act 2002 (LGA) and, just as Parliament conferred those functions and powers, it can remove them. Therefore Parliament can decide whether local infrastructure assets and related services should remain owned or controlled by local councils and how those services should be delivered.
In response the Councils sought to rely on the argument that democratic governance, including local democratic governance, is a core principle of law requiring local infrastructure assets and related services to be owned and provided by local councils.
The Court agreed that local democratic governance was a core principle of law, but did not see that principle as requiring local authorities to own or control those assets, except pursuant to legislation that may be altered through legislative amendment. The LGA sets out the purposes and principles of local government including democratic accountability, and declaratory relief is not needed or useful to state the resulting obligations in respect of its infrastructure assets.
Compensation
The Councils submitted that that the property rights involved in asset ownership include the common law principle that if central government powers are used to deprive lawful (“non-Crown”) owners of property rights, such owners are entitled to proper compensation for that deprivation. The Court agreed, citing the Supreme Court in Waitakere City Council v Estate Homes Ltd [2006] NZSC 112, that there is a constitutional principle that: if the Crown is to expropriate property legislative authority is required; legislative practice is to provide for compensation; and statutes should be construed in recognition of this statutory principle. However, the Court had to decide if the declaratory relief sought as to the Councils’ rights of ownership and entitlement to compensation was appropriate.
The Court agreed with the Crown that the rights of ownership claimed sit within a complex legislative and regulatory framework that was inconsistent with the declarations sought.
Non-interference in the legislative process
The Court then addressed the application of the principle that when a claim before the courts relates to matters that involve Parliamentary proceedings, a doctrine of non-interference with the legislative process applies. The Councils argued that declaratory relief was necessary to ensure that Parliament was informed of the alleged inconsistency between the proposed legislation expropriating water services from local authorities and fundamental common law values. But the Court was not persuaded that was appropriate in this instance. It said to do so would be inconsistent with the principle of non-interference because it should not try todictate, by declaration or a willingness to award damages or any other form of relief, what should be placed before Parliament.
In any case the Court found that when it came to pass the intended legislation to transfer Three Waters assets to the water services entities Parliament would be doing so armed with all of the requisite information as to the role of the councils in relation to their present ownership and control of water services assets. Therefore it did not accept that the declarations were necessary to ensure Parliament was properly informed.
Result
The Court concluded:
“… that the declarations should not be granted. They are expressed in general and abstract terms that deprive them of usefulness. They do so in an attempt to avoid infringing the principle of non-interference with the legislative process but they are unsuccessful in this aim. The impetus for them and their real point is to use the court process to influence the legislative process that is underway. This is contrary to the court's proper role …”
The application for declaratory relief was dismissed.
Comment
This case was never destined or intended to halt the progress of Three Waters reform. That progress is itself now in question for political rather than legal reasons. It does, however, provide some interesting commentary about the role of the declaratory judgment process and the role of the courts in halting or slowing the legislative machinery.
