AUCKLAND REGIONAL RESCUE HELICOPTER TRUST v AUCKLAND REGIONAL AMENITIES FUNDING BOARD [2014] NZHC 647

AUCKLAND REGIONAL RESCUE HELICOPTER TRUST v AUCKLAND REGIONAL AMENITIES FUNDING BOARD [2014] NZHC 647 [2 April 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2013-404-3637[2014] NZHC 647UNDER THE JUDICATURE AMENDMENT ACT 1972IN THE MATTER OF an application for judicial reviewBETWEEN AUCKLAND REGIONAL RESCUEHelicopter TrustApplicantAND AUCKLAND REGIONAL AMENITIESFUNDING BOARDFirst RespondentAND AUCKLAND COUNCILSecond RespondentHearing: 4 and 5 March 2014Appearances: M Harris for applicantT C Weston QC for first respondentL Farmer for second respondentJudgment: 2 April 2014JUDGMENT OF THOMAS JThis judgment was delivered by me on 2 April 2014 at 3.00 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:.Solicitors:Martelli McKegg AucklandG Hall/ J Wilkinson, Buddle Findlay, Auckland.I Thain, DLA Phillips Fox, AucklandIntroduction[1] The Auckland Regional Rescue Helicopter Trust (Rescue Trust) operates the Westpac Rescue Helicopter service for Auckland. It is one of ten specified amenities eligible for special funding from the Auckland Council (Council). The other specified amenities are the Auckland Observatory and Planetarium Trust, Auckland Philharmonia, Auckland Theatre Company Ltd, Coast Guard Northern Region Inc, NZ National Maritime Museum Trust Board, New Zealand Opera Ltd, Surf Life Saving Northern Region, The Auckland Festival Trust and Watersafe Auckland Ltd.[2] The respondents are the bodies charged with implementing the Auckland Regional Amenities Funding Act 2008 (the Act). Under the Act, an annual levy is imposed on the Council to fund operational (not capital) requirements of the specified amenities. The Funding Board assesses applications for funding, having regard to specified funding principles and recommends a total levy for the year, which is allocated by the Funding Board among the specified amenities. If the Council does not approve the levy, it is determined by arbitration.[3] Every specified amenity except the Rescue Trust has received large increasesin funding. The Rescue Trust's funding has been cut. Demand for the helicopterrescue service has increased steadily since the Act came into force. The Funding Board and Council say that the Rescue Trust has taken the view that it can direct its own fundraising efforts toward debt repayment, replacing a helicopter and other capital costs. The Funding Board says that the Rescue Trust appears to expect its shortfalls created by discretionary capital expenditure to be met by the Funding Board.[4] The Rescue Trust has transferred its major assets to the Rescue Helicopter (Auckland) Trust (Helicopter Trust), which is the fundraising vehicle. The original Trust, the Rescue Trust, is the operating vehicle. They are together referred to in this decision as the Trusts.[5] The Helicopter Trust needs to purchase new helicopters. The first new helicopter will cost approximately $15 million. The Helicopter Trust is expected to borrow $5.9 million by 2015 but needs to raise the balance by then too.[6] The Funding Board allocated the Rescue Trust $900,000 for the 2013-2014 financial year. It had sought $1,230,000.[7] In overview, the Rescue Trust claims that the Funding Board did not allocate sufficient funding to Rescue Trust for the financial year ended 30 June 2014 and that the first of two new funding principles is inconsistent with the Act. This principlerequires the Council and the Funding Board to "have regard to" proposed levels ofrates increases. The Rescue Trust argues that this is a "cap" which is unlawful.[8] The Rescue Trust asks the Court to set aside the funding allocation for the 2013-2014 year. The grounds of review are illegality, irrationality and substantive unfairness on the basis that the respondents have failed to exercise their powers as the Act requires.[9] The actions under review are:(a) The Funding Board's draft funding plan for 2013-2014 reducing theRescue Trust's funding;(b) The Council's approval of the draft funding plan;(c) The Council's further funding principle adopted in October 2012.Illegality/unlawfulnessApplicant's submissions[10] The Rescue Trust's case is that the Funding Board and the Council failed toexercise their powers in accordance with the purpose and requirements of the Act.[11] Mr Harris referred to the legislative history and preamble to the Act and the problems the Act was intended to solve. In his submission the regime prior to the Act resulted in unpredictable and unsustainable funding and the specified amenities had to sacrifice the quality of their services to devote resources to fundraising. TheAct created a new regime conferring a special status on the specified amenities and is intended to allow them to focus on improving performance.[12] Mr Harris submitted that the Funding Board must always act in accordancewith the Act's purpose of providing "adequate, sustainable and secure funding" forthe specified amenities and it follows that the funding principles must be applied consistent with that purpose. In his submission, the mechanism established by theAct is intended to ensure that the Funding Board allocates the "correct" amount required to satisfy the Act's purpose and any act found to be contrary to that purposemust be set aside. He referred to Discount Brands v Westfield (NZ) Ltd,1 where thelocal authority's decision was set aside as unlawful because the Court found theauthority did not have the adequate information the statute required before taking the relevant decision.[13] The Rescue Trust's case is that Parliament gave a clear signal to the FundingBoard of what "adequate, sustainable, and secure" funding would mean for eachamenity by the amounts granted for the first year which were set by the Act.2 Theexplanatory note to the Bill records that it included provision "for the amenities to beable to apply for increased funding over time".3[14] Mr Harris noted that whilst there is no minimum entitlement set by Parliament, it is, in his submission, quite clear that Parliament would have expected funding to rise over time from the base set. In his submission, the Act was intended to provide a measure of predictable, reliable support to allow the specified amenities to flourish and statutory funding levels cannot be reduced if the result were to compromise the purpose of the Act.[15] Mr Harris referred to the fact that no other specified amenity has had its funding reduced from the amount first fixed by Parliament and indeed, they have allenjoyed increases. He referred to what he described as the "sheer magnitude of thediscrepancy in treatment between the Rescue Trust and the other specifiedamenities" and said that plainly called for an explanation. The Funding Board's1 Discount Brands v Westfield (NZ) Ltd [2005] NZSC 17, [2005] 2 NZLR 597.2 Auckland Regional Amenities Funding Act 2008, Schedule 2.3 Auckland Regional Amenities Funding Bill (151-2) (explanatory note) at 5.decision resulted in a levy of 50 per cent of the potential maximum levy permitted under the Act. The Funding Board's report on the draft funding plan for 2013-14 was relatively short in its explanation for the $300,000 reduction in funding to the Rescue Trust. It attributed it to the impact of statutory specified amenities' funding and judicial financial management of the Trusts' "excellent and sustainable business model". That appears to be the only contemporary record of the reasons for the Funding Board's decision. There is now lengthy affidavit evidence seeking toexplain those decisions further. That was, fairly, subject to comment by Mr Harris.[16] Mr Harris denied that the Rescue Trust had a wounded sense of entitlement. Rather, he said, it was a sense that the mechanism of the Act was not being implemented in accordance with the scheme of the Act. Mr Harris emphasised that the decision of the Funding Board resulted in a cut to the funding to the Rescue Trust. He acknowledged that was in the context of the Trusts' significantly improved financial position but noted also that it was in the context of a period of significant capital expenditure. Because the Act does not fund capital expenditure, the Helicopter Trust must find that money from other sources. Mr Harris emphasised that the Rescue Trust is a demand based organisation and it was not seeking money to fund new initiatives but to respond to demand.The Funding Board's submissions[17] Mr Walsh, chair of the Funding Board, has given affidavit evidence. He outlined the approach of the Funding Board to funding and interpretation of the Act. His evidence was that:4The Board considers that the word "sustainable" relates primarily to thefunding stream to the specified amenities as a whole, rather than to an individual amenity. This is consistent with the fact that the Act came into being as a result of concerns that the specified amenities receiving funding on an ad hoc basis, without any certainty as to timing or process and, historically, with uncertainty as to which territorial authorities in the Auckland region would contribute. It was not intended to give an individual amenity a guarantee of any particular funding in any particular year. Rather, the intention is that each individual amenity has the right to seek funding from a guaranteed source of funding.4 Affidavit of Mr Walsh dated 22 November 2013 at [29].[18] The Rescue Trust's application was made in September 2012 for the 2013-14 financial year. Three funding workshops were held on 11 October, 24 October and 8 November 2012. Mr Walsh said that when the Funding Board made its provisional allocation of $900,000 to the Rescue Trust it did so on the basis that its financial position had improved since it first received funding under the Act and had done somore than any other specified amenity. Mr Walsh's evidence was that the FundingBoard wanted to ensure its understanding was correct and therefore it instructed theFunding Board's advisory officer, Mr Leigh Redshaw, a chartered accountant, tocarry out a review of the consolidated Trusts' financial position between 2008-2012. He produced a written report to the Funding Board on 20 November 2012.[19] Mr Walsh says:586. Overall, the report reflected a very significant improvement in theRescue Trust's position since it first received funding under the Act.It had moved from suffering losses of over $300,000 in 2008 to achieving a trading surplus (combined with Helicopter Trust) of $2.7 million is 2012. Along the way, its trustees had created Helicopter Trust and together the trusts had accumulated assets of over $10 million and had managed to pay off over $11.5 million of loans in just four years.[20] Set out below is the table attached to the Funding Board's submissions which, using the material provided by the Trusts, shows the consolidated Trusts' financialposition over the relevant period.Consolidated Trusts (in 000s)Year end FundingbyBoardSponsorshippublicfundingOperatingexpensesAnnualsurplusTotal netassetsMissionsflownFleetreplacementfund30.06.09 - 5,979 4,308 142 1,700 51930.06.10 1,500 6,353 3,509 3,871 5,539 56330.06.11 1,200 4,889 4,968 848 6,446 70930.06.12 1,200 7,195 5,056 2,694 10,151 779 85030.06.13 1,200 8,539 5,564 3,413 13,584 834 4,71030.06.14(Forecast)1,230 7,100 6,010 1,660 14,121 - 5,6005 At [86].[21] The analysis subsequently carried out by the expert instructed by the Funding Board, Mr Eric Lucas, noted that out of around $8 million per annum of sponsorship, donations and grant income raised by the Trusts since their consolidation, the Rescue Trust would typically receive around $2 million or less.[22] Mr Weston QC submitted that the Funding Board undertook a careful and considered analysis of the application and in doing so followed an exhaustive process including providing the Rescue Trust with notice of its provisional decision, allowing it to make submissions on that and giving detailed consideration to them.[23] In Mr Weston's submission, the Rescue Trust has misconstrued the purpose of the Act which is the establishment of a mechanism to provide adequate, sustainable and secure funding for all specified amenities. The funding is meant to be of last resort and the objectives of adequate, sustainable and secure funding relate to the maintenance of the funding stream as a whole, not any one specified amenity. The overarching purpose of the Act was, he said, to create a mechanism to allow for specified amenities to apply for funding from a single secure source and that interpretation is consistent with the reasons for the creation of the Act.Analysis[24] The starting point is the principle as stated by the Supreme Court in Unison Networks Ltd v Commerce Commission:6Public bodies must exercise their statutory powers in accordance with the statutes which confer them. If they make decisions that are outside the limits of their powers they abuse them. The courts control any misuse of public power through judicial review.[25] The Court considered the position when statutory powers are conferred in broad discretionary terms saying:7Parliament must have intended that a broadly framed discretion should always be exercised to promote the policy and objects of the Act. These are ascertained from reading the Act as a whole. The exercise of the power will be invalid if the decision-maker "so uses his discretion as to thwart or run counter to the policy and objects of the Act". (footnotes omitted)6 Unison Networks Ltd v Commerce Commission [2007] NZSC 74, [2008] 1 NZLR 42 at [51].7 At [53].The Act[26] It is worth setting out the preamble and relevant sections of the Act in full.Preamble(1) Several arts, educational, rescue, and community organisations that are vital to the Auckland region contribute to the well-being of the whole region by providing facilities or services to the community:(2) The organisations are an essential part of the fabric of the Auckland region and are necessary to make the region a vibrant and attractive place to live in and visit:(3) A significant proportion of those who visit or use, or otherwise benefit from, the organisations come from all the territorial authority districts in the Auckland region:(4) The organisations currently receive their funding from a range of sources by way of grants made in response to annual or periodic applications. In particular, they make separate applications to each of the territorial authorities and various trusts for funding. The grants resulting from applications are often ad hoc and short term:(5) This process does not provide a secure funding stream for the organisations and it does not necessarily result in all the territorial authorities in the Auckland region making a contribution to theorganisations' funding:(6) A statutory framework is needed to provide adequate and secure funding for the organisations by all the territorial authorities in the Auckland region:(7) The existing statutory frameworks for regional funding of the Auckland War Memorial Museum and the Museum of Transport and Technology provide a model for the funding of the organisations:(8) Territorial authorities funding the organisations should have a formal role, through the Electoral College, in the decisions on funding.(emphasis added)3 Purposes(1) The first purpose of this Act is to establish a mechanism to provide adequate, sustainable, and secure funding for specified amenities that, by providing arts, education, rescue, or community facilities for or services to the Auckland region,—(a) contribute to the well-being of the region; and(b) contribute towards making Auckland a vibrant and attractive place to live in and visit.(2) The second purpose is to ensure that the Auckland Council is part of the mechanism and so contributes towards the funding of the specified amenities.5 Funding Board and Amenities Board and purpose of ActIn performing their functions and duties, and exercising their powers, under this Act, the Funding Board and the Amenities Board must act in accordance with the purpose of this Act set out in section 3(1).21 Funding principles(1) The funding principles to which the Funding Board and the Auckland Council must have regard under sections 24 and 28 are as follows:(a) the primary purpose of the funding is to contribute to the expenses that the specified amenity must incur to provide its facilities or services; and(b) funding is not available for capital expenditure; and(c) funding is not available for any part of facilities or services that the specified amenity provides outside the Auckland region; and(d) funding is not available for facilities or services that at any time in the 5 years immediately before the date on which the Funding Board or the Auckland Council applies this paragraph have been provided funding by—(i) a Crown entity, as defined in section 7(1) of the Crown Entities Act 2004; or(ii) a department specified in Schedule 1 of the State Sector Act 1988; and(e) funding for the retention and preservation of a specifiedamenity's library or collection takes priority over the amenity's other expenses; and(f) funding is available only if the specified amenity has made all reasonable endeavours to maximise its funding from other available funding sources; and(g) total funding for all specified amenities assessed for a financial year must not exceed the maximum levy for that year under section 34; and(h) any other funding principle that the Auckland Council publicly notifies under subsection (3).(2) The Funding Board may recommend to the Auckland Council that it add funding principles to those in subsection (1).(3) The Auckland Council—(a) may receive a recommendation from the Funding Board; and(b) with or without a recommendation, may add funding principles; and(c) must give public notice of the added funding principles.24 Funding Board assesses application(1) The Funding Board must—(a) assess an application made by a specified amenity under section 23; and(b) decide provisionally on the amount of funding to be provided to the specified amenity.(2) The Funding Board may request more information from the specified amenity for the purpose of making its assessment and provisional decision.(4) In making its assessment and provisional decision, the Funding Board must have regard to—(a) the funding principles; and(b) the specified amenity's long-term plan, if it—(i) includes the financial year for which funding is sought; and(ii) has been approved under section 22.[27] Section 3(1) of the Act sets out the first purpose, which is to establish a mechanism to provide adequate, sustainable and secure funding for specified amenities. The Act achieves that by identifying specified amenities, creating and empowering a Funding Board to receive and assess applications against specified funding principles, requiring the Funding Board to consult on a draft funding plan, giving the Council the ability to consider and approve the plan or otherwise and then for the plan to be adopted. The second purpose ensures the Council is part of the mechanism and contributes towards the funding. At the time the Act was passed the amalgamation of the Auckland territorial authorities had not been achieved. Asenacted the reference to the Council was to the Electoral College being all Auckland territorial local authorities. By the amendment effective on 1 November 2010 all references to the Electoral College were replaced by the Council. Section 3(2) now reads rather peculiarly as a result.[28] The correct interpretation of sections 3 and 5 of the Act was the subject of much debate. The competing interpretations advanced by counsel both had difficulties. If the Act is read as the Funding Board suggests, that is, the Funding Board in performing its duties must act in accordance with the purpose of the establishment of a mechanism for funding, then s 5 makes no sense. The mechanism has already been established by the Act and the Act has achieved its purpose in that regard. Section 5 would therefore be obsolete.[29] The applicant would have s 3 read so that the purpose is to provide adequate sustainable and secured funding for specified amenities. That interpretationeffectively ignores the words "establish a mechanism".[30] Section 5 was added on recommendation of the Select Committee. The Auckland Regional Amenities Funding Bill as reported from the Local Government and Environment Committee said in the introduction under "commentary":Administrative BodiesTwo key administrative bodies, the Auckland Regional Amenities Funding Board, and the Amenities Board, would be established under Part 2 of the Bill. We believe there should be a clear and strong link between the bill'spurpose, the activities of the administrative bodies, and the funding application process and criteria, to ensure a focus on the well-being of the Auckland region, to contribute towards making Auckland a vibrant and attractive place to live in and visit, and to ensure that all territorial authorities in the region are part of the funding mechanism and so contribute to the funding of the specified amenities. We therefore recommend the insertion of a new clause 4A [now 5] which requires the funding board and amenities board to act in accordance with the purpose of the bill when performing their functions and duties and exercising their powers.[31] Each adjective "adequate, sustainable and secure" addresses a different aspectof the concerns Parliament sought to address. The word "adequate" qualifies thelevel of funding the specified amenities can expect under the Act. The word"sustainable" has the ordinary meaning of being maintained. The word "secure" hasthe ordinary meaning of safe and dependable. That describes the funding, the provision of which is established by the mechanism under the Act. That funding is then available for specified amenities whose applications are assessed by the Funding Board applying the funding principles set out in s 21, resulting in the funding plan and distribution to the specified amenities.[32] Having reviewed the history of the passage of the Bill through Parliament butmost importantly the Act itself, I conclude that the words "adequate, sustainable andsecure" in s 3 refer to the funding stream. However the funding stream is to beavailable to each specified amenity. Parliament cannot have intended that adequate, sustainable and secure funding is available to some of the specified amenities only. That interpretation would thwart the obvious intention of the legislation. While the Act does not guarantee any particular level of funding to specified amenities, it does guarantee them an adequate level and that the funding will be sustained and secure.[33] The Act is clearly intended to provide a measure of reliable support for the specified amenities. I do not agree however, that the intention is that this support is"to allow the specified amenities to flourish" as Mr Harris would have it. TheFunding Board must provide each and every specified amenity with "adequate, sustainable and secure" funding in accordance with the funding principles. Whatconstitutes adequate funding is an objective assessment which the Funding Board must undertake in accordance with the Act. Mr Harris relied upon the fact that theRescue Trust's funding has reduced from the initial allocation of $1.5 million to $1.2million (2010-2011), $900,000 for the year in question (2013-2014) and it appears that there is a further reduction currently proposed for the year 2014-2015 to $450,000.[34] A large part of Mr Harris's submissions were devoted to the way in which the Funding Board dealt with the Rescue Trust's application. He referred to the inquiryby the Funding Board as to whether the proposed reduction in funding would resultin cuts to the Rescue Trust's service. Without delving into the detail of the response and the Funding Board's final decision, I am satisfied that the Funding Board took aproper approach. The Funding Board and the Council must have regard in assessingthe application and draft funding plan to the funding principles set out in s 21. Section 21(1)(a) provides that:The primary purpose of the funding is to contribute to the expenses that the specified amenity must incur to provide its facilities or services.[35] The Funding Board is therefore concerned with the expenses the specified amenity must incur in order to provide its facilities or services and the primary purpose of the funding is to contribute to those expenses. It was therefore entirely appropriate for the Funding Board to make an inquiry as to the impact of the proposed reduction in funding to the Rescue Trust, that is, would the proposed reduction mean the Rescue Trust was unable to pay the costs it has to pay in order to provide its services?[36] In Mr Harris's submission, the Funding Board misdirected itself because itconflated the principles in s 21(1)(b) and s 21(1)(f), which are that funding is not available for capital expenditure and funding from alternative sources has to bemaximised. He said the Funding Board's concern that the Trusts were focused onfund raising efforts and resourcing the helicopter replacement programme was not consistent with the funding principles. He made much of the need for the Trusts to provide fixed assets, noting that helicopters are expensive, have a relatively short depreciation cycle and thus there is an acute need to fund capital. Mr Harris submitted that in effect the Funding Board erred to the extent of unlawfulness in itsanalysis of the trustees' "choice" to allocate income to capital expenditure. Hedescribed the approach as effectively second-guessing the Trusts' decisions withouthaving the relevant expertise.[37] Section 21(1)(f) does not stipulate that the specified amenity's reasonableendeavours to maximise funding must be limited to funding for its expenses as opposed to capital expenditure. However when s 21(1) is read as a whole it is clearthat s 21(1)(f) is directed at the specified amenity's effort to obtain funding for expenses. Section 21(1)(a) provides the primary purpose of the funding is the contribution to expenses and (b) provides that funding is not available for capital expenditure. Section 21(1)(f) says that funding is available only if other fundingsources have been maximised. Read logically, this must relate to funding for expenses.[38] In any event it is clear from the evidence that the Funding Board is mindful of the need for specified amenities to access other funding for capital expenditure. The extent to which specified amenities may apply funds raised to capital as opposed to earmarking it for operational expenditure is a matter of proportion and degree.[39] The Rescue Trust's position appears to be that the Funding Board has anextremely limited role to play in assessing the applications. In response to a question as to whether the Funding Board had a role in scrutinising an application for funding, Mr Harris replied that the Funding Board had no expertise in helicopter replacement. He said it was entitled to look at surpluses. It had a role but not a detailed one. In the situation where the Rescue Trust was meeting its performance targets and there was a growing demand for its services, the Funding Board, in Mr Harris'ssubmission, had no reason to question the Trusts' decisions on capital expenditure, much less reduce funding.[40] That is not what the Act provides. Indeed, the purpose of the Act was to set up the mechanism of which the Funding Board is a major part. Pursuant to s 24 of the Act the Funding Board must assess an application, decide provisionally on the amount of funding and then consult on the funding plan. The Funding Board must have regard to the funding principles. It has a statutory function and is required to apply its mind to the applications. It is not there simply to rubber stamp the applications.[41] The Rescue Trusts' position is that the Funding Board's decision to reduce itsfunding was unlawful because it was contrary to the scheme of the Act, the Funding Board having misconstrued the Act's requirements. When the position of the RescueTrust is analysed however, its criticisms of the decision appear akin to an appeal on the merits of the decision because the Rescue Trust does not like the result.[42] For the year ended 30 June 2012, the Rescue Trust's total revenue was $5.871 million and its operating expenses were $7.867 million, leaving a deficit of $1.996million. The Helicopter Trust's primary sources of funding are donations from thepublic, lease payments made by the Rescue Trust, grants and revenue from the"Rescue One" television series. For the year ended 30 June 2012, its total revenuewas $7.108 million while its expenses were $2.418 million, giving a surplus of $4.69 million.[43] On a consolidated basis the Trusts' combined revenue in the same period was $12.979 million. Expenses totalled $10.285 million and capital commitments came to $3.368 million. There was a combined surplus, after adding back depreciation, of $358,000.[44] In the relevant year ending 30 June 2014, the Helicopter Trust projected raising funds of approximately $5.2 million from other sources and proposed to make some $2.53 million available to the Rescue Trust, retaining the balance for funding of a new helicopter.[45] The effect of the funding principles is that funding under the Act is for a specified amenity's operational expenditure and not capital expenditure. Funding should be available only to cover operating expenditure requirements which remain after the specified amenity has maximised its funding for that purpose from any other sources available to it. The Funding Board was obliged to consider whether, through its financial arrangements, the Rescue Trust had in fact reasonably maximised its funding for operational expenditure from any available sources other than under the Act. That must include whether the Rescue Trust had maximised funding available from the Helicopter Trust. I do not accept therefore that the Funding Board was wrong to have regard to money held by the Helicopter Trust and earmarked by it for capital expenditure when assessing its funding application. Any money which the Helicopter Trust might have received for the purpose of capital expenditure only could not be taken into account but there was no evidence that was the case.[46] The Rescue Trust maintains that the reduction in funding will impact on the security and sustainability of its services. As noted by the Funding Board however, there was no actual evidence of the impact of the reduction in funding on itsservices. The Funding Board made specific inquiry of the Rescue Trust as to the impact on services and was justifiably satisfied that, with funding of $900,000, the Rescue Trust could continue to provide its services.[47] Mr Harris noted that support for the Rescue Trust was far higher at the time the Rescue Trust was included in the Bill than for other specified amenities which have since received large funding increases, such as the Auckland Festival Trust. This serves to emphasise the reality of the situation. The Rescue Trust is obviously highly popular with the public which is generous in its support. The Funding Board is entitled to consider whether the Rescue Trust requires the same level of financial support from the Funding Board as some of the other specified amenities. MrWalsh's evidence makes it clear that the Trusts' financial position had improvedmore than any other specified amenity.[48] It could be said that the Trust is a victim of its own success. In my assessment it is too simplistic to point to the difference in treatment of the various specified amenities as evidence of the unlawfulness of the Funding Board andCouncil's exercise of their powers under the Act.[49] The Rescue Trust is the only specified amenity which has regularly had its funding set at a lower level than applied for. Its funding has decreased since the firstyear of the Act's operation. However, that must be seen in context. Since that time the consolidated Trusts' financial position has improved significantly. I do not haveand it is not necessary for me to have the relevant financial information for the other specified amenities. The issue is whether the funding for the Rescue Trust is adequate, stable and secure. The Funding Board followed the required process and concluded that the sum of $900,000 in the context of the Trusts' healthy financialsituation was an adequate level of funding.[50] It would, however, be a brave Funding Board who took the view that funding for any specified amenity could be dramatically reduced. It is clearly the intention of the Act that there is a baseline of funding on which the specified amenities can rely. The question is what is the adequate level of funding in each year. That depends upon an analysis of the financial position of the relevant specified amenity and thatis the task the Funding Board must undertake. The Council must then act in accordance with its obligations under the Local Government Act and take into account the purposes of the Act when exercising its functions pursuant to it.[51] I am satisfied that the Funding Board and Council exercised their powers in accordance with the purpose and requirements of the Act.Is the further funding principle ultra vires?Applicant's submissions[52] The second claim of the Rescue Trust was that the first further funding principle adopted by the Council in October 2012 is ultra vires. The first furtherfunding principle (the principle) states: "Total funding for all specified amenities assessed for a financial year should have regard to Auckland Council's proposedrates increases for the forthcoming year."[53] The Rescue Trust said that the Council's approval of the draft funding planwas ultra vires because the Council considered the principle and failed to ensure that it took into account and properly applied the funding principles in s 21 of the Act. The Rescue Trust sought a declaration that the adoption of this principle was unlawful as it is inconsistent with the Act.[54] Mr Harris submitted that the principle is inconsistent with the legislative policy, object and purpose of the Act. The Act's purpose is to provide adequate,sustainable and secure funding for specified amenities, subject to the statutory cap. In his submission the principle acts as a cap by directing the Funding Board to"consider" the proposed rates increases for the forthcoming year. However by s 5, the Funding Board must provide whatever funding is necessary to achieve the statutory purpose up to the limit in the Act, regardless of the rates increases. If a levy sufficient to meet the statutory purpose is less than the proposed rates increase, the principle adds nothing. If it is more than the proposed rates increase, then, Mr Harris submitted, s 5 requires the Funding Board to ignore the principle.[55] As evidence that the Council intended the principle to act as a cap, Mr Harrisdiscussed the history of the Council's approach under the Act. In the first year of the Funding Board's role the Council declined to approve the levy recommended by theFunding Board. The matter was referred to arbitration pursuant to s 29 of the Act.[56] The second year of the Funding Board's activities saw a threat of arbitrationwhen the Council was unhappy with the draft funding plan. The end result was that the Funding Board settled the dispute by drawing on its own resources. Mr Harris referred to this as evidence that the Council has consistently tried to constrain the levy. He then referred to the background to the principle and internal Council reports which, in his submission, were revealing. He did not seek to criticise the process by which the principle was added but its effect. He referred to the acknowledgement by the Funding Board itself that it expected the principle to be significant in future grant allocations.[57] The Funding Board said that the principle played no part in its decision in any event. Its provisional decision was an increase of 2.5 per cent and the Council rate increase in fact was 2.9 per cent. However, Mr Harris pointed out that, at the date of the provisional decision on allocations to specified amenities, the Council had released the proposal for the principle for discussion. Therefore the Funding Board was aware of it and must have taken it into account. In support of that proposition he pointed to the fact that, were it not for the $300,000 reduction in thefunding for the Rescue Trust, the Funding Board's allocation would increase by 5 percent on that of the previous year.The Funding Board's submissions[58] The Funding Board submitted that having regard to the principle was not unlawful because it was lawfully adopted by the Council and the principle is not inconsistent with the other funding principles in s 21 of the Act. Additionally, the principle had no effect on the decision.The Council's submissions[59] The Council submitted that the principle is not ultra vires and therefore its decision to approve the levy was correct.[60] Mr Farmer QC submitted that, as the principle is not directed at the Rescue Trust only but all specified amenities, its lawfulness must be assessed within thiscontext. He rejected the applicant's proposition that the principle is a cap, notingthat the Council can still approve increases in the levy exceeding projected ratesincreases. The principle is something that the Funding Board and Council "musthave regard to". They are not obliged to give effect to it.8 The requirement is only to give genuine attention and thought to the matter and such weight as the decision maker considers appropriate.[61] In Mr Farmer's submission, the Council is expressly empowered under the Act to add new funding principles and such principles are the main tool the Councilhas under the Act in relation to use of ratepayers' money by the specified amenities.The principle provides comfort to ratepayers that their interests will be properly considered. It provides some restraint on what would otherwise be open ended. The Council is required to make cost effective asset allocation and resourcing decisions in exercising its decision making powers. The question of rates increases is a proxy to guide proportionality between facilities/services provided by specified amenities and other facilities/services funded by the Council through rates. The principle establishes a cautionary fiscal note but otherwise preserves the judgement and discretion of the Funding Board in recommending annual levy amounts.[62] The Council submitted that the purpose of funding under the Act is not to benefit the specified amenities for their own sakes but to obtain facilities and services to contribute to the Auckland region's wellbeing, vibrancy andattractiveness, as a place to live in and visit (see s 3(1) of the Act). Therefore, adetermination of what amount is "adequate, sustainable and secure funding" not onlytakes into account the interests of the specified amenities but also Auckland communities and visitors.8 As provided by ss 24(4)(a) and 28(b) of the Act, and the wording of the principle itself.[63] The amount of funding to give is a decision to be made in the exercise of theFunding Board's judgement. The Council said that this is clear from the fact that theAct requires regard to be had to the funding principles but does not prescribe any other formula or method by which the amount of funding should be calculated.Section 24(1)(a) states only that the Funding Board is to "assess" fundingapplications. The only restriction is to have regard to the funding principles.[64] In making its decisions under the Act, the Council is also to apply itsjudgement. The Act sets no express limits on the Council's relevant powers. The only fetter on the Council's right to decide whether to approve the total levy is the requirement to have regard to the funding principles. Mr Farmer pointed out that section 5 does not mention the Council. In his submission that is a recognition that, whilst the Council obviously must have regard to the purposes of s 3 of the Act, it acts within a broader context given its role in Auckland. He referred to the second further funding principle as confirmation of the wider context which is the focus of the Council and which it sought to make relevant to the decisions under the Act. The second further funding principle provides that:Funding is available only if the specified amenity has made all reasonable endeavours to align its activities (in the Auckland region, and for which it seeks funding) with the objectives of the Auckland Plan, including by adopting relevant performance measures.[65] Overall, the position of the Council was that, although it is part of the statutory mechanism, its essential role is that of a funder. The Funding Board is the administrator of the statutory scheme and makes the key funding decisions that determine what each amenity will receive. The level of funding must be established though the mechanism which takes into account the interests of Auckland as a whole as well as the costs of the specified amenities. The principle assists the Funding Board in that exercise and is not inconsistent with any provision, the scheme or context of the Act.Analysis[66] The first draft funding plan prepared by the Funding Board under the Act resulted in an arbitration when the Electoral College did not approve the proposed levy. The Honourable Peter Salmon QC was the arbitrator. He gave a decision with some urgency on 26 April 2010, the date of hearing being 21 April 2010.[67] On the issue of whether the specified amenities should have been required by the Funding Board to justify increases above the amount received in the previous financial year and in particular above an inflation adjusted comparative amount he said:... it is my view that the provisions of the statute provide support for the proposition that the legislature considered 2% of the adjusted rate revenue to be an appropriate contribution by ratepayers to the specified amenities and that the limit set by the statute by years one, two, three, were intended to provide a staged movement towards this 2% level. Clearly, the Board is able to provide funding up to the level set in the statute but it should only do so after a rigorous examination of the applications against the funding principles.[68] The arbitrator considered that there was nothing in the principles (at that time) requiring the Funding Board to limit the grant in times of economic stress but also noted that the Funding Board could be expected in such times to take particular care in assessing the requests.[69] Whether the Council wanted the further funding principle to "pack a punch"or not,9 the end result is that the further funding principle was not that initiallyproposed by the Council. The "for the avoidance of doubt" provision was removedand, more importantly, so was wording that total funding for each year was to be"strategically aligned with the proposed rates increase". Not only did the Funding Board accept that wording but so did the Amenities Board.[70] Mr Harris suggested that the Council was trying to introduce something that runs contrary to the scheme of the Act. If the rates increase were a matter of concern9 In an email from Council officer Jaine Lovell-Gadd to councillors Des Morrison and Ann Hartley on 13 August 2012, Ms Lovell-Gadd complained that changes to the further funding principles recommended by the Funding Board "take the 'punch' out of the new principles".it was something appropriate to be raised by the Council at the consultation stage, he said. The difficulty with that submission is that the consultation stage occurs late in the piece, that is, after the draft funding plan has been formulated. The further funding principles are the only way in which the Council has any real influence on the funding decisions. Its role otherwise is limited to either approving the draft funding plan or, if it does not, having the matter referred to arbitration.[71] Unlike the Funding Board and the Amenities Board, which are creatures of the Act, the Council is a different body with wider statutory obligations. I concur with Mr Farmer that the observations of McGrath J in Unison Networks Ltd v Commerce Commission are particularly relevant.10[53] A power granted for a particular purpose must be used for that purpose but the pursuit of other purposes does not necessarily invalidate the exercise of public power. There will not be invalidity if the statutory purpose is being pursued and the statutory policy is not compromised by the other purpose.[54] Ascertaining the purpose for which a power is given is an exercise in statutory interpretation which is not always straightforward. This is partly because legislative regimes differ in the specificity with which they grant powers. In this area the courts are concerned with identifying the legal limits of the power rather than assessing the merits of its exercise in any case. They must be careful to avoid crossing the line between those concepts.[72] All of the funding principles are restrictive in nature and the Act specifically empowers the Council to add further principles. The principle was adopted after consultation with the specified amenities and the Amenities Board. The Amenities Board recommended a change in wording which was the final wording adopted. The Rescue Trust did not raise any objection to or concern with the principle until well after it received notice that its allocation of funding might be less than it had applied for. The addition of the principle was publicly notified and members of the community raised no objections or concerns.[73] Whether the Funding Board considers that the principle will be significant infuture grant applications is not the point. While I can understand the applicant'sapprehension, the principle as adopted requires the Funding Board to have regard only to the Council's proposed rate increases for the forthcoming year. That seems10 Unison Networks Ltd v Commerce Commission, above n 6, at 53-54.to me entirely proper. That information simply adds to the context within which the Funding Board makes its decisions. If, for example, the result of the applications from the specified amenities would result in a total funding increase of 10 per cent from the previous year, it is important for the Funding Board to take into account a Council rate rise of say 2 per cent. That does not mean that the Funding Board is precluded from adopting a funding plan with a higher percentage increase but it needs to be aware of it.[74] The Act sets no express limits or requirements on the Council's relevantpowers. In particular the power to add further funding principles is stated in broad and unfettered terms in ss 21(3) and 21(a)(h). The levy on the Council is paid out of its general revenues (that is predominantly income from rates) as required by s 36(2)(a) of the Act. Sections 25(2)(h) and 31(1)(c) limit the total levy to an amount equal to no more than 2 per cent of the Council's rates revenue in the previousfinancial year. The further funding principle is simply requiring the Funding Board and the Amenities Board to be cognisant of the reality and ratepayers' interests whenconsidering the nature and scope of facilities or services they propose to provide, with the assistance of operational funding under the Act. It is not unlawful that the Funding Board and Council should have regard to a sense of proportion and relativity between total levies and rates increases.[75] For these reasons I am satisfied that the principle was properly added and it is not ultra vires. Accordingly the Funding Board, to the extent that it did have regard to it, and the Council acted properly in having regard to it in exercising their respective functions under the Act.Irrationality and substantive unfairnessThe Applicant's submissions[76] The applicant claimed that the Funding Board's decision should be set asidebecause it was irrational/unreasonable. It submitted that the question for the Court is whether a reasonable board in the position of the Funding Board, acting reasonably and with fidelity to its statutory function, should have reduced the Rescue Trust'sfunding as the Funding Board did. The Rescue Trust says the answer is no. Thedecision should be set aside because the decision to allocate fundraising proceeds to the Helicopter Trust cannot justify a reduction in statutory funding to the RescueTrust. The Funding Board's analysis of the Rescue Trust's financial position iswrong and the Funding Board has erred in relying on the Rescue Trust's expansionof its community programme and training opportunities as evidence of diminished need for statutory funding. The Funding Board has misdirected itself and this has led it to make a decision which is unreasonable having regard to the scheme of the Act.The Funding Board's submissions[77] Mr Weston submitted that the test of irrationality requires application of avery high threshold and none of the Rescue Trust's arguments "come close" tomeeting the test of absurdity or overwhelming unreasonableness.[78] The Funding Board, he said, was entitled and obliged to have regard to theTrust's accelerated loan repayments and proposed acquisition of helicopters, as theAct provides that the Rescue Trust must make "all reasonable endeavours" tomaximise its funding from other available funding sources, and funding is not available for capital expenditure, and the trustees of the Helicopter Trust deprived the Rescue Trust of most of its fundraising activities and transferred these to theHelicopter Trust. They then applied money to the Helicopter Trust's capital commitments, reducing the amount of money available to the Rescue Trust'soperational expenditure. It was not irrational for the Funding Board to determine that the Rescue Trust had the ability to access alternative funding given that the trustees of the Trusts had the ability to transfer funds between the Trusts and their representatives had informed the Funding Board that the Rescue Helicopter Auckland Trust was committed to funding the deficit of the Rescue Trust. The Helicopter Trust raised over $5.7 million from sources other than the Funding Board in 2010 and the projected deficit relied on by the Rescue Trust only arose because of the decision to apply funds raised by Helicopter Trust to capital expenditure.[79] In making its decision, the Funding Board was entitled to take into account the consolidated financial position of the Rescue Trust and the Helicopter Trust andconclude that it was sound, said Mr Weston. The Rescue Trust has always accepted that a consolidated approach to the financial situation of the Trusts should be taken.The Trusts' finances have improved since 2008. All evidence before the Courtsupported the Funding Board's assessment of the strong financial position of the Trusts. The Rescue Trust's position has continued to improve over time despite thediminishing funding provided to it from the Funding Board.[80] Mr Weston referred to the fact that the Rescue Trust gave the Funding Board an assurance that a reduction in funding would not mean that 111 calls would go unanswered. The Funding Board was entitled to rely on that. Despite the RescueTrust's claims that it did not give this assurance, it in fact did.[81] Mr Weston referred to what he described as a careful and considered analysis of the application undertaken by the Funding Board following an exhaustive process including giving the Rescue Trust notice of its provisional decision, allowing it to make submissions on that and giving detailed consideration to those submissions.The decision reached as a result was in Mr Weston's submission valid andreasonable. In his submission, the case is similar to the case of Thames Valley Electric Power Board v NZFP Pulp & Paper Ltd.11[82] The Funding Board's position was that there is no established ground ofjudicial review that a decision is substantively unfair. The circumstances and needs of each amenity differ so there must inevitably be a difference in the funding allocated to each. Pursuant to the Act, the Funding Board must assess each funding application separately. Nothing in the Act suggests that the Funding Board must adopt a uniform approach to funding.Justiciability[83] The Funding Board pleaded an affirmative defence, that the pleadings of irrationality and substantive unfairness are not justiciable given the decision covers a discretionary allocation of public funds, it was made by an expert board with broad11 Thames Valley Electric Power Board v NZFP Pulp & Paper Ltd [1994] 2 NZLR 641 (CA).membership and specialist expertise and there was nothing in the Act to suggest an intention to provide a remedy in the nature of an appeal.[84] Mr Weston submitted that, if the matters are justiciable, the review should be"with a tolerant eye". This is because the Funding Board has experience, knowledge and expertise in assessing funding applications and making allocations so it is appropriate that the exercise of these powers be left to the Funding Board rather than the Courts. The Funding Board is representative of the wider community and is treated as if it were a local authority. The Court should afford the Funding Board a degree of latitude to perform its functions as it sees fit and in a manner which will meet with the approval of those to whom it is politically responsible. Public consultation is an important factor in the Funding Board's decision making process.There is scope for differing views in the complex and difficult issues before the Funding Board, and as such, the Courts are less well equipped to weigh the merits of one solution as against another. Judicial intervention may inhibit the FundingBoard's efficiency in the performance of its statutory duties going forward. TheRescue Trust had opportunities to take an active role in the decision making process, which provided another reason why the Court should be cautious about interfering with the decision, said Mr Weston.Analysis[85] Fisher J in Thames Valley Electric Power Board said:12on each occasion that the expression "substantive unfairness" is applied toa case it will continue to be necessary to identify a more specific and principled administrative law basis for intervention. Otherwise, as I think this case illustrates, the distinction between judicial review and appeals on the merits will become dangerously blurred.[86] In my assessment the applicant's submissions under these heads, which itconcedes are very much secondary to its principal ground of review of unlawfulness, are merely a repeat of the factors relied on by the applicant under the heading of illegality/unlawfulness. They also run perilously close to being a challenge to the decision on its merits.12 At 654.[87] Mr Harris noted what he described as a marked disparity in the FundingBoard's treatment of the Rescue Trust and said that cannot be rationally explained orjustified by reference to the purpose of the Act or the Funding Board's explanation.There is however nothing in the Act which requires the specified amenities to receive the same amount of money.[88] The Funding Board sought and received additional information about the loan repayments and helicopter purchase, as well as a consolidated revenue statement for the Trusts for the 12 months ending 30 June 2012. The consolidated revenue statement also contained projections for 2013 and 2014, reflecting that, for 2014, excluding the projected capital expenditure and before adding back depreciation, the two Trusts forecast a combined surplus of $1.66 million (on the basis of receiving the requested funding from the Funding Board of $1.23 million).[89] My observations and conclusions under the first two heads are relevant therefore to this ground of review also. I am not satisfied given the factors to which I have referred that, even if the decision of the Funding Board and the Council is justiciable, it reaches the level of substantive unfairness or irrationality required. The allocation was one which could be arrived at by a reasonable funding board. The mechanism established by the Act produced an outcome.Result[90] In summary, I have found that:1) The Funding Board did not act inconsistently with the purposes and requirements of the Act by taking into account money held by the Helicopter Trust and earmarked by it for capital expenditure whenassessing the Trust's funding application. It was open to the FundingBoard to conclude that funding of $900,000, in the context of theTrusts' healthy financial situation, was "adequate, stable and secure"funding in terms of s 3(1).2) The first further funding principle is not ultra vires. The Council'spower under the Act to add further funding principles is broad andunfettered. It is not unlawful for the Funding Board and Council tohave regard to rates increases when deciding on use of the ratepayers'money on specified amenities.3) The Funding Board's decision is not substantively unfair or irrational.[91] For the reasons given, the application is dismissed.[92] In the circumstances of this case the parties may well decide that costs should lie. If, however, there is no agreement as to costs the respondents are to file submissions within 28 days of this decision with the applicant's response seven daysthereafter._______________________Thomas J