Environmental / Resource Management

Court of Appeal Clarifies Requirement to Pay Rates

The long-running rates challenge arising from the Kaipara District Council’s major cost overruns associated with the Mangawhai sewage and wastewater treatment scheme may finally have come to an end bringing welcome clarification of the relevant statutory requirements.  The Court of Appeal, in Rogan v Kaipara DC & Northland RC has ruled that the Appellants were not entitled to withhold payment of rates even if a rates assessment or rates invoice did not contain or accurately record all the specified information.

Defence raised

In recovery proceedings for unpaid rates the Appellants had raised the defence that as the rates assessments and invoices did not fully comply with sections 45 and 46 of the Local Government (Rating) Act 2002 they were therefore invalid.  Both the District Court and the High Court disagreed, finding instead that section 60 of the Act, was a complete answer to this contention.  Section 60 states:

A person must not refuse to pay rates on the ground that the rates are invalid unless the person brings proceedings in the High Court to challenge the validity of the rates on the ground that the local authority is not empowered to set or assess the rates on the particular rating unit.

The argument

In the Court of Appeal, the Appellants argued that section 60 did not relieve the burden to prove that rates are due and owing, and that this was dependent on the local authority delivering rates assessments and rates invoices that fully comply with sections 45 and 46 of the Act.  It was alleged that the rates assessment and rates invoiced did not comply with ss 45 and 46, although the inconsistencies with the Act left no room for doubt as to the amount payable or the due date for payment.

For the Councils it was argued that the technical arguments based on non-compliance with sections 45 and 46 of the Act amounted to a challenge to the validity of the rates, and that the challenge was precluded by section 60. 

Consideration by the Court

The Court took a slightly different approach in analysing the relevant provisions of the Act.  It noted that section 44 made a ratepayer liable for rates upon delivery of a rates assessment, and in relation to section 60 determined that the “rates” are to be distinguished from the rates assessment or the rates invoice.  It made the point that the Appellants were not challenging the validity of the underlying rates, but rather the validity of the documents giving notice of their rating liability and triggering the payment obligation.  Therefore, on the facts of the case and contrary to the approach taken in the lower Courts, it determined that section 60 did not apply.

However, the Appellants’ challenge foundered on the finding by the Court that despite the mandatory requirements in section 45 and 46, non-compliance does not invalidate those documents and suspend the payment obligation. 

Pointing out that once rates are assessed in accordance with section 43 of the Act, they become a charge against the rating unit pursuant to section 59, the Court said the liability for rates crystallises on delivery of the rates assessment.  As long as the rates assessment fulfils its function of giving notice of the ratepayer’s liability to pay rates on a rating unit, and the rates invoice notifies the ratepayer of the amount of rates payable for a particular period, the ratepayer’s payment obligation is triggered.

In response to the argument by the Appellants that the errors in the rates invoice needed to be corrected by the issue of an amended rates invoice, the Court pointed out that the requirement to do so only arose under section 47 of the Act where the rates invoice was incorrect as to the amount of rates payable.  Even if that were the case, which it was not in this instance, the ratepayer’s liability to pay is not affected, the only consequence being an adjustment to the penalty period applying.

The Court  concluded:

Section 45 sets out a comprehensive suite of information that must be included in a rates assessment.  However, there is nothing to indicate that Parliament intended that any error or omission in this information would invalidate the rates assessment and suspend the ratepayer’s liability for rates. ……. Further, the interpretation contended for, that would allow ratepayers to seize on any error or omission in the information set out in the rates assessment and refuse payment on that account, would tend to defeat one of the principal purposes of the Act, which is to enable local authorities to rely on the collection of rates from all ratepayers in their districts to fund local government activities.

The result

Although section 60 did not apply on the facts of the case, the Appellants were not entitled to refuse payment of the rates based on the asserted errors and omissions in the rates assessments and rates invoices.  The Act imposes a statutory obligation to pay irrespective of errors or omissions in those documents of the type complained of.  The appeal was dismissed. 

A subsequent application for recall of the judgment, arguing that the Court addressed issues beyond those for which leave to appeal had been given and in respect of which no submissions were made, was declined.

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