Hunter’s Hill Council v Minister for Local Government; Lane Cove Council v Minister for Local Government; Mosman Municipal Counil v Minister for Local Government; North Sydney Council v Minister for Local Government; Strathfield Municipal Council v Minister for Local Government

1. [1]

   BASTEN JA:

2. [2]

   There are before the Court five appeals from judgments in the Land and Environment Court challenging reports and recommendations for the implementation of proposals made by the Minister for Local Government for amalgamations of specified local government areas.

(1) Background to the proposals and the proceedings

1. [3]

   On 6 January 2016 the Minister, the Hon Paul Toole MP, advised his Departmental Head, the Acting Chief Executive, Office of Local Government, of 35 proposals to amalgamate local government areas across the State. Of these, two are relevant for present purposes, namely: (1) Hunter’s Hill, Lane Cove and City of Ryde Councils, and (2) Burwood, City of Canada Bay and Strathfield Municipal Councils.

2. [4]

   The January proposals also included two other amalgamations, namely Manly, Mosman Municipal and Warringah (part) Councils, and North Sydney and Willoughby City Councils. As a result of further consideration, on 25 February 2016 Mosman was extracted from the northern beaches proposal and included with the North Sydney and Willoughby proposal. That constitutes the other proposal relevant for present purposes, namely (3) North Sydney, Mosman and Willoughby City Councils.

3. [5]

   The Acting Chief Executive appointed delegates to examine the proposals, pursuant to s 745 of the Local Government Act 1993 (NSW). With respect to each of the three proposals, the delegate recommended that it proceed. Those reports were reviewed by the Boundaries Commission which sent comments to the Minister. The next step was for the Minister to recommend to the Governor that the proposals be implemented.

4. [6]

   With respect to these three proposals, the final steps have not been taken. That is because some of the councils involved commenced proceedings in the Land and Environment Court challenging the validity of the process of examination and report by the delegates. Not all of the councils involved in each proposal commenced proceedings. With respect to the first proposal, the challengers were Hunter’s Hill and Lane Cove, but not the City of Ryde. With respect to the second proposal, the challenger was Strathfield Municipal Council, but not Burwood or City of Canada Bay. With respect to the third proposal, the challengers were Mosman and North Sydney, but not Willoughby City Council. Each council affected by a particular proposal which was not an appellant was joined as a respondent; each filed a submitting appearance.

5. [7]

   Thus, five councils initiated separate proceedings in the Land and Environment Court. Those proceedings were determined by a judgment of Moore J delivered on 20 September 2016. [1] The proceedings brought by Hunter’s Hill and Lane Cove Councils were dismissed. The challenges brought by Mosman, North Sydney and Strathfield were upheld in part and in each case a declaration was made that the report furnished by the delegate was not a valid report. Although declarations were made in general terms, the findings in the Land and Environment Court involved the dismissal of what were described as “the general complaints concerning the proposed amalgamation process”, [2] but the upholding of complaints with respect to specific matters which were not considered by the delegate. The processes of examination and report were not repeated, except with respect to the identified errors. Those councils, although partly successful, seek to maintain their claims with respect to other challenges which would have produced, in their submissions, more comprehensive reconsideration. They also sought to raise an issue as to the actual reconsideration by the same delegate, which they submitted was inadequate.

6. [8]

   The hearing of the five appeals took place over four days from 3‑6 April 2017. Following oral argument, and with leave of the Court, each of the Councils filed an amended notice of appeal and an exchange of written submissions followed. The Councils’ submissions in reply were filed on 27 April 2017.

7. [9]

   These appeals were not the only challenges brought to the proposals for amalgamation of councils first announced in January 2016. Relevantly for present purposes, three other cases had come before this Court, the first on two occasions:

   1. (1)

      Botany Bay City Council v Minister for Local Government and Botany Bay City Council v State of New South Wales; [3]

   2. (2)

      Woollahra Municipal Council v Minister for Local Government; [4] and

   3. (3)

      Ku-ring-gai Council v Garry West as delegate of the Acting Director-General, Office of Local Government. [5]

8. [10]

   In the first two matters, the challenges brought by the respective councils were unsuccessful and the appeals were dismissed. In the third matter, the appeal was upheld. One particular ground had no relevance to the present matters, namely that the proposal had involved the amalgamation of one local government area with part of another, not fulfilling the requirement for amalgamation of two or more local government areas. However, there were other grounds on which Ku-ring-gai Council was also successful. That decision, handed down two weeks before the present appeals were heard, led to amendments being proposed to the notices of appeal and a round of post-hearing written submissions.

9. [11]

   Some of the appeals raised grounds specific to their particular circumstances; an example arises with respect to the proposed Hunter’s Hill, Lane Cove and Ryde amalgamation. The issue was whether Lane Cove and Hunter’s Hill were “contiguous” as required by the relevant statutory provision for the creation of local government areas.

10. [12]

    Other grounds were described as “common” in a number of the appeals. These included grounds with respect to the reasonableness of the public notice given prior to examination of the proposals, whether the Councils were denied procedural fairness by the failure of the government to provide what became known as the “KPMG documents” and whether there had been a constructive failure on the part of the delegates in purporting to carry out examinations without access to the KPMG documents. (Those documents were understood to explain and justify the assumptions underlying the government’s assessment of the financial benefits of the proposals, and demonstrate how they were calculated.) These grounds did not, however, raise entirely common issues, except to the extent that the factual background was the same in each case.

11. [13]

    When an analogous ground was considered in Ku-ring-gai Council, the Minister accepted that the undisclosed KPMG documents were relevant to the assessment of the financial benefits of the proposal. The concession was made on the basis that two footnotes in the merger proposal document with respect to Ku-ring-gai and Hornsby local government areas expressly referred to documentation which had not been disclosed, although that fact was not immediately apparent from the name of the documents identified in the footnotes. (The identity of the documents could perhaps have been inferred, though with less confidence, from the affidavit filed by the Minister in support of her claim for public interest immunity.) In Ku-ring-gai Council, the Minister contended that the documents were covered by a form of public interest immunity which justified the non-disclosure. She also contended that the delegate’s function of examination and report could be fulfilled without reference to that material.

12. [14]

    In the present cases, the Minister adopted a somewhat different approach. She invited the Court, on the basis of the materials that were now available, to infer that the undisclosed KPMG documents were immaterial and, for that reason, the exercise of the statutory function by the delegate was not affected by the non-disclosure. She did not, however, tender the undisclosed KPMG documents. Nor, indeed, is it clear that this Court would have accepted the documents if tendered, in circumstances where the other parties had had no advance access to them and it was at least plausible that the significance of the documents would require expert evaluation. It will, nevertheless, be necessary for the Court to address the Minister’s submissions as to what may or may not be inferred as to the contents of the undisclosed KPMG documents.

13. [15]

    Further, the Minister sought to distinguish the conclusion reached by the majority in Ku-ring-gai Council by reference to the reasoning of the delegates in each report. Each delegate dealt in a different way with the financial benefits assessed by KPMG, as presented in the merger proposal documents. In principle, such a basis for distinguishing the earlier case is undoubtedly available and it will be necessary to examine the delegate’s process of reasoning in each report in this respect.

14. [16]

    Finally, it is necessary to have regard to the manner in which the issue was raised before each delegate. For example, if a particular council did not take issue with the figures put forward in the merger proposal document, it may not be able to complain about the exercise of a function by reliance upon the unchallenged material. This issue requires consideration of the steps taken by the councils to obtain access to the undisclosed KPMG documents and the submissions made to the respective delegates.

15. [17]

    It is convenient to address the appeals in relation to a single proposal together, but separately from the other proposals. Thus, as the Hunter’s Hill and Lane Cove proceedings involved the same report concerning a single proposed amalgamation it is convenient to deal with these appeals together. Although Mosman and North Sydney Councils had separate representation, their appeals may be heard together as they too involved a single proposal. The appeal brought by Strathfield Municipal Council will be addressed separately, although it raised similar grounds.

(2) The statutory scheme

1. [18]

   The administration of the Local Government Act is allocated to the Minister for Local Government. [6] The responsible executive agency is the Office of Local Government, which is within the Department of Planning and Environment. [7] The head of the Office is identified as the Chief Executive of the Office, but is also referred to in the Act as the Departmental Chief Executive. The Office is also referred to in the Act as the Department of Local Government, and just the Department. (The terminology no doubt reflects the difficulty in keeping legislation in harmony with the ever-changing nomenclature for arms of the executive government.)

2. [19]

   The powers sought to be exercised in the present case followed a scheme for the amalgamation of local government areas set out in Ch 9, Pt 1, Div 2A and Div 2B of the Local Government Act. The amalgamation of areas is addressed in s 218A, which provides:

3. [20]

   The reference in s 218A(3) picks up Divs 1 and 2 of Pt 1, including the following provisions from Div 1:

4. [21]

   The provisions of Div 2 (ss 214-218), dealing with the constitution of an area, are reflected in the separate provisions in Div 2A and Div 2B, which involve, in effect, the constitution of a new area, but specifically by way of an amalgamation of existing areas. Division 2B is headed “What must be done before areas can be amalgamated or their boundaries altered?” and provides:

5. [22]

   Of the three ways in which a proposal may be initiated under s 218E(1), it is only necessary to have regard to the first, that is a proposal made by the Minister. That is what happened in the present case.

6. [23]

   It was necessary for the Minister to refer the proposal “for examination and report” under s 218F(1). Given that a report made by the Minister would almost certainly be the product of work done within his or her own Department, it may have been arguable that the provision was intended to read disjunctively, so that a proposal made by the Minister must be referred to the Boundaries Commission and a proposal received by the Minister may be referred to the Chief Executive of the Minister’s Department. [8] No submission to that effect was made; accordingly the case must be considered on the basis that the Minister validly referred each of the proposals he had made to the Departmental Chief Executive.

7. [24]

   No doubt the incongruity of the head of the Department, purporting to examine and report upon the proposals which emanated from the Department, or, alternatively, to delegate that function to another officer within the Department, led to the scheme which was devised and applied in the present case. That involved appointing “delegates”, apparently from outside the Department and in some cases at least outside the public service, who were not the Boundaries Commission, to examine and report on the proposals. There was no submission that that course was inconsistent with the scheme of the Local Government Act.

8. [25]

   Each of the proposals under consideration in the present case was “not supported by one or more of the councils affected by it” and was “an amalgamation proposal”; accordingly, the Chief Executive was required to furnish his or her report (as prepared by the delegates) to the Boundaries Commission “for review and comment”. That function of the Boundaries Commission, it has been held, is a more constrained function than that of examination and report. [9]

9. [26]

   As appears from the terms of s 218F(2), the process to be adopted by a delegate of the Chief Executive must be found in ss 263-265. The section of primary importance for present purposes is s 263, which provides:

10. [27]

    Although not all the factors set out in s 263(3) are relevant in the present cases, it is important to understand their context. They reflect a European Union principle, known as “the principle of subsidiarity” which is now incorporated in the Treaty on European Union, Art 5(3). The Oxford English Dictionary describes subsidiarity as a principle that “a central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level.” [10] The benefits associated with the principle have been recorded and analysed since the time of de Tocqueville, as part of the development of theories of federalism. [11] Both the benefits and disadvantages commonly associated with devolution of power to the local level are to be found in the factors identified in s 263(3).

11. [28]

    This issue was expressly raised in a preliminary submission by Mosman Council to the delegate: [12]

12. [29]

    It follows that factors set out in s 263(3), which include existing historical and traditional values (par (c)), the attitude of residents and ratepayers (par (d)) and the effective representation of diverse communities (par (e5)), may weigh against amalgamations, whereas financial advantages may weigh in favour. That would suggest that any proper consideration of the factors set out in s 263(3) must include a weighing of countervailing considerations. That is because the matter for examination and report is the proposed amalgamation, and not merely the several factors set out in the paragraphs of s 263(3).

13. [30]

    In one report it was said that “[t]he Delegate has applied equal weighting to all factors.” [13] Whether that proposition was justified or not, it implied that a weighing exercise had been undertaken. (The delegate concluded that of all the relevant factors, six supported the proposal and five were neutral.) It is not clear that all delegates in fact undertook this balancing exercise, but no issue was taken in that regard in the Land and Environment Court or in this Court.

14. [31]

    Section 264 deals with the question of entitlement to representation “[i]n proceedings before the Boundaries Commission” and was assumed to be relevant to a public inquiry held by a delegate pursuant to s 263(2A). Section 265 provides for “an opinion survey or poll” of residents and ratepayers to determine their attitudes, for the purposes of s 263(3)(d).

15. [32]

    It is also convenient to note that despite the apparently broad language of s 263(1), that which must be the subject of examination and report in the present circumstances was the “proposal” made by the Minister and referred by the Minister to the Departmental Chief Executive. As held in Botany Bay No 1, a delegate could not be required to examine and report on an alternative proposal put forward by a council. That decision has some relevance in the present case, because the original proposal in relation to Manly Council was to amalgamate it with councils other than North Sydney. That proposal did not go ahead. However, on one view, the making of the proposal was relevant to aspects of the procedure before the delegate.

16. [33]

    Some of the present submissions proposed a reading of Botany Bay No 1 which expanded its reasoning beyond that which was necessary for its conclusion. Thus, the complaint made by each of the councils that neither they nor the delegates had been able to obtain undisclosed KPMG documents, which were said to contain analysis relevant to costs and benefits outlined in the proposals, was met with the response that they could have prepared their own financial analysis. If that analysis had been undertaken and demonstrated, not that no amalgamation should take place, but that the proposed amalgamation was not as beneficial as an alternative proposal, the delegate would arguably have been required to take that into account in examining the referred proposal, because it would have been relevant to the mandatory factor identified in s 263(3)(a).

17. [34]

    Section 263(7) constitutes a form of privative clause, which presumably applies with respect to the exercise of functions by the Chief Executive and his or her delegate. Despite the preclusion of “an order in the nature of prohibition” (which can only be made on the basis of jurisdictional error) the Minister did not submit that any such constraint operated and, indeed, such a constraint would be inconsistent with the decision in Kirk v Industrial Court of New South Wales. [14] In any event, such provisions have not conventionally been given such a construction. The Minister did not submit that the relief sought in the present case, on the grounds articulated by the Councils, would not be available if the grounds were made good.

(3) The nature of the Councils

1. [35]

   It is convenient to refer to the nature of the Councils which are the appellants in each proceeding. Each claims an entitlement to be accorded procedural fairness, not in relation to the formulation of the Minister’s proposals, but in relation to the conduct of the examination to be conducted by the delegate of the Chief Executive. Each also asserts that the examination process failed in particular respects relating to the public notices given, and the conduct, of the inquiries undertaken by the delegate.

2. [36]

   Section 51 of the Constitution Act 1902 (NSW) states in part:

3. [37]

   Nevertheless, local government bodies live in a constitutional twilight zone; they are statutory bodies created under State law, but with a democratically elected membership. [15] They are funded to provide services through the levy of rates and by the collection of other fees and charges. They obtain grants from the State government and from the Commonwealth via the State, pursuant to s 96 of the Constitution, and directly. [16] Although created by the State under State legislation (now the Local Government Act [17] ), the councils are autonomous public bodies with legal and financial interests of their own. So far as statute permits, they are entitled to procedural fairness in resisting infringement by executive government of identifiable legal and financial interests. As Professor Cheryl Saunders has noted: [18]

4. [38]

   Although they have a democratically elected membership, councils are not to be treated as proxies for the electorate within their local government areas. This is significant with respect to their claims that the public notification of the inquiries held by delegates miscarried, or was inadequate to satisfy the statutory requirements. This consideration could operate in two different ways. First, it might be doubted if a council, which knew exactly what was to happen, had standing to challenge the adequacy of public notification. On the other hand, it might be said that a council had no obligation to correct misleading public statements or ensure that residents and ratepayers had adequate notice of changes which could affect their legal obligations and interests.

5. [39]

   No challenge was made to the standing of the Councils to raise such issues. Nor did the State suggest that the Councils had an obligation themselves to ensure that proper public notice was given, although it did submit that the role the Councils in fact played in notifying residents and ratepayers of how they could be involved in the inquiries should not be ignored.

(4) The proposed amendments

1. [40]

   As noted above, each Council sought to file an amended notice of appeal after the hearing of the appeal. Further written submissions were filed in relation to the motion to amend and in relation to the new grounds. It is convenient to deal with the proposed amendments before turning to the specific appeals.

2. [41]

   The issues can be addressed by reference to the amendments sought in the Hunter’s Hill appeal. First there was a new proposed ground, 5A, which should be read in the context provided by ground 5:

3. [42]

   The proposed amendments also included, in addition to formal orders allowing the appeal, setting aside the orders made by the primary judge and with respect to costs, substantive orders as follows:

4. [43]

   The Minister did not oppose the addition of ground 5A, subject to one qualification. The qualification related to what was said to be an uncertainty as to whether the submissions in support of the ground involved the proposition that the government had “a contractual right to be provided with the KPMG Excel model and to make it available to third parties (such as the Councils or members of the public).” The Minister did not suggest that such an allegation was a central element of the new ground, but merely that if it were, the Minister should have had an opportunity to demonstrate that the factual premise was wrong. The Minister submitted that if that issue were sought to be raised, the amendment should be refused in accordance with the principles stated in Suttor v Gundowda Pty Ltd. [19]

5. [44]

   The Minister also submitted that, if the ground did not involve the proposition that the government had access to the KPMG Excel model, then the ground involved an absurdity. However, that proposition was not put as a basis for refusing the amendment.

6. [45]

   Given that the appropriateness of the amendment involves an issue going to the substance of the ground, the question of leave will be addressed in considering the terms on which the ground is pursued.

7. [46]

   With respect to the orders sought, the variations involved a departure from the declaratory relief sought in the initial notice of appeal, in favour of quashing orders. In the proceedings commenced in the Land and Environment Court, and in the unamended version of the notice of appeal, the Council sought orders restraining the Minister from recommending implementation of the proposal until certain preconditions had been satisfied.

8. [47]

   The summons also sought declarations identifying the alleged errors in the process of examination and report. The summons did not seek relief in relation to the decision of the Boundaries Commission, a point raised in the course of argument in this Court and the subject of an additional order in the amended notice of appeal. No issue was taken by the Minister with respect to the form of the orders proposed in the amended document.

9. [48]

   Relief will be addressed, as required, in the context of the separate appeals. However, it is convenient to consider as a preliminary issue the availability in principle of quashing orders. The availability of declaratory relief is less constrained than quashing orders, the latter being orders in the nature of certiorari. [20] In Hot Holdings Pty Ltd v Creasy [21] the majority stated:

10. [49]

    Hot Holdings involved the issue of a mining tenement by the Minister following a hearing by a warden in open court and a recommendation by the warden as to the grant or refusal of the mining lease. [24] The Minister was not required to follow the recommendation. The question before the High Court was whether certiorari lay to challenge a decision by the warden to conduct a ballot for the purpose of determining to whom priority should be given in respect of competing applications. [25] The Court held: [26]

11. [50]

    The majority accepted that the warden’s recommendation and report, which was required by the statute to be provided to the Minister, was something the Minister was bound to take into account in exercising the statutory discretion to grant or refuse the application. Accordingly it was held that “the warden’s decision has a discernible legal effect upon the Minister’s exercise of discretion” and was subject to certiorari. [29] Working backwards, the Court accepted that this involved a right to challenge the holding of the ballot, which in turn depended upon the warden’s satisfaction as to a matter of fact, namely that certain applications were lodged “at the same time”. The Court further held that the meaning of the statutory words “at the same time” was a question of law. [30]

12. [51]

    By parity of reasoning, in the present case, if the appellants are correct in submitting that a delegate erred in law in some material respect, which either appears “on the face of the record” or constitutes jurisdictional error, they are entitled to have the delegate’s report set aside. There will, in that circumstance, be a further question as to the terms of the order and whether, as the appellants submitted, the function of “examination and report” is a single function, not appropriately dissected into separate parts. The alternative view is that only the report can properly be set aside, even though the vitiating error occurred in the course of conducting the examination.

(1) The proposal

1. [52]

   The document published by the Minister headed, “Merger proposal: Hunter’s Hill Council, Lane Cove Council, City of Ryde Council” contained 18 pages. The first page contained a map showing the proposed amalgamated council area, which was followed by a foreword by the Minister. That in turn was followed an executive summary, an introduction and an examination of the proposal under the headings, “A new council for the Hunter’s Hill, Lane Cove and Ryde area”, “Benefits, opportunities and impacts”, “The local community” and “Conclusion”. The executive summary covered two pages, commencing with the following paragraph under the heading “Introduction”:

2. [53]

   In that paragraph, it is clear that the term “merger proposal” referred to the whole document, which was indeed called “Merger Proposal”. (It may conveniently be referred to as the “merger proposal document”.) However, in Woollahra Council (CA), [31] this Court held that the “proposal”, for the purposes of examination and report under s 218E, was the proposed exercise of the function of amalgamation, as identified in the paragraph set out above. For the jurisdictional question, the proposal did not include the many pages of discussion and analysis set out in the balance of the merger proposal document.

3. [54]

   To the extent that a proposal made by the Minister (or made to the Minister) involves the amalgamation of local government areas, it is undoubtedly a function which is defined by reference to the terms of s 218A. It is true that there is a distinction between (a) the function to be exercised, (b) the justification for exercising the function and (c) the possibility of recommendations that it be exercised or not exercised depending upon the fulfilment of certain conditions, which may involve the contemporaneous or future exercise of other statutory powers. The arguments put forward by Woollahra Council had required that a “proposal” should be understood to include the exercise, or recommendation to exercise, powers beyond that contained in s 218A.

4. [55]

   No party put forward a contention inconsistent with the ruling in Woollahra Council (CA) with respect to that matter. Rather, and somewhat more obliquely, there was an issue as to the extent to which a delegate, exercising the functions of examination and report, in accordance with s 263(3), was required to consider all of the matters set out in the proposal document. As will be seen below, the submissions in the present cases did not impinge either directly or indirectly on the decision reached in Woollahra Council (CA).

(2) Grounds of appeal and proposed relief

1. [56]

   Pursuant to an amended notice of appeal filed on 19 April 2017, Hunter’s Hill Council relied upon 10 grounds, of which ground 8 was not pressed at the hearing. Ground 9 was irrelevant and appears to have been included by inappropriate copying from another appeal, to which it was relevant.

2. [57]

   Grounds 1, 2, 3 and 4 each related to questions of whether reasonable public notice of the inquiry had been given, whether statements as to how the inquiry was to proceed were misleading and whether there had been a representation that the analysis and modelling undertaken by KPMG as to the financial benefits of the proposal were “independent”. Further, ground 7 relied on a denial of procedural fairness arising from a statement by the delegate that he had taken into account “other material” without disclosing the substance of the material to the appellant. Each of these grounds lacked substance, but given the conclusions with respect to another ground, it is not necessary to address them in detail, or to set them out in these reasons.

3. [58]

   Grounds 5 and 5A have been noted above in the context of the application to amend. Ground 6 read as follows:

4. [59]

   Identical grounds were relied on by Lane Cove Council. Both appeals can be resolved by reference to ground 6, which should be upheld.

(a) the trial judge’s approach – the deeming provision

1. [60]

   The Councils’ case under this ground was that the proposal to amalgamate Ryde and Hunter’s Hill local government areas with Lane Cove was fundamentally flawed because the Hunter’s Hill and Lane Cove areas were separated by the Lane Cove River, which was not included in either local government area. Pursuant to s 204(3), “[a]n area must be a single area of contiguous land.” That condition, the appellant submitted, was not satisfied.

2. [61]

   The trial judge accepted that “contiguous” described land which was in “immediate physical proximity” to other land. [32] It may also be described as abutting or adjoining the other land. It is convenient to characterise this as the strict meaning of contiguous. The judge nevertheless dismissed the challenge on the basis that the two local government areas were connected by the Fig Tree Bridge and the respective areas therefore had an expanded area by application of s 205(3)(b). The Minister’s submission, which was adopted by the trial judge, was that “[l]and on the boundary of an area” is taken to be “in the area” if “it is on the foreshores of the area… and beyond low water mark” and the land “has a structure erected on it.” [33]

3. [62]

   In finding that the effect of s 205(3) was to create an area of contiguous land, the judge said that it was “clearly an outcome intended by the legislature”, a conclusion qualified by the reservation “no matter how offensive to common sense some might regard the outcome”. [34] The question as to why the outcome might be seen to be offensive to common sense could have been further developed and should have cast doubt upon a finding as to the clear meaning of the provision.

4. [63]

   The factual foundation for this conclusion relied on the fact that the Fig Tree Bridge (over Tarban Creek) was supported by pylons on either side that were erected below the low water mark. The submission continued: [35]

5. [64]

   If this were the high water mark of the submission, as it appears to have been, it elides a number of propositions. For example, it is not the bridge (“a structure”) which is included within a local government area, but rather the land on which the structure is erected. It is by no means clear that the bridge is erected “on” the land over which it passes. However, before applying the provision to the facts, it is necessary to consider more carefully both the language used in the section and the purpose of the section.

6. [65]

   The Councils’ first submission was that s 205 had no operation for present purposes because “area” was a defined term and (as at January 2016) meant “an area as constituted under Division 1 of Part 1 of Chapter 9.” [36] The definition referred, it was submitted, only to the terms of s 204 which require that an area be constituted by proclamation and that the boundaries be determined by the proclamation. The deeming provision in s 205(3) does not affect the operation of the definition.

7. [66]

   That submission does not do justice to the language or the structure of Div 1 of Pt 1 of Ch 9. That Division contains other sections besides ss 204 and 205, but the juxtaposition of ss 204 and 205 suggests that they are to be read together. Indeed, that is clear from s 205(4) which provides that “[t]his section is subject to any proclamation made under this Division.” There are various forms of proclamation which may be made under the Division, but the subject matter of s 205 and the structure of the Division indicate that it is a proclamation determining the boundaries of an area to which the section is subject. However, the submission raises a question as to the effect of the deeming in s 205, and its relevance to the terms of the proposal, which will be addressed below.

8. [67]

   Accepting that s 205 may have operation in relation to the extent of an area, the next question is how it operates, a question which includes the interrelation of the provisions. If a proclamation expressly fixes a boundary of an area by reference to the high water mark on the foreshore, is the area between the high water mark and the low water mark taken to be in the area, pursuant to s 205(1), or does the proclamation prevail? If the proclamation is to prevail, presumably s 205(1) will only have effect where the proclamation is silent as to whether a boundary identified by reference to tidal waters is taken to be at the high water mark, the low water mark, or some other point. Similar questions must arise with respect to the expansionary effects of subss (2) and (3). Nevertheless, it should be accepted that s 205 may operate to affect the “area” as defined by the proclamation under s 204, by expanding a boundary. However, it does not follow as a matter of fact that the expansion will result in a point of contact between two separate areas of land, nor, even if that were to occur, does it follow that a single area of contiguous land will be created. For reasons explained below, the judge correctly accepted that contiguity involved a shared physical boundary. Contact of the kind effected by the bridge would, at best, involve a single point at which two large areas touched.

9. [68]

   Turning to the language of s 205(3), it is clear, first, that both limbs speak only of land affected by tidal waters. Secondly, when, in par (b), the land is described as “on the foreshores of the area” it is not using the ordinary meaning of “foreshore”, which includes the intertidal zone (and, possibly, land above the high water mark), because the provision expressly identifies the land in question as being “beyond low water mark”; that is, land permanently covered by water. (The last conclusion should be qualified; low water mark varies on a daily basis and there are several ways of defining a low water mark.) Thirdly, the land must be “on the boundary” of an area and, fourthly, it must be “privately owned” or have “a structure erected on it.” There was no private ownership and, accordingly, it was necessary to identify the area of land on which a structure was erected. That area was confined to land “on the boundary of” the local government area as otherwise proclaimed. The Minister’s submissions did not assay that exercise and it is a matter to which it will be necessary to return.

10. [69]

    The Councils’ submission in this Court adopted a different perspective. The proper focus, they submitted, was the area which would result from the proposed amalgamation. Section 205 could only have effect after the proclamation was made (and subject to it). The boundaries identified in the proposal did not include land which was said to be affected by an application of s 205(3). Accordingly, the proposal did not identify “a single area of contiguous land”, for the purposes of s 204(3). As a matter of logic, it was submitted, the areas referred to in s 205 would otherwise be outside the proclaimed area; were that not so, s 205 would have no work to do. It could therefore operate only once an area has been proclaimed and the boundaries determined.

11. [70]

    The last submission should be accepted as far as it goes. However, the issue is whether the area identified in the proposal satisfies s 204(3). The proposal refers to the merger of “Hunter’s Hill, Lane Cove and Ryde local government areas.” If s 205(3) were thought to have a current operation, so as to expand the boundaries of either Hunter’s Hill or Lane Cove local government areas, that expanded area is included in the proposed new area; the question is therefore to be resolved by the effect of s 205(3) on the current areas. The Minister’s submissions did not seek to justify the reasoning below by which the areas were said to be contiguous due to the construction of the Fig Tree Bridge. There are, however, a number of reasons why the bridge does not have the effect, either now, or in relation to the new area, for which the Minister contended.

12. [71]

    First, the effect of each limb of s 205 is to deem land which is beyond the boundary of an area to be “taken to be in the area.” It does not purport to vary the boundaries of an area, as defined by the relevant proclamation, to which the section is subject. The proposal should be construed as referring, in accordance with the accompanying map (which does not include a tongue of land in the vicinity of Fig Tree Bridge), to the areas as identified in the respective proclamations and not as including areas deemed to be within the respective areas.

13. [72]

    Secondly, the concept of land with a structure erected on it would adequately describe the land on which stood the pylons supporting the bridge, but not the land over which the bridge passes. Ships passing under the Sydney Harbour Bridge would not, in ordinary usage, be described as passing over land on which a structure has been erected. Further, even if the structure was constituted by the whole of the bridge and the pylons on which it stood, it could not be the case that land on both sides of the tidal waters were within each local government area. Not only would that be inconsistent with any identifiable purpose of the provision, but it would be inconsistent with the requirement that the land in question be land “on the boundary of” an area. The Minister’s submissions in the Court below appear to have recognised this difficulty, by suggesting that a boundary would have to be created, possibly in the middle of the bridge. That suggestion failed to address the question as to how land in the middle of the river could be said to be “on the boundary of” either local government area.

14. [73]

    Section 205(3) has ready application to jetties and wharves, but not to bridges. The attempt to rely upon it to create a point of contact between the boundaries of separate local government areas must fail. Even if a point of contact were established, there was no shared boundary sufficient to create “a single area of contiguous land.”

15. [74]

    It follows that the basis on which the trial judge upheld the validity of the proposal cannot be accepted.

(b) notice of contention – meaning of “contiguous”

1. [75]

   The Minister’s submissions in this Court focused on her notice of contention, alleging error on the part of the trial judge in finding that land was not contiguous unless “it is touching or in contact”. The contention alleged that the primary judge “ought to have found that areas of land that are within close proximity to one another, but which do not actually touch, may be contiguous within the meaning of s 204(3) of the Act”.

2. [76]

   This contention involved two elements of statutory construction. The first required attention to the meaning of the word “contiguous”; the second required attention to the composite expression “a single area of contiguous land.”

3. [77]

   To identify the meaning of the word “contiguous”, reference was made to two possible descriptions derived from dictionaries. Resort to dictionaries to determine the meaning of a word used in a legal context is rarely favoured. [37] Such judicial disfavour is not a result of some dismissive or precious attitude towards the compilers of dictionaries. The point is rather that dictionaries reflect common usage and common usage may not be reflected in a particular statutory context. Thus, it used to be said that the ordinary meaning of a word, other than a technical term, is a question of fact, whereas the construction of the statutory provision in which the word is found is a question of law. [38] Since Collector of Customs v Agfa-Gevaert Ltd [39] that distinction is no longer applied. As explained by Lord Hoffmann in R v Brown, [40] referred to in Agfa-Gevaert: [41]

4. [78]

   That is not to say that dictionaries may not be helpful, or are not used, although they are rarely referred to in judgments. Their function is, however, limited. That limitation is illustrated in the present case by the reliance before the trial judge on the definition of “contiguous” in the Macquarie Dictionary, namely “(1) touching; in contact” and “(2) in close proximity without actually touching; near.” The Council contended for the first (strict) meaning and the Minister for the second (loose) meaning. Unsurprisingly, the judge obtained little assistance from those possible alternatives.

5. [79]

   The Oxford English Dictionary is more expansive. The first meaning, which has a long lineage, is:

6. [80]

   The parties also took the Court to a range of authorities using the term, without achieving a definitive outcome, except perhaps to emphasise the importance of context and subject-matter.

7. [81]

   Different issues will arise in different areas of the law. In land law, “[i]n the absence of contrary evidence, a conveyance of riparian land bounded by a non-tidal river carries with it the soil ad medium filum (or to the middle point of the river), whether the conveyance be of a freehold or leasehold estate.” [42] Such estates will thus readily be described as contiguous. That was not this case; it was common ground that the local government areas of Lane Cove and Hunter’s Hill included no part of the Lane Cove River, which separated them.

8. [82]

   There is no doubt that the term “contiguous” in respect of blocks of land is used to describe adjoining properties or properties which abut each other, in the sense of having a common boundary. [43] It is also clear that statutes, including those permitting road authorities to “cut make and maintain drains or watercourses upon or through any lands lying contiguous to any road” are given a similar meaning. [44]

9. [83]

   It is necessary, therefore, to focus upon the particular statutory context in which the language is used. [45] That inquiry may properly include the history derived from earlier legislation dealing with local government, the legislative history of this provision and the practice of parliamentary counsel in New South Wales, as revealed by other legislation using the same language.

10. [84]

    The Municipality of Hunter’s Hill was declared on 4 January 1861, pursuant to The Municipalities Act of 1858 (NSW). The 1858 Act provided that “any defined area adjoining to any such Municipality… [may] be united”, [46] but contained no equivalent to s 204. The Municipalities Act 1897 (NSW) provided for the union of “any two or more adjoining municipalities”. [47] The Act also provided for the annexation of “any area adjacent to a municipality”. [48] The Act contained a definition of “adjoining municipalities”, namely “[m]unicipalities whose boundaries touch at any point or points, but such point or points need not be common to all”.

11. [85]

    An early form of s 204 appeared as s 14 of the Local Government Act 1906 (NSW). That Act conferred power on the Governor to “unite two or more adjoining areas” [49] and contained the following definition: [50]

12. [86]

    Section 15 of the Local Government Act 1919 (NSW) was closer in form to the current provision. Part III provided for the alteration of cities, municipalities and shires, providing further that “[e]very area, when altered under this Part, shall consist of adjoining territories.” [51] Section 4 contained the following definition:

13. [87]

    Section 204 in the 1993 Act abandoned the language of “adjoining” land and substituted a requirement that an area must be “a single area of contiguous land.” As the Councils noted, the concept of a single area, in combination with the epithet “contiguous”, favours the construction that there must be no element of separation between one part of the land and another and, indeed, casts doubt on the proposition that a mere touching at one point would be sufficient to satisfy that requirement.

14. [88]

    Although the term “adjoining” was retained in the Dictionary, the definition was varied and its actual operation, as submitted by the Minister, was limited to one provision. The definition was as follows:

15. [89]

    Its operation is to be found in Pt 2 of Ch 17, dealing with prosecution by a council for an offence committed on a public road, or part of a river, watercourse or tidal or non-tidal water, “which forms the boundary of the area”. Section 702(2) provides that “[t]he council of the area or the council of any adjoining area may take proceedings for any such offence.”

16. [90]

    The only other uses of “adjoining” in the Act are in reference to premises adjoining community land in ss 46 and 47, and a reference to “adjoining parcels of land” in s 713. Given the definition of “area”, these uses do not attract the definition of “adjoining”. The term used to appear in provisions relating to the giving of notice of applications to erect buildings and with respect to qualifications on disclosure requirements for councillors. [52] These provisions have been repealed.

17. [91]

    The parties were not able to provide any assistance to the Court as to why there had been a deliberate adoption of different language in s 204, and without defining the new terminology. The second reading speech (incorporating a lengthy explanatory memorandum) contained no discussion of the issue, beyond saying that “[t]he provisions relating to the constitution of areas of land as councils have been modernised.” [53]

18. [92]

    There is, however, one point of assistance which may be derived from the legislative history of this provision. The phrase “contiguous land” appears to involve a conceptual elision; two areas of land may be contiguous, or land may be contiguous with other land. The Bill which became the Local Government Act 1993 was, originally, the Local Government Bill 1992. The second reading speech referred to above related to the 1992 Bill. In that Bill, the precursor to s 204 was cl 192, which read as follows:

19. [93]

    The 1992 Bill was introduced at the end of the parliamentary sittings for that year. On 11 March 1993 the Minister reintroduced the Bill as the Local Government Bill 1993. The second reading speech commenced with the following explanation: [54]

20. [94]

    It is clear that the amended provision, then appearing as cl 202 of the 1993 Bill, [55] had undergone what might have been seen as “refinements” of a drafting kind. That was clearly so in relation to the express indication that the Governor would act “by proclamation”. Although it is a matter of speculation, it is possible that Parliamentary Counsel were concerned about the conceptual elision noted above, when describing an area as consisting of “contiguous land.” It may have been thought that greater clarity was achieved by varying the requirement that an area “must consist of contiguous land” to a requirement that the area “must be a single area of contiguous land.” Whatever the process of reasoning, the effect was to emphasise, rather than derogate from, the use of “contiguous” in its strict sense.

21. [95]

    In passing, the variation appears to have introduced an infelicitous use of the word “area”. The phrase “a single area” is not apt to pick up the definition of “area” in the Dictionary, but rather must be understood as referring to a tract of land in the topographical sense.

22. [96]

    There are other statutes in New South Wales which use the term “contiguous” as a topographical concept.

23. [97]

    Legislation enacted broadly contemporaneously with the Local Government Act 1993, together with some more recent legislation, demonstrates that the legislature has consistently used “contiguous” in the strict sense of land adjoining or abutting other land. (The qualifying phrases have been emphasised.) First, in the Community Land Development Act 1989 (NSW), s 3(1), “land” is defined to mean “contiguous land …”. Section 3(3) states that “[f]or the purposes of this Act, land is contiguous even if it is divided by, or separated from other land by, a natural feature, a railway, a public road, a public reserve or a drainage reserve.” (Interestingly, there is reference in that Act to “contiguous strata schemes”, which may be intended to be contiguous in the strict sense, depending on the scope of the definition of “land”.) The definition extends what is clearly intended to be the primary meaning of “contiguous”, that is, its strict sense.

24. [98]

    The Mining Act 1992 (NSW), s 85 provides that mining leases may be consolidated “if the leases are held by the same person and relate to contiguous parcels of land or to parcels of land that are separated only by a road, stream or railway”. The term “contiguous” is not defined. The disjunctive provision for land which is in close proximity indicates that “contiguous” is used in the strict sense.

25. [99]

    The Ports and Maritime Administration Act 1995 (NSW) refers to land which is “contiguous” with other land in s 37(4). Section 37(5) states that “[l]and is contiguous with other land if it adjoins the other land (or would adjoin the other land were it not separated from the other land by a road, rail corridor or easement) or it is in close proximity to the other land.” A similar provision and definition are found in s 43E(6) and (7). Again “contiguous” is used in the strict sense.

26. [100]

    The Local Land Services Act 2013 (NSW) deals with various programs and advisory services associated with agricultural production, biosecurity and natural resource management, amongst other matters. The definition of “holding” in the dictionary is in the following terms:

27. [101]

    Again, the disjunctive form of (b)(i) demonstrates that “contiguous” is used in the strict sense. The term “contiguous” is also to be found in various sections of the Strata Schemes Development Act 2015 (NSW). There is a definition in s 5 which states that “[i]n this Act, land is contiguous to other land even if it is divided, or separated from the other land, by a natural feature (for example, a watercourse), a railway, a road, a public reserve or a drainage reserve.” The definition is clearly intended to be expansive in a manner which is consistent with the strict meaning of contiguous otherwise operating. A similar definition appeared in the former Strata Schemes (Leasehold Development) Act 1986 (NSW), in s 4(7A).

28. [102]

    Under the Liquor Act 2007 (NSW), the Secretary may approve a “community event liquor accord” which will apply to more than one specified area “whether or not those areas are contiguous”. [56]

29. [103]

    The Local Land Services Act has been amended by the Local Land Services Amendment Act 2016 (NSW), Sch 1 of which includes the following definition:

30. [104]

    These statutes are representative of the legislation in New South Wales over the relevant period. Arguably no clear inference can be drawn from those provisions which refer to land being “contiguous” where the term is not defined. They are all, however, consistent with contiguity being used in the strict sense. In all cases where there is a definition, references to certain circumstances in which parcels of land are separate from each other are at least consistent with the view that no such expansive operation would be achieved simply by the use of the term “contiguous”. Further, no definition is consistent with the loose usage merely referring to proximity.

31. [105]

    Finally, as the Minister conceded, any meaning of “contiguous”, undefined, which is not confined to a common boundary must require the application of an evaluative judgment, with no criteria by which to assess the level of proximity which would be sufficient to satisfy the statutory scheme. Such a meaning might be inferred if the condition were founded upon the Minister’s satisfaction, but absent that element there is no reason to impose such an indefinite condition of validity.

32. [106]

    This analysis supports the Councils’ submission that s 204(3) requires a single area without elements of division or separation between its parts. The Minister’s contention must be rejected.

(4) Ground 5 – the obligation to consider particular matters

1. [107]

   Although the appeals should be upheld for the reasons given above, it is desirable, for consistency with the other appeals, to address the grounds raising an alleged constructive failure on the part of the delegate to exercise his statutory function under s 218F according to law. That allegation involved a failure to have proper regard to a mandatory factor, prescribed by s 263(3)(a), namely the financial advantages and disadvantages of the proposed amalgamation.

2. [108]

   Ground 5A in each appeal dealt with the scope of the obligations with which the delegate was required to comply in conducting an examination of the proposal, and ground 5 with the question whether the Council was accorded procedural fairness in the course of the examination. The Council submitted that, (i) if the delegate did not examine the financial benefits of the proposal which he was required to consider, the function will not have been exercised according to law; (ii) if the delegate relied on the benefits calculated by KPMG he could not properly undertake his function without access to the analysis underlying those opinions; and (iii) there was a denial of procedural fairness because the Council did not have access to the underlying analysis.

3. [109]

   It was not submitted that the delegate failed to consider the financial benefits or disadvantages at all; accordingly, there was no need to consider (i). There was, however, consideration of the KPMG figures, with the result that (ii) was engaged. It was also true that the Council did not have access to the underlying analysis, with the result that (iii) was also engaged.

(a) constructive failure to exercise function – principles

1. [110]

   The starting point for this inquiry is the statement of mandatory factors in s 263(3) of the Local Government Act. In particular, the first factor, contained in par (a), identifies “the financial advantages or disadvantages (including the economies or diseconomies of scale) of any relevant proposal to the residents and ratepayers of the areas concerned”. In Ku-ring-gai Council, after a careful examination of the statutory scheme, Sackville AJA concluded: [58]

2. [111]

   The Court in Ku-ring-gai Council divided over the question whether the delegate did in fact undertake an independent and objective assessment of the financial advantages and disadvantages of the proposal, or whether he merely accepted the claims by the Minister set out in the merger proposal document without attempting to assess their plausibility or accuracy, in the absence of the underlying analysis.

3. [112]

   Macfarlan JA identified the obligation of the delegate with respect to this factor in the following terms:

4. [113]

   Having considered further the manner in which the delegate dealt with the financial advantages and disadvantages in his report, Macfarlan JA concluded:

5. [114]

   My reasons in Ku-ring-gai Council stated:

6. [115]

   Although there was a division in the Court as to the proper characterisation of the reasoning of the delegate, it was common ground that an essential step in review of the delegate’s reasoning was to consider how the delegate had assessed financial advantages and disadvantages. The Minister took no issue with that proposition.

7. [116]

   Given the way in which the submissions were articulated in the present case, my own statements in Ku-ring-gai require restatement. However, it is preferable not to do so in a context in which the conclusions will not be determinative of these appeals. The same applies with respect to the ground of procedural unfairness which will, accordingly, not be addressed here, but in relation to the Mosman Council and North Sydney Council appeals. It is, nevertheless, convenient to deal with the specific ground relating to constructive failure to exercise the statutory function.

(b) constructive failure to exercise function – application

1. [117]

   In the present case, the delegate recommended that the proposal to amalgamate the entire local government areas of Hunter’s Hill, Lane Cove and Ryde to form a new entity should proceed to implementation. [59] The executive summary, setting out “conclusions and recommendations”, commenced with the following statement: [60]

2. [118]

   It is apparent that the anticipated financial advantages formed the primary basis of the recommendation. The assessment of the financial factors appeared in Part 6 of the report. Three elements of that discussion are significant. First, there is no doubt that the delegate took into account the estimated net financial savings calculated by KPMG. Secondly, the delegate took into account an “alternative analysis” undertaken by Morrison Low, on behalf of the three affected councils. Thirdly, the delegate accepted that on either set of assumptions, there would be a net financial benefit (if certain efficiencies were realised), but did not identify the amount of the benefit. [61]

3. [119]

   More generally, the delegate took into account that the three councils had made a joint submission to the Independent Pricing and Regulatory Tribunal (IPART), which had considered the financial benefits which might result from (a) a merger, (b) the creation of a joint regional authority, and (c) the councils continuing on a separate and individual basis. He noted the conclusion of IPART that “neither operating standalone nor with a Joint Regional Authority was as good as merger options.” [62] With respect to the current financial circumstances, the delegate noted that the proposal claimed there was a backlog of $71 million in infrastructure required across the three areas, and that both the KPMG analysis and that of Morrison Low found net financial benefits in keeping with the IPART’s conclusion.

4. [120]

   The delegate acknowledged that there were costs that would accompany the proposed amalgamation, but assessed the financial benefits without reference to those costs, or to the proposed $25 million grant from the government to contribute to such expenditure. The delegate stated: [63]

5. [121]

   Accepting that the financial benefits were not expected to be uniform over the respective periods of 20 and 8 years adopted by the experts, an average annual figure was $3 million in benefits (KPMG), as opposed to $2.5 million (Morrison Low). Given the indefiniteness of the assumptions and the difficulty in predicting net benefits over 20 years, the difference might be seen as relatively small. Certainly the benefits in absolute terms were themselves small given that the combined revenue of the three Councils for the financial year 2014/15 was a little over $200 million. [64]

6. [122]

   Because the delegate did not prefer one set of figures over another, and because he was not reliant on the KPMG analysis, it cannot be said that there was a failure to consider the financial advantages referred to in s 263(3)(a). The acknowledgement that the KPMG analysis and assumptions had been “questioned” by some councils, and the adoption of a conclusion which did not involve preferring one set of assumptions to another, demonstrated compliance with the statutory requirement. The grounds alleging constructive failure to carry out the statutory function should be rejected.

(5) Conclusions

1. [123]

   It follows that the Councils’ appeals, based on ground 6 in the amended notices of appeal, should be upheld. The proposed new local government area did not constitute “a single area of contiguous land” within the terms of s 204(3). As the proposal failed to conform to the requirements of the Act, the functions of the delegate and the Commission were not legally exercised and should be set aside.

2. [124]

   No different conclusion should be reached by reference to s 205(3). As explained above, the bed of the Lane Cove River, over which the bridge passes, is not land on the boundary of an area which has a structure erected on it. The areas of Hunter’s Hill and Lane Cove remain separate areas, even if connected by a bridge at one point. They do not constitute a “single area of contiguous land.” It follows that the proposal to amalgamate the three local government areas into one new area, pursuant to s 218A, could not be achieved, because the area to be constituted by proclamation would not satisfy the terms of s 204(3).

3. [125]

   Although the successful contention was not raised before the delegate, it was raised in the Land and Environment Court, but rejected on a basis which cannot be maintained. Accordingly, the Councils are entitled to their costs in the Land and Environment Court and in this Court.

4. [126]

   The Court should make the following orders:

   1. (1)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed on 19 April 2017.

   2. (2)

      Allow the appeal and set aside the orders made in the Land and Environment Court on 20 September 2016 in matter No 158774 of 2016.

   3. (3)

      In place of those orders,

   4. (4)

      Order that the respondent Minister pay the appellant’s costs in this Court.

   5. (5)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed on 19 April 2017.

   6. (6)

      Allow the appeal and set aside the orders made in the Land and Environment Court on 20 September 2016 in matter No 161918 of 2016.

   7. (7)

      In place of those orders,

   8. (8)

      Order that the respondent Minister pay the appellant’s costs in this Court.

C. The Mosman, North Sydney and Willoughby proposal

1. [127]

   The appeals brought by Mosman Municipal Council and North Sydney Council related to a proposal made by the Minister on 25 February 2016 for the amalgamation of those local government areas with that of Willoughby City Council. As the appeals concern the one report and raise the same issues it is convenient to deal with them together.

(1) Background

1. [128]

   This proposal constituted a departure from the initial proposals of 6 January 2016, one of which proposed that Mosman be amalgamated with Manly and part of Warringah, and that North Sydney be amalgamated with Willoughby only. In response to the former proposal, Warringah Council submitted an alternative proposal to the Minister involving the amalgamation of Manly, Warringah and Pittwater local government areas. As a result of the Minister accepting that alternative proposal, he also added a proposal to amalgamate North Sydney, Willoughby and Mosman. The delegate, Mr Ian Reynolds, who had originally been assigned the proposal to amalgamate North Sydney and Willoughby, was assigned the function of examining and reporting on the new proposal for North Sydney, Willoughby and Mosman.

2. [129]

   The delegate’s report in respect of the last proposal was sent to the Boundaries Commission under cover of a letter dated 19 April 2016. The Boundaries Commission sent its comments on the delegate’s report to the Minister, under cover of a letter dated 3 May 2016. In fact, the delegate also prepared a report with respect to the first proposal, but it has been treated as effectively superseded by the second report and is relevant only peripherally to four grounds relied on by North Sydney alone.

3. [130]

   On 29 April 2016, between the report of the delegate and the comments of the Commission, Mosman Council took a pre-emptive step by commencing proceedings in the Land and Environment Court, seeking to restrain the Minister from recommending to the Governor the implementation of either the earlier proposal or the then current proposal [65] On 27 May 2016 an “amended summons” was filed which abandoned the challenge to the first proposal. [66] This proceeding, together with that commenced by North Sydney Council, [67] was determined by Moore J in the judgment of 20 September 2016.

4. [131]

   It will be necessary in due course to consider the reasoning of the primary judge with respect to the specific grounds raised on appeal and addressed below; however, it is convenient to note at this point that the judge upheld a ground of challenge with respect to the manner in which the delegate dealt (or failed to deal) with the factor set out in s 263(3)(e5) of the Local Government Act. This provision prescribed as a mandatory consideration, “the need to ensure that the opinions of each of the diverse communities of the resulting area or areas are effectively represented”. The judge concluded that there were “two fundamental defects” with respect to the delegate’s exercise of his functions and that the delegate had not had “proper regard to this relevant mandatory matter.” [68]

5. [132]

   As a result, the judge proposed a declaration, eventually entered on 9 November 2016, “that the report furnished by the Delegate to the Boundaries Commission is not a valid report in satisfaction of the requirements of s 218F(6)(a) of the Act …”. The Court also ordered that, in the absence of any motion seeking a different order by 4 October 2016, certain respondents should pay the applicants’ costs. (As the order was entered a month after the expiry of the time allowed for the motion, it may have been thought that the proposed order had become unconditional, although no actual order had been made.) The parties who were intended to be made liable for costs included the Minister, the Chief Executive, the delegate and the Boundaries Commission.

6. [133]

   On 27 September 2016 Mosman Council served a notice of intention to appeal from the judgment in the Land and Environment Court and, on 10 October 2016, filed its notice of appeal. [69]

7. [134]

   There was correspondence between the Councils and the Crown Solicitor’s Office as to any further steps to be taken in relation to the proposal. It appears to have been assumed that the delegate’s function not having been completed, the matter could be returned to him by the Chief Executive for further consideration in the light of the judgment of the Land and Environment Court. That occurred. A “revised report” was prepared by the delegate and furnished to the Boundaries Commission on or about 30 September 2016. On 20 December 2016, fresh proceedings were commenced by the Councils in the Land and Environment Court seeking judicial review of the revised report.

8. [135]

   These events, subsequent to the judgment now under appeal, are relevant for two reasons. The first is that, if the grounds of appeal (or any one of them) were to succeed, there would be an issue as to the current status of both the original report and the “revised report” prepared by the delegate. Secondly, because the Chief Executive and the delegate (and presumably the Boundaries Commission) concluded that all that was required as a result of the order made by the Land and Environment Court was for the delegate to complete his task by having regard to that factor which had not been the subject of proper consideration, the Councils contended that the order made by the Land and Environment Court was defective. That contention was raised separately from the further challenges to the original report which had been rejected by the Land and Environment Court.

9. [136]

   The separate challenge to the nature of the relief in the Land and Environment Court raises a question as to whether the relief granted was inadequate, or the action taken thereafter was inadequate, to cure the error identified in the declaration. The former matter might be addressed in this appeal, but the latter was a matter to be determined in the separate proceedings now pending in the Land and Environment Court.

10. [137]

    There was discussion in the course of the hearing of the appeals as to whether, if the Councils were successful, the declaratory relief sought, together with an order restraining the Minister from recommending the implementation of the proposals, would be adequate. In particular, it was noted that no order was sought setting aside or quashing either the report of the delegate, or the comments of the Boundaries Commission.

11. [138]

    The appellant Councils were all granted leave to file amended notices of appeal, identifying, in particular, a fresh ground alleging a constructive failure on the part of the delegates in carrying out their functions of examination and report without having access to the undisclosed KPMG documents. By an amended notice of appeal filed on 20 April 2017 Mosman Council included a new ground 7A, dealing with the constructive failure to fulfil the function, but also including further proposed orders. [70] Of these, orders 3 and 4, seeking to set aside (a) the examination and the report of the delegate of 19 April 2016 and (b) the review and comments of the Boundaries Commission of 3 May 2016, are not controversial. A new order 7 sought to prohibit the delegate from carrying out any further examination and report; to the extent that that involved a further exercise of the function of examination following the judgment of this Court, the amendment to seek that order also was not controversial.

12. [139]

    However, proposed new orders 5 and 6 in both appeals sought to set aside the further report of the delegate of September or October 2016 and the further review of the Boundaries Commission. The Minister took objection to the inclusion of those proposed orders on the basis that (a) no leave to amend had been sought or granted with respect to the further report and the review of that report, and (b) the basis for setting aside the further report and review had not been the subject of consideration by the Land and Environment Court (although there were proceedings pending there), nor had it been particularised by new grounds in the notice of appeal.

13. [140]

    In the terms in which it was presented, the Minister’s objection to these two further proposed orders was sound on both bases. However, there was a separate question as to whether acceptance of a ground alleging error in the first examination and report may nevertheless require relief quashing the second report because that report had superseded the earlier invalid report. Put negatively, any relief directed to the first report would arguably lack utility.

(2) Grounds of appeal

1. [141]

   Mosman Council’s amended notice of appeal contained 11 grounds, being grounds 1-10 and a new ground 7A. [71] Grounds 1, 2 and 3 [72] related to the giving of notice and the conduct of the inquiry by the delegate. Similar grounds did not find favour in Ku-ring-gai Council but the appellant sought to distinguish the reasoning in that case.

2. [142]

   Grounds 4, 5 and 6 [73] were not pressed in the light of this Court’s decision in Woollahra Council (CA). Ground 8 concerned the refusal of the delegate to conduct a poll, at the request of the Council. This ground was not pressed. [74] Grounds 9 and 10 [75] were directed to the alleged inadequacies of the relief granted with respect to the error which had been identified by the primary judge.

3. [143]

   The remaining grounds (grounds 7 and 7A) [76] involved the undisclosed KPMG documents. They read as follows:

4. [144]

   It is convenient to deal initially with grounds relating to the notice given of the meetings and the manner in which they were conducted. Chronologically, those issues arose first. North Sydney also raised four additional grounds, three of which (grounds 1, 3 and 7) related to the change by which Mosman local government area was removed from the Northern Beaches proposal and added to the North Sydney and Willoughby proposal. A fourth ground (ground 8) alleged that the delegate had failed to have regard to the mandatory factors set out in s 263(3)(a) and (e1) of the Local Government Act. As the first three additional grounds concern the structure of the proposals to be examined, it is convenient to deal with them prior to the grounds relating to undisclosed documents. Ground 8 involved two elements of an alleged constructive failure to carry out the delegate’s function and will be addressed in that context.

(3) The change in proposals

1. [145]

   It will be recalled that in January 2016, the Minister referred two proposals, one of which incorporated Mosman into a new Northern Beaches local government area and the other of which was limited to North Sydney and Willoughby. The Chief Executive delegated the proposals to different delegates. On 25 February 2016 the Minister referred the new Northern Beaches proposal to the Chief Executive and made a new proposal to amalgamate North Sydney, Willoughby and Mosman. The latter proposal was also referred to the Chief Executive, who in turn delegated his function to the same delegate who had been considering North Sydney and Willoughby. The delegate reported on the first proposal (North Sydney and Willoughby) on 24 March 2016. He reported on the second proposal (including Mosman) in April 2016. The first ground of appeal challenged the delegation of the second proposal with respect to North Sydney and the new Northern Beaches proposal to different delegates. The proposals were said to involve “a single function which could not be bifurcated”.

2. [146]

   The invalidity of the appointments of separate delegates was said to derive, not from some limitation in the legislative scheme, but from the Minister’s letter, referring the new proposals to the Chief Executive, “for examination and report”, to which the Minister added that he looked forward “to receiving your report in due course.” The letter was said to envisage a report (singular) in respect of both proposals, thus rendering delegation to different delegates inconsistent with the Minister’s intention.

3. [147]

   The primary judge noted that the function involved examination and report on a proposal; there was no express or implied limitation in the words of the letter to the Chief Executive on the Chief Executive’s power to delegate the relevant function in respect of each proposal to one or more delegates. That must be so; the ground was without substance.

4. [148]

   North Sydney’s ground 7 complained that the delegate had failed to consider the mandatory factors by comparing them with the factors as relevant to other associated proposals.

5. [149]

   As the submissions recognised, this ground was, on its face, inconsistent with the finding of this Court in Botany Bay No 1, which rejected the proposition that a review under s 263(3) required consideration of an alternative proposal put forward by the Botany Bay Council in that case. North Sydney submitted that Botany Bay was distinguishable because, in this case, the delegate had two actual proposals before him, both of which had been referred by the Minister for examination and report. As a matter of fact, the distinction is correctly drawn; as a matter of law, it makes no difference to the construction of s 263(3), which imposes a separate function with respect to each proposal. There was no error on the part of the delegate in failing to make a comparative assessment of two separate proposals. Ground 7 must be rejected.

6. [150]

   Ground 3 also turned upon the existence of the two concurrent proposals. The complaint was that, having commenced an examination of the first proposal (excluding Mosman local government area) and having received numerous submissions with respect to that proposal, the delegate declined to treat those submissions as submissions made with respect to the new proposal, unless the authors expressly invited him to do so. This approach was said to involve procedural unfairness as “interested members of the public were denied the opportunity to make submissions concerning the [second proposal]”.

7. [151]

   The gravamen of this ground appears to have been based on a likely response of the affected members of the public, succinctly identified as “submission fatigue”. That was reflected in the figures which indicated that 423 written submissions were made to the first inquiry, but only 176 submissions were received from residents and ratepayers of the North Sydney and Willoughby local government areas in relation to the second inquiry. [77]

8. [152]

   While, as a practical matter, some individuals may have been discouraged from making a further submission, despite their interest in the issues raised, it cannot be said that the fact that two separate proposals were put forward in close succession meant that individuals were deprived of the opportunity to make submissions with respect to the second proposal. Even if they had in some way been deprived of such an opportunity, it is by no means clear that the answer lay in treating their earlier submissions in relation to one proposal as intended to reply to the second proposal. In any event, there was no breach of procedural fairness; accordingly the ground must be rejected.

(4) Challenge to notices of public meetings

1. [153]

   Both Councils challenged (in similar terms) the adequacy of the public notice of the inquiry; ground 2 in the North Sydney appeal read as follows: [78]

2. [154]

   The primary judge dealt with the submissions before him by adopting the reasoning of the Chief Judge in Woollahra Municipal Council v Minister for Local Government. [79] A specific matter raised in Woollahra Council (LEC) was the same reference in the notices to a proposal “to amalgamate or alter the boundaries”. The challenge was rejected. Before the primary judge, the Councils sought to distinguish Woollahra Council (LEC) by reliance on authorities supporting the importance of clarity in notifications and the pitfalls of providing additional misleading information, such as Ryan v Edna May Junction Gold Mining Company [80] and Scurr v Brisbane City Council. [81] The primary judge was not persuaded that these cases cast any doubt on the reasoning of the Chief Judge in Woollahra Council (LEC).

3. [155]

   Three underlying principles articulated by the Councils may be noted and accepted, with some qualifications. First, it was submitted that the “purpose of notice is to enable participation.” In broad terms, that proposition may be accepted; however, the statement, and the caselaw generally, relate to the adequacy of notice given to an individual interested party who may be affected by a government decision. [82] It may well be that, as a matter of general law procedural fairness, the delegate (or the Chief Executive of the Office) was required to give adequate notice of the proposal to the councils affected; however, that is not the kind of notice in issue here. Rather, the Councils were complaining that “reasonable public notice” was not given, as required by s 263(2B) of the Local Government Act.

4. [156]

   Secondly, the fact that the notice must be “reasonable” imports an objective test. To the extent that the primary judge considered it relevant that there was “no evidence anyone was misled by the notice”, [83] that statement should not have allowed the inquiry to be diverted from the assessment of the adequacy of the notice. However, the observation was made in a context where the judge had already concluded that the notice was in fact adequate.

5. [157]

   Thirdly, it may be accepted, as the Councils submitted, that the adequacy of the notice must be assessed by reference to its purpose. In the present case, the purpose was to allow for public participation in the planning process and to allow an opportunity for members of affected communities to express their views to the body responsible for examining and reporting to the Minister with respect to the proposal.

6. [158]

   The notice which was published in two State-wide newspapers and in two local newspapers read as follows:

7. [159]

   It may be accepted that the reference in the heading to “alter the boundaries of”, referring to identified local government areas, was erroneous in the sense that there was no such proposal. It is clear that the error occurred from the usual mechanism of copying the form of notice used in relation to another proposal and simply substituting the relevant local government areas. There were proposals (of which this was not one) which did seek to alter boundaries, as well as amalgamate areas. However, the explanation has no relevance to the question of validity; members of the public were not expected to compare numerous notices in relation to other proposals in which they had no interest.

8. [160]

   The Councils sought to identify the relevant principles by reference, not so much to the statutory context of the present requirement, as to authorities dealing with different legislation. The earliest, Ryan v Edna May Junction, concerned the validity of a notice of the proposed winding up of the respondent company. The meeting at which the winding up was approved passed a resolution varying the entitlement of certain classes of shareholders in the distribution. The notice gave no indication of such a proposal. The class entitled under the articles obtained a declaration that the distribution should take place in accordance with the articles of association, unaffected by the resolution. The Councils relied upon the following statement in the judgment of Isaacs J: [84]

9. [161]

   In the present case, the notice identified the gravamen of the proposal, namely amalgamation of the three local government areas. The problem, if there were one, rested on the additional reference to boundary alteration.

10. [162]

    Attorney-General (Vic) v City of Geelong [85] involved a notice given by the Minister for Local Government under the Local Government Act 1958 (Vic) of a proposed order by which the number of wards in the City was to be reduced from five to four and the number of councillors from 15 to 12. All councillors were to go out of office on the day of the next election. The notice merely referred to “proposals for the resubdivision of the municipal districts [within the] City of Geelong.” In holding that the notice was invalid, the Court stated that the notice “failed to give the necessary intimation or warning of the impending order because it failed to specify any part of the proposal.” [86] The reasoning provided no assistance as to any principle to be applied in assessing the adequacy of reasonable public notice in the present case.

11. [163]

    Of more direct relevance was the decision of this Court in Litevale Pty Ltd v Lismore City Council. [87] The case concerned the validity of a public notice given under s 66 of the Environmental Planning and Assessment Act 1979 (NSW) with respect to the exhibition of a proposed local environmental plan. The complaint was that the notice included surplusage, which rendered it misleading. The Act specified what was required to be set out in the notice. Rolfe AJA stated: [88]

12. [164]

    To similar effect, Sheppard AJA stated: [89]

13. [165]

    In considering the validity of a public notice required to be given “in a form and manner determined by the council” [90] it should be borne in mind that the challenge to the validity of the notice, which, if accepted, would render the inquiry invalid, is to be undertaken by reference to a minimum legal standard required by the statute, and not by reference to some broader discretionary power to give effect to terms which might be clearer or preferable. Adopting the more limited legal standard, the challenges to the validity of notices must be rejected.

14. [166]

    Although there are two separate functions in the Local Government Act, one involving the alteration of boundaries, and the other the amalgamation of local government areas, the reference to both when only the latter is proposed will not have the kind of effect referred to in Litevale, unless the reader were to be lulled into a sense of security because amalgamation was not clearly being proposed and there were merely proposals to alter boundaries. That reading is not plausible. The reader, unaware of the separate statutory functions, might well think that amalgamation would indeed alter local government areas and hence boundaries (and in colloquial terms would be correct); the greater change will include the lesser. There is no reason to infer that the greater is not being proposed. Accordingly, the mere reference to boundary alteration did not undermine or cast doubt on the terms of the notices, which were otherwise correct.

15. [167]

    The Councils also submitted that the notices were inadequate because they failed to identify the serious consequences which might follow from implementation of a proposal to amalgamate three local government areas. It was said that “the public notices did not give the slightest indication that what was proposed would result in the dissolution of three democratically elected bodies.” [91]

16. [168]

    This submission owed more to what the former Meagher JA once characterised (albeit in a different context) as “Wilkes-like rhetoric” [92] than to practical reality. On the one hand, it seems unlikely that the interested reader would fail to realise that a proposal to amalgamate three local government areas would result in the dissolution of the existing councils and their replacement with a new council for which it would be necessary, in due course, to hold an election. The possibility that the further election might be delayed “at the whim of the government” [93] was something of a flourish, unless it were to be inferred that the amalgamation process was for the ulterior purpose of allowing the government, through an administrator, to exercise a degree of control over the new local government area, inconsistent with the rights and wishes of the electorate. No such case was mounted. Any delay in making provision for elections was, necessarily, for a permissible purpose under s 213(1).

17. [169]

    It may be added that there is a countervailing consideration with respect to the content of any public notice, namely that more detail, rather than less, might tend to discourage participation, rather than encourage it. Further, it is to be remembered that the consequences were “drastic” with respect to the Councils and their elected councillors, and, no doubt, their staff. The proposed amalgamations were undoubtedly important to those who take part in local government elections in a particular area, but the consequences of the proposal should not be exaggerated. The notices were readily comprehensible; they gave important information as to where and how members of the public could express their views with respect to the proposal. The challenges to the validity of the notices should be rejected.

18. [170]

    Finally, it may be observed that the Minister sought to raise by way of contention the possibility, rejected by the primary judge, that any deficiencies in the notices given by the Chief Executive or the delegate might be cured by steps taken by the Councils to publicise the relevant proposal and the public meetings. [94] The primary judge dismissed this in colourful terms as analogous to inviting “turkeys to advertise Thanksgiving”. [95] The Minister’s submission appears to have been not that the Councils were under any obligation to remedy deficiencies in the notices given by the delegate, but rather that the steps actually taken by the Councils were relevant circumstances in determining whether reasonable public notice had been given within the requirement of s 263(2B). As the impugned notices were not shown to be deficient, it is not necessary to address that contention.

(5) Conduct of public inquiries

1. [171]

   Ground 4 in North Sydney’s notice of appeal was in the following terms:

2. [172]

   The grounds raised by Mosman were in different terms to the extent that they relied upon a “representation” by the Government that each proposal would be “subject of a public inquiry where the community can hear about and discuss the Proposal”. The representation was that “each delegate would undertake an active inquiry process, involving some degree of interaction between the Delegate and attendees, and that this representation was not in fact fulfilled”. [96]

3. [173]

   The latter complaint, based on a misleading representation, may be disposed of shortly. The ground appears to have been copied from the challenge to the Hunter’s Hill proposal, where the statement from which the representation was extracted appeared at the end of the merger proposal document; there was no similar statement contained in the March 2016 document relating to Mosman, North Sydney and Willoughby.

4. [174]

   Turning to the North Sydney ground, the written submissions sought to rely upon a similar “representation”, although the representation was not to be found in the merger proposal document for the three local government areas, but rather in the earlier proposal relating only to North Sydney and Willoughby. Nevertheless, the submissions were squarely directed to a failure to fulfil the promise of an interactive exercise in which the delegate would do more than listen to the views of residents and ratepayers, although that (passive) role was precisely what he promised to do at the opening of each meeting.

5. [175]

   The statutory requirement is that the Boundaries Commission (and in this case the delegate) “must hold an inquiry” for the purpose of exercising the functions of examination and report. [97] The nature of the “inquiry” is not further elucidated in the Act. However, in dealing with a proposal by two or more councils for amalgamation, the Act requires that the Boundaries Commission or Chief Executive “seek the views of electors of each of those areas” and may do so by means of (i) advertised public meetings, (ii) invitations for public submissions, (iii) postal surveys or opinion polls, and formal polls. [98] With respect to the proposals made by the Minister, these requirements were not engaged. However, it may be inferred that the purpose of the inquiry which was required was to “seek the views of electors” and that this was to be done in “public meetings”. There is no reason to impose some greater level of interaction or discussion involving the engagement of the delegate when holding an inquiry under s 263. There was, therefore, no failure of legal process in the manner in which the public meetings were conducted. Within the restricted time limits, numerous people were able to express their views, which were recorded. Others made written submissions.

6. [176]

   There being no legal obligation on the delegate to do more, these challenges to the validity of the process must be rejected.

(6) Procedural fairness

1. [177]

   As noted above, [99] the grounds of appeal relating to procedural fairness relied upon the refusal of the Minister to provide documents prepared by KPMG, which, it was understood, included further explanations of the assumptions and modelling undertaken by KPMG with respect to the putative financial advantages of the proposed amalgamation. In order to address these grounds, it is necessary to identify the applicable legal principles, the undisclosed documents and the manner in which the delegate dealt with the mandatory consideration identified in s 263(3)(a) of the Local Government Act.

(a) applicable principles

1. [178]

   The submissions for the Minister as to what constituted procedural unfairness in the context of the delegate’s statutory function require consideration of issues somewhat sketchily addressed in Ku-ring-gai Council. The primary question concerns the identification of what was required to be disclosed. Further, because the Minister sought to demonstrate that the underlying documents would not have assisted the Councils in presenting a case against amalgamation, there is an issue raised as to the nature of the fact-finding exercise appropriate to this aspect of judicial review.

2. [179]

   This was not a case in which it was asserted by the Minister that the Councils were not entities capable of enjoying procedural fairness. Nor was it submitted that their interests were limited to the representation of a large class of individuals, perhaps ratepayers within their local government areas, who were likely to have a range of opinions as to the proposed amalgamations. [100] It was assumed, no doubt correctly, that each Council had a legitimate interest in its own continued existence.

3. [180]

   It was also assumed, at least implicitly, that each Council was entitled to be provided with information relied on by the Minister which was prejudicial to its interests (including in its own survival) and that was “credible, relevant and significant to the decision to be made.” [101] Although the Minister did not accept any burden of proof, she did seek to demonstrate that the Court should not be satisfied that the undisclosed KPMG documents fell into that category.

4. [181]

   The precise point of engagement with this tripartite standard was not entirely clear. As the material had been produced by KPMG at the request of and for the purposes of the Government, it can be assumed that there was no challenge to its credibility. Further, as the material was undoubtedly relied upon by the Office of Local Government in formulating the proposals for the Minister, it may be assumed that it was relevant. The thrust of the Minister’s submission appeared to be that it had not been demonstrated to be “significant”, in the sense that it added anything to the material already in the public arena or otherwise available to the Councils.

5. [182]

   This broad statement of the issue requires refinement in two respects. The first relates to the concept of material which is “significant” to the decision to be made. In addressing this issue it is helpful to distinguish two different categories of case. The first (the most common) is where the nature of the undisclosed material is revealed in the reasons for decision. The less common case is one where reliance on undisclosed material is revealed, but the content of the material is not. [102] These appeals fall into the latter category. That fact is also relevant to the second issue.

6. [183]

   The second issue concerns the nature of the burden on the party seeking to demonstrate procedural unfairness. Putting to one side practical difficulties in identifying the content of as yet undisclosed documents, the question is whether the applicant must show that the undisclosed material was: (i) material of which it could not be said that it could not affect the outcome; (ii) material which was capable of affecting the outcome, or (iii) material which would affect the outcome.

7. [184]

   The submissions in the present case, in common with the language used in some authorities, tended to elide the distinction between the existence of jurisdictional error (for the present purpose, procedural unfairness) and the circumstances in which the court will, as a matter of discretion, refuse relief despite the fact that jurisdictional error has been established. No doubt there are cases in which the distinction is unimportant; however, in some cases it may be critical. In principle, it involves the distinction between the right to a fair hearing before a power is exercised adversely to one’s interests and a recognition that relief would be futile because the outcome was inevitable. A typical example of the latter situation may arise where the tribunal has stopped the applicant from tendering evidence, or making submissions, on the basis that the claim will be accepted, only for the claim to be rejected. However, if, in the course of the judicial review proceeding it were to be demonstrated that the applicant was ineligible as a matter of law, relief would be refused, despite the fact that the applicant had established procedural unfairness. As explained by Gaudron and Gummow JJ in Re Refugee Review Tribunal; ex parte Aala, [103] albeit in the context of a claim for a constitutional writ:

8. [185]

   In Ex parte Aala, the Tribunal had assured the applicant that it had certain documents, including a 16 page statement which the applicant had filed, and that it had read them. The applicant then did not provide the additional material which was otherwise available to him. The Tribunal’s assurance turned out to be mistaken. In granting relief, Gaudron and Gummow JJ stated: [104]

9. [186]

   The two prerequisites to the conclusion reached by the majority in Aala (McHugh J dissenting) were that (i) the credibility of the applicant was in issue and (ii) the untendered material was relevant to his credibility. The applicant did not have to show that the untendered material would necessarily have been “significant”; nor did he have to demonstrate that a different outcome was likely, but merely possible.

10. [187]

    The reason for this approach, at least in part, is that it is not for the court to second-guess how the repository of the power would have exercised the power if the submissions or material not available to it had in fact been available. It follows that if the court is to have regard to the final decision of the decision-maker, it is for a limited purpose. Thus, in Aala, reference was made to the reasons of the Tribunal only in order to determine whether the credibility of the applicant remained a factor in the Tribunal’s reasoning. In Applicant VEAL, the Court reiterated that “principles of procedural fairness focus upon procedures rather than outcomes.” [106]

11. [188]

    As explained in SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs: [107]

12. [189]

    Further, the mere fact that the reasons do not expressly rely on particular material may not be decisive against a finding of procedural unfairness. As explained by Brennan J in Kioa v West: [110]

13. [190]

    The Minister relied upon the proposition, adopted from the judgment of Gleeson CJ in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam, [111] that fairness is an “essentially practical” concept and that “the concern of the law is to avoid practical injustice.” There was, it was submitted, no practical injustice in the present case, because the Councils were aware of the figures which KPMG had produced and were fully able to undertake their own calculations if they considered the benefits of amalgamation had been overstated.

14. [191]

    The reasoning in Lam, taken out of context, has been relied upon to establish an onus on the party complaining of procedural unfairness to establish “practical” as opposed to putative unfairness in the outcome. The context in Lam does not warrant such a generalisation. Lam commenced the process of exorcising the concept of “legitimate expectations” from this aspect of administrative law. (That process was completed in Minister for Immigration and Border Protection v WZARH. [112] ) In Lam, the officer assessing whether the applicant should be deported stated that further information would be sought from the person caring for the applicant’s children before a final decision was made. That did not occur, but neither the carer, nor the applicant, in fact had any further information to convey. The applicant had not been dissuaded by the statement from providing further information, as occurred in Ex parte Aala and in WZARH.

15. [192]

    In the latter case, the Court unanimously held that the question of unfairness turned, not upon the fact that the first officer who had interviewed the applicant had indicated that the process would be repeated in circumstances where the decision was to be made by a second officer, but upon the fact that, no further interview having been accorded, “it cannot be said … that the [visa applicant] lost no opportunity to advance his case.” [113] The joint judgment continued: [114]

16. [193]

    In a separate judgment, Gageler and Gordon JJ noted that “[t]he absence of practical injustice in Lam lay in the fact that ‘[t]he applicant lost no opportunity to advance his case’ [116] .” [117] The joint judgment continued:

17. [194]

    There are two important points to be derived from this discussion of the authorities. First, it is clear that the principle of fairness is concerned with process, not outcome. The reasoning of the decision-maker may be relevant as an indication of the issues in play, but not for the purpose of determining whether a different process would have affected the result. Secondly, fairness may require more than according an opportunity to the affected party to present its case. Where the decision-maker has available information which is adverse to that party’s interests, a fair process must include an opportunity to address the adverse material. That was the basic principle established by Kioa. There was no issue that Mr Kioa had an opportunity to place material before the decision-maker to support his claims; rather he had no opportunity to address the adverse material. The same was true in Applicant VEAL. The proposition that the Councils could (and did) present their own financial assessments was not a sufficient answer to the complaint that they lacked a proper opportunity to challenge the Government’s figures.

18. [195]

    Before turning to the circumstances of the particular case, two further principles should be noted. First, as explained in Minister for Immigration and Border Protection v SZSSJ: [121]

19. [196]

    Secondly, it is appropriate to refer to the way in which the courts deal with the interface between a claim for disclosure in the interests of procedural fairness, and a refusal because the relevant material is subject to a legal obligation on the holder not to disclose the material, or to protect some aspect of its content on the basis of confidentiality. [122] The question is relevant because of the claims made by the Government for public interest immunity with respect to three critical documents sought by the Councils, together with an apparent claim for confidentiality with respect to the KPMG Excel workbook which was used to derive the final figures contained in the merger proposal document.

20. [197]

    In broad terms, the courts have been at pains to ensure protection for confidential material, such as the identity of informers, while seeking to accord those subject to the exercise of a compulsory statutory power a degree of disclosure consistent with the public interest to be protected. [123]

21. [198]

    As will be noted below, such an approach may have consequences where there is some element of commercial confidence to be protected. For example, the disclosure of an electronic copy of the Excel spreadsheet may reveal some element of the intellectual property of KPMG. However, disclosure of the printed directions for the calculations required to be undertaken by the program would not reveal that aspect of the confidential material. At least, there was no evidence to suggest the contrary.

22. [199]

    What is required in any particular case will depend upon the statutory framework of the decision-making and the position of the affected party. For example, where the affected party is seeking a benefit, greater weight may be placed upon its presentation of its own case. In a case such as the present where the affected party is resisting a challenge to its interests (and its existence) greater weight will need to be placed on its opportunity to answer the material deployed against it.

23. [200]

    The present case is far removed from Kioa, in which the adverse material was evidence that the applicant had engaged in illegal activities with respect to persons seeking to enter Australia unlawfully. On the other hand, the assessment of the financial advantages and disadvantages of the proposed amalgamation nevertheless involved what Edelman J, sitting in the Federal Court, described as “evaluative judgment and overall impression.” [124]

24. [201]

    Finally, it is necessary to consider the principles applicable to fact-finding upon such an application. Although the Minister did not accept she bore an onus of proof, she sought to persuade the Court that it should not be satisfied that the content of the undisclosed documents was materially different from that which had been disclosed and that, accordingly, there had been no unfairness in refusing to provide them to the Councils.

25. [202]

    There is good reason why the Court would not readily be persuaded that the undisclosed documents were not significant. Just as the Court will not lightly assume that known material, if presented to the decision-maker, could not affect the outcome, it would be quite inconsistent for the Court to conclude that unknown material would not, if provided to the parties and the decision-maker, with additional submissions from the parties, have influenced the analysis of a mandatory consideration.

26. [203]

    In SZSSJ details of applicants for protection visas in Australia had been accidentally made available on a Government website. That material is usually kept confidential to avoid a sur place claim; that is a claim of a well-founded fear of persecution based on the fact that the claimant’s country of nationality knows that allegations have been made by the claimant in Australia. The applicants in SZSSJ sought access to an unredacted report prepared for the Government which was understood to reveal who had obtained access to the site while the confidential information was available. To determine the consequences of the breach of procedure with respect to the disclosures, the Government undertook “International Treaties Obligations Assessments” (ITOAs); the Court noted that these were dealt with in the following manner:

27. [204]

    It will be necessary to consider below whether the content of the undisclosed documents was shown to be of a nature which could not properly have been disclosed; however, assuming that it was of that kind, the appropriate course in seeking to resolve the tension between confidentiality and procedural fairness is for the Court to assume that the material was “significant”, in the sense that, if available to the Councils, it might have been deployed in a way which might have changed the delegate’s views as to the strength of the Government’s claims as to financial benefits.

28. [205]

    Bearing those cautions in mind, it is necessary to address the evidentiary basis of the respective submissions.

(b) the undisclosed documents – general

1. [206]

   While it is necessary to identify the undisclosed documents, there is a problem with nomenclature. As similar titles were given to different documents, and the Court has not seen the documents, there is likely to be a degree of imprecision in their description.

2. [207]

   When, in February 2016, Mosman Council sought access to “[t]he report prepared by KPMG providing independent analysis and modelling referred to in [the merger proposal document]”, it assumed a singular “report”, described by its function. The response under the Government Information (Public Access) Act 2009 (NSW) (“Government Information Act”) identified 15 government documents in a schedule of records, two of which were said to be publicly available online, three of which were released and 10 of which were withheld in the public interest.

3. [208]

   One of the documents, entitled “Summary – Metro Options” was not the subject of further consideration. Three documents, each entitled “KPMG – Options Analysis” have been disclosed. There remained three other documents which were not disclosed, identified as follows:

4. [209]

   The second document had the same title as a document which was publicly released. The publicly released document was referred to as the “short form” and the undisclosed version was known as the “long form”. An affidavit by an officer in the Department of Premier and Cabinet, claiming public interest immunity in the Ku-ring-gai Council proceedings, described the content of the two versions of this document as “different”. In Ku-ring-gai Council, the Minister conceded that a footnote referring to the document by name, as the source of the figures contained in the merger proposal in that case, was in fact the long form (undisclosed) version. That specific concession was not withdrawn in these proceedings. However, the Minister submitted that the proposal referred to “[a]nalysis by KPMG in 2016”, [125] which suggested the 2015 analysis was not used. (That left unanswered the question as to what analysis was undertaken in 2016.)

5. [210]

   The process by which the figures were derived was described in the letter to Mosman Council as the application of certain “modelling assumptions” to council-produced data for the financial year 2013-2014, via a computer program designed to produce “modelling outputs and analysis for each of the 35 proposed mergers.” The computer program was later identified as the “Microsoft Excel workbook”, or the “Microsoft Excel model”. This was not identified as a document subject to disclosure under the Government Information Act as the Government did not “hold” the computer program; [126] it was said to be held by KPMG.

6. [211]

   Given the uncertainty as to the content of these documents and the strenuous submissions on behalf of the Minister that the Court should not be satisfied that the failure to disclose the documents had any significant consequence for the ability of the Councils to respond to the figures relied on by the Minister in the merger proposal document, it is appropriate to set out the prolonged history of requests for production and refusals to produce.

(c) procedural history – undisclosed documents

1. [212]

   The merger proposal document stated, under the heading “Key analysis”:

2. [213]

   This merger proposal document contained no footnote identifying the source of the KPMG analysis referred to above; although the last paragraph had a superscript number indicating a footnote, the footnote was omitted.

3. [214]

   The “key analysis” referred to in the executive summary was developed further, and repeated in the text of the document. [127] The document also indicated that “the proposed merger is expected to enhance the financial sustainability of the new council” through a number of factors, including those already noted and with the addition of the following factors: [128]

4. [215]

   On 23 December 2015 the General Manager, North Sydney Council, Mr Warwick Winn, wrote to the Minister asking for a copy of “the KPMG analysis/report”. On 25 January 2016, following the release of the 6 January proposals, Mr Winn wrote to the Acting Chief Executive, Office of Local Government, in the following terms:

5. [216]

   On the same day, Mr Winn lodged a formal application under the Government Information Act. The documents identified in the schedule included:

6. [217]

   The Government’s responses to these requests were not consistent. With respect to the request under the Government Information Act, an officer in the Department of Premier and Cabinet claimed public interest immunity. With respect to the letters to the Minister of 23 December 2015 and 25 January 2016, a response was provided by the Acting Chief Executive, which was received by the Council on 1 March 2016. The response was:

7. [218]

   On 22 March 2016 Mr Matt Richards, Director, Department of Premier and Cabinet, replied to the request under the Government Information Act addressing some 60 documents which had been identified as covered by the request. Annexure B to the letter identified 19 documents (numbered 5-23) for which public interest immunity was sought on the basis that they had been placed before Cabinet. Many of the documents were drafts, but four were identified as follows: [129]

8. [219]

   In January 2016 officers of Mosman Council were also seeking access to the undisclosed KPMG documents, albeit by reference then to the earlier proposal with respect to the Manly, Mosman and Warringah amalgamation. An internal email exchange between Premier and Cabinet and “the Local Government Reform team” noted that the latter did not have “full copies of the independent analysis and modelling for each merger proposal by KPMG.” On 9 February 2016 Mosman Council received the response to its request under the Government Information Act noted above. The number of documents subject to the request was treated as more limited, but seven documents were identified as subject to an overriding public interest against disclosure. Those documents fall within the class the subject of the response to the North Sydney request.

9. [220]

   Two weeks later, on 23 February, the Chief Executive of the Office of Local Government wrote to the Mayor of Mosman, responding to his letter to the Minister of 11 January, and stating, consistently with his response to North Sydney of the same date, that “KPMG’s analysis and modelling of the merger proposals is [sic] entirely contained within documents that are publicly available.”

10. [221]

    The communications between the Councils and the delegate had two purposes. One, not immediately relevant here, was to put the delegate on notice that the Councils took the view that, unless he had access to the underlying KPMG material, he would not be able to carry out his function of examining the financial advantages put forward by the Minister. The other purpose was to reiterate the Councils’ claims that they were being denied procedural fairness in not being provided with the material. Although it is only the latter purpose which is immediately relevant, from the point of view of coherence it is desirable to set out the whole of the material in one place.

11. [222]

    Both Councils communicated their concerns to the delegate. On 5 February 2016 Mr Winn, from North Sydney, noted the reference to “independent analysis and modeling by KPMG” in the merger proposal document and continued:

12. [223]

    On 15 February 2016 Mr Winn wrote to the delegate noting that at a meeting of Council on 10 February, a resolution had been passed with several elements, including one “vigorously opposing the proposal” and another directing the Council to write to the delegate “requesting that he immediately release the full KPMG report referred to in the Minister’s proposal”.

13. [224]

    On 26 February 2016, still addressing the North Sydney and Willoughby City Council merger proposal, Mr Winn wrote again to the delegate enclosing a copy of the Council’s submission and continuing:

14. [225]

    On 7 April 2016 Mr Winn sent the delegate a submission from North Sydney Council in opposition to the revised merger proposal involving North Sydney, Willoughby and Mosman. The “preamble” to the submission repeated passages from the letter to the delegate of 26 February. The submission noted that the Council had received a response dated 11 March 2016, although that document is not in the material before this Court. The preamble to the submission read:

15. [226]

    The following day, 8 April 2016, the Mayor of Mosman wrote to the delegate enclosing what was described as a “preliminary submission”. The letter to the delegate continued:

16. [227]

    In the submission which accompanied the letter, the following was said in relation to the first factor identified in s 263(3)(a):

17. [228]

    On 13 April 2016, Mr John McDonnell, Acting Crown Solicitor, replied on behalf of the delegate to the Mayor’s letter of 8 April:

18. [229]

    It does not appear that any response was provided to North Sydney Council in relation to its communications with the delegate on 5 and 15 February 2016. However, on 19 April 2016, being the same date as the letter from the delegate to the Boundaries Commission attaching the delegate’s report, solicitors for North Sydney Council wrote to the delegate in the following terms:

19. [230]

    On 22 April 2016 Mr McDonnell responded to the solicitors for North Sydney Council on behalf of the Office of Local Government, the Boundaries Commission and the delegate. He noted his instructions that the delegate had provided the “First and Second proposals” to the Boundaries Commission and the Minister. He concluded:

20. [231]

    On 29 April 2016 Mosman Council commenced proceedings in the Land and Environment Court; it is not apparent from the papers before this Court on what date North Sydney commenced proceedings.

(d) Professor Dollery’s reports

1. [232]

   It remains to refer briefly to Professor Dollery’s reports, which were provided to the delegate. Professor Dollery was a professor of economics at the University of New England and the Director of the Centre for Local Government. He was first engaged by the solicitors for North Sydney Council in order to prepare a report with respect to the first merger proposal (with Willoughby Council). That he did, in February 2016. In March 2016 he prepared a second report with respect to the second proposal (Mosman, North Sydney and Willoughby). That report was addressed by the delegate, at least in part. Because the Minister sought to rely upon Professor Dollery’s reports to demonstrate that the Councils’ own expert was able to address apparent flaws in the KPMG analysis without access to the undisclosed documents, in order to demonstrate the absence of any unfairness, it is necessary to refer to that material at this stage.

2. [233]

   Professor Dollery commenced his analysis with an 11 page history of the local government reform process preceding the proposal of February 2016. He referred to the separate assessments made by the Government’s independent panel entitled “Future Directions” and “Revitalizing Local Government” in April and October 2013; a study by NSW Treasury Corporation (TCorp) in 2013 entitled “Financial sustainability of the New South Wales local government sector”; by the Government itself in its “Fit for the Future” analysis in September 2014, and the IPART report of October 2015. [130] Professor Dollery noted that the difficulty with the process followed from variations in criteria used by different agencies in their analyses and reports. [131]

3. [234]

   With respect to the financial state of Mosman, North Sydney and Willoughby, TCorp had rated Mosman as having a “weak” financial sustainability rating (FSR), but a “positive” outlook rating. North Sydney and Willoughby were both identified as having moderate FSRs and neutral outlook ratings. Neither IPART nor TCorp undertook quantitative financial analyses with and without the proposed amalgamations. Professor Dollery inferred that financial viability did not require the amalgamation of the three councils. (The delegate referred to the basic conclusions reached by IPART and TCorp.)

4. [235]

   Professor Dollery then turned to the financial case for merger under the February 2016 proposal, stating: [132]

5. [236]

   Professor Dollery noted: [133]

6. [237]

   Professor Dollery also prepared an affidavit which was read in the proceedings in the Land and Environment Court, although he was not available for cross-examination. That affidavit stated in part (excluding references to his earlier reports):

(e) reasoning of delegate

1. [238]

   The delegate made a positive finding only with respect to the question of financial strength, stating: [134]

2. [239]

   In the body of his report, the delegate expressed his conclusion as to financial advantages more neutrally; in a passage adopting the language of s 263(3)(a), he found that “the financial advantages outweigh disadvantages; and that mechanisms exist to help manage transitional issues, such as differential rates.” He then stated, “[a]s such, there is no impediment to the merger proposal proceeding, with respect to this factor.” [136] This factor also thus attracted only a neutral evaluation.

3. [240]

   Relevantly for present purposes, it was clear that, in relation to what was a key factor in the analysis, the delegate accepted the financial forecasts provided in the merger proposal document, which reflected the KPMG figures. The relevant part of the report was expressed in the following terms: [137]

4. [241]

   Although the delegate also referred to the TCorp and IPART reports, he expressly adopted the KPMG figures. Further, while engaging with Professor Dollery’s criticisms based on the publically available material, he made no reference to the underlying material which had not been disclosed. That is apparent from the following passage in the financial analysis section of the report: [138]

5. [242]

   At no stage was reference made to the submissions set out above (including Professor Dollery’s observations) as to the need to have access to the material upon which KPMG formulated its assumptions and undertook its calculations in order to understand the justification for the assumptions.

6. [243]

   Appendix D to the delegate’s report addressed criticisms raised by Professor Dollery of the KPMG assumptions. It did so by reference to a document prepared by KPMG entitled “Outline of Financial Modelling Assumptions for Local Government Merger Proposals – Technical Paper” (“Technical Paper”) prepared for the NSW Department of Premier and Cabinet and dated 19 January 2016.

7. [244]

   Although it was true that Professor Dollery identified what he saw as specific problems with the assumptions in the Technical Paper, this exercise of the delegate did not engage with the proposition that the information in the Technical Paper to which Professor Dollery was responding was expressed at a level of generality which prevented any calculation by reference to figures relevant to the specific proposal in question. Arguably the figures were important, as were the methods of calculation, in part because they involved predictions over a period of 20 years.

(f) reasoning of primary judge

1. [245]

   In the proceedings below, both Councils complained that they were denied access to the undisclosed KPMG documents and thereby lost an opportunity to make informed submissions to the delegate about why the KPMG figures might be unreliable or unsupportable.

2. [246]

   The primary judge dealt with the submissions as to procedural unfairness in two stages. [139] First, he considered the reasoning of Preston CJ of LEC in Woollahra Council (LEC); secondly, the primary judge said that he had formed his own view as to the principles to be applied and accepted the correctness of the approach adopted by the Chief Judge. [140] He concluded: [141]

3. [247]

   That finding missed the point; that which the delegate took into account was a set of conclusions (in the form of a set of financial benefits) reached by KPMG. The Councils’ complaint was that they did not have the underlying analysis which would allow them to test the conclusions. The judge’s finding supported the separate complaint as to the delegate’s failure to test the KPMG conclusions; it was not an answer to the complaint of procedural unfairness.

4. [248]

   Turning to the reasoning adopted from Woollahra Council (LEC), [142] the issue was identified in the following terms: [143]

5. [249]

   Preston CJ dealt with this complaint in two parts. First, he rejected so much of the challenge as related to the submissions of Waverley and Randwick Councils and the SGS Economics and Planning report, which had been prepared for those Councils. [144] That conclusion was challenged on appeal but this Court rejected the challenge in Woollahra Council (CA).

6. [250]

   The approach of the Chief Judge in Woollahra Council (LEC) was informed by an earlier decision of this Court, Minister for Local Government v South Sydney City Council, [145] as explained in the following passage: [146]

7. [251]

   The issue relevant for present purposes, namely the undisclosed KPMG documents, was dealt with succinctly by Preston CJ in the following passage, being that relied upon by the primary judge: [147]

8. [252]

   Of the three reasons identified by Preston CJ for rejecting the argument that the non-disclosure of the KPMG documents involved procedural unfairness, it was the first which was seen as self-evidently conclusive by the primary judge in the present matter. However, to say that the delegate cannot disclose documents which he did not have is to ignore the institutional structure within which the decision-making process was undertaken. As has been explained above, the delegate was a delegate of the Chief Executive of the Office of Local Government, which was in turn the agency of the New South Wales Government responsible for administering Ch 9 of the Local Government Act. Section 218F obliges the Minister to refer a proposal to the Boundaries Commission or to the Chief Executive. Where the referral is to the Chief Executive, the Chief Executive is required to carry out the examination. The scope of that function cannot be diminished by a delegation under s 745 of the Local Government Act. Indeed, if a delegation were to have that effect, there would be a potential inconsistency which might lead to the conclusion that the power of delegation was not available.

9. [253]

   Subject to two possible qualifications, there was no evidence before the Land and Environment Court (or this Court) that the Chief Executive did not have access to the undisclosed KPMG documents.

10. [254]

    The first qualification relates to the claim for public interest immunity which had been made by the Government with respect to those documents. That claim was denied by this Court in Ku-ring-gai Council and, although the issue did not arise for determination in these proceedings, the Minister, understandably, did not rely upon the proposition that the documents could not have been disclosed to the Departmental Chief Executive for this reason.

11. [255]

    There are three further points to note in this regard. First, the claim of public interest immunity did not deny (but indeed acknowledged) that the Minister had access to the material contained in the undisclosed documents in relation to which immunity was claimed. Secondly, non-disclosure was based upon a class claim; it did not, without more, establish why the contents of the documents could not be disclosed in some form. As Applicant VEAL and SZSSJ demonstrate, the courts will be astute to ensure that as much as possible is disclosed in order to accord procedural fairness without contravening a justified basis for non-disclosure of a document. Thirdly, there was an inconsistency in the Minister’s submission that, while the documents should not be disclosed, nevertheless, the Court could infer that they contained nothing which was not publicly available.

12. [256]

    The second qualification arose from the “contingency” identified by the Minister in acceding to the amendments proposed by the Councils, adding a ground to the notice of appeal in each matter. The Minister wished to reserve her position with respect to any argument as to whether she had access to what was described as KPMG proprietary computer programming, used to calculate the financial elements of each proposal. That description appears to have referred to that which was otherwise described as KPMG’s Microsoft Excel Workbook. However, that matter should not, in principle, affect this aspect of the case. The fact that the Government contracted out the preparation of materials used to support the amalgamation proposals should not affect the statutory function conferred on the Chief Executive under s 218F. If particular material is required in order to evaluate the proposals, either that material must be provided, or the examination required by the statute will be subverted and cannot be undertaken. That proposition extends to the need to make the material available to the Councils which identified and requested it.

13. [257]

    Amongst the background material provided by the Minister in this Court was a “standard form of agreement” between KPMG as service provider and the Office of Local Government as principal. It commenced in June 2015. In the absence of evidence and submissions to the contrary, it should not be assumed that the contract precluded the Office from obtaining from KPMG material relevant to the case which it was requiring KPMG to produce for it. Such an assumption should not be drawn, because no such argument was developed in this Court. That was not because it related to any amendment proposed by the Councils; it did not – rather, it related to the argument as to procedural fairness which had been run at all stages of the proceedings (and in the Woollahra Council proceedings). It is sufficient for present purposes to note that the first reason given by Preston CJ in Woollahra Council (LEC) is not a persuasive answer to the claim of procedural unfairness.

14. [258]

    Finally, no evidence was placed before this Court to justify the claim of confidentiality in relation to the KPMG Excel workbook. There was no evidence that KPMG asserted confidentiality; there was no evidence to demonstrate that the programming was sophisticated or unique. In any event, as noted above, the “content” of the computer program could have been sufficiently revealed by disclosing the precise instructions for the development of the program and the raw data which was relied upon to produce the Government’s financial figures.

15. [259]

    The second reason given by the Chief Judge reflected language used in 2002 by Mason P in South Sydney City Council. South Sydney City Council involved a challenge to a report of the Boundaries Commission in a matter involving alterations to the Council’s boundaries. The proposal under examination involved the transfer of parts of the South Sydney and Leichhardt local government areas to the City of Sydney. The issues raised in relation to what was described as a multi-party multi-stage examination covered much territory which is irrelevant in the present case. Further, the case dealt with written submissions made to the Commission, which did not conduct a public inquiry. [148] After identifying a number of statements of principle in the case-law and academic writing, Mason P adapted a question identified by Lord Diplock in Mahon v Air New Zealand Ltd, [149] as to whether a person being investigated has been “left in the dark” as to the risk of an adverse finding “and thus deprived of any opportunity to adduce additional material of probative value which, had it been placed before the decision-maker, might have deterred him from making [those findings] even though it cannot be predicted that it would inevitably have had that result.” [150]

16. [260]

    The colourful expression “left in the dark” as to a particular risk is, as Mason P noted in the following paragraphs, imprecise; it might also be described as unhelpful. Further, the passage in Mahon impliedly imposed a burden on the affected party to establish the nature of the material which it was deprived of an opportunity to place before the decision-maker and demonstrate why the decision-maker might have been persuaded to a different outcome.

17. [261]

    Mason P continued in South Sydney City Council:

18. [262]

    The circumstances were identified further by Mason P in the following passage: [152]

19. [263]

    Mason P assumed that the answer he gave to the rhetorical question was applicable in the circumstances of that case; he should not be taken to be saying that the question is universally appropriate. In Woollahra Council, and in the present cases, the councils were facing dissolution, indicating that a powerful factor which appears to have swayed the reasoning in South Sydney City Council, namely the diversity and extent of the relevant interest groups, differed from the present cases because that council was not facing dissolution. The conclusion as to the applicable scope of the duty in South Sydney City Council was then expressed in the following terms: [153]

20. [264]

    Mason P considered whether there were issues raised in the submissions of the other councils which should be treated as sufficiently adverse to require an opportunity to respond, concluding that there were not.

21. [265]

    Although in Woollahra Council (CA) Beazley P referred to the test adopted by Mason P as to the identification of “some particular issue” that was “so damaging and so unforeseeable” that an opportunity should have been given to respond, that language was not specifically adopted in the dispositive reasoning. The issue before the Court in Woollahra Council (CA) related only to the contents of the SGS report, prepared and relied upon by the other councils, in circumstances where “according to the Delegate, the assumptions and calculations in the SGS report had been independently assessed by external auditors of all three Councils, and in any event, the report was discussed at the public meeting held at Rose Bay at which Woollahra Council was present.” [154] Further, the content of the obligation for which Woollahra Council had contended required that the delegate, having completed the examination function, should refer some aspect of the tentative conclusions to an affected party prior to sending a report to the Boundaries Commission. [155] These claims are far removed from the present case. The President concluded: [156]

22. [266]

    The language of Mason P in South Sydney City Council imposes a high burden on the aggrieved party and need not be adopted in other contexts as a statement of principle. Rather, this case was closer to an application of the observations of Lord Diplock in Bushell v Secretary of State for the Environment, [157] quoted by the President in Woollahra Council (CA): [158]

23. [267]

    To the extent that the Chief Judge in Woollahra Council (LEC) required that the aggrieved party establish “that the documents contained information that ‘was so damaging and so unforeseeable’” that the council should not have been left in the dark about it, the judge was in error. First, Mason P in South Sydney City Council used that language with respect to a particular issue, not the contents of undisclosed documents. Further, in the present case, the contents of the undisclosed documents were not revealed in the delegate’s report, or at all.

(g) appellants’ case on appeal

1. [268]

   In summary terms, the Councils sought to show that (i) the KPMG figures for financial benefits accruing from the proposal were derived from undisclosed documents; (ii) the Minister was not able to direct the Court to any disclosed document which contained such figures; (iii) the Minister had in the Ku-ring-gai Council proceedings conceded that the source of the figures was an undisclosed document, and (iv) while the Minister had submitted (although without evidence) that she did not have access to one particular undisclosed document, it was not in doubt that she had access to two other critical documents, which she did not tender. Those factors, the Councils submitted, were sufficient to establish that the source of the calculations was undisclosed and that the figures could not be derived from publicly available material.

2. [269]

   In their final joint submissions, filed 13 April 2017, the Councils noted that the publicly available KPMG material did not allow the reader to “replicate” the exercise undertaken by KPMG, nor to derive specific figures which appeared in the merger proposal documents. The Minister made no submission to the contrary, nor was there any evidence to contradict the assertions of Professor Dollery in this respect.

3. [270]

   Further, although the Government had released (subsequent to the examinations of the proposals undertaken by the delegates) a KPMG “Model Design Methodology Paper” (“Methodology Paper”) dated 8 July 2015, it was apparent that various refinements must have been made before the Technical Paper was published. However, it is clear from the Methodology Paper that for each item of expenditure efficiencies, and each item of cost, various figures were under consideration, each of which no doubt required evaluative judgment. Interestingly, although the delegate was dismissive of the relevance of the Queensland comparison which had been raised by Professor Dollery, the Methodology Paper expressly referred to Queensland experience as the source of its assumptions as to “information communications & technology” [159] (ICT) costs and other transition costs. It also appears from the Methodology Paper that median figures were proposed, discriminating only between metropolitan and regional councils. In addressing staff redundancy payments the document acknowledged that it would be necessary to estimate redundancy packages “[i]n the absence of detailed employee accumulated entitlement data for each council”. With respect to ICT costs it was said that: [160]

4. [271]

   The Councils noted that the Methodology Paper envisaged a five-phase process. The Councils also noted that while the Technical Paper identified the data sources used in the model, in accordance with phase 2, it did not provide any specific data actually utilised in the model, nor did it provide further information about the other phases revealed in the Methodology Paper.

5. [272]

   Notably, in phase 3, entitled “Development of Assumptions”, the Methodology Paper stated: [161]

6. [273]

   The Methodology Paper explained that as the model would be “a Microsoft Excel-based tool designed to offer a clear and robust evidence base on possible merger impacts[,] a key requirement of the model will be to enable direct comparison of merger impacts across each option.” [162] While this revealed an aspect of the intended “model functionality” of the proposed computer program, it provided no detail as to how the program would manipulate data.

7. [274]

   Finally, the Councils submitted that although the data sources were identified (as publicly available data and council-prepared data) the Methodology Paper made it clear that it was not simply a matter of collating such information. In phase 2, the paper noted that “[f]ollowing collation, data formatting will be undertaken to ensure data integrity and consistency across sources in the format required for inclusion in the model.” [163]

8. [275]

   In phase 4, as the Councils noted, “each of the model components [was] to be formulated in a functional and integrated Microsoft Excel workbook.” That, it was stated, required “all the data inputs for undertaking the analysis of financial, service, infrastructure, community and rates impacts to be populated in the model and then linked to the agreed assumptions and calculations to generate the required model outputs.” It was further stated: [164]

9. [276]

   The Councils also drew attention to a Government paper dated 29 October 2015, identified as “Briefing for the Local Government Reform Taskforce” which made recommendations to adopt “the KPMG business case to support any analysis outlining the Proposal’s financial and qualitative benefits.” The paper noted that the Government had access to figures published in the IPART report and by Ernst and Young and then stated:

10. [277]

    The Councils submitted that this description of the KPMG Business Case demonstrated that it was necessary to have access to that document in order for the Councils to have a reasonable opportunity to respond to the economic case advanced in the merger proposal documents.

(h) Minister’s response on appeal

1. [278]

   It is not possible to identify with precision the Minister’s initial written submissions with respect to ground 7 in the Mosman appeal and ground 6 in the North Sydney appeal. That is because, in each case, the Minister adopted her submissions in relation to Hunter’s Hill and Lane Cove. However, that delegate dealt with that proposal differently from the consideration given by the delegate examining Mosman and North Sydney. Accordingly, it was not correct to say that the facts and procedures were relevantly the same. Nevertheless, two passages from the Minister’s written submissions with respect to Hunter’s Hill are significant in identifying the common ground between the parties. The Minister stated: [165]

2. [279]

   In her final submissions the Minister sought to resist the Councils’ reasoning in four different ways. First, with respect to the concession which had been made in the Ku-ring-gai Council proceedings, she submitted that the issue had arisen on the run, in the course of argument, and that senior counsel appearing in those proceedings had not had a proper opportunity to either advise or receive instructions as to what might be shown by the publicly available documents. On this appeal, the Minister was not formally held to the concession and was permitted to attempt to demonstrate that the publicly available documents supported an inference that that which was undisclosed was immaterial. However, the concession remained significant in two respects. First, it was not entirely correct to say it was made “on the run”; the context was a challenge to the Minister’s reliance on public interest immunity to resist disclosure. That challenge was not made without warning; materiality had always been perceived as relevant to the claim for immunity. Secondly, that basis for refusing to disclose the documents having been rejected by this Court (and there being no appeal from that determination) the Minister was, presumably, in a position to release the documents in her control to this Court in support of her contention. She was entitled not to take that course but, as in any other circumstance where a party with access to material which would resolve a factual issue fails to produce the material, the court will not assume that it would have assisted her to do so.

3. [280]

   The second and third arguments reflected aspects of the reasoning in South Sydney City Council, but in a somewhat different form. The second argument has been addressed in considering the principles defining the nature of procedural fairness. It involved the proposition that there was no “practical injustice” (and therefore no procedural unfairness) because the Councils were aware of the financial advantages which the Government claimed would flow from carrying out the proposed amalgamations. They could (and had) presented their own material supporting a different conclusion.

4. [281]

   As has been explained, that is not a sufficient answer to the Councils’ complaints unless it can be said that the Government’s figures were given no weight by the delegate. That was not so; the reason for that conclusion has been explained in recounting the manner in which the delegate dealt with the issue. [166] The delegate expressly referred to the Government’s figures on three occasions in less than two pages and in fact quoted the relevant passage from the merger proposal document. In reaching the conclusion that “the financial advantages outweigh disadvantages”, it is clear that he relied upon those figures as there were no other figures set out in the report. (Although the delegate also referred to the assessments done by TCorp and IPART, those assessments related to the financial status of the current Councils, and did not produce a financial comparison with any hypothetical amalgamation.)

5. [282]

   Thirdly, and consistently with the foregoing argument, the Minister submitted that the demand for the analysis underlying the KPMG figures, beyond what had been provided in generic terms, went further than would be expected with respect to an expert’s report in adversarial litigation. It therefore went beyond what the law required with respect to an administrative inquiry. This was a reformulation of the third reason relied upon by Preston CJ, namely that the “adverse” information was that disclosed in the merger proposal document and the KPMG documents which had been made publicly available. Accordingly, the duty to disclose “adverse material” had been discharged; it did not extend to disclosure of the workings and calculations underpinning the conclusions.

6. [283]

   Fourthly, the Minister challenged the proposition that the documents which were publicly available permitted an inference that the undisclosed documents would have allowed the Councils any better opportunity than they already had to challenge the financial advantages identified in the merger proposal document.

7. [284]

   Specifically with respect to the first document, the submission was that “disclosure of the [Methodology Paper] would not have better enabled the Councils to make informed submissions – it would probably only have caused confusion.” [167] That was said to be because the methodology was used “to generate a series of short ‘Options Analysis’ papers in late August 2015”, [168] but based on assumptions which “were different to [the assumptions] used to generate the figures in the Proposal Documents.” [169] The submission continued: [170]

8. [285]

   The Minister submitted that the assumptions as to staffing efficiencies and ICT costs differed from those contained in the proposal documents, as revealed in the Technical Paper. However, that raised further questions as to why changes may have occurred; the fact that a range had been identified might well assist in interrogating the justification for adopting a particular figure.

9. [286]

   With respect to the Business Case document the Minister submitted that the purpose of the document had been to support a submission to Treasury to secure capital funding for the proposed mergers. However, it may be assumed that the figures produced for that purpose within Government would not be different or based upon different calculations and assumptions than the figures produced to justify the merger proposals publicly. It was further noted that the Business Case modelled financial impacts over 10 years, rather than the 20 years used in the merger proposal documents. That too may be so; if the assumptions remained the same over the longer period, that might be a significant factor; and if the assumptions changed, that might also be a significant factor.

10. [287]

    Finally the Minister submitted that the Microsoft Excel workbook need not be disclosed because it was not necessary for the Councils to be able to “replicate” KPMG’s calculations. That may have been so, so long as the other material fully disclosed the assumptions and methods by which the calculations were undertaken. Whether or not that was so is not known.

(j) conclusions – procedural fairness

1. [288]

   The first step in addressing the complaint of procedural unfairness is to note the issue to which it was directed. That issue was the anticipated financial advantages and disadvantages of the proposal. That was an important, if not critical, element in the delegate’s examination for three reasons. First, it was a mandatory consideration to which the delegate was to have regard, pursuant to s 263(3)(a) of the Local Government Act. Secondly, it was presented by the Government as a critical factor in the Executive Summary at the front of the merger proposal document. Thirdly, it is apparent from the report prepared by the delegate that it was an important, if not critical, factor in his favourable conclusion with respect to the proposed amalgamation.

2. [289]

   The second step is to determine whether it has been established that, through not having access to the undisclosed KPMG documents, the Councils lost a real (and not merely theoretical) opportunity to persuade the delegate that the Government’s figures should not be accepted.

3. [290]

   It is not in doubt that, on the basis of publicly available material, the Councils were not able to replicate or reverse engineer the basis of the calculations.

4. [291]

   The documents passing between the Office of Local Government and KPMG revealed the nature of the task proposed to be undertaken by KPMG. Its purpose was to provide the Government with “robust” figures to support the merger proposals. It should be inferred that the materials KPMG provided to the Government in carrying out its contractual obligations would permit an assessment of the validity (robustness) of the assumptions, the data and the methods of calculating financial costs and benefits. That material was not disclosed; it is likely that, had it been disclosed, it would have allowed the Councils to present a different case from that which they were able to present. Whether that case would have been persuasive is not known; however, it is clear that there were evaluative and potentially contestable steps to be taken in various stages in calculating the costs and benefits. Given the nature of the exercise, it is not for this Court to assess the likely persuasiveness of any attack on the assumptions or the methodology adopted by KPMG. Subject to some additional considerations relating to the Minister’s submissions, the appellants’ arguments clearly have force.

5. [292]

   As the Minister noted, in Appendix D to his report the delegate set out his “Review of commentary on KPMG modelling”. He did so by reference to the critique undertaken by Professor Dollery. In respect of each assumption relied on by KPMG, the delegate concluded that, despite Professor Dollery’s critique, the assumption was “reasonable”. Accepting that that was so, such a finding did not cast doubt on the possibility that a more detailed and helpful explanation for the assumptions and how they fed into the final figures was available in the undisclosed documents. There must be an inherent element of unreliability in prognostications as to financial benefit and detriment over a period of 20 years, or indeed a lesser period; the exercise of choosing appropriate parameters must have involved evaluative judgment, with a range of possible outcomes. The possibility that a better understanding of those matters might have led the delegate to reject or qualify his acceptance of the financial advantages of the proposal cannot be disregarded. Adapting the language of Gleeson CJ in Ex parte Aala, “[i]t is possible that, even if [the Councils] had been given an opportunity to deal with the point, the [delegate’s] ultimate conclusion would have been the same. But no one can be sure of that.” [172]

6. [293]

   The Minister’s submission that the further disclosures sought by the Councils imposed a requirement that exceeded that required of expert witnesses in adversarial litigation missed the point. This was not adversarial litigation and no officer of KPMG was available to be questioned about how the assumptions were justified or how the calculations were made. The broad assertion that the underpinning workings and calculations were not part of the adverse material cannot be accepted as a statement of principle. What constitutes the “adverse material” will depend upon the statutory and factual framework of the decision-making. For example, where adverse material is provided by “an informer”, protection of the informer’s identity does not depend upon a factual assessment that the identity is not important; it may well be critical to the credibility of the information supplied, although the decision-maker may not know why.

7. [294]

   In the present case, the statute required that the financial advantages and disadvantages of the proposal be examined; the figures contained in the merger proposal document could have been pure speculation, or they could have been soundly based, or they could have been rationally calculated but attended by a high level of uncertainty or variability. The Government appreciated that the underpinnings of the calculations were important, because it employed and relied upon the work of consultants with undoubted expertise in the area. The results were only as good as the analysis, modelling and data permitted; indeed, the results were largely meaningless without knowing their underpinnings. The underlying analysis and modelling was an essential part of the “adverse material”.

8. [295]

   The points raised by the Minister in the present case must be addressed by asking whether, by not having access to the underlying KPMG analysis, the Councils lost an opportunity, which might have allowed them to demonstrate that the figures presented by KPMG were not “reasonable”, as the delegate concluded. It is not to the point that this Court cannot be satisfied that the outcome would have been different; the question is rather whether an opportunity to dispute financial figures which were relied on by the delegate was denied. In my view, that question admits of only one answer; the opportunity was expressly denied; if the material had been produced the Councils might have been able to persuade the delegate to a different view of the reliability of the figures prescribed by the Minister. As a result, the Councils were not accorded procedural fairness.

9. [296]

   On this basis the appeals should be upheld and, subject to questions as to the nature of the relief, the report of the delegate set aside.

(7) Constructive failure to exercise function

1. [297]

   Much of the background to the consideration of this ground has been recounted in dealing with procedural fairness. The present ground requires attention to how the delegate addressed the function of review and report with respect to this proposal. However, before undertaking that exercise, two other factual matters should be noted.

2. [298]

   First, in considering how the delegate dealt with the proposal, it should be noted that the merger proposal document omitted a number of headings contained in other documents, including, as compared with Hunter’s Hill, a discussion of the local community by reference to “geography and environment” and “shared community values and interests”. It was the failure to address those issues which led to the declaration made by the primary judge. That form of omission is also relevant to any inference to be drawn as to the weight placed by the delegate on material which did not appear in the merger proposal document.

3. [299]

   Secondly, it will be recalled that Mosman Council was only joined in the proposal now under consideration in February 2016. The original proposal, limited to North Sydney and Willoughby, had been made on 6 January 2016. The relevant inquiries with respect to the undisclosed KPMG documents were initiated by North Sydney, before Mosman was joined. The history of requests and responses chronologically with respect to both Councils was addressed above conjointly and is relevant to the present ground.

4. [300]

   From the available background information, one may derive three broad propositions. First, the constraints on assessing the KPMG figures for financial net benefits were identified by both Councils at an early stage of the process, and indeed before the first proposals were announced. Copies of the underlying KPMG documents were sought, both by letter and through formal application under the Government Information Act. Secondly, the same concerns were raised with the delegate, both by letter and by formal submissions. Thirdly, and importantly for the present ground, the issues raised with the delegate included the inability of the delegate to carry out his statutory function of examining the proposal in the absence of the material which would allow him to assess the validity of the claimed financial benefits.

5. [301]

   The manner in which the delegate addressed the question of financial advantage or disadvantage has been set out above. [173]

(a) approach of primary judge

1. [302]

   Before the primary judge, the challenge raised with respect to this factor was restricted to a failure to consider the financial advantages and disadvantages “including the economies and diseconomies of scale”. The judge noted that the delegate had had regard to the reports of TCorp and the IPART, as well as the KPMG figures set out in the proposal. The delegate had also referred to the KPMG Technical Paper published on the Government’s Council Boundary Review website. [174]

2. [303]

   Further, the delegate had not only said that he had considered Professor Dollery’s criticisms of the KPMG assumptions, but addressed the specific criticisms in Appendix D to the report, based on the Technical Paper. As noted above, each criticism was dismissed on the basis that KPMG’s approach “was considered to be reasonable” or was “reasonable in the circumstances.” [175] The judge therefore rejected the challenge to the delegate’s consideration of this factor, as presented at trial.

(b) submissions on appeal

1. [304]

   Given the shift in the basis of the challenge over the course of the appeal, it is necessary to note the submissions of each party, both in writing and orally.

2. [305]

   In circumstances where neither the delegate nor the Councils had the undisclosed KPMG documents, and the Councils had told the delegate why they were needed for him to complete his task, the Councils submitted that an independent examiner had three options available, namely (a) to seek access to the undisclosed KPMG documents; (b) if access were refused, to decline to complete the examination of the financial considerations absent such material, or (c) to press on without seeking or obtaining the documents. The Councils submitted that the third approach, which was that adopted, meant that there had been a failure properly to examine a mandatory factor.

3. [306]

   The Councils put forward a number of assertions as to the role and significance of the undisclosed KPMG documents. With respect to the Methodology Paper, they noted that the model design sought by the Government in July 2015 involved a five-phase approach which was designed to inform government decision-making. The inference that it had in fact served that purpose supported its relevance, rather than, as the Minister submitted, its ongoing irrelevance. The content of the document, which had been disclosed after the delegate’s report, has been considered above.

4. [307]

   Secondly, reliance was placed on the briefing prepared for the Local Government Reform Taskforce dated 29 October 2015 [176] which set out the proposed “merger proposals process”. Its recommendation was “to use the figures from the KPMG Business Case to support any analysis outlining the Proposal’s financial and qualitative benefits.” The paper noted:

5. [308]

   The source of the $2bn figure of savings over 20 years claimed in the Government’s December 2015 press release did not reflect this analysis, but some later assessment. It confirmed expectations that such forward estimates were inherently imprecise. On one view, there was a volume of material available in the public domain and, as was not in dispute, the Councils had been engaged in the process of assessing the effects of possible mergers over a significant period. However, according to Professor Dollery each inquiry had had different terms of reference and adopted different criteria. Furthermore, it was argued that what was available provided a firm basis to conclude that the KPMG Business Case document was critical to the exercise being undertaken in calculating the specific figures in each separate merger proposal document.

6. [309]

   Thirdly, there was the KPMG Excel workbook, which was said to demonstrate how the benefits of individual amalgamations were calculated. (This was referred to by the Minister as the same document as the Methodology Paper; [177] however, as noted above, the Methodology Paper expressly envisaged a process which would create the workbook.) Professor Dollery stated that the publicly available KPMG information “[did] not reveal how the calculations were done, on what information they were based and the particular assumptions used for specific councils.” [178] That opinion was not contradicted by the Minister, and was in any event self-evidently correct.

7. [310]

   The Minister raised three propositions in response to these grounds. First, it was said that the delegate had no obligation, or indeed power, to obtain material not made available to him by the Government or by interested parties who participated in the inquiry. That proposition was relevant to resisting both the allegation of constructive failure to exercise the statutory function and the denial of procedural fairness by not disclosing material to the Councils: it has been addressed in dealing with the procedural fairness grounds.

8. [311]

   Secondly, the Minister submitted that “there is no norm in the Act that requires disclosure of any particular level of information to the Delegate or to councils or members of the public as part of the process of considering an amalgamation proposal”. [179] The situation under the Local Government Act may thus be contrasted with the requirements of the Migration Act 1958 (Cth), which underlay cases dealing with the obligation of disclosure to applicants before the Refugee Review Tribunal, such as Applicant VEAL, discussed above. (The Migration Act, s 418(3), requires that the Secretary of the Department give to the Registrar of the Tribunal each document in the Secretary’s possession or control which is considered by the Secretary to be relevant to the review of a decision.) The Minister further submitted that if there were an obligation to provide material to the delegate, the “character of the information” to be provided was “wholly obscure.”

9. [312]

   Thirdly, the Minister submitted that this Court should infer from the available materials that the undisclosed KPMG documents would not in any event have assisted the delegate in his examination, or the Councils in opposing the amalgamations.

10. [313]

    In preparation for the hearing in this Court, the Minister provided three supplementary books of documents, running to 1,252 pages. This material had been before the Land and Environment Court and included material relevant to the engagement of KPMG and the supply of information by KPMG to the Government. It also included the letter to Mr Winn of 22 March 2016, setting out the claim for public interest immunity for documents which had been placed before Cabinet. Mr Miller’s affidavit, which supported the immunity claim and was before this Court in the Ku-ring-gai proceedings, was treated as before the Court in these proceedings. [180]

11. [314]

    At the hearing of the appeals, the Minister provided a document entitled “Findings sought by the Minister based on documents in supplementary blue books”. [181] That document provided a concise summary of the factual findings to be derived from the voluminous documents. It is convenient to set out the substance of the document (omitting references to the evidence, and to “instructions” given by the Minister and not supported by evidence).

12. [315]

    The inferences identified above were explored in more detail in submissions in reply filed by the Minister on 21 April 2017, discussed above. Similar, but briefer submissions were made with respect to the “Business Case Document” and with respect to the “Microsoft Excel Model”.

13. [316]

    The Minister took issue with Professor Dollery’s assertion that “the publicly available information from KPMG is not sufficient for me to be able to fully assess the validity of [the Proposals]”. [183] The submission noted the extensive critique which Professor Dollery had been able to proffer, with the inference that whatever else was missing need not have been supplied. The Minister also rejected the proposition that it was necessary for the Councils to be able to “replicate” the KPMG analysis in order to take issue with it. [184]

(c) consideration of constructive failure grounds

1. [317]

   It is convenient to deal first with the questions of construction raised by the first two propositions put forward by the Minister, which deal with access to information held by, or available to, the Government, and its availability to the delegates.

2. [318]

   First, as discussed above, these submissions were based on a false premise. The statutory function of examination was vested in a delegate of the Chief Executive of the Office of Local Government. There would be a serious issue about the validity of the delegation (and the resultant examination and report) if the power of the delegate were circumscribed in a way in which the power of the Departmental Chief Executive was not. In the absence of any material (or submissions) to the contrary, the delegate should be assumed to have access to all the material which was available to the Departmental Chief Executive whose function the delegate was exercising, and to have the powers of the Chief Executive to obtain information needed for the examination. As the statutory exercise was entirely internal within the one government agency, no question of disclosure arose, as it may do with respect to reviews undertaken by independent tribunals. Hence the comparison with the express provision for transfer of material in the Migration Act was inapt.

3. [319]

   Nor was it appropriate to consider the “power” of the delegate to obtain documents held by the Government. The only potentially relevant issue as to power arose from the claim of the Minister that there was an issue as to the Microsoft Excel workbook, which it was said was in the control of KPMG. As noted above, the Minister’s acceptance of the amended grounds of review was qualified, based on a concern that the Councils sought to assert that the Government “had a contractual right to be provided with the KPMG Excel model and to make it available to third parties (such as the Councils or members of the public).” [185] In the course of submissions, the Court was taken to various passages in the evidence where government officers referred to the Microsoft Excel Model as “proprietary”, or as involving KPMG intellectual property. The Councils relied on provisions in the contractual arrangements between KPMG and the Government to show that intellectual property in at least some of the material provided by KPMG was to vest in the Government. However, the Councils’ submissions did not depend upon establishing a “contractual right” in the Government to obtain the Microsoft Excel workbook created by KPMG and apparently located on the KPMG computer system. As explained in dealing with the procedural fairness ground, it was not demonstrated that the basis of the KPMG modelling and the data used were not available to the Minister.

4. [320]

   Secondly, identification of the information which should have been provided to the delegate was not, as a matter of principle, “wholly obscure”. It was identified by reference to (a) the terms of the amalgamation set out in the proposal; (b) the case for amalgamation set out in the merger proposal document, and (c) the scope of the statutory function of “examination and report” identified in s 218F(1) of the Act.

5. [321]

   As a matter of fact, the scope of the disclosure sought, as the submissions noted, was limited to (a) the Methodology Paper; (b) the Business Case document, (c) the long form Local Government Reform: Merger Impacts and Analysis Report, and (d) the Microsoft Excel workbook. Although there was a degree of vacillation in the Minister’s submissions, she appears to have accepted that these documents reflected (or contained) the “independent analysis and modelling by KPMG” referred to in the merger proposal document, and that they explained the relevant assumptions (which were said to be disclosed), on the basis of which the figures for net savings were calculated.

6. [322]

   Thirdly, the Minister challenged the “factual assumption” which was described, in terms reflecting the separate ground of procedural unfairness, as being that the documents were needed by the parties in order for them to make “informed submissions” to the delegate. That analysis was undertaken by reference to each of the sources of information identified above, but without the sources of information (other than the Methodology Paper) being available to the parties or the Court.

7. [323]

   Before considering that exercise, it is necessary to refer to a separate submission as to why the documents were not available to the Court. The Minister noted that in Ku-ring-gai Council the Court had rejected a claim for public interest immunity with respect to the documents, but submitted that that circumstance was irrelevant in the present case as neither Council had sought to challenge the refusal of the Government to produce the documents, as a preliminary step to seeking their production and submission to the Court.

8. [324]

   The correctness of that submission turned primarily on two factors, namely (i) that the officer responsible for examining and reporting on the proposal was the Chief Executive of the Office of Local Government, and (ii) that the proposal was made by the Minister for Local Government and was not a proposal made by a third party (such as a council) to the Minister. In circumstances where parties to the inquiry conducted by the delegate had sought material which was available to the Minister in formulating the proposal, the first question was not whether the parties should have had access to the material, but whether the Chief Executive could and should have obtained and considered the material in carrying out his or her examination. Having ascertained that the delegate did not have access to the material, the Councils were entitled to rely upon that fact as a basis for challenging the exercise of the function.

9. [325]

   So far as the procedural element is concerned, the Councils had two responses. They pointed out that the Minister had raised in the Court below the absence of a challenge to the claim of public interest immunity on behalf of the present Councils. [186] The primary judge suggested that the matter could be resolved by agreement on the basis that if a notice for production were to be issued, “the response of the Crown would be as it has been in other proceedings, and I think I would be prepared to record that my ruling would be the same as in the other proceedings, if that tripartite acknowledgment on the transcript is sufficient for the purposes.” [187] Counsel for both the Minister and the Councils expressed tentative agreement with that approach and the matter was not, as it appears, revisited.

10. [326]

    The Councils acknowledged that they did not expressly challenge the ruling on public interest immunity in the appeal. Rather, they submitted that the available material was sufficient to allow the Court to draw the necessary inferences as to the relevance, materiality and significance of the undisclosed material. As explained in relation to procedural fairness, they were able to articulate their submissions in this Court more fully by reference to the Methodology Paper which had been released. Indeed, the finding of this Court in Ku-ring-gai Council rejecting the validity of the claim for public interest immunity did not result in the production of the documents, but only the rejection of a particular ground relied upon to justify non-disclosure. Accordingly the Councils were not to be burdened by an adverse inference from the fact that they had not produced the undisclosed documents, in circumstances where they were not their documents, were not documents which were available to them, and were documents which the Minister had, to that point in time, refused to provide.

11. [327]

    Fourthly, there is a practical difficulty with the exercise sought to be undertaken by the Minister to demonstrate that the documents were not significant. That exercise required this Court to determine the materiality of documents which not only were not before it, but were not before the delegate. That in turn would require an assessment of whether the delegate would or might have considered that material to be persuasive in relation to any particular consideration and, if that possibility could not be dismissed, to what particular degree. Assumptions would need to be made about how the Councils might have been able to deploy the information obtained.

12. [328]

    The usual case in which such an exercise is sought is one where the material is available to the decision-maker, but not the affected party, who claims to have been denied procedural fairness. In principle such an exercise is eschewed in relation to a claim of procedural unfairness, [188] because it exceeds the proper limits of judicial review. That constraint applies equally with respect to this ground, once it is established that the material is probably relevant. Its relevance, as opposed to the degree of materiality, was not disputed. Only if the Court can be satisfied that access to the material could not have led the delegate to form a different view as to the financial benefits claimed by the Government as the anticipated result of the mergers, so that requiring the delegate to reconsider would be a futility, would the factual assessment succeed. Such an assessment can have very limited scope where the material to be assessed is not available.

13. [329]

    It is apparent that the submissions, based on the publicly available material, engage in a set of assertions and counter assertions as to the significance of what was not disclosed, and involve an evaluative exercise which could not readily be undertaken by a court without expert assistance. More importantly, resolution of the differing submissions lay outside the proper role of a court exercising its judicial review function. The resolution of the dispute should have been undertaken by the delegate.

14. [330]

    It would have been entirely appropriate for the delegate to address this issue himself. Had he done so, he might have taken one of a number of positions described above, [189] including, possibly, deciding that he was unable to examine the figures proposed by the Minister and therefore disregarded them in assessing the financial advantages and disadvantages. For that approach to have been available, it was necessary for the Councils to establish that the issue had been raised before the delegate. It may be inferred from the evidence that: (a) the delegate knew that not only the Councils, but also Professor Dollery, as an expert, believed it was necessary to have access to the undisclosed KPMG documents in order to examine the assumptions and determine the validity of the figures contained in the merger proposal document; (b) there were such undisclosed KPMG documents; (c) he did not have them, and (d) he had not sought to obtain them. Whether the delegate knew that the Councils had sought the documents and had been refused access is not entirely clear, but it is not presently relevant.

15. [331]

    Thus, the Councils’ position was clearly outlined in submissions to the delegate, but was not addressed. The Councils’ complaints were not patently false or irrelevant. They were supported by credible material, including the reports of Professor Dollery. They were also central to what appears to have been the key issue in the conclusions reached by the delegate, all other factors being, in his assessment, essentially neutral.

16. [332]

    Had there been no issue raised as to the adequacy or accuracy of the anticipated financial benefits flowing from the proposed amalgamation of the three local government areas, no doubt the delegate could have simply accepted the KPMG figures, as the opinions of qualified experts, as the Minister submitted. But there was a challenge to the ability of the Councils and the delegate to examine the proffered benefits, without the underlying analysis. This challenge was not acknowledged and addressed, and then accepted or dismissed: it was sidestepped. The fact that the delegate accepted the figures as “reasonable” demonstrated reliance upon them. The delegate failed to examine the asserted financial advantages, being unable to do so in the absence of the key underlying documents. He therefore failed to carry out the requisite examination in accordance with s 263(3)(a) of the Act.

17. [333]

    This ground of appeal should be upheld.

(d) North Sydney – ground 8

1. [334]

   In part, North Sydney’s ground 8 complained of a failure on the part of the delegate to have regard to the mandatory factors set out in s 263(3)(a), a matter which has been dealt with in the preceding discussion. The second part of ground 8 alleged a failure to have regard to the mandatory factors set out in par (e1) of s 263(3). That factor was the impact of the proposal on the ability of the councils concerned to provide adequate, equitable and appropriate services and facilities.

2. [335]

   This was a factor which both the delegate and the Boundaries Commission dealt with in their respective reports. The genesis of the challenge appears to have been the Commission’s view that the delegate had not adequately considered the relevant issues. [190] There were certainly submissions put to the delegate on this topic, which were expressly addressed. The fact that the Boundaries Commission considered that the matter was not adequately addressed by the delegate should be understood as a reflection on the merit of the delegate’s approach, rather than a conclusion that the consideration was legally inadequate. It is apparent that the delegate gave weight to the fact that, “pursuant to Government policy, the service level trajectory is fixed for four years, from the time of any merger onwards.” [191] Thereafter, he accepted that service levels would depend upon the conduct of the new council. His acceptance of that situation may have been contestable, but it was not irrational or manifestly unreasonable.

3. [336]

   The primary judge was correct to reject the challenge on the basis that the consideration was real and not legally inadequate. Ground 8 in North Sydney’s appeal should be rejected.

(a) dispositive orders

1. [337]

   The relief which would normally be granted in the case of the exercise of a function which has been undertaken, but in a manner affected by reviewable error, would be to set aside the exercise of the function. The result will be that the function remains unexercised. Where the function involves the making of a decision, the usual form of relief will be to set aside the invalid decision, so as to clear the record, thus allowing for the process to be undertaken afresh. An invalid report prepared by the delegate can have no further effect and may be set aside. [192]

2. [338]

   The next issue is to identify any effect which may have already taken place. In this case, there have been two subsequent events, each of which predates the finding of this Court on review. The first involved the review undertaken by the Boundaries Commission and the furnishing of comments to the Minister by the Commission. On the basis that that function can only be exercised by reference to a valid report of the Chief Executive (or the Chief Executive’s delegate), that function has also miscarried in the present case. These steps have an important legal consequence in that the power of the Minister to recommend to the Governor that the proposal be implemented is conditioned upon receipt of the report of the Chief Executive and the comments of the Boundaries Commission on that report. [193] Accordingly, and subject to the next consideration, the review and comments of the Boundaries Commission should also be set aside.

3. [339]

   The second event which has occurred since the delivery of the report and the decision of the primary judge has been the reconsideration by the same delegate of the same proposal. As noted above, that occurred because the primary judge had found that the delegate had erred in failing to address the factors set out in s 263(3)(e5), namely “the need to ensure that the opinions of each of the diverse communities of the resulting area … are effectively represented”. The delegate completed his further review in September 2016. On 30 November 2016 North Sydney Council, which appeared not to have a copy of the revised report at that time, commenced fresh proceedings in the Land and Environment Court, seeking a preliminary injunction against the Minister. According to the Minister’s response, filed in the Land and Environment Court on 6 March 2017, the delegate provided the revised report to the Minister and to the Boundaries Commission on 30 September 2016 and, on 5 October 2016, the Boundaries Commission concluded its review and provided its comments to the Minister.

4. [340]

   The further report was put before this Court by the Council on the limited basis, accepted by the Minister, that the Court might be informed as to the subsequent steps which had eventuated. The Minister did not accept that the Court should consider the validity of the revised report. That constraint should be accepted. The present purpose is to identify whether the revision extended to the consideration of the factor in s 263(3)(a), which has been the subject of the foregoing consideration. A perusal of the content of the report reveals that this section was unchanged. The existence of the revised report provides no basis for refusing relief because the error identified in these reasons had been addressed in a subsequent review; it had not.

5. [341]

   There remains a question as to the form of the relief. On one view, the revised report (like an amended statement of claim) added to, but did not supersede, the earlier report, which had not been set aside. The alternative view is that the order made by the primary judge (declaring the report to be “not a valid report in satisfaction of the requirements of s 218F(6)(a) of the Act”) had the same effect as a quashing order. If it did, there is no purpose in making a further order with respect to the first report. On the other hand, even if it did not, it appears to have been superseded by the “revised report” made on 30 September 2016.

6. [342]

   The appropriate order is to set aside the revised report of 30 September 2016 and the review and comments of the Boundaries Commission of 5 October 2016. That order is made, not on the basis of any flaw in the further process (which has not been considered by the Court) but on the basis that the revised report suffered the same flaw with respect to the treatment of the factor in s 263(3)(a) as did the original report, but is now the operative report.

7. [343]

   The Councils also seek an order setting aside the orders made by the primary judge. There is, however, no challenge to the terms of the declaration made by the primary judge, except in so far as it is thought to be too limited in its scope. However, that order was made in relation to the first report and has now had the consequence that the first report has been superseded by the revised report. There is no purpose in setting aside the dispositive order made by the primary judge.

(b) costs

1. [344]

   There is a separate question as to the effect of the costs order made by the primary judge. That order in the North Sydney proceedings was in the following terms:

2. [345]

   That was not itself an order with respect to costs, but merely a statement of intention. No later order is disclosed on the records of the Land and Environment Court. In those circumstances, it should be assumed that no order was made.

3. [346]

   The effect of the proposed order was to require that the successful Council obtain its costs from all the respondents other than the two Councils who were joined as the fifth and sixth respondents. The fifth respondent was Willoughby City Council which filed a submitting appearance. The sixth respondent, Mosman Council, was the active challenger in its own proceedings with respect to the proposal and may be seen to be in the same interest as the appellant Council. It is entirely appropriate that no order for costs be made against either of the respondent Councils.

4. [347]

   The record available to this Court does not reveal whether the Minister, the Chief Executive, the delegate and the Boundaries Commission were all active respondents. The costs order made suggests that they were. Nobody having suggested to the contrary, it is appropriate to make a costs order with respect to the proceedings in the Land and Environment Court in the terms proposed by the primary judge with respect to both the Mosman and North Sydney appeals.

5. [348]

   In this Court, only the Minister was an active respondent and the Minister should therefore pay the costs of the appellant Councils.

(c) direction – further examination

1. [349]

   Should this Court direct that any further examination of the Minister’s proposal not be carried out by the delegate who was involved in the original examination and report and in preparing the revised report?

2. [350]

   Mosman Council made submissions that the delegate should be disqualified on the basis that he had been an active respondent in the Land and Environment Court and had failed to limit his role to that envisaged by The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman. [194]

3. [351]

   The Minister resisted such a direction on two bases. One was that, although jointly represented with the Minister and the Chief Executive in the proceedings in the Land and Environment Court, it could only be said in a formal sense that the delegate was an “active participant” in those proceedings. Secondly, active participation did not of itself give rise to a reasonable apprehension of bias, were the matter to be remitted to the same delegate for further inquiry.

4. [352]

   There are a range of issues which arise in determining whether an order should be made in the terms sought. First, a reasonable apprehension of bias may arise in circumstances where the decision-maker has already made a finding as to contested facts, which will need to be revisited. At least in some circumstances, it would be reasonable for the Court to conclude that an independent observer might reasonably fear that the decision-maker might not make an objective and impartial decision on the merits, if asked to repeat the exercise he or she has already undertaken. [195] That inference is arguably more readily drawn in a case where the decision-maker is not a judicial officer than in one in which he or she is a judicial officer. On the other hand, a senior and experienced bureaucrat may be expected by an independent observer to have a similar level of detachment. Furthermore, where the relevant assessment is to be made based on objective factors, such as assumptions made by accountants and management consultants, re-examination of further material may more readily be expected to be impartial than the assessment of the truth or reliability of a witness.

5. [353]

   Secondly, a concern as to partiality may be accentuated in cases where the party has been actively involved in defending his or her own earlier decision. That may be seen to demonstrate an unwillingness to stand aside and let the dispute run its course and to enhance any natural resistance to reaching a fresh conclusion without regard to what had been decided before. If it could be said that the independent bystander would know that the active involvement in the proceedings had been merely formal, that concern might be mitigated. However, all that the independent bystander would know is that counsel for the Minister, the Chief Executive and the delegate all appeared in the same interest and actively resisted the challenge to the decision. The bystander might be expected to understand that a delegate who had been genuinely detached from the proceedings would have filed a submitting appearance. This is a serious concern in circumstances where, unlike the tribunal in Hardiman, the delegate has no cause to be actively involved in the litigation and no reason not to submit.

6. [354]

   Thirdly, any such concern must be further enhanced in circumstances where the delegate has revisited his original report after it was declared invalid and added to it. He has thus reaffirmed his earlier consideration by expressly adopting the same reasoning as that which has now been found to be inadequate.

7. [355]

   Fourthly, there is a countervailing consideration: the Court may be disinclined to impose a constraint on a remitter, the effect of which will be to remove an element of discretion from the officer of any court, tribunal or government agency whose function it is to determine the identity of the relevant decision-maker. The intervention of the court exercising supervisory jurisdiction may be seen as an unwarranted interference with a function conferred by statute on some other person and which that person has not yet had an opportunity to exercise. In the present case, that concern is diminished by knowledge that the Chief Executive has already thought it appropriate on one occasion to remit the matter to the same delegate whose decision was held to be invalid. It is also diminished by the fact that the power of delegation appears to be quite broad and exercisable in favour of a person not within the Minister’s department, or, indeed, in public sector employment at all. It was not suggested that there were any practical or legal limits on the range of persons to whom the function could be delegated.

8. [356]

   Fifthly, the Court may be reluctant to intervene in a way which would foreclose the opportunity of the individual to determine his or her own recusal. That consideration is of limited weight in the present case, as it appears from the material filed with respect to the revised report that there may have been no opportunity, or no adequate opportunity, afforded to the Councils to make a recusal application on the last occasion.

9. [357]

   Finally, the fact that the delegate acted expeditiously to conclude the revised report without seeing the need to reconsider the balancing exercise which was presumably required with respect to factors tending in favour of and against the proposal may limit the confidence the objective bystander would have in the third attempt by the delegate to complete the process lawfully.

10. [358]

    Weighing all these considerations, in the particular circumstances of this case, the Court should direct that any reconsideration of the proposal be undertaken by a person other than the respondent delegate.

(d) orders

1. [359]

   The Court should make the following orders:

   1. (1)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed on 20 April 2017 other than proposed additional orders 5 and 6.

   2. (2)

      Allow the appeal with respect to the judgment given in the Land and Environment Court on 20 September 2016 in matter No 155301 of 2016.

   3. (3)

      Make the following orders:

   4. (4)

      Order that the respondent Minister pay the appellant’s costs in this Court.

   5. (5)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed on 20 April 2017, other than proposed additional orders 5 and 6.

   6. (6)

      Allow the appeal with respect to the judgment given in the Land and Environment Court on 20 September 2016 in matter No 158919 of 2016.

   7. (7)

      Make the following orders:

   8. (8)

      Order that the respondent Minister pay the appellant’s costs in this Court.

(1) Factual background

1. [360]

   The issues raised by Strathfield Council mirror those raised in the Mosman and North Sydney appeals, with respect to the undisclosed KPMG documents. Strathfield raised grounds as to both procedural unfairness and constructive failure on the part of the delegate to exercise his functions by considering the factor identified in s 263(3)(a) of the Local Government Act.

2. [361]

   The proposal to merge Strathfield, Burwood and Canada Bay local government areas was amongst the original proposals made on 6 January 2016. Examination of and reporting on the proposal was delegated by the Departmental Chief Executive to Mr Richard Colley. Mr Colley completed his report at an undisclosed date in March 2016. [196] The Boundaries Commission undertook a review and prepared comments, dated April 2016, which were apparently published on the “Stronger Councils” website on 12 May 2016. [197]

3. [362]

   The submissions by the parties largely relied upon the generic submissions in other proceedings. It is, however, necessary to understand the particular manner in which the issues were raised and addressed.

(2) Merger proposal document

1. [363]

   As with other merger proposal documents, the document with respect to Strathfield, Burwood and Canada Bay set out figures generated by KPMG as to net savings to council operations, which were estimated to be $60 million over 20 years, with a projected 140% increase in annual “operating results” achieved within 10 years. It was anticipated that the benefits would exceed the merger costs after three years. From 2020, the savings were estimated to be in the order of $5 million per year. As with other proposals, a backlog of infrastructure was identified (in this case $182 million) which was expected to be reduced by the application of the net financial savings resulting from the amalgamations.

(3) Submissions to the delegate

1. [364]

   In early March 2016, Strathfield Council made a submission to the delegate which opposed the merger proposal. It referred to the IPART report of June 2015: [198]

2. [365]

   With respect to the financial case for amalgamation, the Council cast doubt on the KPMG Technical Paper which set out “assumptions used for financial modelling” and was said to contain significant errors. The submission continued: [199]

3. [366]

   The submission dealt specifically with financial advantages and disadvantages, being the factor set out in s 263(3)(a), in the following terms: [200]

4. [367]

   The submission continued in similar vein, spelling out some of the inaccuracies and inadequacies in the assumptions on which the KPMG figures were based. The footnotes stated that some of the comments in the submission were drawn from Professor Dollery’s findings and cited a report prepared by Morrison & Low, “Fit for the Future – Shared Modelling Report for Communities of the Inner West, 2015”.

5. [368]

   Some of these criticisms were echoed in the comments of community members in the public meeting held at the Canada Bay Club on 4 February 2016. For example, “Speaker 5” [201] stated:

6. [369]

   The issues were well known to officers in the Department of Premier and Cabinet, which circulated an email to the delegates on 9 February 2016 including the following statement:

7. [370]

   A group known as Burwood Community Voice also made a submission to the delegate which addressed the key factors for him to consider. It too noted that there had been no “rigorous business case undertaken to support the supposed financial advantages of amalgamation” and that there were “significant financial risks to residents and ratepayers”. [202] In relation to the first key factor, namely financial advantages and disadvantages, the submission referred to a report by consultant Morrison Low supporting its concern and continued: [203]

8. [371]

   It appears not to have been the practice of delegates to provide copies of their reports to interested parties. On 21 April 2016, the solicitors for the Council wrote to the Minister, the delegate and the Boundaries Commission, noting that the Council had received “informal advice that you may have already provided your report … to the Minister”. [204] In the letter to the delegate, the solicitors noted that the merger proposal document stated that the proposal “[i]s supported by independent analysis and modelling by KPMG” and that “financial modelling assumptions” had been set out in a document entitled “Local Government Merger Proposals Technical Paper”, dated 19 January 2016. The letter noted that the Technical Paper “merely sets out a series of modelling assumptions.” [205] The letter continued:

9. [372]

   The letter requested a copy of the report (if completed) and an undertaking, from the Minister, that no steps would be taken to recommend the implementation of the proposal until the Council “has received a complete copy of the KPMG report and any associated detailed modelling and analysis and has been afforded a reasonable opportunity to make representations in respect of its content”. [206] Similar requests were made in the other letters of the same date. At least as of 4 May 2016 (after the Boundaries Commission’s comments had been received by the Minister) no response had been received to those letters. [207]

(4) Delegate’s report

1. [373]

   In reaching the conclusion that the financial factor “supports the proposal” the delegate set out, over two pages, the material contained in the merger proposal document. The report then concluded: [208]

(5) Boundaries Commission review and comments

1. [374]

   The Boundaries Commission provided its comments to the Minister on 22 April 2016. It concluded that the delegate had failed adequately to consider the factors listed under s 263(3)(a) (finance), (b) (communities of interest) and (e5) (representation of diverse communities). [209]

(6) Pleadings in Land and Environment Court

1. [375]

   On 5 May 2016 Strathfield Council filed a summons in the Land and Environment Court, at a stage when it was unaware of the comments of the Boundaries Commission. It included in its challenge to the validity of the delegate’s report a complaint that it had been denied procedural fairness by the denial of an opportunity for it to comment on the “Full KPMG Report”. Under a ground which claimed that the Council had been “denied procedural fairness by the Delegate” (ground 3) the Council included particular (h) which was in the following terms:

2. [376]

   Ground 4 complained that the Minister was proposing to deny procedural fairness to the Council “by failing to disclose the Full KPMG Report to Council so that Council has a reasonable opportunity to make submissions about it before the Minister decides whether to recommend that the Proposal be implemented”. The particulars noted that “[t]he Minister took into account the Full KPMG Report in formulating the Proposal, and in presenting it for endorsement to the NSW Cabinet.” (The term “full KPMG report” was a term used to refer to “the independent analysis and modelling by KPMG referred to in the Proposal”.)

3. [377]

   By the time of the hearing before the primary judge, the Strathfield summons had been amended so as to include the following ground:

(7) Reasoning of primary judge

1. [378]

   The primary judge accepted that the delegate had failed to give proper consideration to the matters set out in pars (b) and (e5) of s 263(3). [210] (The first failure was conceded by the Minister.) He therefore concluded that the two identified failures had “vitiated his report.” [211] He then found that the appropriate relief was “the making of a declaration of a limited nature confirming that the Delegate has failed to provide a report that complies with the mandated statutory requirements.” [212] The judge said that the effect of such a declaration would be to “[leave] the Delegate in the position where he has not fulfilled the task delegated to him but he has not been discharged from so doing.” [213]

2. [379]

   With respect to the alleged failure to deal with the financial effects of the proposed amalgamation, the primary judge noted the comment of the Boundaries Commission, but also said that there was “no analysis … to explain why that view was reached.” [214] The judge considered that the delegate had considered the factor and that “a complaint only has validity if no regard has been had by the Delegate to … submissions, not the issue of whether the Delegate gave sufficient weight to the material advanced on behalf of the Council and others who objected to the proposed amalgamation on financial grounds.” [215] The judge was satisfied that some consideration had been given to the submissions because the delegate had stated at the beginning of his brief consideration: [216]

3. [380]

   The second factor upon which the judge relied as demonstrating consideration of the submissions was the inclusion in the report of a table providing a comparison of the operating results of each council for 2013-14 and 2014-15. The delegate had noted that it was only the earlier year which had been included in the merger proposal document. [217] On the comparative table, all operating results were positive, although that for Burwood Council was only $3.2 million, as compared with $5 million for the previous year. The other comparative figures, for Canada Bay Council ($26.2 million, compared with $18.8 million in the earlier year) and for Strathfield Council ($10.3 million compared with $2.3 million) demonstrated improvement. The delegate then stated:

4. [381]

   Although the Minister had submitted to the primary judge that the delegate “was not required to recite all aspects of the Council’s submission in his report” and that he was “not required to canvass each item of evidence relevant to an issue that the decision maker treated as material”, [218] the delegate had in fact addressed none of the submissions and referred to none of the contentions raised by the councils in opposition to the amalgamation.

(8) Grounds of appeal

1. [382]

   Putting to one side challenges to the giving of notice and the procedures followed in carrying out the inquiry, the relevant ground of appeal, as originally formulated, alleged procedural unfairness by denying the Council access to, and an opportunity to make submissions on, “the independent analysis and modelling by KPMG” (ground 5). There was also a complaint in relation to the relief granted, namely, the failure to declare that the whole process of examination and report had miscarried and that the delegate should be precluded from taking any further step because of his active role in defending his own decision (grounds 6 and 8).

2. [383]

   The Council made a further amendment, in keeping with the amendments by other appellants, after the hearing of the appeal, to allege error in failing to find that “in the absence of the [KPMG financial assessment documents] … the delegate constructively failed to fulfil the statutory function of examining the Minister’s proposal” (ground 5A). In fact this ground followed the tenor of ground 4 in the amended summons in the court below, [219] but adding the particular reference to the undisclosed KPMG documents.

(9) Determination of appeal

1. [384]

   The submissions for both the Council and the Minister addressed this appeal largely by reference to common issues. As a result, little attention was paid to the specific deficiencies in the report regarding the Strathfield Council amalgamation, with respect to the consideration of financial advantages and disadvantages. Had the detail been addressed, there would have been much to be said for the view that the original ground of challenge, rejected by the primary judge, should have been upheld. That issue, however, is not before this Court.

2. [385]

   Rather, the present issue (which also requires consideration of the particular reasoning of the delegate) concerns the failure of the delegate to undertake an examination of the financial advantages and disadvantages set out in the merger proposal document. For that purpose, it was necessary for the delegate to engage with the submissions noted above, asserting that this exercise could not be undertaken without access to the undisclosed KPMG documents. That failure to engage involved a constructive failure to carry out the function of examination and report in relation to what was, arguably, the most important of the factors favouring the amalgamation.

3. [386]

   The only sense in which the delegate revealed any consideration of matters not contained in the merger proposal document was, as the primary judge noted, the updating of figures for council operating results, for one further year. However, on one view, those results tended to confirm the submissions of Strathfield Council that its residents and ratepayers would be significantly disadvantaged by the amalgamation, because Strathfield Council was more efficient and effective in its financial management than the other councils, and particularly Burwood. If the delegate had in fact taken the submissions of the Council into account, he would have noted that fact.

4. [387]

   By a process of reasoning which was not self-evident, the delegate took the improved operating results as a factor supporting amalgamation, rather than the contrary. In any event, the delegate’s reasoning with respect to the financial advantages and disadvantages rested squarely on the KPMG figures provided in the merger proposal document. If, for the reasons outlined in the Mosman and North Sydney appeals, those figures could not be the subject of a proper examination without access to the undisclosed KPMG documents, the exercise has manifestly failed in relation to this factor in this proposal.

5. [388]

   It follows that ground 5A should be upheld and the delegate’s report set aside.

(10) Relief

1. [389]

   With respect to relief, the same considerations as those outlined in relation to the Mosman and North Sydney appeals apply and should be reflected in the orders made by this Court.

2. [390]

   The orders in the Land and Environment Court in this matter included a proposed order that the Council’s costs be paid by the first four respondents, namely the Minister, the delegate, the Chief Executive and the Boundaries Commission. According to an affidavit filed by the Council’s solicitor, Ms Kirston Gerathy, dated 3 April 2017, the Council had written to the delegate on 22 September 2016, that is two days after judgment was delivered in the Land and Environment Court, and before the orders were entered, seeking an assurance that the whole of the process would be repeated and that the Council would have an opportunity to provide a written submission. The Council also sought a further public meeting, in order for others to update their submissions or engage with the fresh process.

3. [391]

   On 26 September 2016, Mr McDonnell, then Assistant Crown Solicitor, responded on behalf of the delegate noting that he “will be undertaking the process of examination and report in light of the Court’s reasons for judgment”. The letter further stated that “the delegate does not propose to provide the assurance sought by [the Council]”. It would have been inferred from the letter that no opportunity would be given to make further submissions, nor would the process of examination and report be undertaken afresh.

4. [392]

   Ms Gerathy asserted in her affidavit that a revised report was furnished to the Boundaries Commission on 5 October 2016.

5. [393]

   The failure of the delegate to engage with the Council as to the appropriate procedure to be followed, together with the completion of the reconsideration of an invalid report within 14 days, might well lead the hypothetical bystander to be concerned that, if asked to undertake the task for a third time, the delegate might not be able to approach the exercise willing to consider further submissions and material impartially. It follows that an order should be made in this matter also, directing that another officer or agency undertake the function of examining and reporting on the proposal.

6. [394]

   The orders proposed in the appeal brought by Strathfield Municipal Council are:

   1. (1)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed on 19 April 2017.

   2. (2)

      Allow the appeal with respect to the judgment given in the Land and Environment Court on 20 September 2016 in matter No 158221 of 2016.

   3. (3)

      Make the following orders:

   4. (4)

      Order that the respondent Minister pay the appellant’s costs in this Court.

7. [395]

   MACFARLAN JA: I have had the advantage of reading Basten JA’s judgment in draft. I gratefully adopt his Honour’s description of the facts and circumstances relevant to these appeals. Using his Honour’s nomenclature, I state below my conclusions concerning the KPMG issues. The first of these issues is whether, by reason of them not forming their own views about the financial advantages or disadvantages of the amalgamation proposals referred to them, the delegates constructively failed to conduct an “examination” of the proposals in accordance with s 263(1) of the Local Government Act. The second is whether the Councils were denied procedural fairness by reason of their inability to access material relevant to the KPMG analysis upon which the amalgamation proposals were founded.

8. [396]

   I agree with Basten JA’s judgment in respect of the remaining grounds of appeal and with his Honour’s proposed orders in relation to the appeals by Hunter’s Hill, Lane Cove and Strathfield Councils. In relation to the appeals by Mosman and North Sydney Councils, I propose, for the reasons given below and Basten JA’s reasons concerning the other grounds of appeal, that the following orders be made in each appeal:

   1. (1)

      Grant the appellant leave to file and rely upon the amended notice of appeal in fact filed in the Registry.

   2. (2)

      Dismiss the appeal.

   3. (3)

      Order the appellant to pay the respondents’ costs of the appeal.

Constructive failure to examine

1. [397]

   I agree with Basten JA (see [117]-[122] above) that the delegate did not constructively fail to examine this proposal. For the reasons that his Honour gives, it is apparent that the Delegate did not simply accept the KPMG figures as “a given”. Unlike the delegate in Ku-ring-gai Council v West [2017] NSWCA 54, the delegate in this case formed his own view about the financial considerations referable to the proposed amalgamation. His report indicates that he did not adopt the KPMG analysis uncritically and that he gave “proper, genuine and realistic” consideration to the financial advantages or disadvantages of the Proposal (compare Ku-ring-gai at [125]), in particular by having regard to a report of Morrison Low.

2. [398]

   This having occurred, no justifiable complaint can be made that the delegate was not able to, and did not, examine material explaining the manner in which the KPMG analysis had been arrived at. That analysis came from a reputable firm with acknowledged expertise in financial matters. As a result, the delegate was entitled to take the analysis into account whether or not he examined further material explaining it, so long, as I have held, that he did not accept it uncritically.

Procedural fairness – KPMG material

1. [399]

   My reasoning concerning the constructive failure to examine argument leads to the further conclusion that the Councils were not denied procedural fairness by reason of their inability to access material explaining the KPMG analysis. If, as was the case in Ku-ring-gai, the delegate had effectively placed sole reliance on the KPMG analysis and accepted it uncritically, it would have been unfair for the opponents of the Proposal not to have been able to go behind KPMG’s conclusions to examine, and if appropriate, challenge the manner in which they have been arrived at. The position is different where the delegate, consistently with the statute, turned his mind to the financial advantages or disadvantages of the proposal and formed his own view, taking into account the KPMG analysis as but one of a number of relevant matters. As I have said above, it was permissible for him to do this without examining material explaining KPMG’s analysis. Likewise, it was not unfair to the Councils for them not to be able to access such explanatory material as they dealt with a delegate who gave genuine consideration to the relevant financial issues. In that situation, it was open to the Councils, as Hunters Hill Council did, to put competing financial views before the delegate to be considered along with the KPMG analysis.

Conclusion

1. [400]

   For the reasons Basten JA gives, the Hunters Hill Council appeal should be upheld on the contiguity ground (Ground 6). However, for the reasons I have given above, the Council is however not entitled to succeed on the KPMG grounds (Grounds 5 and 5A).

Constructive failure to examine

1. [401]

   The delegate’s report of 19 April 2016 concerning this proposal does not in my view evidence a constructive failure of the delegate to conduct an “examination” of its financial aspects.

2. [402]

   Under the heading “Financial factors”, the delegate referred to s 263(3)(a) of the Local Government Act and to the Councils’ submissions on financial matters. Under the sub-heading “Financial Analysis” he referred to reports of the NSW Treasury Corporation (“TCorp”) and of the Independent Pricing and Regulatory Tribunal (“IPART”), and to KPMG’s analysis. The delegate then referred to a funding package announced by the NSW Government and to Council submissions critical of KPMG’s modelling. He continued:

3. [403]

   Appendix D was a four page “Review of Commentary on KPMG Modelling” under headings including “Service Equalisation”, “Financial Assistance Grants”, “Savings Assumptions”, “Efficiency Savings”, “Elected Representation”, “Costs of Councillors”, “Staffing Costs”, “Redundancy Costs”, “Information and Communication Technology (ICT) Transfer Costs” and “Discount Rate”.

4. [404]

   In the body of the report, the delegate then dealt with “Rates” and “Debt Levels” before reaching the conclusion that the financial advantages of the proposal outweighed its disadvantages.

5. [405]

   These portions of the report demonstrate that the delegate undertook a proper examination of the financial aspects of the proposal.

6. [406]

   Moreover, for the reasons that I have given in relation to the Hunters Hill, Lane Cove, City of Ryde proposal (“the Hunters Hill Proposal”), the delegate’s report in relation to this proposal was not vitiated by the absence of any examination by him of material further to the publicly available documents which he indicated that he did consider.

Procedural fairness – KPMG material

1. [407]

   Again for the reasons I have given in relation to the Hunters Hill Proposal, the Councils’ complaint that they were denied procedural fairness because they were unable to access further material explanatory of the KPMG analysis must be rejected.

2. [408]

   My reasoning in relation to this issue, and that of constructive failure to examine, is elaborated below where I deal with the Strathfield and other councils amalgamation proposal.

Conclusion

1. [409]

   For the reasons I have given, none of the grounds of appeal with which I have dealt above should be upheld. Further, I have earlier expressed my agreement with Basten JA that the remaining grounds should be rejected.

2. [410]

   As a result, the appeals of Mosman Council and North Sydney Council should be dismissed with costs.

Constructive failure to examine

1. [411]

   In my view, the delegate’s report of March 2016 in relation to this proposal indicates that he constructively failed to conduct an examination of the financial advantages or disadvantages of the proposal in accordance with s 263 of the Local Government Act.

2. [412]

   In his report under the heading “Financial factors” and after referring to s 263(3)(a), the delegate said:

3. [413]

   In the following six paragraphs, the delegate referred to information, contained in the Minister’s Proposal Document, concerning KPMG’s analysis. The only other matter he referred to before reaching his conclusion was a comparison of the 2014-5 operating results for the three affected Councils with their results for 2013-4.

4. [414]

   This comparison showed an improvement in the former results compared to the latter. The delegate said that this demonstrated “that the new council, if approved, can achieve an operating surplus (including capital grants). This supports the conclusion that the financial advantages arising from the proposal are realistic”. However this comparison did not, as a matter of logic, shed any light on the financial advantages or disadvantages of the amalgamation proposal. Stating that the individual Councils improved their operating results from one year to another did not indicate whether they would be likely to achieve a greater or lesser improvement from one year to another if amalgamated.

5. [415]

   The delegate’s final paragraph concerning “Financial factors” made it clear that it was only this (what I consider to be illusory) consideration and the information contained in the Proposal Document that led him to his conclusion that “on balance, the proposal would have greater advantages than disadvantages for residents and ratepayers”.

6. [416]

   In these circumstances it is apparent that the delegate simply adopted uncritically what was said about the KPMG analysis in the Proposal Document and did not conduct any proper, genuine or realistic “examination” as s 263 required him to do. Even accepting that the “matter” (see s 263) that the delegate was required to “examine” was the proposal for amalgamation rather than the Proposal Document itself, it is clear that the foundation for the proposal, as presented by the Government, was the KPMG analysis, which lauded the financial benefits of the proposal. It would be curious indeed if the delegate could properly have discharged his duty to examine the proposal by simply and uncritically accepting that analysis (see Ku-ring-gai at [99] and [117]). In these circumstances the “examination” would not be an examination at all.

7. [417]

   In this respect the report is similar to that under consideration in Ku-ring-gai (see [120]-[125] of Ku-ring-gai). It is different from that dealt with in Woollahra Municipal Council v Minister for Local Government [2016] NSWCA 380; (2016) 219 LGERA 180 where the Court found, particularly by reference to the delegate’s reliance on a report by SGS Economics and Planning, that the delegate did undertake a proper examination of the financial advantages and disadvantages of the amalgamation proposal there under consideration (see [106]).

8. [418]

   For the reasons I gave in Ku-ring-gai, it was incumbent upon the delegate to go behind KPMG’s conclusions to examine their foundation if, as occurred here, in effect the only financial information on which the delegate chose to rely was the description of the KPMG analysis contained in the Proposal Document. In such circumstances, if the delegate was unable to go behind KPMG’s conclusions, or chose not to, he needed to have recourse to financial material additional to the KPMG analysis to enable him to form his view about the financial aspects of the proposed amalgamation. As he took neither course, his report did not constitute a proper “examination” of the proposal.

Procedural fairness – KPMG material

1. [419]

   In light of this conclusion and for reasons to the same effect as those given in Ku-ring-gai (at [105]-[106] and [126]-[127]), procedural unfairness has been established.

2. [420]

   By submissions founded upon a Summary of Argument that was marked on the appeal as MFI 1, the Minister argued that in the case of each amalgamation proposal under consideration in the concurrently-heard appeals, there was sufficient information available in publicly disclosed documents to enable the Councils to challenge the KPMG analysis described in the Proposal Documents. She submitted that there was therefore no procedural unfairness. In particular, she argued that she had demonstrated that access by the Councils to the long form KPMG document entitled “Merger Impacts and Analysis” (the “Long Form MIA”) would not have provided any further assistance to them in understanding how KPMG’s conclusions had been arrived at, and in challenging them. For the reasons that follow, I do not accept that submission.

3. [421]

   The Strathfield Proposal Document stated, as did other Proposal Documents, that the Proposal was supported “by independent analysis and modelling by KPMG”. It described, in two paragraphs, what the KPMG analysis showed regarding potential savings and Council performance after amalgamation. These paragraphs were directed to the Strathfield, Burwood and City of Canada Bay amalgamation proposal and did not contain statements simply concerned with the Government’s amalgamation proposals generally. The second of those paragraphs gave, in a footnote, a reference to a document described as “NSW Government (2015), Local Government Reform: Merger Impacts and Analysis, December”. It was agreed in Ku-ring-gai (see Ku-ring-gai at [36]) and accepted on this appeal that this was a reference to the Long Form MIA which was the subject of a claim of public interest immunity that was rejected in Ku-ring-gai. Due to the immunity claim, the Long Form MIA was not made available to Strathfield Council for the purposes of the delegate’s public inquiry. It remains undisclosed by the Minister.

4. [422]

   Importantly, the Proposal Document refers only to conclusions reached by KPMG and not to the manner in which they were arrived at. In referring to “independent analysis and modelling by KPMG”, the Proposal Document implied that there must be details of such analysis and modelling recorded elsewhere.

5. [423]

   A short form MIA was made available to the Council (and other councils) prior to the public inquiry (the “Short Form MIA”). This 10 page document included the following statements:

6. [424]

   It also stated that “[a] comprehensive analysis was undertaken [by KPMG] to evaluate the impacts of the proposed local government reforms. These include quantified and non-quantified impacts, including: … ”. In contrast to the Proposal Document, this document did not contain figures referable to individual mergers. Instead it dealt with the overall effect of the Government’s various merger proposals.

7. [425]

   An affidavit of Mr Paul Miller, General Counsel of the Department of Premier and Cabinet, was in evidence on the Ku-ring-gai appeal and was treated as before this Court on the Strathfield appeal (transcript 5/4/17 at p 147). In his affidavit Mr Miller advanced a public interest immunity claim by the Government in respect of a document he described as the “Business Case Document” and in respect of the Long Form MIA. Mr Miller said that the Short Form MIA document was made public on 18 December 2015. He continued:

8. [426]

   The matters referred to in [421] to [425] above give rise to the inference that the Short Form MIA summarised the outcomes of KPMG’s overall analysis, whilst the Long Form document gave a more detailed description of the analysis and its outcomes. By reason of its references to KPMG’s conclusions concerning the Government’s amalgamation proposals generally, the Short Form MIA provided some assistance in understanding the basis for KPMG’s conclusions as described in the Proposal Documents. Mr Miller’s affidavit gives rise to an inference that the Long Form MIA would have provided significant additional assistance in that respect, if access to it had been given. As he describes it as an “earlier version” of the Short Form MIA, it can be concluded that it deals with the same subject matter. Further, as it is said to be “substantially longer” and “substantially different” from the Short Form MIA it can be concluded that considerably more detail in relation to KPMG’s analysis probably appears in the document. Moreover, because the Proposal Documents referenced the Long Form MIA as the source of the information in at least the second of its two paragraphs dealing with KPMG’s conclusions in relation to the particular amalgamation under consideration, it can be assumed that the Long Form MIA contained information on that topic (whereas the publicly-released Short Form MIA did not).

9. [427]

   The Minister’s argument, as contained in MFI 1 and expanded by oral submissions, did not contradict these inferences. At the centre of the argument was the proposition that financial information concerning individual amalgamations, as distinct from the amalgamations generally, was derived from KPMG’s Microsoft Excel Workbook (another document or set of documents not available to the Councils). Even if correct, that proposition does not indicate that such individual amalgamation information is not recorded in, as distinct from being derived from, the Long Form MIA. Moreover, even if that information is not in the Long Form MIA, that does not mean that the Long Form MIA does not contain further significant material explaining the KPMG conclusions described in the Short Form MIA.

10. [428]

    The latter point is emphasised by the concluding paragraph of MFI 1, which is in the following terms:

11. [429]

    The opening words to that paragraph relate to “particular amalgamations” and do not assert that the Long Form MIA does not contain a more detailed description of the KPMG analysis and the manner in which it was conducted, the overall results of which analysis are recorded in the Short Form MIA. Nor does subparagraph (b) which is also concerned only with modelling in relation to individual amalgamation proposals. Subparagraph (a)’s reference to the Long Form MIA as a “draft” is not an entirely accurate reflection of Mr Miller’s evidence which described it as an “earlier version” of the Short Form MIA.

12. [430]

    Nor does another written submission of the Minister, MFI 6, seek to contradict the inferences I have drawn. Rather it accepted that the concessions made by the Minister in the Ku-ring-gai appeal were correctly made. Those concessions included that “each of the relevant paragraphs in the Proposal Document was ‘based on’ the Long Form Document” (MFI 6, [21(f)]). The submission in MFI 6 continued:

13. [431]

    The written submission thus pointed out limitations in the concessions but did not seek to contradict the inferences referred to in [426] above.

14. [432]

    In these circumstances, it remains appropriate to infer that there was documentary material (at least, the Long Form MIA) which was not in the possession of Strathfield Council and which was likely to have enabled it to better understand, and therefore challenge, KPMG’s reasoning and conclusions. It does not matter that Strathfield Council did not prove that the outcome of the delegate’s inquiry would have been different if it had had access to this material. To establish its claim of procedural unfairness, it was sufficient for the Council to demonstrate that it lost a realistic opportunity to obtain a different result (see Minister for Immigration and Border Protection v WZARH (2015) 256 CLR 326; [2015] HCA 40 at [43]-[44] and [58]-[60], referred to by Basten JA at [191] – [193] above).

15. [433]

    The reason that procedural unfairness was denied to Strathfield Council but not to Hunters Hill, Lane Cove, Mosman and North Sydney Councils is as follows. The delegates with whom those latter Councils were concerned acted in accordance with the statute and did not accept the KPMG analysis uncritically, without regard to other material. It was therefore open to those Councils to attempt to persuade the delegates that the proposed amalgamations would be financially disadvantageous. Access to material explaining the KPMG analysis was not essential because they could attempt to counter that analysis with their own analyses, which they could assume the delegate would consider on their merits. As in Director-General, Department of Trade and Investment, Regional Infrastructure and Services v Lewis (2012) 301 ALR 420; [2012] NSWCA 436, procedural fairness did not require that opponents of the proposals have access to the source materials for the report or reports supporting the proposals (or to the material explaining how the conclusions in the reports were arrived at).

16. [434]

    One factor of relevance in that case was that the source materials sought were not going to be before the decision-maker when he made his decision (at [154(f)]). Likewise here, although the materials underlying the KPMG analysis were as a matter of law to be treated as available to the delegates (see [437] below), they were not in fact before them and there was never any suggestion that they would take them into account.

17. [435]

    To hold that procedural fairness required that the Councils be given access to the material even where a delegate proposed (without breach of his or her statutory duty to examine) to proceed without reference to, and indeed knowledge of, the material would go close to converting the examination process into the type of “full-blown adversarial trial” to which Mason P referred in Minister for Local Government v South Sydney City Council (2002) 55 NSWLR 381; [2002] NSWCA 288 at [251]). Adverse material which is “credible, relevant and significant” and which an interested party is entitled to see (Kioa v West (1985) 159 CLR 550 at 628-9; [1985] HCA 81) is, at least ordinarily, confined to material that is actually before the decision-maker. Support for this proposition is to be found in the High Court’s indication in Applicant VEAL v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88; [2005] HCA 72 at [17] that material of that description is “information that cannot be dismissed from further consideration by the decision-maker before making the decision”.

18. [436]

    The position was different for Strathfield Council, notwithstanding that the delegate did not have the material before him, because, as became apparent from his report, he decided to accept the KPMG analysis uncritically without regard to other material. The only way the Council could have countered that approach would have been to attempt to undermine the KPMG analysis, because there was no open-minded decision-maker to whom the Council could have addressed competing evidence and arguments concerning the financial disadvantages of the amalgamation proposal. On the inferences which I have drawn (see [426] above), and which I have found were not dispelled by the Minister (see [427] above), the Long Form MIA may well have assisted Strathfield Council to do this. It was thus procedurally unfair for the delegate to have reported as he did without the Council having had access to the Long Form MIA or an alternative source of the information as to how KPMG’s conclusions were arrived. There was, in the words of Gleeson CJ in Re Minister for Immigration and Multicultural and Indigenous Affairs; ex parte Lam (2003) 214 CLR 1; [2003] HCA 6 at [37], “practical injustice”.

19. [437]

    It is important to recall in this context that the Proposal Document referred only to the conclusions reached by KPMG and not to the manner in which they were arrived at (see [422] above). As the Long Form MIA was constructively in the possession of the delegate (see [318] – [319] above in Basten JA’s judgment), and it can be inferred that it probably provides significant assistance in understanding how KPMG’s figures in the Proposal Document were arrived at, the Council’s inability to have access to it caused it practical injustice. It does not matter that there may be, and probably are, other documents to which the Council did not have access which may have provided similar or additional assistance (for example, KPMG’s “Business Case” documents and its Microsoft Excel Work Book). It is sufficient to found my conclusion of procedural unfairness on the non-provision of the Long Form MIA.

20. [438]

    It does not matter that the unfairness did not become apparent until the delegate’s report was published. By analogy, procedural unfairness in litigation may only become apparent upon publication of a judgment when, for example, a judge decides a case on the basis of a point that was not raised or argued at the hearing. Likewise in Minister for Immigration v WZARH, the denial of procedural fairness only occurred when, unbeknownst to the claimant and contrary to normal procedure, his application was determined by a different delegate to the one who had interviewed the claimant, without the claimant being given notice of the change and the opportunity to supplement written submissions or request a second interview.

21. [439]

    In Applicant VEAL of 2002 at [19], the High Court said that a court’s inquiry as to whether procedural fairness has been afforded is concerned with “neither what decision should the decision-maker have made, nor what reasons did the decision-maker give for the conclusion reached”. The context in which this statement was made was however different from the present. In that case, the procedure adopted was unfair because the Tribunal did not inform the applicant of allegations of which the Tribunal had been apprised. The High Court held that the unfairness was not negated by the Tribunal stating in its reasons for decision that it had given no weight to the allegations. In my view the High Court’s statement that I quoted does not detract from the proposition, relevant here, that a procedure which is apparently fair may become unfair if the decision-maker departs from his or her duties in the course of making a decision. Here, the procedure was fair if the examination involved, as it should have, the delegate forming his own views about the financial advantages or disadvantages of the proposed amalgamation. The delegate’s undertaking of a different process rendered it unfair.

Conclusion

1. [440]

   Although Strathfield Council’s grounds of appeal concerning reasonable public notice and the delegate’s conduct of his inquiry (Grounds 1, 2 and 3) should be rejected for the reasons Basten JA gives, the Council has established that the delegate constructively failed to examine the amalgamation proposal referred to him (Ground 5A) and that it was denied procedural fairness (Ground 5).

2. [441]

   As a result, the orders Basten JA proposes in relation to this appeal should be made.

3. [442]

   SACKVILLE AJA:

4. [443]

   These appeals concern challenges by five councils constituted under the Local Government Act 1993 (NSW) (LG Act) to actions taken in relation to several proposals made by the first respondent (Minister) for the amalgamation of local government areas (LGAs). The five proceedings were heard together in the Land and Environment Court (L & E Court). The primary Judge (Moore J) granted limited relief in three of the five proceedings and dismissed the remaining two proceedings. [220]

5. [444]

   I am grateful to Basten JA for explaining the procedural background to this litigation, the issues and the relevant provisions of the LG Act. I shall endeavour to minimise repetition, except to the extent necessary to explain my reasons.

The appeals

1. [445]

   The five appeals relate to three proposed amalgamations initiated by the Minister, as follows:

2. [446]

   As Basten JA has explained, each of the Merger Proposals was referred by the Minister pursuant to s 218F(1) of the LG Act to the Departmental Chief Executive for examination and report. The Chief Executive then delegated the task of examining and reporting on each Merger Proposal under s 745 of the LG Act to a separate delegate.

3. [447]

   It has been held by this Court that the matter that is referred for examination and report is simply the proposal to merge two or more LGAs, not the reasons given by the Minister in support of the particular proposal. [221] The merger proposal document published by the Minister in each case incorporated the Minister’s reasons for making the proposal, including financial projections intended to demonstrate the financial advantages of the proposed merger. In this judgment I refer to each merger proposal, respectively, as the Hunter’s Hill Merger Proposal, the North Sydney Merger Proposal and the Strathfield Merger Proposal. I refer to the document published by the Minister in each case, respectively, as the Hunter’s Hill Merger Document, the North Sydney Merger Document and the Strathfield Merger Document.

4. [448]

   The Delegate’s Report on the Hunter’s Hill Merger Proposal (Hunter’s Hill Delegate’s Report) was forwarded to the Minister on 18 March 2016. Hunter’s Hill Council (Hunter’s Hill), and Lane Cove Council (Lane Cove) each succeeded in the L & E Court in obtaining a declaration that the Hunter’s Hill Delegate’s Report was not a valid report because it did not satisfy s 218F(6)(a) of the LG Act. [222] However, neither Hunter’s Hill nor Lane Cove obtained the broader relief they had sought in the proceedings. In this appeal (Hunter’s Hill Appeal) they seek orders setting aside the Delegate’s examination and the Hunter’s Hill Delegate’s report, together with consequential relief. The City of Ryde Council is affected by the Hunter’s Hill Merger Proposal but it entered a submitting appearance in the L & E Court and in this Court.

5. [449]

   The Delegate’s Report on the North Sydney Merger Proposal (North Sydney Delegate’s Report) was forwarded to the Minister on 19 April 2016. North Sydney Council (North Sydney) and Mosman Municipal Council (Mosman) obtained declarations in the L & E Court that the North Sydney Delegate’s Report was not a valid report because it did not satisfy the requirements of s 218F(6)(a) of the LG Act. In their appeal (North Sydney Appeal), they seek orders equivalent to those sought in the Hunter’s Hill Appeal. Willoughby City Council is affected by the North Sydney Merger Proposal but it also entered a submitting appearance in the L & E Court and in this Court.

6. [450]

   Strathfield Municipal Council (Strathfield) is the only appellant challenging the delegate’s report relating to the Strathfield Merger Proposal (Strathfield Delegate’s Report). Like Hunter’s Hill and Lane Cove, Strathfield succeeded in obtaining limited relief in the L & E Court. In its appeal (Strathfield Appeal), Strathfield seeks broader relief, including a declaration that the delegate’s examination of the Strathfield Merger Proposal miscarried.

7. [451]

   Most attention in argument was devoted to two contentions advanced on behalf of the appellants in each appeal. These contentions are encapsulated in Grounds 5 and 5A of the Further Amended Notice of Appeal filed on behalf of Hunter’s Hill. Although it turns out not to be strictly necessary to address the contentions in the Hunter’s Hill Appeal, the contentions are central to the North Sydney and Strathfield Appeals. It is convenient to reproduce Grounds 5 and 5A of Hunter’s Hill Amended Notice of Appeal:

8. [452]

   The Amended Notices of Appeal filed on behalf of Lane Cove (Grounds 5 and 5A), Strathfield (Grounds 5 and 5A) and Mosman (Grounds 7 and 7A) are in similar terms. North Sydney’s Second Further Amended Notice of Appeal contains more detailed references to documents said to comprise the full analysis conducted by KPMG. North Sydney’s Ground 8A (equivalent to Hunter’s Hill’s Ground 5A) is as follows:

9. [453]

   There was an issue as to whether the Councils should be permitted to file Amended Notices of Appeal incorporating these grounds. As Basten JA has explained, the Minister’s objection was based on a limited ground that is peripheral to the main issues debated. In my view, to the extent necessary, leave to file the Amended Notices of Appeal should be granted.

The legislation

1. [454]

   The LG Act mandates a sequential decision-making process governing proposals to amalgamate two or more areas or to alter the boundaries of one or more areas. A striking feature of the statutory scheme is that there appear to be numerous opportunities for parties opposed to particular proposals (including councils) to challenge the validity of steps purportedly taken in conformity with legislative requirements.

2. [455]

   Without being exhaustive, it would seem that challenges can be made to the validity of:

3. [456]

   Of course not all challenges to an administrative decision-making process succeed. Moreover, if a statutory scheme, properly construed, gives a party affected by a proposal the opportunity to make challenges at several successive stages of the process, the courts must give effect to the legislation. But the courts are entitled to assume that Parliament intends a statutory scheme to be workable. [228] In interpreting the legislation and in determining what procedural fairness requires in the circumstances of the case, the courts must take into account the statutory context and, so far as can be discerned from the text, the objects of the legislation. If, for example, the legislation contemplates that the Chief Executive can discharge the statutory function of examining and reporting a merger proposal notwithstanding that the Chief Executive may have played some part in developing the proposal, it is not for the Court to question the wisdom of such a procedure. Likewise if the legislation, properly construed, permits the Chief Executive to delegate the statutory function to a person outside the Department, the Court must proceed on the basis that the desirability of delegating the function is a matter for the Chief Executive, provided statutory procedures are followed.

Possible conflict in the authorities

1. [457]

   Each of the appellants instituted separate proceedings in the L & E Court, but the cases were heard together. The appeals have also been heard together.

2. [458]

   These proceedings, however, have not been the only challenges by councils to Ministerial merger proposals or to actions taken to advance these Proposals. [229] No doubt for very good reasons, it has not proved possible for all the challenges to be heard at the same time in the L & E Court. Nor has it proved possible for this Court to hear altogether all appeals from decisions of the L & E Court.

3. [459]

   The result has been that a series of cases have been decided, some of which raise similar if not identical issues. This has had a number of consequences. One is that councils challenging steps in the process have been encouraged to modify their arguments in the course of proceedings in order to take advantage of favourable decisions in other cases or to circumvent difficulties created by unfavourable decisions. The changing forensic landscape has required a degree of flexibility on the part of the Minister’s advisors as new arguments emerge and others are adapted. Flexibility has sometimes developed into apparent inconsistency, perhaps because the Minister has not always briefed (or been able to brief) the same counsel in all proceedings involving merger proposals.

4. [460]

   Another consequence of cases raising similar issues being heard successively is that the risk of inconsistent decisions is increased. Two decisions have been given by this Court on issues similar to those raised by Grounds 5 and 5A of Hunter’s Hill Further Amended Notice of Appeal. The first, Woollahra (CA), was heard by a Court comprising Bathurst CJ, Beazley P and Ward JA. [230] The second, Ku-ring-gai, was heard by a Court as presently constituted. The judgments in Ku-ring-gai were delivered on 27 March 2017, only a week before the present appeals were heard. Since the majority judgments in Ku-ring-gai appeared to take a different approach on critical issues to that taken in Woollahra (CA) the appellants filed further written submissions seeking to rely on the reasoning of the majority in Ku‑ring-gai.

5. [461]

   In Woollahra (CA), the Court unanimously rejected a challenge to the validity of a report prepared by a delegate recommending implementation of a proposal to amalgamate the LGAs of Randwick, Waverley and Woollahra. The Court held, among other things, that Woollahra Municipal Council (Woollahra) failed to establish that the delegate did not conduct an examination into the financial advantages or disadvantages of the amalgamation proposal as required by s 263(3)(a) of the LG Act. [231] The Court reached this conclusion despite the fact that Woollahra sought but was not given access to “…the KPMG analysis and all documents underpinning the KPMG analysis…”. [232]

6. [462]

   In Ku-ring-gai, the Court set aside the examination and report of a delegate prepared in relation to the proposed amalgamation of Ku-ring-gai LGA and part of Hornsby LGA. The Court held unanimously that the delegate misapprehended the function he was required to perform under ss 263(1) and 263(3) of the LG Act in that he failed to consider the proposed alteration to the boundaries of the Hornsby LGA by reference to the mandatory factors specified in s 263(3). [233] More significantly for present purposes, a majority of the Court held that the delegate’s report was affected by two additional jurisdictional errors. [234]

7. [463]

   Basten and Macfarlan JJA held that two documents prepared by KPMG over which the Minister had claimed public interest immunity (PII) should have been made publicly available. Since the delegate did not have access to the KPMG material notwithstanding repeated requests for it by Ku-ring-gai Council (Ku-ring-gai), their Honours held that he constructively failed to fulfil the statutory function of examining the Minister’s proposal. [235]

8. [464]

   The second jurisdictional error was that Ku-ring-gai had been denied procedural fairness. It had repeatedly and unsuccessfully sought the KPMG Documents which were necessary both to enable the delegate to “examine” the Merger Proposals and to give the Council an opportunity to challenge the figures on which the financial advantages proposed by the Minister had been based. In the absence of any legal justification for withholding the KPMG Documents, procedural unfairness was established. [236] Macfarlan JA also held that the Council had been denied procedural fairness because the delegate relied on the results of the withheld KPMG Documents and did not conduct his own assessment of the advantages and disadvantages of the proposed merger. [237]

9. [465]

   No submission was put on behalf of the Minister in Ku-ring-gai that the conclusions ultimately reached by the majority were inconsistent with the decision of the Court in Woollahra (CA). In the absence of any such submission it is not entirely surprising that the majority judgments did not consider whether there was any inconsistency between their decision and Woollahra (CA). The question, however, was raised by the Minister in the present appeals. Mr Hutley SC who appeared with Mr Hutton, Mr O’Brien and Mr Birch for the Minister, submitted that the majority decision in Ku-ring-gai that the delegate had not conducted the required examination of the Merger Proposal was directly inconsistent with the decision in Woollahra (CA). He further submitted that the decision in Woollahra (CA) was correct and should be followed, to the extent of any inconsistency, in preference to the decision in Ku-ring-gai.

10. [466]

    By contrast, Mr Galasso SC, who appeared with Mr Lazarus and Mr Robertson for North Sydney, submitted that the North Sydney Appeal raised issues identical to those decided by the majority in Ku-ring-gai. He contended that Ku-ring-gai required this Court to conclude that North Sydney had been denied procedural fairness because the “Full KPMG Report” had not been disclosed to it and it therefore did not have a reasonable opportunity to make submissions on the contents of that report. He also submitted that Ku-ring-gai required this Court to conclude that in the absence of the KPMG financial assessment documents, the delegate had constructively failed to carry out the statutory function of examining the North Sydney Merger Proposal. Similar submissions were made on behalf of the other appellants.

KPMG Documents

1. [467]

   Each of the appellants, like other councils, has diligently sought access to documents and analyses prepared by KPMG that they say underpin the financial projections set out in the Minister’s Merger Proposals. It is also clear that the appellants have been denied access to some material prepared or compiled by KPMG relating to the Merger Proposals. The precise identity and contents of that material have been the subject of considerable confusion both in these proceedings and in Ku-ring-gai.

2. [468]

   The confusion can be seen in the various versions of the notices of appeal filed by the appellants. The early versions seem to assume the existence of a single document prepared by KPMG which constituted the “independent analyses and modelling” referred to in the various Merger Proposal Documents published by the Minister. The notices of appeal asserted that the delegate and the Minister denied procedural fairness to the appellants by failing to make available a copy of the KPMG analysis and modelling documents.

3. [469]

   The notices of appeal, in their final iteration, take a more expansive approach to the documents said to have been withheld by the Minister, whether pursuant to a claim of PII or otherwise. The amended notices of appeal focus on the failure to provide the appellants with the “full and detailed independent analysis and modelling by KPMG referred to in the proposal documents” and supplement the contention by providing non-exhaustive examples of documents answering that description. The notices of appeal also incorporate a ground presumably inspired by the majority judgments in Ku-ring-gai. This ground contends that the failure to produce the analysis and modelling necessarily meant that the delegate could not carry out the examination of the Minister’s merger proposals required by ss 218F(1) and 263(1) of the LG Act. [238]

4. [470]

   The source of the confusion may be traced to the way the trial and the appeal in Ku-ring-gai were conducted. The Amended Notice of Appeal filed by Ku‑ring-gai alleged that it had been denied procedural fairness because the Merger Proposal Document in that case contained projections based on two documents prepared by KPMG neither of which had been produced to Ku‑ring-gai or to the delegate. The first of the two so-called “KPMG Documents” was ultimately identified as a longer version of a document entitled “Local Government Reform: Merger impacts and analysis” (Short Form Impacts Analysis) published by the New South Wales Government on 18 December 2015. The longer form version of the Short Form Impacts Analysis was referred to in Ku-ring-gai as the Long Form Document. The second of the two KPMG Documents was entitled “Implementation of Local Government Mergers: Business Case” (Business Case Document). Both the Long Form Document and the Business Case Document were subject to claims of PII.

5. [471]

   Mr Hutley, in his submissions in the present appeal, suggested that confusion arose in Ku-ring-gai because it had not been part of Ku-ring-gai’s case that the so-called “KPMG Documents” contained modelling or analysis that supported the financial advantages claimed in the Merger Proposal Document. According to Mr Hutley, this interpretation of the KPMG Documents emerged in the course of argument as Ku-ring-gai’s case developed, perhaps with some encouragement from the Bench.

6. [472]

   Mr Hutley acknowledged that senior counsel representing the Minister in Ku‑ring-gai made concessions in argument. However, those concessions, so Mr Hutley contended, were more limited than the judgments in Ku-ring-gai assumed. The concessions went no further than accepting that some figures contained in the Merger Proposal Document had been derived from the Long Form Document and that one particular estimate recorded in the Merger Proposal Document could not be found in any published source. There had been no concession that the two KPMG Documents identified in Ku-ring-gai contained modelling or analysis supporting the financial projections in the Merger Proposal Document. Nor had there been any concession that figures contained in the Long Form Document had not subsequently been published.

7. [473]

   Mr Hutley took the Court through a substantial body of documentary evidence bearing on the relationship between KPMG and the Government agencies. This evidence, according to Mr Hutley, not only shed light on KPMG’s role in the formulation of the various Merger Proposals but demonstrated that the Long Form Document did not contain the analysis and modelling supporting the stated financial advantages and disadvantages of the Merger Proposals contained in the Merger Proposal Documents.

8. [474]

   Mr Hutley pointed out that much of this material had been in evidence in Ku‑ring-gai. However, it had been admitted into evidence on an issue that had not been pursued on appeal and presumably for that reason had not been drawn to the attention of this Court. Had the Court been aware of the true function of the Long Form Report and the nature of the Business Case Document, so Mr Hutley argued, the Court would have been less likely to infer that the delegate required access to the two KPMG Documents to examine the Merger Proposal or to infer that Ku-ring-gai needed the KPMG Documents to have a fair opportunity of challenging the Minister’s financial projections.

Hunter’s Hill Appeal

1. [475]

   Many of the arguments in the Hunter’s Hill Appeal overlapped with the arguments advanced in the North Sydney and Strathfield Appeals. Indeed Mr T Robertson SC, who appeared with Mr Lazarus, Mr D Robertson and Ms Walker for the appellants other than North Sydney (including Mosman), presented the bulk of the argument on the procedural fairness and the delegates’ constructive failure to fulfil the statutory function of examination and report on the three relevant Merger Proposals.

2. [476]

   Despite the focus in argument on these issues, Basten JA has explained that the Hunter’s Hill Appeal can and should be resolved on the basis of an argument not available in the other appeals. I agree with his Honour that Hunter’s Hill and Lane Cove have made good Ground 6 in their appeals: that is, they have established that the Hunter’s Hill Merger Proposal was fundamentally flawed because the proposed new area is not “a single area of contiguous land” as required by s 204(3) of the LG Act.

3. [477]

   It is curious that this argument appears not to have been drawn to the delegate’s attention and that it was raised for the first time only in the L & E Court. Nonetheless, the conclusion that Basten JA reaches is sufficient to support the orders he proposes in the Hunter’s Hill Appeal.

4. [478]

   Since Hunter’s Hill and Lane Cove have made good Ground 6, it is not necessary to consider their procedural fairness argument. Had it been necessary to address this argument I would have rejected it substantially for the reasons I give in the North Sydney Appeal.

5. [479]

   The conclusion that Hunter’s Hill and Lane Cove have made good Ground 6 in their appeals also makes it unnecessary to consider their argument that the delegate failed to have proper regard to the mandatory factor identified in s 263(3)(a) of the LG Act, namely:

6. [480]

   I agree with Basten JA that a common element in the judgments in Ku-ring-gai is that the delegate, in order to have proper regard to the financial advantages and disadvantages of the Hunter’s Hill Merger Proposal had to exercise his own independent judgment [239] as to those matters. It was not open to him to adopt uncritically the Minister’s claims in the Hunter’s Hill Merger Proposal Document. Nor was it open to him to ignore submissions and readily available credible information casting doubt on the Minister’s claims.

7. [481]

   The three Councils affected by the Hunter’s Hill Merger Proposal each made a submission to the delegate. The Lane Cove submission referred to KPMG’s estimate of net benefits totalling $61 million over 20 years. The submission argued that KPMG’s estimate represented a “gross overstatement” of the net benefits.

8. [482]

   Lane Cove’s contention was based on a report prepared by Morrison Low in January 2016 entitled “Comparison of KPMG Document Assumptions and Morrison Low Assumptions” (Morrison Low Assumptions Report). Morrison Low estimated that the Hunter’s Hill Merger Proposal would produce $19.4 million in net savings over the eight year period ending in 2024. Lane Cove’s submission also said that it had received advice that it was not possible to reliably extrapolate estimates of savings over a 20 year period as KPMG had purported to do.

9. [483]

   The Morrison Low Assumptions Report was appended to Lane Cove’s submission. The Report included a table, four pages in length, comparing KPMG’s assumptions as recorded in its Modelling Assumptions Document and the assumptions Morrison Low considered to be realistic. The table included assumptions on a number of matters which, according to Morrison Low, KPMG had not taken into account. The Morrison Low Assumptions Report stated that a key difference between the two sets of assumptions was that Morrison Low had made adjustments depending on the nature, size and location of the councils and the number of councils.

10. [484]

    The Morrison Low Assumptions Report did not include precise calculations explaining how the sum of $19.4 million in net savings was derived. It can be inferred, however, that Morrison Low calculated the costs and savings likely to flow from the Hunter’s Hill Merger proposal by reference to the assumptions identified in its report.

11. [485]

    The Morrison Low Assumptions Report included a summary as follows:

12. [486]

    Hunter’s Hill submitted a document to the delegate entitled “Response to Proposed Merger”. The submission, which is undated, attached two reports prepared by Morrison Low. The first was the same Morrison Low Assumptions Report which had been annexed to Lane Cove’s submissions. The second was a document entitled “Merger Business Case Updated Modelling Summary Report” dated 25 February 2016 (Morrison Low Second Report). This document was said to provide “the results of further modelling undertaken for Hunter’s Hill, Lane Cove and Ryde Councils” and to constitute “an update of work undertaken for the three Councils in 2015”.

13. [487]

    The Morrison Low Second Report estimated that the financial savings from the Hunter’s Hill Merger under the “efficiencies realised scenario” amounted to only $12.7 million (NPV) over the period to 2023. The Morrison Low Second Report did not explain why its estimate of savings over the eight year period was lower than the estimate prepared a month or so earlier. The graphs accompanying the Morrison Low Second Report appear to be identical to those accompanying the Morrison Low Assumptions Report.

14. [488]

    Hunter’s Hill’s response to the delegate included the following statement:

15. [489]

    While this statement in Hunter’s Hill’s response seems to imply that Morrison Low was the source of the estimate of a net financial cost of $33.9 million, this figure does not appear in the Morrison Low Second Report and its provenance is not clear. However, a footnote to the two page section of the Hunter’s Hill response headed “Merger Business case for Hunter’s Hill, Lane Cove and Ryde Councils” suggests that the figure was derived from a report prepared by Morrison Low on 19 June 2015 relating to a different merger proposal. A separate section of the Hunter’s Hill’s Response noted that “[b]enefits for the current merger proposal have been re-assessed at $12.7 m over 8 years” and added that “[i]f efficiencies are not realised this would in all probability result in a cost to the new entity (Council)”.

16. [490]

    Basten JA has set out the substance of the delegate’s reasoning on this point. [241] While the delegate dealt relatively briefly with the financial advantages and disadvantages of the Hunter’s Hill Merger Proposal, he did not uncritically accept the claims made by the Minister in the Hunter’s Hill Merger Proposal Document.

17. [491]

    The Hunter’s Hill Delegate’s Report clearly took into account the analysis in the Morrison Low Assumptions Report and did so in a manner which is not said to have involved any misapprehension as to the contents or significance of that Report. The delegate considered that the Morrison Low Assumptions Report supported KPMG’s claim that the Hunter’s Hill Merger Proposal, if implemented, would produce a net financial benefit to the merged entity. He acknowledged that the estimates produced by KPMG and Morrison Low related to different periods of time and that the assumptions adopted by each differed in some respects. But he was satisfied on the material before him that the Hunter’s Hill Merger Proposal would result in net financial benefits.

18. [492]

    Mr Robertson criticised the delegate for failing to mention either the Morrison Low Second Report or the loss of $33.9 million mentioned in Hunter’s Hill’s Response. The delegate was under no obligation, whether pursuant to s 363 of the LG Act or otherwise, to refer to every submission made by the Councils or any other interested person. He was entitled to make a judgment that some matters raised in submissions lacked sufficient cogency or materiality to the issues to warrant discussion.

19. [493]

    Morrison Low’s revised calculation of the benefits attributable to the Hunter’s Hill Merger Proposal was not explained, at least in any documentation submitted to the delegate or to which he was referred. Moreover, the revised calculations did not alter Morrison Low’s assessment that the Hunter’s Hill Merger Proposal would produce net financial benefits over eight years. The delegate’s examination of the financial advantages and disadvantages was no less an examination because the delegate made no specific reference to Morrison Low’s revised estimate of the benefits that would flow from the proposed Merger. As Mr Hutley pointed out, it is somewhat ironical that Hunter’s Hill should rely on the delegate’s failure to refer specifically to an unsubstantiated assertion that the net savings from the Hunter’s Hill Merger would be less than previously estimated, when Hunter’s Hill also complained of the delegate’s failure to obtain the data or calculation underpinning KPMG’s estimates of the net savings.

20. [494]

    The assertion in Hunter’s Hill’s submissions that if no efficiencies were realised, costs of $33.9 million would be incurred was based on an assumption that the delegate could fairly regard as not only unexplained but unrealistic. It seems to have been no more than a figure derived from a report concerning a different proposal that in any event was not provided to the delegate. The delegate’s failure to mention the assertion carries no consequences for the validity of his Report on the Hunter’s Hill Merger Proposal.

21. [495]

    For these reasons I would not have accepted the submissions by Hunter’s Hill and Lane Cove that the delegate failed to discharge the duty imposed on him by s 263(3)(a) of the LG Act. The rejection of that submission would not involve any inconsistency with the views of the majority in Ku-ring-gai.

North Sydney Appeal

1. [496]

   It is convenient to follow the order adopted by Basten JA and deal next with the North Sydney Appeal. His Honour has set out the background to the appeals by Mosman and North Sydney and has identified the grounds of appeal that were pressed.

2. [497]

   I agree with Basten JA that the Councils’ challenges based on the changes in the Merger Proposals and on the alleged inadequacy of the public notice of the inquiry should be rejected (Grounds 1, 2, 3 and 7). I also agree with his Honour that the delegate did not deny procedural fairness to the Councils in the manner by which he conducted the public inquiry (Ground 4).

3. [498]

   The remaining issues in the North Sydney Appeal relate to the grounds of appeal which allege that the primary Judge erred:

4. [499]

   Basten JA has reproduced extracts from the Executive Summary to the North Sydney Merger Document and from the section addressing “Financial Benefits of the Proposed Merger”. [242] The North Sydney Merger Document is a brief document (ten pages of text and charts) and stated the claimed financial advantages of the North Sydney Merger Document in summary form.

5. [500]

   The “Financial Benefits” section of the North Sydney Merger Document contains a chart depicting the projected operating performance of the proposed new Council over 20 years, with and without a merger. The Document attributes dollar amounts to savings identified in the Executive Summary as follows:

6. [501]

   As has been seen, the parties to the North Sydney Appeal (and the other appeals) were at odds as to whether the Councils had a reasonable opportunity to make informed submissions to the delegate so as to satisfy the delegate’s obligation to afford North Sydney and Mosman procedural fairness. In order to address this question, it is necessary to refer to publicly available documents relating to the proposals to amalgamate LGAs as those proposals developed over time. This material indicates the information that was available to the Councils and their advisers for the purpose of making submissions to the delegate. Because of the way the appeal in Ku-ring-gai was argued many of these documents were not drawn to the attention of the Court in that case.

7. [502]

   It is also necessary to refer to the “secret” KPMG Documents on which the Councils placed much reliance. Two of the KPMG Documents over which claims of PII were made (the Long Form Document and the Business Case Document) were not in evidence. The third significant “undisclosed” KPMG Document was a document described as the Model Design Paper which was in evidence, but had not been publicly released at the time the delegate finalised his report. In order to understand the significance of these documents (together, the Withheld Documents) reference must be made to documentary evidence that enables inferences to be drawn as to the nature of the Long Form Document and the Business Case Document.

8. [503]

   According to Professor Dollery, whose Reports are referred to later, the Fit for the Future reform process for New South Wales local government began with the Destination 2036 Workshop held in August 2011. This Workshop was attended by representatives of all New South Wales councils and led to the establishment of a three person Independent Local Government Review Panel (ILGRP).

9. [504]

   In October 2013, the ILGRP Final Report (ILGRP Report) was published. The ILGRP Report analysed in detail the structure of local government in New South Wales and made 65 unanimous recommendations. It also provided options for mergers of existing councils and provided a rationale for each option.

10. [505]

    The options included:

11. [506]

    In June 2015, the Office of Local Government (OLG) made a “Request for Quotation” seeking a consultant to “assist with analysis of potential local government mergers within Sydney and NSW”. The request noted that the ILGRP Report had recommended particular council mergers as a means of addressing issues of insufficient scale and capacity. The consultant, among other tasks, was to “[d]esign a template/narrative that can be populated with requisite analysis to present preferred options for local government reform…”.

12. [507]

    On 22 June 2015, KPMG submitted a proposal to OLG entitled “Local Government Reforms – Options Analysis”. KPMG proposed a five week timetable, with the delivery of the “Final Options Model” by 1 August 2015. The first phase of the project was to include preparation of a “Model Design Paper”, described as follows:

13. [508]

    KPMG noted that it had:

14. [509]

    The objective of the second phase of the project was:

15. [510]

    Table 2 (referred to in connection with the financial appraisal module) set out a number of possible areas of savings and costs, such as savings attributable to staff reductions and redundancy costs associated with staff redirections. The material was general in nature.

16. [511]

    On 23 June 2015, OLG prepared an evaluation of three tenders for the consultancy. On or about 29 June 2015, OLG and KPMG entered into an agreement requiring “final deliverables” by 1 August 2016. The services to be provided by KPMG were as follows:

17. [512]

    On 8 July 2015, KPMG produced the Model Design Paper. The document referred to the metropolitan priorities identified by the ILGRP Report and proposed a model design.

18. [513]

    The Model Design Paper stated that KPMG proposed to design a “fit-for-purpose” and user friendly Microsoft Excel-based model that would “shape and inform the NSW Government’s decision-making on local government reform”. The model would provide the greatest possible extent of merger impact analysis to inform the NSW Government’s decisions given the constraints of date availability and strict timetables for delivery.

19. [514]

    The five key phases of model design were identified as follows:

20. [515]

    Under the heading “Model Functionality”, the following appeared:

21. [516]

    The Model Design Paper identified the “Underlying Assumptions” in the following passage:

22. [517]

    Appendix A provided a summary of data sources. The following were identified:

23. [518]

    Appendix B set out a number of financial assumptions addressing the following matters:

24. [519]

    On about 31 July 2015, OLG provided KPMG with “scenarios for mapping”. For example, the ILGRP Report’s recommendation for the possible amalgamation of Hunter’s Hill and the other five Councils was to be broken up into options, one of which was the merger of Hunter’s Hill, Lane Cove and Ryde.

25. [520]

    On 12 August 2015, KPMG produced a document entitled “Options Analysis Local Government Reform” marked “Cabinet-in-Confidence” (Options Analysis Document). The Options Merger Document included sections briefly summarising the estimated costs and benefits of possible mergers.

26. [521]

    One section of the Options Analysis Document addressed various aspects of a possible merger of Hunter’s Hill, Lane Cove and Ryde LGAs. This section included a single page “overview of financial impacts” suggesting a “net financial benefit of $50.8 million over ten years with a payback period of 4.6 years”. A bar chart summarised merger savings and costs by categories such as staff redundancies, wages, information technology, materials and contracts and councillor remuneration. There is nothing in the Options Analysis Document to suggest that the projected costs and benefits were assessed by reference to any sources other than those foreshadowed in the Model Design Paper of 8 July 2015.

27. [522]

    The single page overview contained the following caveats:

28. [523]

    The Options Analysis Document included a similar “merger cluster impacts” analysis for the proposed merger of Mosman, North Sydney and Willoughby. This analysis estimated a net financial benefit of $71.8 million over ten years.

29. [524]

    On 27 August 2015, KPMG presented a proposal to OLG for further economic, financial and regulatory analysis of Local Government reforms. The proposal envisaged “Financial appraisal” which would require KPMG to:

30. [525]

    In a separate document marked “Cabinet-in-Confidence”, also dated 27 August 2015, KPMG proposed to develop a “robust business case” to build the case for change to underpin the “Local Government Reform Agenda” and to gain approval for the “required investment” from the New South Wales Government. The document emphasised the very short time frame for completion of the business case.

31. [526]

    The body of the document explained the approach KPMG would take to developing a business case by identifying a number of phases for the project. Phase 2a was designated as “Demonstrating the case for change”. This phase was to include:

32. [527]

    Phase 2b involved “Collating the evidence”. For this purpose:

33. [528]

    On 17 September 2015, KPMG wrote to OLG confirming KPMG’s engagement to provide “a comprehensive analysis and public report on the NSW Government’s Local Government reforms”. The letter is significant because it constituted the framework for KPMG’s role in preparing the Long Form Document over which PII was claimed and the Short Form Impacts Analysis which was publicly released on 18 December 2015.

34. [529]

    KPMG’s letter stated as follows:

35. [530]

    In October 2015, the Independent Pricing and Regulatory Tribunal (IPART) presented Local Government – Final Report: Assessment of Council Fit for the Future Proposals. IPART included the two amalgamation options identified in the ILGRP Report. [243] The IPART Report gave estimates of “savings over a 20 year period using standardised assumptions based on council consultant business cases”.

36. [531]

    A document entitled “Implementation of Local Government Mergers: Business Case”, dated 14 October 2015, was prepared by KPMG (KPMG Business Case Document). It was submitted to Cabinet and was the subject of the claim to PII. [244]

37. [532]

    In October 2015, the New South Wales Department of Premier and Cabinet (DPC) requested quotes for the preparation of Merger Proposals for the Minister. The drafts were to outline the key elements of the proposed Merger including:

38. [533]

    A DPC briefing paper to the Local Government Task Force of 29 October 2015 noted that the Merger Proposals would be informed by figures from the KPMG Business Case. The briefing paper stated that the Government had access to three different sets of modelling outlining the costs and benefits of council mergers. The relevant statement has been extracted in the judgment of Basten JA. [245]

39. [534]

    On 1 December 2015, KPMG provided a “status update” to OLG. The update recorded that KPMG had been instructed to develop a total of 44 Merger Proposals. These included Merger Proposals for Hunter’s Hill, Lane Cove and Ryde and for North Sydney and Willoughby. Following completion of the Merger Proposals, KPMG indicated that it would “finalise the templates for the public report”.

40. [535]

    On 18 December 2015, the New South Wales Government published the Short Form Impacts Analysis. [246] This document dealt with proposed mergers on a State-wide basis, claiming that reducing the number of councils from 152 to 112 had the potential to generate a net financial benefit to local councils of around $2 billion across New South Wales over a 20 year period. The Short Form Impacts Analysis gave the following explanation of its provenance:

41. [536]

    Among the “merger benefits” claimed in the Short Form Impacts Analysis were the following:

42. [537]

    An earlier version of the Short Form Impacts Analysis was annexed to a Cabinet Submission. It was this document, described as the Long Form Document in Ku-ring-gai, over which PII was claimed. Mr Miller stated in his affidavit claiming PII that the Long Form Impacts Document “was substantially longer… [and] substantially different [from the Short Form Impacts Analysis]”. However, it is clear from Mr Miller’s affidavit that some parts of the Long Form Document were published in the Short Form Impacts Analysis.

43. [538]

    An internal DPC email of 12 January 2016 (six days after the Minister referred the Merger Proposals to the Chief Executive for examination and report) commented on a pending application under the Government Information (Public Access) Act 2009 (NSW) (GIPA Act). The GIPA application sought, among other documentation, supporting material used in the development of the Merger Proposals. The email stated that:

44. [539]

    A technical paper prepared for DPC by KPMG was published on 19 January 2016. The Technical Paper was entitled “Outline of Financial Modelling Assumptions for Local Government Merger Proposals” (KPMG Modelling Assumptions Document). [247] The introduction to the KPMG Modelling Assumptions Document stated as follows:

45. [540]

    Since the KPMG Modelling Assumptions Document is of some importance, it is convenient to reproduce portions of a chart identifying assumptions and data sources for several of the categories of savings said to flow from the proposed merger.

46. [541]

    As can be seen from this extract, the KPMG Assumptions Document set out the assumptions used to calculate categories of projected savings attributed to the merger proposals. The KPMG Assumptions Document also identified data sources used to make the estimates.

47. [542]

    Professor Dollery prepared two reports on behalf of North Sydney. The first report, dated 18 February 2016, was entitled “A Critical Assessment of Merger Proposal: North Sydney Council and Willoughby City Council” and related to the Merger Proposal for North Sydney and Willoughby (Dollery Report 1). The second report, dated 22 March 2016, was entitled “An Analysis of the Financial Case for the Proposed Mosman/North Sydney/Willoughby Forced Amalgamation” and related to the North Sydney Merger Document (Dollery Report 2). Basten JA has referred to the contents of Dollery Report 2. [248] Since these reports were referred to in detail in the course of argument, some further observations should be made.

48. [543]

    First, at the time the reports were prepared Professor Dollery was a Professor of Economics at the University of New England and had held the position of Director of the Centre for Local Government since 1994. He had considerable experience and expertise in the economics of local government in New South Wales. Professor Dollery’s publications include commentaries on various proposals for reform of local government in this State, demonstrating that he had detailed knowledge of successive reform proposals. [249]

49. [544]

    Secondly, it is apparent that Professor Dollery held strong views about the desirability of the merger proposals put forward by the Minister. Both Dollery Reports are very critical of the merger proposals and indeed of the process which led to them. In Dollery Report 2, for example, Professor Dollery stated that:

50. [545]

    For reasons that will be explained, Professor Dollery was not cross-examined. Nonetheless, the flavour of advocacy that is evident in his Reports is relevant in considering the significance of the claim in his affidavit that the “publicly available information from KPMG is not sufficient for me to be able to fully assess the validity of either [of the two Merger] Proposals”.

51. [546]

    Thirdly, Professor Dollery was very critical of a number of steps in the process leading to the North Sydney Merger Document. His criticisms centred on the absence of empirical evidence to substantiate the claimed benefits of amalgamating LGAs. For example, Professor Dollery criticised the ILGRP Report (entitled Revitalising Local Government) on the ground that, like the ILGRP’s Interim Report, it lacked empirical evidence for its proposals. He expressed concern that the NSW Government had endorsed ILGRP’s recommendation that Hunter’s Hill, Lane Cove, Mosman, North Sydney and Willoughby be amalgamated “without adducing any additional supportive empirical evidence”.

52. [547]

    Professor Dollery observed that the Government’s announcement on 18 December 2015 that it intended to create 35 new councils seemed to have been influenced by political considerations. He also observed that the Minister had not provided any explanation for departing so sharply from IPART’s recommendations in the North Sydney Merger Document.

53. [548]

    Fourthly, Professor Dollery, in Section 3.1 of Dollery Report 2, addressed what he described as the “Purported Pecuniary Benefits and Costs” claimed by the Minister in the North Sydney Merger Document. He stated that the claimed benefits were based on KPMG’s financial modelling in the Long Form Report which the NSW Government had declined to release. The North Sydney Merger Document had merely summarised KPMG’s estimates without explaining how they were calculated. This was said to “severely undermine its authority as the basis for a forced amalgamation”.

54. [549]

    After referring to the figures provided in the North Sydney Merger Document, Professor Dollery stated that:

55. [550]

    Professor Dollery noted, however that the NSW Government had “belatedly released” KPMG’s Modelling Assumptions Document in January 2016. He then said, in a passage which contains a typographical error:

56. [551]

    Fifthly, in Section 3.2 of Dollery Report 2, Professor Dollery identified three “major problems” with KPMG Modelling Assumptions Document. These were:

57. [552]

    Sixthly, Section 3.3 of Dollery Report 2 set out in chart form extending over five pages “specific problems” with KPMG’s modelling. An illustration is the portion of the chart considering “Savings from Councillor Expenditure” set out below:

58. [553]

    Seventhly, Dollery Report 2 analysed the North Sydney Merger Document by reference to the criterion stated in s 263(3)(a) of the LG Act. In this section, Professor Dollery stated that the “purported pecuniary costs and benefits” in the North Sydney Merger Document were based on the Long Form Document which the NSW Government had refused to release. Instead, “under pressure” the NSW Government published the KPMG Modelling Assumptions Document which set out the methodology used in calculations contained in the North Sydney Merger Document.

59. [554]

    Professor Dollery said that two important implications flowed from these facts:

60. [555]

    Dollery Report 2 went on to identify a number of “inequities” that would flow from the North Sydney Merger Proposal. These included disparities in rates among existing areas and wealth transfers from North Sydney to Mosman and Willoughby.

61. [556]

    The key passage in Professor Dollery’s affidavit addressed the sufficiency of the publicly available information to assess the “First and Second Proposals”. The “First Proposal” was the proposed merger of North Sydney and Willoughby. The “Second Proposal” was the North Sydney Merger Document.

62. [557]

    The passage is as follows:

63. [558]

    At the hearing in the L & E Court the Minister’s representatives informed North Sydney’s representatives that Professor Dollery was required for cross-examination. On the second day of the trial (1 June 2016) senior counsel for North Sydney stated that for medical reasons Professor Dollery was unavailable on that day. Progressive updates were provided on Professor Dollery’s condition and on the sixth day of the trial (10 June 2016) the Court was told that he would not be available until 27 June 2016.

64. [559]

    On 28 June 2016, North Sydney’s solicitors advised the Crown Solicitor that Professor Dollery would not be available for cross-examination until August 2016. On the tenth day of the trial (4 July 2016) the Court was informed that Professor Dollery was no longer required for cross-examination.

65. [560]

    Basten JA has outlined the requests made by North Sydney and Mosman to the Minister, the Chief Executive and the delegate for the production of KPMG’s independent analysis and modelling and the responses to those requests. [250] The requests included the application by North Sydney pursuant to the Government Information (Public Access) Act 2009 (GIPA Act), the terms of which Basten JA has set out. [251]

66. [561]

    In his response of 22 March 2016, the Director of the Information Access Unit of DPC interpreted the application as seeking access to KPMG analysis and modelling referred to in the Merger Proposal for North Sydney and Willoughby. The Director’s response to this application included the following:

67. [562]

    Basten JA has summarised the submissions made by the parties in relation to the Withheld Documents. [252] It is not necessary for present purposes to restate the Minister’s submissions. However, I think it is useful to explain how the Councils’ submissions developed as the appeal proceeded.

68. [563]

    Mosman’s written submissions in chief [253] pointed out that despite repeated requests for access to the modelling and analysis carried out by KPMG, the material had never been released. Mosman acknowledged that the Minister had disclosed two documents which purported to record some of KPMG’s modelling and analysis. The first was the Short Form Impacts Analysis published on 18 December 2015 [254] and the second was the KPMG Modelling Assumptions Document published on 19 January 2016. [255] Mosman submitted that these published documents did not provide any of the calculations or modelling upon which KPMG’s conclusions were based.

69. [564]

    Mosman accepted that the North Sydney delegate did not have KPMG’s modelling and analysis. However, it submitted that the delegate had relied upon conclusions derived from KPMG’s modelling and analysis. The material could be regarded as “adverse” to the process of examination and report. The effect of non-disclosure of the material was to deprive the Councils of a reasonable opportunity to properly scrutinise the case advanced in support of the North Sydney Merger Document.

70. [565]

    Mosman disputed that it was necessary to show that the information not disclosed was “so damaging and so unforeseeable” that the Councils should not have been left in the dark. [256] But even if that was the test, the KPMG modelling and analysis was “highly damaging” and should have been disclosed. It was impossible for the Councils to have anticipated the contents of the “Full KPMG Report”.

71. [566]

    Mosman submitted that in practice the delegate worked closely with DPC “and between them they could have arranged for the [C]ouncils to access the information subject to a confidentiality regime. If DPC refused, the delegate could have minimised unfairness by declining to place any weight on the KPMG’s conclusions (which the Minister had adopted)”.

72. [567]

    North Sydney’s written submissions in chief were in substance the same as Mosman’s written submissions.

73. [568]

    Mosman’s written reply submissions were filed between the date the judgment in Ku-ring-gai were delivered and the hearing of the appeals. Mosman contended that the reasoning in Ku-ring-gai was directly applicable to the North Sydney Appeal. The failure to disclose the KPMG Documents to the Councils in response to their requests deprived them of the opportunity to respond effectively to KPMG’s claims. Accordingly, the Councils had been denied procedural fairness.

74. [569]

    North Sydney’s reply submissions relied on the decision in Ku-ring-gai to submit that the delegate reporting on the North Sydney Merger Document had constructively failed to exercise the statutory function of examining the Merger Proposal as required by s 263(1) of the LG Act. In Ku-ring-gai, Basten JA, with whom Macfarlan JA agreed, held that because the delegate did not have access to the KPMG Documents on which the Minister’s projections were based, the delegate could not properly discharge his function of examining the Merger Proposal. North Sydney submitted that this reasoning applied to the present case.

75. [570]

    At the conclusion of oral argument, all appellants foreshadowed applications to amend the Notices of Appeal to incorporate a ground of appeal expressly contending that the delegate in each case, in the absence of the KPMG Documents, constructively failed to fulfil the statutory function of examining the Minister’s Merger Proposal. The amended grounds have been set out earlier in this judgment. [257]

76. [571]

    By leave, all appellants filed joint “submissions on publicly available KPMG material and secret KPMG material” (Joint Submissions).

77. [572]

    The appellants invited the Court to reject the Minister’s contention, advanced in oral argument, that the Councils had sufficient information available to them from publicly available documents to have the opportunity to make informed submissions to each delegate about the financial advantages or disadvantages of each Merger Proposal. The Joint Submissions contended that a comparison between what were characterised as the “secret” KPMG Documents and the publicly available KPMG Documents showed that the Councils could not have replicated “KPMG’s detailed financial model(s)”.

78. [573]

    The Joint Submissions placed particular emphasis on the three Withheld Documents, namely, the Long Form Document, the Business Case Document and the Model Design Paper. As to the last of these, they submitted that the Model Design Paper contained detailed information about KPMG’s model design and methodology underpinning the projections contained in the North Sydney Merger Document. They accepted that the published KPMG Modelling Assumptions Document provided information about the assumptions made by KPMG for the purposes of its projections. However, the appellants contended that there were significant differences between the assumptions described in the Model Design Paper and those described in the published KPMG Modelling Assumptions Document.

79. [574]

    The appellants argued that neither they nor their advisors could have replicated KPMG’s modelling underlying the projections. The actual data used by KPMG had never been released. In any event, so it was argued, KPMG went beyond collecting data, for example, by engaging in “data formatting”, the nature of which has never been revealed.

80. [575]

    The gravamen of the Councils’ procedural fairness complaint is that they did not have enough information available to them from publicly available KPMG Documents to allow each of them to make informed submissions about the financial advantages and disadvantages of the relevant merger proposal. [258] It will be seen that the complaint in this form assumes that unless North Sydney and Mosman had access to the undisclosed KPMG Documents they lacked the opportunity to make informed submissions to the delegate about the financial advantages and disadvantages of the North Sydney Merger Document.

81. [576]

    In Ku-ring-gai I stated the general principles relating to the obligation of a decision-maker (in this instance the delegate of the Chief Minister) to afford procedural fairness. I did not understand the appellants to submit that the statement was erroneous. It is therefore convenient to reproduce it: [259]

82. [577]

    The task that the North Sydney delegate had to perform in accordance with s 263(1) and (3)(a) of the LG Act was to examine and report on the North Sydney Merger Document having regard to the financial advantages and disadvantages of the Proposal to the residents and ratepayers of the areas concerned. Procedural fairness, in the circumstances of this case, required that each Council be given the opportunity:

83. [578]

    In my view, the obligation of the North Sydney delegate to afford procedural fairness to the Councils in this case extended to giving the Councils a fair opportunity to comment on and, if appropriate, to attempt to rebut the financial projections and assessment included in the North Sydney Merger Document. Mr Hutley’s submissions on this question were perhaps a little equivocal. He submitted that the Minister’s justification for the North Sydney Merger Document, including the financial projections, had no “legal primacy”. This conclusion, so he argued, followed from this Court’s decision in Woollahra (CA) that in the case of a proposed merger, the only “proposal” that must be referred for examination and report under s 218F(1) of the LG Act is the proposal to amalgamate two or more LGAs. [270] The “proposal” therefore does not include any financial projections or assessments advanced by the Minister as justification for the proposed merger.

84. [579]

    Mr Hutley made this submission principally in support of a contention that a delegate of the Chief Executive, in order to discharge his or her statutory function, was not required to pay particular attention to the Minister’s financial projections. I understood the submission also to be advanced to support an argument that a delegate was not obliged to offer affected councils the opportunity to comment on or rebut the Minister’s financial projections or claimed financial advantages for a particular proposed merger.

85. [580]

    If this was intended to be the argument I do not think it is correct. It is true that the LG Act does not oblige the Minister to publish a merger proposal document incorporating financial projections or an analysis of the financial advantages and disadvantages of the proposed merger. Nonetheless publication of material of this kind in the merger proposal document is consistent with the legislative scheme. Moreover, it is a course that a Minister or Government might be expected to adopt when making public a proposal of such significance, not only to the affected councils but to local residents and ratepayers. Accordingly, if the Minister does put forward financial projections or claims that the merger proposal will generate financial advantages, procedural fairness requires an affected council to be afforded a fair opportunity to comment on the projections and claims and to challenge their reliability or cogency.

86. [581]

    It is, however, one thing for procedural fairness to require a delegate to afford affected councils a reasonable opportunity to comment on and challenge the Minister’s financial projections and claimed benefits for a merger proposal. It is quite another for procedural fairness to require the delegate (or the Minister) to make available to the councils all preliminary analyses or working papers prepared as part of the process of preparing financial projections or arguments in support of a proposed merger.

87. [582]

    In Woollahra (CA) the Court accepted that the Boundaries Commission, in the exercise of its function to examine and report on a proposal to alter the boundaries of LGAs, was bound to give directly affected councils a reasonable opportunity to address the issues s 263(3) required the Commission to take into account. The Court also said that the obligation went no further. In many cases, a council (or any other party with a particular interest in a proposal) will be able to adequately address the issues identified in s 263(3) of the LG Act without access to preliminary assessments or working papers underlying financial projections or claims made by or on behalf of the Minister.

88. [583]

    There may be particular circumstances in which procedural fairness requires an affected council to be given access to documents prepared within the relevant Department or Ministerial office. For example, the Chief Executive responsible for examining and reporting on a merger proposal may have in his or her possession a key Departmental document which, if made available, would expose a significant flaw in the Minister’s assessment of the financial benefits of a merger proposal when compared with the councils’ current performance. A document of this kind is likely to incorporate adverse information that is “credible, relevant and significant to the decision to be made”. Procedural fairness would require the document to be made available to a council requesting it or, perhaps, even without a specific request.

89. [584]

    There may also be circumstances in which procedural fairness requires that a council be given access to documents even though they are not in the possession of the Chief Executive or delegate conducting the examination of a merger proposal. For example, the merger proposal document may make it clear that the Minister’s assessment of the financial advantages of the proposed merger has been informed by a confidential report critical of an affected council’s probity or efficiency. The adverse report may not necessarily be in the possession of the Chief Executive or delegate. In these circumstances, procedural fairness might require the Chief Executive or the delegate to obtain the adverse report and make it available to the council for comment. If this cannot be done, the Chief Executive or delegate might have to determine that it is not possible to complete the independent examination of the financial advantages and disadvantages of the merger proposal required by the statute.

90. [585]

    The North Sydney Merger Document represented the culmination of a long process in which a variety of entities participated. The process included publication of a number of significant documents including the ILGRP Report (October 2013), the IPART Report (October 2015), the Short Form Impacts Analysis (18 December 2015) and the KPMG Modelling Assumptions Document (19 January 2016).

91. [586]

    At each stage of the process one or other of the entities assessed the financial advantages and disadvantages of merger proposals then under consideration. The approach in each case was to apply assumptions to information derived from publicly available data sources of the kind identified by KPMG in its June 2015 proposal to OLG [271] and in its Model Design Paper (July 2015). [272] KPMG explained in the Model Design Paper the limitations of the process due to the constraints of time and resources. KPMG noted that each council’s published LTFP provided the basis for examining the financial impact of each merger option because “collating data from individual councils is beyond the scope and timeframes of this Engagement”.

92. [587]

    KPMG repeatedly emphasised that only a very short time frame was available to complete the tasks it contracted to undertake on behalf of OLG. For example, its proposal of 27 August 2015 to prepare a “robust business case” referred to the need to work within stringent time constraints. [273] The letter of 17 September 2015 confirming KPMG’s engagement to provide a public report on the proposed reforms stated that a final report would be prepared within two weeks. [274]

93. [588]

    The process in which KPMG played a key role, insofar as it concerned financial matters, involved estimating the savings and costs that would flow from the proposed mergers. This was done by applying assumptions for a range of variables to data compiled from publicly available sources. The process operated at two levels. Much of the work, for example, for the purposes of preparing the Business Case Document, was designed to provide estimates or projections on a State-wide or regional basis. Some of the work was directed to the 35 individual merger proposals that ultimately emerged from the process, although the proposed clusters changed from time to time. But at each level the process involved the application of assumptions to publicly available data.

94. [589]

    As is common with the presentation of projections as to future financial performance, the results of the work performed by KPMG (and others involved in the process) gave the appearance of precision. Thus, the North Sydney Merger Document, for example, claimed that “the removal of duplicate back office and administrative functions and reducing senior management roles” would produce savings of $87 million over 20 years. In reality the apparently precise or reasonably precise projections, whether presented on a State-wide basis or in relation to particular merger proposals, depended on which assumptions were applied to the data. Different assumptions applied to matters such as the efficiency savings likely to be achieved on expenditure for materials and contracts would inevitably produce very different outcomes. Moreover, the longer the period for which projections were to be made, the greater the differences that would result if the assumptions were changed.

95. [590]

    It is clear that Professor Dollery was very much alive to the significance of assumptions to the financial projections adopted by the Minister. It is also clear that Professor Dollery was very familiar with the reform process as it had evolved over time and the approach taken by KPMG.

96. [591]

    In his detailed report prepared for North Sydney, Professor Dollery criticised what he said was the absence of empirical evidence to support many of the assumptions applied by KPMG and adopted by the Minister. More significantly for present purposes, he identified a “host of specific problems” with the assumptions used by KPMG as the basis for its financial projections. He was able to do this because the assumptions were outlined in the publicly released KPMG Modelling Assumptions Document.

97. [592]

    For example in Dollery Report 2, Professor Dollery criticised the “critical claim” made by KPMG that overall staffing efficiencies would be 7.4 per cent for metropolitan council mergers. He pointed out that the experience of council mergers in Queensland suggested that amalgamated councils actually had a higher annualised rate of growth in nominal terms than the non-amalgamated cohort. Similarly, Professor Dollery also questioned the costs attributed by KPMG to redundancies on the basis of the Queensland experience. His detailed analysis of projected savings from councillor expenditure [275] concluded that KPMG’s projection was ‘deeply flawed”. As can be seen from Professor Dollery’s close examination of the issue, [276] he was able to challenge KPMG’s analysis by referring to precise data, such as the quantum of fees payable to councillors and the maximum number of councillors permitted under the legislation.

98. [593]

    The contents of Dollery Report 2 demonstrate quite clearly in my view that North Sydney not only had the opportunity to make informed submissions about the assumptions underlying the Minister’s financial projections and the financial projections themselves but took full advantage of that opportunity. Professor Dollery criticised many of the assumptions underlying the Minister’s projections and drew attention to empirical evidence suggesting that KPMG and the Minister had overestimated the financial advantages of the North Sydney Merger Document. Professor Dollery had access to all the published sources of information to which KPMG applied its assumptions and had the expertise to analyse the material. If North Sydney or Mosman had unpublished financial information specific to them that strengthened their respective cases, Professor Dollery doubtless could have sought that information and incorporated the material into his reports.

99. [594]

    Professor Dollery’s claim in his affidavit that the publicly available information from KPMG was insufficient to enable him to “fully assess the validity of [the North Sydney Merger Document]” does not carry the matter further. Professor Dollery did not explain in his affidavit what he meant by this expression. In any event, procedural fairness does not necessarily require an interested party to “fully assess the validity of” a particular proposal. Procedural fairness required, in the context of the present case, that an affected Council be given a fair opportunity to make submissions on the Minister’s financial projections and claimed financial advantages for the North Sydney Merger Document and to answer adverse information that was credible, relevant and significant to the decision.

100. [595]

     Furthermore, Professor Dollery’s complaint that he was unable to fully assess the North Sydney Merger Proposal did not rest solely on his inability to access KPMG’s unpublished documents or analyses. He said that his inability to fully assess the proposal was also due to “errors and inconsistencies” in KPMG’s published documents and the absence of empirical evidence to support KPMG’s analysis. It is difficult to see how Professor Dollery would have been in any better position to expose these alleged defects if he had access to any of the Withheld Documents.

101. [596]

     Professor Dollery recorded in his affidavit his expectation that the “missing information” he needed would be found in the “withheld” material. He did not explain the basis for his expectation. In my opinion, the evidence does not support the Councils’ claim that the Withheld Documents would have materially enhanced their ability to make informed submissions on the reliability of the Minister’s financial projections.

102. [597]

     As I have noted, North Sydney and Mosman placed considerable emphasis on the Model Design Paper, which was in evidence but was not made available to them prior to completion of the North Sydney Delegate’s Report. The Model Design Paper was prepared six months before the KPMG Modelling Assumptions Document was released. At the time the Model Design Paper was completed the clusters for proposed mergers had not been finalised.

103. [598]

     The Model Design Paper set out a proposed methodology for aggregating data, formulating assumptions and applying the assumptions in order to estimate “merger impacts”. The stated object was to create a suitable format for “reporting and visualisation”. In substance, the Model Design Paper created a broad framework within which the impact of proposed mergers could be addressed. The framework provided for the formulation of more precise assumptions to assess the financial consequences of mergers.

104. [599]

     It is true, as the Councils’ submissions pointed out, that there were differences between the assumptions recorded in the Model Design Document and those adopted by the KPMG Modelling Assumptions Document (although it is fair to say that the two sets of assumptions are broadly consistent). But the differences simply reflect the fact that KPMG modified and refined some of its financial assumptions over the six month period it worked on the project. Access to the Model Design Document would have done little if anything to enhance the capacity of Professor Dollery or the Councils to make informed submissions on the financial projections and claims in the North Sydney Merger Document.

105. [600]

     The Councils also complained of their inability to gain access to the Business Case Document and the Long Form Document. As I have noted, PII was asserted over each of these documents and neither was tendered in the proceedings. Unlike Ku-ring-gai, however, the Court’s attention in this appeal was drawn to evidence indicating the nature of each of these documents. The evidence suggests that access to these two Withheld Documents would not have materially assisted the Councils to make more informed submissions to the delegate concerning the financial projections and claimed financial advantages set out in the North Sydney Merger Document.

106. [601]

     The Business Case Document was prepared by KPMG pursuant to its proposal to the OLG of 27 August 2015. [277] KPMG’s proposal made it clear that the purpose of the exercise was to prepare a document establishing the case for change, taking into account the extensive work already completed by the ILGRP. The Business Case Document was to be framed at a general level, dealing with such matters as the financial sustainability of the Local Government sector. KPMG was to derive all key economic, financial and regulatory impacts of the proposed reforms from the Options Analysis it had previously undertaken. This appears to have been a reference to KPMG’s Options Analysis Document, which had been provided to OLG on 12 August 2015. [278] The Options Analysis Document provided only a very brief overview of the financial impacts of the two relevant mergers contemplated at the time, namely, Hunter’s Hill, Lane Cove and Ryde and North Sydney, Mosman and Willoughby.

107. [602]

     The Business Case Document was completed on 14 October 2015. While its precise contents are not known, the evidence makes its character tolerably clear. It was general in nature and directed to making a case for the Government’s strategy of amalgamating LGAs in New South Wales. On the evidence, access to the Business Case Document would not have materially advanced the understanding of the Councils or their advisers as to the financial assumptions formulated and applied by KPMG or the data relevant to the North Sydney Merger Proposal to which the assumptions were applied.

108. [603]

     As has been seen, the Long Form Document was a longer version of the Short Form Impacts Analysis published on 18 December 2015. Both were prepared by KPMG (so it can be inferred) in accordance with the template set out in KPMG’s letter of 17 September 2015. [279] Consistent with that template, the Short Form Impacts Analysis addressed the benefits of the proposed mergers at a general level, rather than by reference to particular merger proposals.

109. [604]

     Mr Miller’s affidavit stated that the Long Form Document was longer than and substantially different from the Short Form Impacts Analysis, although parts of the former were included in the latter. The likelihood, however, is that the Long Form Document also followed the template set out in KPMG’s letter of 17 September 2015 and did not address the financial advantages and disadvantages of particular proposed mergers.

110. [605]

     This inference is supported by the fact that it was not until 26 November 2015 that OLG provided KPMG with an “updated list of merger proposals” (which even then proved not to be final). The conclusion is also supported by DPC’s letter of 22 March 2016, sent in response to North Sydney’s application under the GIPA Act. [280] The letter stated that the modelling assumptions set out in the published KPMG Modelling Assumptions Document were fed into KPMG’s proprietary model to produce modelling outputs for each of the mergers. The letter also stated that KPMG did not prepare a different analysis and modelling report for each merger in addition to the 35 Merger Proposal Reports.

111. [606]

     Clearly, KPMG would have had to use a computer program, such as Microsoft Excel in order to produce projections for each of the 35 Merger Proposals. But equally clearly, that process involved applying the published assumptions to publicly available data relevant to each of the proposed mergers. As the DPC’s letter said, the use of computer programs did not involve KPMG undertaking any further analysis and modelling for each of the proposed mergers.

112. [607]

     North Sydney and Mosman were afforded procedural fairness in that they were given the opportunity to make informed submissions on the financial projections and claimed financial advantages set out in the North Sydney Merger Document. The fact that they did not have access to the Withheld Documents did not prevent them from presenting their views and doing so in a way that effectively engaged with the projections and claim in the North Sydney Merger Document. In essence, the Councils’ complaints rested on a misapprehension as to the contents and import of the Withheld Documents. Accordingly, North Sydney and Mosman have not made out their claim to have been denied procedural fairness by the Minister or the delegate.

113. [608]

     In my view there is no inconsistency between this conclusion and the reasoning of Basten and Macfarlan JJA in Ku-ring-gai. The argument in that case proceeded on an assumption as to the nature of the Withheld Documents, the correctness of which has not been borne out by the evidence in this case. While many of the relevant documents in fact were in evidence in Ku-ring-gai, the Court was not taken to them in the way that has now occurred.

114. [609]

     This conclusion provides a factual answer to the appellants’ submission that procedural fairness required the Minister or the delegates to take active steps to obtain the Withheld Documents and make them available to the appellants. Even assuming that procedural fairness might oblige a decision-maker (or recommending entity) to take such steps, the appellants have not established that they needed access to the Withheld Documents in order to have a fair and reasonable opportunity to put their cases to the delegates. Specifically North Sydney and Mosman have not shown that they needed access to the Withheld Documents to have a fair and reasonable opportunity to put their case to the delegate responsible for the North Sydney Delegate’s Report.

115. [610]

     The conclusions I have reached on the requirements of procedural fairness do not depend on the circumstances that the delegate conducted the examination of the North Sydney Merger Proposal, rather than the Chief Executive personally. I accept that the principles of procedural fairness apply equally to the examination of a merger proposal required by s 218F(1) of the LG Act, whether the examination is conducted by the Chief Executive or a delegate.

116. [611]

     There were obvious practical reasons in the present case why the Chief Executive could not personally examine the 35 merger proposals published by the Minister. Quite apart from the number of examinations that had to be undertaken, the Chief Executive presumably had been closely involved in the process leading up to publication of the merger proposal documents.

117. [612]

     If, however, the Chief Executive had personally conducted the examination of the North Sydney Merger Proposal, for the reasons I have given, procedural fairness would not have required the Withheld Documents to be made available to the Councils. Of course it is possible that the Chief Executive (unlike the delegate) would have known the contents of the Withheld Documents (for example, because the Chief Executive decided to claim PII over them). In these circumstances, procedural fairness perhaps might have required the Chief Executive to explain to the Councils why the Withheld Documents were not material to the examination. But since the Withheld Documents did not contain credible material adverse to the Councils’ contentions, the Chief Executive would not have been obliged to release the Withheld Documents.

118. [613]

     The challenge by North Sydney and Mosman to the validity of the North Sydney Delegate’s Report rested on the delegate’s alleged failure, in the absence of the withheld KPMG Documents, to fulfil the statutory function of examining the North Sydney Merger Proposal. In particular, the Councils contended that the delegate did not have regard to the financial advantages and disadvantages of the North Sydney Merger Proposal as required by s 263(3)(a) of the LG Act and thus constructively failed to exercise his statutory functions.

119. [614]

     The North Sydney Delegate’s Report did not accept uncritically the Minister’s claims made in the North Sydney Merger Document as to the financial projections and advantages of the Merger Proposal. Mr Robertson acknowledged in oral argument that the North Sydney delegate had undertaken a “degree of analysis”. This acknowledgement in my opinion understates the extent to which the delegate examined the financial advantages and disadvantages of the North Sydney Merger Document, including the criticisms advanced by Professor Dollery. Mr Robertson’s comment did recognise that the delegate clearly made a serious attempt to grapple with the assumptions underlying the Minister’s claims about the financial advantages of the proposed merger.

120. [615]

     The delegate referred to the submissions made by each of the affected Councils. Under the heading “Financial Analysis” he stated that he had considered a report prepared by the New South Wales Treasury Corporation (TCorp) on the sustainability of individual councils. In this report, TCorp assessed each Council’s Financial Sustainability Rating (FSR) over a three year period. The delegate quoted the FSR assessment made by TCorp for Mosman (weak), North Sydney (moderate) and Willoughby (moderate).

121. [616]

     The delegate also referred to IPART’s assessment of the three Councils the subject of the North Sydney Merger Proposal. IPART had determined that none of the three was fit to remain as a stand alone entity. Operating individually, each Council had “limited scale and capacity to effectively deliver on behalf of residents and meet future community needs.”

122. [617]

     The delegate then considered the financial forecasts in the North Sydney Merger Document. His assessment was as follows:

123. [618]

     The North Sydney delegate concluded as follows on the financial issues:

124. [619]

     Appendix D (as it is headed) to the North Sydney Delegate’s Report contained a detailed four page analysis of Professor Dollery’s criticisms of the KPMG modelling. The analysis addressed ten separate issues and explained why the delegate considered that, despite the criticisms, the claimed financial benefits of the merger had a reasonable basis. For example, the delegate addressed the question of “Staffing Costs” as follows:

125. [620]

     The North Sydney Delegate’s Report, when read as a whole, makes it clear that the delegate did not accept the Minister’s claims and financial projections uncritically. He carefully considered whether the claims and projections were soundly based. The delegate did so by paying close attention to the criticisms made by Professor Dollery and explaining why the assumptions underlying the Minister’s claims and financial projections were nonetheless reasonable. The delegate then directed attention to the specific question posed by s 263(3)(a) of the LG Act and concluded that the financial advantages of the North Sydney Merger Document outweighed the disadvantages.

126. [621]

     North Sydney and Mosman submitted to the delegate that he was not in a position to examine the financial advantages and disadvantages of the North Sydney Merger Document without having access to the Withheld Documents. In this Court, the Councils criticised the delegate for not expressly addressing the submissions in the North Sydney Delegate’s Report.

127. [622]

     This criticism has to be considered in the light of the well-established principle, recently reaffirmed by the High Court that “[t]he reasons for [an administrative] decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error”. [281] It is implicit in the delegate’s approach that he considered that he could address the financial advantages and disadvantages of the North Sydney Merger Proposal notwithstanding that he had not seen the Withheld Documents. The delegate simply could not have dealt with that question as he did unless he had formed the view that the available material enabled him to understate the required task.

128. [623]

     It is also necessary to bear in mind that the delegate was not presiding over a trial between adversaries. The delegate was examining and reporting on a merger proposal that raised many issues for consideration. Numerous individuals and bodies, including the Councils, responded to the invitation to make submissions or attend the public meetings. The delegate had to take these contributions into account. The legislation obliged the delegate to hold a public inquiry, [282] but it otherwise provided little guidance as to the procedures the delegate (or the Chief Executive in the absence of a delegation) was to follow. In these circumstances, the absence of an express reference to a particular submission does not establish that the delegate failed to discharge his statutory function.

129. [624]

     To the extent that it matters, the evidence shows that the delegate did not in fact require access to the withheld KPMG Documents in order to fulfil his statutory functions. Access to those Documents would not have materially assisted the delegate in performing his statutory functions.

130. [625]

     For these reasons I do not accept the submission by North Sydney and Mosman that the delegate failed to discharge the statutory function of examining the North Sydney Merger Proposal having regard to its financial advantages and disadvantages.

131. [626]

     The appeals by North Sydney and Mosman should be dismissed. I agree with the orders proposed by Macfarlan JA in respect of those appeals.

Strathfield Merger Proposal

1. [627]

   Basten JA has set out the material facts relating to Strathfield’s challenge to the Delegate’s Report dealing with the Strathfield Merger Proposal. As his Honour observes, the issues raised by Strathfield mirror those raised in the other appeals. [283] Accordingly, the issues can be dealt with very briefly.

2. [628]

   Strathfield’s submission to the delegate was less elaborate than the submissions made, for example, by North Sydney which relied heavily on Dollery Report 2. Even so, Strathfield had precisely the same opportunity to make submissions on the financial projections and claims in the Strathfield Merger Document as North Sydney and Mosman had in relation to the North Sydney Merger Document. Indeed Strathfield’s submission to the delegate referred both to the Morrison Low Report and Dollery Report 2 and adopted some of the arguments in those reports.

3. [629]

   For substantially the same reasons I have given in rejecting the procedural fairness argument in the North Sydney Appeal, I reject Strathfield’s procedural fairness argument in the Strathfield Appeal.

4. [630]

   The Strathfield Delegate’s Report differed from the Hunter’s Hill Delegate’s Report and the North Sydney Delegate’s Report. Under the heading “Financial factors”, the Strathfield Delegate’s Report did no more than summarise the financial advantages asserted by the Minister in the Strathfield Merger Document. The Strathfield Delegate’s Report did not engage with Strathfield’s submission or with the material referred to in that submission. Nor is there anything to indicate that the delegate made any attempt to assess whether the Minister’s financial projections and claims were reasonable.

5. [631]

   In short, the Strathfield Delegate’s Report indicates that the delegate did not exercise an independent judgment in assessing the financial advantages and disadvantages of the Strathfield Merger Proposal. The delegate therefore failed to perform the function required of him by s 263(3)(a) of the LG Act.

6. [632]

   Ground 5A of the Strathfield Further Amended Notice of Appeal contends that the primary Judge erred in failing to find that in the absence of the Withheld Documents the delegate constructively failed to fulfil the statutory functions of examining the Strathfield Merger Proposal. Although Ground 5A focuses attention on the delegate’s failure to obtain the Withheld Documents, I think Ground 5A is broad enough to cover the delegate’s failure to exercise an independent judgment in the manner I have identified.

7. [633]

   For these reasons I would allow Strathfield’s appeal. I agree with the orders proposed by Basten JA in respect of this appeal.