Mosman Municipal Council v Minister for Local Government; North Sydney Council v Minister for Local Government (No 2)

1. [1]

   BASTEN JA: On 31 July 2017 the Court handed down judgment in five appeals challenging determinations of several delegates of the Minister with respect to proposals to amalgamate certain local government areas. Three of the appellant councils were successful; two, namely Mosman Municipal Council and North Sydney Council, were, by majority, unsuccessful.

2. [2]

   On 10 August 2017 (North Sydney Council) and 14 August 2017 (Mosman Municipal Council), the unsuccessful appellants filed notices of motion seeking to reopen the judgments and orders given in their appeals on 31 July. The basis for the motions was the alleged failure of the Court to address two grounds of appeal on which they said they were entitled to succeed, accepting that they had been unsuccessful on all other grounds. The issue, briefly stated, was that in each case the trial judge had identified error in the determination made by the delegate, but had failed to provide the appropriate relief. The error resulted in the delegate failing to carry out his statutory function, so that both his report and the consequent recommendation of the Boundaries Commission based on his report should have been set aside.

3. [3]

   The motions seek to have the respective appeals upheld on that basis. However, there is a practical aspect to the present applications which needs to be acknowledged. It arises from the fact that the Minister publicly announced that the proposed amalgamations (including that involving the present applicants) were to be abandoned. As a result, the judgment and orders made in this Court had limited practical utility for the appellant Councils. Indeed, the only remaining practical consequence of the Court’s orders is to be found in the allocation of the costs of the proceedings, particularly in this Court. That gives rise to a significant issue, namely whether, assuming that the Court did overlook a ground upon which the applicants were entitled to succeed, the Court should now reopen its decision, not in order to provide utile substantive relief, but in order to determine the appropriate disposition of costs as between two bodies politic, each acting in the public interest.

4. [4]

   I am satisfied that the basis on which the re-opening is sought is made good. Unattractive as it may be to devote further public resources to proceedings which have now, through a change in political direction, achieved their purpose, the error being that of the Court should be rectified. The consequence in relation to the costs of the appeals should be addressed.

Adequacy of relief granted by trial judge

1. [5]

   The substantive order made by the trial judge in respect of each appeal (each being directed to the same report) was that the Court:

2. [6]

   The Councils challenged this order as involving limited relief, which revealed that “the primary judge acted on a misunderstanding of the law, by treating s 263(3) [or particularly subs (3)(e5)] as if it applied only to the delegate’s function of reporting on the [North Sydney/Willoughby/Mosman] proposal, whereas this breach applied to the whole process of examination and report, by virtue of s 218F(2) and caused that whole process to miscarry.”

3. [7]

   The second limb to the challenge was directed to the failure of the primary judge to require that the proposal be reconsidered afresh by a different delegate.

4. [8]

   The form of the orders made by the primary judge do not readily reveal their underlying purpose. In order to explain the outcome it is necessary to have regard to two provisions in the Local Government Act 1993 (NSW) and a passage in the reasons given by the primary judge, albeit in disposing of a different appeal which gave rise to the same issue, namely the Strathfield Council appeal.

5. [9]

   The relevant statutory provisions commence with the requirement that the Minister who made the proposal must refer it for examination and report. The obligation imposed on the Minister is set out in s 218F in the following terms:

6. [10]

   The structure of s 218F is to impose a series of sequential steps which must be taken before the Minister may recommend implementation of the proposal to the Governor. Relevantly for present purposes, these include:

7. [11]

   The second element of the statutory scheme was to be found in the identification of the functions of the Boundaries Commission (and, by virtue of s 218F(2), the delegate) with respect to the examination and report on the proposal. Those requirements are set out in s 263, which relevantly provides as follows:

8. [12]

   Each of the “factors” set out in s 263(3) was accepted as being a mandatory consideration. Failure to comply with the obligation to consider a mandatory factor meant that the resultant report did not constitute a report capable of referral to the Boundaries Commission for comment. The declaration made by the primary judge was designed to reflect that consequence.

9. [13]

   Finally, it is necessary to refer to a passage in the reasons of the primary judge dealing expressly with the Strathfield appeal, in which an order in similar terms was made: [1]

10. [14]

    The judge later stated: [2]

11. [15]

    Then noting that none of the “general complaints” concerning the process had been made out, but noting that there had been failure to address one of the mandatory requirements, the judge stated:

12. [16]

    Although it was true to say that the delegate had not completed “the task” delegated to him, it was misleading to state that the “exercise of his functions with respect to any of the other elements of s 263(3) did not miscarry.” Yet it appears to have been the last statement which was instrumental in the formulation of the order. The difficulty is that the delegate was not required to exercise a number of “functions” in considering each of the mandatory “factors”; rather, he exercised a single function of examination and report of the matter referred to him and, in doing so, was required to have regard to the identified factors.

13. [17]

    To treat the function as partly completed, and therefore still capable of completion, without revisiting the whole exercise, was to misunderstand the nature of the function. The function of examination and report required a consideration of potentially conflicting factors, requiring them to be weighed and their conflicting tendencies resolved. Thus, whilst financial considerations might favour amalgamation into larger local government areas, the relationship between elected representatives and ratepayers might be diminished by amalgamation and thus pull in a different direction.

14. [18]

    An analogy, albeit an imprecise analogy, may be found in sentencing principles. Thus, if the Court of Criminal Appeal determines that a sentencing judge has failed to take into account some material consideration, it must carry out the sentencing exercise afresh, having regard to all relevant factors. [3]

15. [19]

    The same error in approach appears to have led the primary judge to reject the suggestion that the function should be carried out by another delegate. Yet it is precisely where a fact finding exercise has miscarried and must be repeated that a reasonable apprehension of pre-judgment may arise. In other words, an officer who has come to one decision on an inadequate basis might be thought to favour the same outcome, regardless of the results of reconsideration.

16. [20]

    It follows that the Councils’ challenges to the form and limitations of the orders made by the primary judge should have been accepted by this Court on the appeal.

Judgment in this Court

1. [21]

   The following passages in my judgment accepted, in principle, the reasoning set out above. First, the following observations were made in setting out the background to the appeals and, in particular, certain proposed amendments. One aspect of the amendments sought relief in the nature of certiorari, quashing or setting aside the reports of the delegates and the comments of the Boundaries Commission. After referring to the circumstances in which such reports could be set aside, I said:

2. [22]

   Secondly, in dealing with the background to the Mosman and North Sydney appeals, I set out the error identified by the primary judge, the orders made and referred to the subsequent preparation by the same delegate of a “revised report” which had been furnished to the Boundaries Commission for comment. My reasons continued:

3. [23]

   Although I identified grounds 9 and 10 at [142] I did not return to accept or reject them specifically, having found that the function of examination and report had miscarried for other reasons. In formulating orders, my main concern was to identify whether the challenged report had in some way been superseded by the revised report so that it was the revised report to which relief should be directed. Nothing turns on that aspect of my reasoning for present purposes.

4. [24]

   Had I not identified other and arguably more fundamental errors, I would in any event have allowed the appeal and granted relevant consequential relief required by grounds 9 and 10.

Order for costs

1. [25]

   As noted at the outset, except with respect to the costs of the appeal, all these matters have been overtaken by subsequent political events; only the question of costs remains outstanding.

2. [26]

   Had the appellant Councils succeeded only on the basis of grounds 9 and 10, and failed on all other grounds, they would not necessarily have obtained a costs order on the basis of their ultimate success. That success would need to be weighed against the circumstances in which the Minister had been put to considerable expense in resisting other far broader grounds which covered the bulk of the hearing of the two appeals. An appropriate order, based on that outcome, would have been that each party bear her and its own costs of the appeals.

3. [27]

   MACFARLAN JA AND SACKVILLE AJA: This Court delivered judgment on 31 July 2017 in five appeals by councils constituted under the Local Government Act 1993 (NSW) (LG Act). [4] By a majority decision, [5] the Court dismissed the appeals by North Sydney Council (North Sydney) and Mosman Municipal Council (Mosman).

4. [28]

   North Sydney and Mosman (together the Councils) have each filed a notice of motion pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.17 or alternatively r 36.16(3A), seeking to set aside the Court’s orders dismissing the Councils’ appeals and requiring the Councils to pay the respondents’ costs of the appeal. In lieu of those orders the Councils seek the following orders in each appeal:

5. [29]

   The first respondent (the Minister) opposes the applications by the Councils and has filed written submissions in response to the Councils’ written submissions.

6. [30]

   UCPR r 36.16(1) provides that the Court may set aside or vary a judgment or order if the notice of motion for the setting aside or variation is filed before entry of the judgment or order. If, however, the notice of motion is filed within fourteen days after the judgment order is entered, the Court may determine the matter and, if appropriate, set aside the judgment or order under subrule (1) as if the judgment or order had not been entered (r 36.16(3A)). The Councils’ notices of motion were filed within the time allowed.

7. [31]

   UCPR r 36.17 is the slip rule. It relevantly provides that if there is an accidental slip or omission in a judgment or order the Court, on the application of any party, may at any time correct the mistake or error.

8. [32]

   The basis for the Councils’ applications is that the majority of the Court failed to address two grounds in each of their notices of appeal. The relevant grounds in Mosman’s Further Amended Notice of Appeal are as follows:

9. [33]

   The “Hardiman principle” is derived from The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman (Ex parte Hardiman). [8] In that case the High Court criticised the Tribunal for taking the “unusual course of contesting the prosecutors’ case for relief” and observed that: [9]

Reopening

1. [34]

   The Minister expressly agreed with the following statement of principle in the Councils’ written submissions:

2. [35]

   The Councils submitted that the failure of the majority to address in the Principal Judgment either the Relief Ground or the Hardiman Ground made this a “clear case” for reopening the orders in the interests of justice. The Councils recognised that if their applications succeeded, “the subject matter of the proceedings” would not be affected. This followed from the actions of the Minister who notified the parties on 28 July 2017, shortly before the Principal Judgment was delivered, that she had decided not to recommend that the merger proposal affecting the Councils should proceed. [11] Nonetheless, the Councils contended that this Court should reopen the orders made in the Principal Judgment because it would be unjust to require the Councils to pay the Minister’s costs if success on the Relief Ground or the Hardiman Ground would have led the Court to make different costs orders. The Councils also submitted that the outcome of their applications to reopen the Court’s orders might affect the incidence of costs in further proceedings between the parties in the Land and Environment Court.

3. [36]

   The Minister submitted that the discretionary power to reopen should not be exercised in the present case because the grounds which the Councils wish to agitate have been rendered moot by the Minister’s decision not to proceed with the merger. Since the Minister had decided not to proceed there was no utility in ordering that any further examination of the North Sydney Merger Proposal [12] should be undertaken by a different Delegate or in expanding the relief to extend to the whole of the examination process. The Minister further submitted that the Court should be reluctant to try an action only for the purpose of determining an issue as to costs.

4. [37]

   The Relief Ground arose out of the primary Judge’s finding that the Delegate failed to comply with s 263(3)(e5) of the LG Act in that he did not have regard to “the need to ensure that the opinions of each of the diverse communities of the [amalgamated area or areas] are effectively represented”. [13] By reason of this finding the primary Judge made a declaration in each appeal that: [14]

5. [38]

   The Minister did not file a cross-appeal or otherwise challenge the primary Judge’s finding that the Delegate did not comply with s 263(3)(e5) of the LG Act. Nor did the Minister seek to disturb the declaratory relief granted by his Honour. However, the Relief Ground in the Councils’ notices of appeal (as amended) contended that the primary Judge erred in not granting broader relief on the basis of the Delegate’s failure to comply with s 263(3)(e5) of the LG Act. This contention was independent of the other grounds in the notices of appeal.

6. [39]

   The Councils are correct to point out that the majority did not address either the Relief Ground or the Hardiman Ground. Even so, there is some force in the Minister’s submission that the orders should not be reopened.

7. [40]

   The Councils’ main arguments on the appeals were that they had been denied procedural fairness by the Minister’s refusal to grant access to the so-called KPMG Documents and that the Delegate contravened s 263(3)(a) of the LG Act by failing to have regard to the financial advantages and disadvantages of the North Sydney Merger Proposal. [15] Contrary to the Councils’ submissions in support of their applications to reopen the orders, the Relief Ground and the Hardiman Ground were not “centrally relevant issue[s]” on the appeals. The Relief Ground played a minor role in the argument while the submissions on the Hardiman Ground proceeded for the most part on the assumption that the Councils’ principal arguments would succeed. Moreover, as the Councils accepted, the only purpose of the reopening applications is to enable them to vary the costs orders made by the Court.

8. [41]

   Against these considerations is the fact that the Councils advanced arguments in the appeals in support of the Relief Ground and the Hardiman Ground. They are not responsible for the Court’s failure to address these arguments in the Principal Judgment. In these circumstances, notwithstanding that the Councils’ arguments are now relevant only to the question of costs, it is appropriate that the Court address the issues that were overlooked in the Principal Judgment.

The Relief Ground

1. [42]

   The primary Judge considered that it was sufficient to grant declaratory relief to the Councils in respect of the Delegate’s failure to comply with s 263(3)(e5) of the LG Act. [16] His Honour said that it was appropriate to assume that the Minister would have proper regard to the consequences of the declaration and that, accordingly, a restraining order was not necessary. [17]

2. [43]

   The Councils submitted that the primary Judge overlooked their contention that a declaration should be made that the entire function of examining and reporting on the North Sydney Merger Proposal had miscarried. They argued on the appeals that the primary Judge erred by not making a declaration to this effect. The Councils also submitted that the function of “examination and report” entrusted by ss 218F(1) and 263(1) of the LG Act to the Chief Executive (or a Delegate) is “indivisible” and that therefore the Delegate’s failure to prepare a report that fully complied with the LG Act rendered invalid the entire process of examination of and reporting on the North Sydney Merger Proposal.

3. [44]

   The Councils’ submissions, if accepted, would require the Delegate (or another decision-maker) to conduct the whole examination afresh regardless of the nature of the defect in the report. For example, the Delegate would be required to hold a fresh public inquiry [18] even if the defect is unrelated to any issue that had been raised at the public inquiry or indeed could reasonably be expected to be raised at such an inquiry. To determine whether this submission should be accepted it is necessary to refer to the legislation governing the proceedings in the Land and Environment Court (L&E Court).

4. [45]

   The Councils brought the proceedings in the L&E Court pursuant to ss 673 and 674 of the LG Act. [19] Section 673(1) provides that a council (among others) may bring proceedings in the L&E Court for an order to remedy or restrain a breach of the LG Act. Section 674(1) provides that any person may bring proceedings in the L&E Court for an order to remedy or restrain a breach of the LG Act.

5. [46]

   Section 676 deals with the functions of the L&E Court and relevantly provides as follows:

6. [47]

   Brief reference was made in oral submissions in the L&E Court to s 676 of the LG Act, but little attention seems to have been paid to the nature and scope of the powers conferred by that provision. The Councils’ written submissions to this Court do not refer to s 676 of the LG Act. It is, however, important to appreciate that s 676(1) empowers the L&E Court, if satisfied that a breach of the LG Act has been committed, to make such order as it thinks fit “to remedy or restrain the breach”.

7. [48]

   The primary Judge found that there were two “fundamental defects” in the Delegate’s examination and reporting process in relation to the mandatory consideration specified in s 263(3)(e5) of the LG Act. [20] His Honour reasoned as follows: [21]

8. [49]

   When considering the relief that should be granted in respect of the Delegate’s contravention of s 263(3)(e5) of the LG Act, the primary Judge noted that the Councils’ position was that a bare declaration would not be enough and that the Minister should be restrained from proceeding further with the amalgamation proposal. [22] His Honour rejected this contention on the ground that the Minister would have proper regard to the declarations made and that therefore a restraining order was unnecessary. [23]

9. [50]

   It is true, as the Councils submitted in this Court, that they invited the primary Judge to set aside the examination and report of the Delegate. [24] However the invitation was extended in the context of the Councils’ contention that the process of examination and report involved multiple breaches of the LG Act. It is not apparent, at least in the passages cited in the Councils’ submissions to this Court, that his Honour was asked to make such an order on the assumption that the only contravention of the LG Act concerned the Delegate’s failure to have regard to s 263(3)(e5).

10. [51]

    In any event, there are difficulties with the Councils’ submission that the functions of examination and report are “indivisible”. One difficulty is that the LG Act itself distinguishes between the two functions. Section 281F(1) requires the Minister to refer a proposal for examination and report (relevantly) to the Chief Executive. Section 263(1) requires the Chief Executive to examine and report on the relevant matters. Section 218F(2) states (inter alia) that s 264, which deals with representation of interested parties in proceedings before the Chief Executive, applies to the examination of a proposal.

11. [52]

    A second difficulty is created by the terms of s 676(1) of the LG Act. What is needed or appropriate to remedy or restrain a particular breach (or breaches) of the LG Act will depend on the circumstances. These include the nature of the breach, whether the breach is remediable by the decision-maker and, if so, the measures that are appropriate to ensure that the breach is remedied.

12. [53]

    Although the LG Act distinguishes between the functions of examination and report, the two are clearly related. The contents of a report by a Delegate may reveal breaches of the LG Act that can be remedied only by orders requiring the process of examination and report to be undertaken afresh. However, not all contraventions of the LG Act necessarily require orders of such breadth. The breach may be capable of remedy by requiring the decision-maker (in this case the Delegate) to reconsider a particular matter, rather than restart the process of examination and report from the very beginning.

13. [54]

    The primary Judge made a declaration that the Delegate’s report was not a valid report in satisfaction of the requirements of s 218F(6)(a) of the LG Act. [25] His Honour considered a declaration in this form sufficient to remedy the breach of s 263(3)(e5) of the LG Act that he was satisfied had occurred.

14. [55]

    The Councils did not advance cogent reasons in this Court as to why a declaration in this form was not sufficient to remedy the only breach of the LG Act the primary Judge found had occurred. At the very least the declaration had the effect of requiring the Delegate to reconsider the North Sydney Merger Proposal having regard to the need to ensure that the opinions of each of the diverse communities of the resulting area or areas would be effectively represented. Subject to the question of an apprehension of bias (referred to below), it is not apparent why requiring the Delegate to undertake the particular inquiry mandated by s 263(3)(e5) of the LG Act will not remedy the Delegate’s failure to do so.

15. [56]

    There may be some doubt as to precisely what the Delegate must do in order to produce a report that conforms to s 263(3)(e5) of the LG Act. There also may be some doubt as to whether the effect of the declaration is to require the Delegate to reconsider aspects of the report other than his treatment of the criteria identified in s 263(3)(e5). The Councils did not rely on these possible difficulties in their submissions to this Court and the respondents did not seek any modification of the terms of the declaration. Since the precise effect of the declaration is an issue that has been rendered moot by the Minister’s decision not to proceed with the North Sydney Merger Proposal, it is not necessary to carry it further.

16. [57]

    The Councils have not established that the primary Judge erred in not granting additional relief to the Councils on the basis of the Delegate’s contravention of s 263(3)(e5) of the LG Act.

The Hardiman Ground

1. [58]

   The Councils submitted to the primary Judge that he should exercise his discretion not to remit the matter to the same Delegate who prepared the report. This submission was based on the contention that the Delegate had played an active role in resisting the Councils’ claims for relief and thus “chose to enter the affray”. The Councils argued in the L&E Court that the fundamental object to be served by adherence to the Hardiman principle is to avoid the perception that the Delegate might not bring an impartial and unprejudiced mind to the resolution of the remaining issues. The Delegate’s conduct, so the Councils contended, created a reasonable apprehension of bias and justified an “exclusionary remitter order” (that is, one remitting the matter to someone other than the original decision-maker).

2. [59]

   The Councils submitted in this Court that the primary Judge erred in failing to address the Hardiman Ground. Their submissions recognised that a breach of the Hardiman principle may lead only to an order depriving the decision-maker of costs even if the decision-maker is “successful” in the proceedings. However, the Councils cited authority suggesting that in an appropriate case the Court may regard a person or body who flouts the Hardiman principle as disqualified from further participation in the decision-making process. [26]

3. [60]

   The Delegate, the Chief Executive, the Boundaries Commission and the Minister were all respondents to the Councils’ applications in the L&E Court. In contrast to Ex parte Hardiman, the decision-maker in this case (the Delegate) was not separately represented in the proceedings. Instead all four respondents had common representation and submissions were made on behalf of all of them. Nonetheless, the Delegate, consistently with the Hardiman principle, should have entered a submitting appearance in the L&E Court and should not have actively resisted the relief sought by the applicants. But the approach taken on behalf of the Delegate in the L&E Court is partly explained by the fact that all four respondents had played or were to play a part in the decision-making process leading to the implementation of the North Sydney Merger Proposal. This raised a question as to which of these parties should have been the active contradictor in the L&E Court proceedings, an issue that seems not to have attracted close attention until the parties filed their final written submissions in that Court.

4. [61]

   The Councils’ submissions in the L&E Court supporting an exclusionary remitter order did not clearly distinguish between two situations. The first involved the primary Judge finding (as the Councils had submitted) that the Delegate and the Minister breached the LG Act in a number of significant respects, not limited to a breach of s 263(3)(e5). The second involved the Court rejecting (as it ultimately did) the Councils’ contentions, except for their claim that the Delegate breached s 263(3)(e5). The case for an exclusionary remitter order would be considerably stronger if this Court had upheld the Councils’ arguments on procedural fairness and a contravention of s 263(3)(e5) of the LG Act.

5. [62]

   In Laws v Australian Broadcasting Tribunal, [27] Gaudron and McHugh JJ emphasised the need for careful scrutiny of claims of bias based on prior findings by a decision-maker. Their Honours said that:

6. [63]

   The claim of apprehended bias in the present case does not stem from a claim of pre-judgment arising from a previous decision of the Delegate but from his role in the L&E Court proceedings. Nonetheless, the observations in Laws v Australian Broadcasting Tribunal demonstrate that a finding of apprehended bias is not to be made lightly. In the particular circumstances of this case, the Delegate’s contravention of the Hardiman principle does not give rise to a reasonable apprehension that the Delegate, if the matter was to be remitted, would be unable to bring an unprejudiced and impartial mind to the resolution of the one issue which, on the Court’s reasoning, remains to be determined.

Orders

1. [64]

   The Councils’ motions should be dismissed. The Councils should pay the Minister’s costs of the motions.