NORTHLAND REGIONAL COUNCIL v KAIPARA DISTRICT COUNCIL [2018] NZCA 63

NORTHLAND REGIONAL COUNCIL v KAIPARA DISTRICT COUNCIL [2018] NZCA 63 [27 March 2018]IN THE COURT OF APPEAL OF NEW ZEALANDCA526/2017[2018] NZCA 63BETWEEN NORTHLAND REGIONAL COUNCILAppellantKAIPARA DISTRICT COUNCILCross-appeal RespondentAND RICHARD BRUCE ROGAN ANDHEATHER ELIZABETH ROGANFirst RespondentsMANGAWHAI RATEPAYERSʼ &RESIDENTSʼ ASSOCIATIONINCORPORATEDSecond RespondentHearing: 23 November 2017Court: Kós P, French and Clifford JJCounsel: D J Goddard QC and E H Wiessing for Appellant andCross-appeal RespondentJ A Browne for First and Second RespondentsJudgment: 27 March 2018 at 10.00 amJUDGMENT OF THE COURTA The first and second respondents' application for an extension of time to file amemorandum in accordance with r 33 of the Court of Appeal (Civil) Rules 2005is granted.B The appeal against the interim and final decisions of the High Court in relationto the Northland Regional Council is allowed to the extent described at [90] ofthis judgment.C The cross-appeal is allowed to the extent described at [91] of this judgment.D Orders under s 5 of the Judicature Amendment Act 1972 are made in the termsset out at [92] of this judgment.E The first and second respondents must pay the appellant and cross-appealrespondent one set of costs for a standard appeal on a band A basis with usualdisbursements.F Costs in the High Court are to be determined by that Court in light of thisjudgment.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] Mr and Mrs Rogan are members of the Mangawhai Ratepayers' & Residents'Assoc Inc. They and the Association issued judicial review proceedings inthe High Court challenging the legality of certain rates charged by theKaipara District Council and the Northland Regional Council.[2] The case was heard by Duffy J. In an interim decision, the Judge dismissed thechallenges to the rates set by the Kaipara District Council but upheld some of thoserelating to the Regional Council rates.1 She found the Regional Council had notcomplied with certain requirements in the Local Government (Rating) Act 2002(the Rating Act) and granted a declaration that the regional rates in question had not beenlawfully set or assessed. The issue of further relief was reserved.1 Mangawhai Ratepayers' & Residents' Assoc Inc v Northland Regional Council [2016] NZHC 2192[interim decision].[3] In a subsequent decision (the final decision), Duffy J made orders quashing theunlawful Regional Council rates and associated penalties.2 She declined to validatethem under s 5 of the Judicature Amendment Act 1972 and also declined to make anorder under s 120 of the Rating Act directing the Regional Council to set replacementrates.[4] The Regional Council now appeals both the interim and the final decisions.[5] The Rogans and the Association cross-appeal the finding that theKaipara District Council rates were not unlawful. In addition, although successfulagainst the Regional Council, they seek to support Duffy J's judgment relating tothe Regional Council on grounds other than those relied on by the Judge.These additional or other grounds are arguments they advanced in the High Court butwhich the Judge rejected. The notice setting out the additional grounds was filed late.However, the Regional Council and the Kaipara District Council raised no objection tothe late filing, and we accordingly grant an extension of time.3[6] The Rogans and the Association ask us to invalidate the impugned resolutionsand quash all rates and penalties imposed in reliance on them.Background[7] This judicial review proceeding represents another chapter in a long runninglegal battle.[8] It began with a major cost blow-out for a new sewage scheme which the KaiparaDistrict Council was proposing to establish in Mangawhai. Consultation with thecommunity about the scheme had taken place on the basis the construction cost wouldbe $17 million. The actual cost was in the vicinity of $63 million. There was a publicoutcry and as a protest, the Rogans and other members of the Association withheldpayment of rates to the Kaipara District Council. They believed the Kaipara District2 Mangawhai Ratepayers' & Residents' Assoc Inc v Northland Regional Council [2017] NZHC 1972[final decision].3 Court of Appeal (Civil) Rules 2005, rr 33 and 5(2).Council was illegally entering into contracts relating to the scheme, illegally taking outloans to pay for the contracts and illegally levying rates to repay the loans.[9] Then followed an Auditor General's report that was critical of the KaiparaDistrict Council and the appointment of commissioners to replace some councillors.4The Association also issued judicial review proceedings against the KaiparaDistrict Council. Before those proceedings were determined, Parliament had passed theKaipara District Council (Validation of Rates and Other Matters) Act 2013retrospectively validating the rates. The Judge who heard the judicial reviewproceedings — Heath J — found the Kaipara District Council had acted illegally but inlight of the validating legislation only issued a declaration of illegality regarding theentry into the contracts. He declined to issue a declaration of invalidity regarding therates themselves.5[10] Dissatisfied, the Rogans considered it unjust they should be required to pay ratesa portion of which was to gather revenue to pay debts that were illegal. They filed anappeal against Heath J's decision in this Court and continued to withhold payment of therates pending the outcome of the appeal (which was dismissed) and a subsequent leaveapplication to the Supreme Court.6[11] The Supreme Court however declined to grant leave. By that time, the KaiparaDistrict Council had already issued proceedings in the District Court against the Rogansand other ratepayers seeking recovery of the unpaid rates and penalties. The KaiparaDistrict Council was the named plaintiff although it was also suing in respect of ratessaid to be owing to the Regional Council.[12] The Rogans intended to defend the case on the grounds the KaiparaDistrict Council's rates assessment and rates invoices did not comply with ss 45 and 46of the Rating Act and that until compliant documents were issued rates were not payable.4 Office of the Controller and Auditor-General Inquiry into the Mangawhai community wastewaterscheme (November 2013).5 Mangawhai Ratepayers' and Residents' Assoc Inc v Kaipara District Council [2014] NZHC 1147,[2014] 3 NZLR 85 at [63]–[73] and [116].6 Mangawhai Ratepayers' and Residents' Assoc Inc v Kaipara District Council [2015] NZCA 612,[2016] 2 NZLR 437. The Supreme Court refused leave in Mangawhai Ratepayers' and Residents'Assoc Inc v Kaipara District Council [2016] NZSC 48.As regards the Regional Council rates, the argument was that the Kaipara DistrictCouncil could not sue in its own name for Regional Council rates.[13] Shortly before trial, the Regional Council was joined as a second plaintiff. Thatprompted the Rogans and the Association to examine the Regional Council's ratingprocess for the first time. They identified alleged deficiencies and the judicial reviewproceedings which are the subject of this appeal were then launched.[14] We turn now to address each of the claimed irregularities at issue in both theappeal and the cross-appeal, the relevant High Court rulings, the arguments on appealand our assessment.Non-compliance by Regional Council with s 24 Rating Act — due date[15] The Regional Council is a local authority under the Local Government Act 2002for the Northland region.7 There are three constituent territorial authorities in theNorthland region, one of which is the Kaipara District Council. The other two are theFar North District Council and the Whangārei District Council.[16] The Regional Council sets its own rates, due dates for payment of its rates and apenalties regime for unpaid rates. Some of the rates it sets are region wide rates andothers are specific to parts of the region, for example the Kaipara region. The ratesassessed by the Regional Council on rating units in each constituent district are payablein addition to those assessed by the three District Councils for their respective districts.[17] Under rating services agreements entered into by the Regional Council and thethree District Councils, the Regional Council appoints the District Councils to preparethe rates assessments and invoices for all Regional Council rates, the rates themselveshaving first been set for each rating year by Regional Council resolutions. In accordancewith the agreements, the District Councils send out the assessment notices and invoicesfor the Regional Council rates to their respective ratepayers combined with the DistrictCouncils' own assessments and invoices. Under the agreements, the three DistrictCouncils also undertake to act as the Regional Council's rates collection agent.7 Local Government Act 2002, s 5(1) definitions of "local authority" and "regional council", and sch 2pt 1.[18] These collaborative arrangements have the laudable aims of minimising cost andincreasing efficiencies as required of the Regional Council by the Local GovernmentAct.8[19] For three rating years — 2011/2012, 2012/2013, and 2013/2014 — the RegionalCouncil's relevant rates resolution set due dates for payment of its rates by reference tothe dates to be resolved for that purpose by each of the constituent territorial authorities.For example for the 2011/2012 rating year, the resolution read:The dates and methods for the payment of instalments of rates and any discountand/or additional charges applied to the regional rates shall be the same asresolved by the Far North District Council, the Kaipara District Council and theWhangarei District Council and shall apply within those constituencies of theNorthland region.[20] The Rogans and the Association contended this was a breach of s 24 of the RatingAct. Justice Duffy agreed. She held that in order to comply with the section, theresolution must expressly specify a calendar date.9[21] Section 24 provides:24 Due date or dates for paymentA local authority must state, in the resolution setting a rate,—(a) the financial year to which the rate applies; and(b) the date on which the rate must be paid or, if the rate is payable byinstalments, the dates by which the specified amounts must be paid.[22] The phrase "due date" is defined in s 5 of the Rating Act as meaning in relationto a rate or part of a rate the last day for payment of the rate or part of the rate, that is setout in the rates assessment.[23] On appeal, Mr Goddard QC argued on behalf of the Regional Council thatidentifying a date by reference to some other date constituted stating a date for thepurposes of s 24. He submitted this followed having regard to both the text of s 24 andits purpose. In Mr Goddard's submission, the purpose of s 24 was to enable the ratepayer8 Local Government Act, s 14.9 Interim decision, above n 1, at [27].to know when rates must be paid in order to avoid the adverse consequences that followfrom default. It followed that so long as the date was specified in a way that providedthe necessary certainty to ratepayers, it was compliant. The formula adopted in theresolution meant that by the time the rates assessments and invoices went out, thespecific date would be fixed, known and communicated.[24] We do not accept these arguments. In our view, correctly interpreted, s 24requires specificity and certainty at the time of the resolution. In effect the impugnedresolutions were purporting to authorise payment of rates to take place at an unknownand uncertain time in the future. That cannot have been intended by Parliament. It usedthe word "state" which as Mr Goddard himself acknowledged is prescriptive in nature.We consider the use of the definite article "the" is also significant. What must be statedis "the" financial year and "the" date.10[25] We therefore agree with Duffy J's finding that the resolutions breached s 24. Weappreciate that the resolutions were worded the way they were because of the ratingservices agreements. However, those agreements did not dictate this formula, as isevidenced by the fact that in other rating years the resolutions have nominated a specificcalendar date.[26] We consider the appropriate relief later in the judgment.Unauthorised delegation by the Regional Council of assessment process[27] As mentioned, it was a term of the rates services agreement between the RegionalCouncil and the Kaipara District Council, that the latter would undertake the ratesassessment process on behalf of the Regional Council for ratepayers in the KaiparaDistrict. That was done for all five of the rating years at issue in the proceeding.[28] There was no challenge to the correctness of the assessments. The claim wasthat they had been done by the wrong entity. Justice Duffy agreed. She held the10 See similarly Fletcher Construction New Zealand Ltd v New Zealand Engineering Printing &Manufacturing Union Inc [1999] 2 ERNZ 183 (CA) at [29]–[32].contracting out of the assessment function by the Regional Council amounted to anunauthorised delegation of a statutory function and was therefore unlawful.11[29] We respectfully disagree with that ruling.[30] It was common ground that the assessment of rates is a purelymechanical/mathematical process done by a computer. It involves the application of therating formula specified in the local authority's rates resolution to the information storedon the database relating to each individual rating unit. This produces the figure payableby a ratepayer in respect of a particular rating unit. It involves no element of discretionor evaluative judgment.[31] As submitted by Mr Goddard, in those circumstances it is simply not the sort ofprocess that engages public law restrictions on delegation of powers. The underlyingreason for those restrictions is that where Parliament has conferred a discretion on adesignated person, it has placed its confidence in that designated person and no-oneelse.12 Those reasons do not apply to a process where there can only be one correctanswer. In short, if there is no discretion, the prohibition on delegation is not triggered.13The Regional Council was entitled to buy in what were effectively IT services in thesame way it is able to contract for a third party to provide payroll services.[32] In arguing to the contrary, Mr Browne for the Rogans and the Association soughtto rely on the existence of provisions in the Rating Act that expressly allow delegation.For example, s 27(7) which permits delegation of the statutory duty to maintain a ratinginformation database and s 53(1) which sanctions the appointment of a collection agentto recover unpaid rates. In Mr Browne's submission, having regard to these expressprovisions, and the fact that under the former Rating Powers Act 1988, there was anexpress power to delegate to another local authority the power to assess and collectrates,14 the absence of any equivalent provision in the Rating Act allowing delegation ofthe rates assessment function was highly significant.11 Interim decision, above n 1, at [56]–[57].12 See generally Philip A Joseph Constitutional and Administrative Law in New Zealand (4th ed,Thompson Reuters, Wellington, 2014) at [23.3.1]–[23.3.6].13 R v Thompson [1990] 2 NZLR 16 (CA) at 19–21.14 Rating Powers Act 1988, s 127.[33] So too he argued was the wording of s 53(1). Section 53(1) authorises alocal authority to appoint a person or another local authority "to collect the rates theyassess". Mr Browne emphasised the concluding words "they assess" and submittedthose words supported the Judge's conclusion that the Regional Council must undertakeits own rates assessment.[34] In our view, none of these arguments answers the fundamental point that the ruleagainst delegation only applies to functions requiring the exercise of discretion orevaluative judgment. We also agree with Mr Goddard that the words "they assess" donot assist the Rogans. It is far too long a bow to suggest those words carry an implicationas to who carries out the assessment process for the local authority. If Parliament wantedto limit the contracting out of the assessment process, it would be very strange for it tohave done so in such an elliptical way and in the absence of any conceivable policyjustification. We consider the better view is that Parliament was silent on the issuebecause it does not matter which entity carries out the task.[35] What the argument advanced by the Rogans would effectively mean is that theRegional Council must itself input the data it sends to the Kaipara District Council andat the point where an assessment run is about to take place, the Kaipara District Councilwould need to contact someone from the Regional Council to come and press the button.That is patently absurd and in our view highlights the flaws in the argument. It is alsoinconsistent with the obligation of local authorities under s 14 of the Local GovernmentAct to save costs and eliminate inefficiencies.[36] For the same reasons, we also conclude the Judge was wrong to hold the RegionalCouncil was required itself to assess penalties.15Recovery of rates arrears in the name of another entity[37] Justice Duffy held it was not open to the Regional Council to enter into anarrangement with the Kaipara District Council under which the latter would recover15 As Mr Goddard QC conceded, it might be different if what was at issue was the power to remitpenalties, which contains an element of discretion.unpaid rates on behalf of the Regional Council by suing for the arrears in the KaiparaDistrict Council's name.16[38] There is no doubt that initially the wrong plaintiff was named in theDistrict Court proceedings for recovery of the rates arrears. However, that cannot affectthe lawfulness or validity of the debt itself.[39] Mr Browne conceded the Judge had made a mistake in relation to this issue andthat this aspect of her decision could not stand. We agree.Setting rates on a GST inclusive basis by the Kaipara District Council and theRegional Council — cross-appeal[40] It was common ground that goods and services tax (GST) under the Goods andServices Tax Act 1985 (the GST Act) is a tax charged on supplies.17 It was also commonground that by virtue of s 5(7) a local authority is deemed to supply goods and servicesto persons liable to pay rates for the purposes of the GST Act.[41] Both the Regional Council and the Kaipara District Council set their rates on aGST inclusive basis. Mr Browne acknowledged that setting rates on a GST inclusivebasis is a practice adopted by most local authorities throughout the country. Howeverhe submitted the practice was without statutory authority and hence unlawful. In supportof that general proposition, Mr Browne advanced the following key arguments:(a) The Rating Act does not permit charges other than rates to be set as rates.All it does is authorise the collection of rates. It does not authorise anyadd-on.(b) When rates are set there is no supply of goods or services and no invoicefor the purposes of the GST Act.(c) Nor is it permissible to add GST to rates at the time the rates are assessedbecause at that time there is still no supply for the purposes of the GSTAct. It is only when the rates invoice is delivered to the ratepayer that16 Interim decision, above n 1, at [53]–[55].17 Goods and Services Tax Act 1985, s 8.there is effectively a supply, a supplier and a recipient in terms of the GSTAct.[42] Justice Duffy rejected this argument and we consider she was correct to do so.18[43] As Mr Goddard submitted, the argument is based on a misconception about theoperation of the GST Act.[44] Under the GST Act, the legal liability to Inland Revenue for payment of GSTfalls on the supplier of the goods and services, not the recipient of those services.19 Thecost of the GST liability thus falls on the local authority and from its perspective it issimply another cost incurred in the course of carrying out its functions, to be recoveredthrough rates in the normal way. To include in the rates an allowance for the GSTpayable by the local authority in connection with the deemed supply is common senseand entirely proper. As Mr Goddard graphically put it, it makes no more sense to saythe rates do not include the GST component than it does to say the price of milk doesnot include a GST component payable by the supermarket in connection with the supplyof that milk. The supermarket is not dependent on the GST Act for the authority to addanything to its price.[45] We therefore reject the position advanced by Mr Browne. As he accepted, if hisargument on GST failed, that meant a further argument about penalties being added to aGST inclusive figure must also fail.Non-complying penalty resolutions — cross-appeal[46] Section 57 of the Rating Act provides that a local authority may by resolutionauthorise penalties to be added to rates that are not paid by the due date. Both theKaipara District Council and the Regional Council purported to pass various penaltyresolutions over the period at issue.[47] The Rogans and the Association contend that some of the resolutions wereinvalid. Various deficiencies are alleged.18 Interim decision, above n 1, at [63]–[64].19 The recipient may be entitled to an input credit but that is a different thing.Reservation of a discretion[48] It was common ground20 that a local authority cannot pass a penalties resolutionthat arrogates to itself an option whether to impose penalties later. As Mr Brownesubmitted, either the local authority does not have penalties and therefore does not passa resolution or it decides to impose penalties in which case the resolution is passed andpenalties must be added in accordance with a formula. The only scope for the operationof discretion is after the penalty is imposed via a rates remission policy. But not via theresolution itself.[49] Mr Browne says penalty resolutions passed by the Kaipara District Council forthe 2012/2013 and 2014/2015 financial years and resolutions passed by theRegional Council for the 2013/2014 and 2014/2015 years breached this requirement.[50] The correctness of that assertion turns on the use of the word "may" in theresolutions and whether it is permissive or mandatory. The wording at issue is asfollows:21P) PenaltiesUnder sections 57 and 58 of the Act:a) A penalty of 10 per cent of the rates assessed in the 2012/2013 financialyear that are unpaid after the due date for each instalment may be addedon the day following the due date except where a ratepayer has enteredinto an arrangement by way of direct debit authority, or an automaticpayment authority, and honours that arrangement so that all currentyears rates will be paid in full by 30 June in any year, then no penaltywill be applied; andb) A penalty of 10 per cent of the amount of all rates assessed in anyfinancial year that are unpaid on 05 September 2012 may be added onthe day following that date.c) A penalty of 10 per cent of the amount of all rates to which a penalty hasbeen added under (b) and which are unpaid on 5 March 2013 may beadded on the day following that date.20 At least for the purposes of this appeal and cross-appeal.21 Emphasis added. This wording is from the Kaipara District Council's rating resolution for2012/2013. The wording for the other relevant resolutions is similar in all material ways, and theparties did not seek to draw any distinction between them on this issue.[51] We acknowledge that the word "may" commonly denotes a discretion. Howeverthat is not always the case. In our view, in the context of these resolutions the word"may" means "will". The two words "may" and "will" are used interchangeably. Wenote too the absence of any machinery that one might expect if a discretion was intendedto be conferred, such as who was to exercise this discretion and in accordance with whatcriteria. We therefore agree with Duffy J that correctly interpreted the resolutions do notpurport to reserve a power to later add a penalty and further record that the resolutionswere never administered on that basis.22Failure to state date of calculation[52] This alleged irregularity relates to s 57 of the Rating Act and the penaltyresolution passed by the Kaipara District Council for the year 2011/2012.[53] Section 57 provides:57 Penalties on unpaid rates(1) A local authority may, by resolution, authorise penalties to be added torates that are not paid by the due date.(2) A resolution made under subsection (1) must—(a) be made not later than the date when the local authority sets therates for the financial year; and(b) state—(i) how the penalty is calculated; and(ii) the date that the penalty is to be added to the amount ofthe unpaid rates.(3) A penalty must not—(a) exceed 10% of the amount of the unpaid rates on the date whenthe penalty is added; or(b) be added to rates postponed under section 87 until the ratesbecome payable.[54] The impugned resolution reads:Due Dates for Payment of Rates22 Interim decision, above n 1, at [80]–[81].That all rates will be paid in six instalments due on:Number Date Number Date1 20 August 2011 4 20 February 20122 20 October 2011 5 20 April 20123 20 December 2011 6 20 June 2012PenaltiesThat the Council delegates authority to the Chief Executive and theManagement Accountant to apply the following penalties on unpaid rates:• A penalty of 10 per cent will be added to each instalment or part thereofwhich are unpaid after the due date for payment.• Previous years' rates which remain unpaid will have a further 10 per centadded on 10 July 2011, and again on 10 January 2012.[55] The resolution purports to impose two types of penalties. The first bullet pointpurports to impose an instalment payment for the current year and the second bulletpoint imposes a further penalty in relation to arrears from previous years.[56] Mr Browne submitted the resolution breaches the local authority's statutoryobligation under s 57(2)(b)(i) to state how both types of penalty are calculated.That obligation he argued includes an obligation to state two crucial dates. The first isthe date used in the calculation (the reference date) and the date the penalty will be added(the debiting date). The impugned resolution he contended only states the date when thepenalty will be added and that is insufficient. It should also have stated the date used inthe calculation and the failure to do so renders the resolution invalid. In his submission,Duffy J overlooked that crucial point when she upheld the resolution.23[57] Instalment penalties are governed by s 58(1)(a) of the Rating Act. Section 58(1)states that a local authority may impose a penalty on rates assessed in the financial yearfor which the resolution is made and that are unpaid after the due date for payment (orafter a later date if so specified). No later date is specified in the resolution. Theresolution does identify the due date for payment of each instalment. We therefore donot accept the resolution is non-compliant in relation to the instalment penalty.23 See interim decision, above n 1, at [85].[58] As regards the arrears penalty, these are governed by s 58(1)(b). Significantly, itprovides a mandatory reference date. It states:(1) A local authority may impose the following types of penalty:(b) a further penalty on rates assessed in any financial year and thatare unpaid on whichever day is the later of—(i) the first day of the financial year for which theresolution is made; or(ii) 5 working days after the date on which the resolution ismade:[59] In light of this legislative provision, we do not accept that the resolution canproperly be denounced as non-compliant. As Mr Goddard put it, the reference date ishardwired.Timing errorsKaipara District Council penalty resolution for 2013/2014[60] The relevant parts of the penalty resolution in question read:b A penalty of 10 per cent of the amount of all rates assessed in anyfinancial year that are unpaid on 1 July 2013 will be added on the dayfollowing that date.c A penalty of 10 per cent of the amount of all rates to which a penalty hasbeen added under (b) and which are unpaid on 1 January 2014 will beadded on the day following that date; and[61] On appeal, the Kaipara District Council concedes the dates in the resolutionbreach the time requirements of s 58. The resolution was passed on 25 June 2013. Thatmeant under s 58(1)(b) that the earliest date that could be specified as the reference datewas 2 July 2013, being five working days after the date on which the resolution wasmade. The resolution however specified a date of 1 July 2013. That was an error.[62] As the Kaipara District Council further concedes, this error also resulted in asecond error in para (c) of the resolution. Paragraph (c) purports to impose furtherpenalties on rates to which a penalty has already been added under para (b).Such penalties are governed by s 58(1)(b)(c) which states that a further penalty may beimposed "if the rates are unpaid 6 months after that penalty was added". Six monthsafter 2 July 2013 is 2 January 2014, not 1 January 2014 as stated in the resolution.[63] The concessions are appropriate. We agree the resolution is non-compliant andthat Duffy J erred in holding otherwise.24Regional Council penalty resolutions[64] On appeal, Mr Goddard conceded that several of the penalty resolutions passedby the Regional Council also contained timing errors.[65] For convenience, we set these out in a table.Year Non-compliance with s 582011/2012 Date specified for para (b) penalty is 10 July 2011 rather than1 July 20112012/2013 Date specified for para (b) penalty is 10 July 2012 rather than3 July 2012 (being five working days after the resolutionpassed on 26 June 2012)2014/2015 Date specified for para (b) penalty is 2 July 2014 rather than1 July 20142015/2016 Dates specified for para (b) penalty is 7 July 2015 rather than1 July 2015, and for para (c) penalty is 7 January 2016 ratherthan 8 January 2016 (being six months after the first penaltywas added)[66] It is clear the resolutions do breach the time requirements of s 58.25Penalties on unpaid penalties[67] This challenge relates to resolutions passed by both the Regional Council and theKaipara District Council for all rating years from 2011/2012 to 2015/2016 inclusive andthe imposition of cumulative penalties: that is, penalties being added to penalties.24 Interim decision, above n 1, at [88].25 Justice Duffy did not consider this argument as she held the Northland Regional Council's penaltyresolutions were invalid because they were delegated: interim decision, above n 1, at [74].[68] Mr Browne contended that the wording used in the resolutions did not authorisethis and accordingly the imposition of cumulative penalties by the two local authoritieswas not lawful. The resolutions provided for penalties to be added to rates assessed. InMr Browne's submission what was required was a provision explicitly providing for"penalties to be added to penalties".[69] We do not accept that submission which in our view takes insufficient accountof the definition of the word "rate" and s 58(2). Section 5 expressly defines "rate" toinclude a penalty added to a rate in accordance with s 58. And s 58(2)(a) expresslyconfirms that a penalty previously added to unpaid rates is included in the amount ofunpaid rates to which a penalty may be added.[70] If a penalty forms part of the rate, it follows that a resolution authorising theimposition of penalties on unpaid rates must encompass all penalties previouslyimposed.[71] Mr Browne attempted to counter this analysis by pointing out that under s 5 theexpanded definition of "rate" to include a penalty does not apply if the context otherwiserequires. And in his submission the context in issue does otherwise require. Theresolutions refer to "rates assessed".26 The statutory assessment process only occurs atthe time the rates are first imposed and accordingly Mr Browne argued the reference to"rates assessed" in the penalty resolutions must be a reference to the rates as initiallyassessed.[72] However, the phrase "rates assessed in any financial year" appears in the keypenalty section itself in s 58(1)(b) and it is very clear from the structure of s 58 that whenused in s 58(1)(b) the phrase "rates assessed" is intended to include a rate with a penaltycomponent. We note too s 59, which states "[r]ates assessed in respect of a rating unitare a charge against that unit." It has never been suggested that only the amount of theinitial rate can be a charge and that subsequent penalties cannot.[73] In our view, Duffy J was correct to dismiss this argument.2726 Emphasis added.27 Interim decision, above n 1, at [95]–[96].Summary of conclusions regarding alleged irregularities[74] We have upheld some of the breaches of the Rating Act found by Duffy J, butrejected others. We have also identified breaches which were not found by the Judge.[75] We have found the Regional Council breached the requirements of theRating Act in the following ways:(a) It passed resolutions purporting to set rates for the years 2011/2012,2012/2013 and 2013/2014 without stating the date on which the rate mustbe paid, contrary to s 24.28(b) It passed penalty resolutions for the rating years 2011/2012, 2012/2013,2014/2015 and 2015/2016 that did not comply with the time requirementsof s 58.29[76] We have found the Kaipara District Council breached the requirements ofthe Rating Act in the following way:(a) It passed a penalty resolution for the year 2013/2014 which did notcomply with the time requirements of s 58.30[77] Having found these breaches, we turn now to consider the appropriate relief.Because our findings differ in significant respects from Duffy J, we do so afresh.For completeness, we also record that counsel agreed we were not required to addressthe application of s 120 of the Rating Act.31Relief[78] Section 5 of the Judicature Amendment Act states:5 Defects in form, or technical irregularities28 See above at [24]–[25].29 See above at [65]–[66].30 See above at [61]–[63].31 Section 120 of the Local Government (Rating) Act 2002 sets out circumstances in which a localauthority may set replacement rates. A local authority may decide to do so in certain circumstances,and must do so if a court orders. Justice Duffy held this did not empower a court to so order, anddeclined to apply it: final decision, above n 2, at [54].On an application for review in relation to a statutory power of decision,where the sole ground of relief established is a defect in form or atechnical irregularity, if the Court finds that no substantial wrong ormiscarriage of justice has occurred, it may refuse relief and, where thedecision has already been made, may make an order validating thedecision, notwithstanding the defect or irregularity, to have effect fromsuch time and on such terms as the Court thinks fit.[79] Mr Goddard urged us to exercise the validation power under s 5 or alternativelydecline to grant the Rogans and the Association any relief having regard to the age ofthe affected resolutions and the serious prejudice the remedies sought would have onmany existing ratepayers.[80] In contrast, Mr Browne urged us to invalidate and quash the affected ratingdecisions. He argued the errors here were in a more serious category than the error atissue in Westland County Council v Greymouth Harbour Board.32 In that case,the Harbour Board had levied a rate without first passing the necessary specialresolution. Justice Tipping held that such an error was outside the scope of s 5 anddeclined to validate the decision.33[81] It was a central theme of Mr Browne's submissions — both in relation to whetherthere had been non-compliance and the issue of relief — that rates are a form of tax.The imposition of them involves the exercise of a coercive power and that as the courtshave always recognised, this requires the courts to be ever vigilant and insist on strictcompliance with the authorising legislation.34 In Mr Browne's submission, the courtsprovide the only avenue whereby transgressing local authorities can be held to accountfor unlawful conduct. Accordingly, unless the courts provide ratepayers with relief inthe event of non-compliance, local authorities will be emboldened to breach the legalrestrictions on their powers with impunity and ratepayers deterred from seeking redress.This would, he said, have fundamental implications for the rule of law.[82] However, as even Mr Browne conceded, it is not the law that every ratesirregularity no matter how technical automatically results in a remedy being granted to32 Westland County Council v Greymouth Harbour Board (1987) 7 NZAR 22 (HC).33 At 29–31.34 Relying on Franklin District Council v Cryer [2011] 1 NZLR 529 (HC) at [67].the ratepayer and the rates being set aside. The power under s 5 is available even in therating context. Common sense and proportionality have a role to play.35[83] In our view, the deficiencies identified in the penalty resolutions are in a verydifferent category to the failure to pass a special resolution as in Westland CountyCouncil. That error meant the fundamental statutory foundation for the decision wascompletely missing. In contrast in this case the errors can all be described as highlytechnical. They have also not caused any prejudice to the Rogans, any member ofthe Association or indeed any ratepayer.[84] In the case of the Regional Council penalty resolutions, there was not even thetheoretical possibility of prejudice to ratepayers. The errors were actually of benefit tothe ratepayers because it gave them extra time before penalties were added.36 In the caseof the 2013/2014 Kaipara District Council penalty resolution, the error was one day,which could only have prejudiced a ratepayer if they paid their overdue rates on thecorrect day and in the preceding 24 hours a penalty had been applied. In fact, noprejudice of this kind was suffered by any ratepayer.[85] We agree with Mr Goddard that in these circumstances setting aside the penaltyresolutions would be a disproportionate response and we decline to do so.The appropriate response in our view is to exercise our power under s 5 of the JudicatureAmendment Act and validate the resolutions in question and any rates imposed inreliance on them.[86] The Regional Council's breach of s 24 — failure to state the due date — isrelatively speaking more serious than the errors in the penalty resolutions but can alsobe described as a technical irregularity. On balance, we consider the impugnedresolution satisfies the s 5 criteria and should also be the subject of validation.35 West Coast Province of Federated Farmers of New Zealand (Inc) v Birch CA25/82, 16 December1983 at 9 and 30; Magna Carta 1297 (Eng) 25 Edw I, c 29; Petition of Right 1627 (Eng) 3 Cha I, c 1;and Bill of Rights 1688 (Eng) 1 Will and Mar Sess 2, c 2, art 4.36 The one exception is the 2015/2016 rating year, where the para (c) date is one day too early: seeabove at [65]. Mr Goddard submitted and we accept that there could be no substantive prejudicebecause of the para (b) date.[87] Under the formula that was adopted, there was no possibility of a ratepayer beingmisled or prejudiced in any way. They would have known the percentage amount of therate from the resolution and known too that there would be payment by instalments.Further, under the formula, the rates assessment could only ever issue once a specificcalendar date for payment of the instalments had been fixed. The assessment notice wasin practice the first communication with ratepayers.37[88] Contrary to the submission made by Mr Browne, we do not consider thisoutcome will deter ratepayers from bringing proceedings in relation to complaints thathave real substance. This proceeding lacks complaints of substance. It largely consistsof overly technical points involving no disadvantage to individual ratepayers, but theraising of which will have caused unnecessary cost to the general body of ratepayers inthe area.Outcome[89] The first and second respondents' application for an extension of time to file amemorandum in accordance with r 33 of the Court of Appeal (Civil) Rules 2005 isgranted.[90] The appeal against the interim and final decisions of the High Court in relationto the Northland Regional Council is allowed except for the finding that the resolutionsof the Northland Regional Council setting rates for the years 2011/2012, 2012/2013 and2013/2014 breached s 24 of the Local Government (Rating) Act. That finding is upheld.[91] The cross-appeal is allowed in part. The finding of the High Court that(a) a penalty resolution of the Kaipara District Council for the year 2013/2014 and(b) penalty resolutions of the Northland Regional Council for the rating years2011/2012, 2012/2013, 2014/2015 and 2015/2016 did not breach the time requirementsof s 58 of the Local Government (Rating) Act is reversed.[92] We make the following orders under s 5 of the Judicature Amendment Act, tohave effect from the dates of the respective resolutions:37 The exception was the 2012/2013 year when the assessment notice was not sent with the firstinstalment invoice, as was standard practice, but with the second.(a) The Northland Regional Council's rates resolutions for the years2011/2012, 2012/2013 and 2013/2014 are valid notwithstanding thefailure to state the date on which the rate must be paid, contrary to s 24of the Local Government (Rating) Act.(b) The Northland Regional Council's penalty resolutions for the years2011/2012, 2012/2013, 2014/2015 and 2015/2016 are valid,notwithstanding the failure to comply with the time requirements of s 58of the Local Government (Rating) Act.(c) The Kaipara District Council's penalty resolution for the year 2013/2014is valid, notwithstanding the failure to comply with the time requirementsof s 58 of the Local Government (Rating) Act.[93] As regards costs, Mr Browne sought indemnity costs on behalf of the Rogansand the Association regardless of the outcome of the appeal and the cross-appeal. Insupport of that application, Mr Browne placed weight on the fact that Heath J hadawarded his clients indemnity costs in the previous judicial review proceedings.38However, we consider this proceeding is in a very different category from that tried byHeath J. In the proceeding before Heath J there was a strong public interest and theplaintiffs were essentially vindicated in the position they had taken. In this case, thereis no principled basis on which indemnity costs could be awarded.[94] In our view, the general principle that costs follow the event should apply andwe accordingly award costs against the Rogans and the Association. We acknowledgethey had a measure of success in the appeal but it was of only a minor nature and notsufficient to displace the general rule. There should however be only one set of costsfor a standard appeal on a band A basis with usual disbursements.[95] The Rogans and the Association must pay the appellant and cross-appealrespondent one set of costs for a standard appeal on a band A basis with usualdisbursements.38 See Mangawhai Ratepayers' and Residents' Assoc Inc v Kaipara District Council, above n 5, at[113]–[115]; and Mangawhai Ratepayers' and Residents' Assoc Inc v Kaipara District Council[2014] NZHC 1742 at [39]–54].[96] Costs in the High Court are to be determined by that Court in light of thisjudgment.Solicitors:Simpson Grierson, Wellington for Appellant and Cross-appeal RespondentHenderson Reeves, Whangārei for First and Second Respondents