Australia: Fatal blow or flesh wound? Court dismisses challenge to NSW Government's forced Council amalgamations

The decision casts significant doubt on the likely success of the pending challenges to the council amalgamation process brought by other councils.

NSW Government's forced amalgamations of local councils, which arguably is the most important micro-economic reform in the State, is still on track, after the Land and Environment Court comprehensively dismissed Woollahra Council's challenge. While this raises doubt about the prospects of upcoming challenges by other NSW councils, there is more to come, with the council lodging an appeal (Woollahra Municipal Council v Minister for Local Government [2016] NSWLEC 86).

What happened?

On 6 January 2016, the Minister made 35 proposals for local councils to be amalgamated under section 218E(1) of the Local Government Act 1993, one of which involved a proposal to amalgamate Woollahra, Randwick and Waverley Councils.

The Minister referred these proposals to the Acting Chief Executive of the Office of Local Government. The Acting Chief Executive's Delegate held public inquiries as required under the Local Government Act, and sent his report to the Boundaries Commission for review and comment.

A number of local councils sought to challenge the decision and the process which was undertaken by the Government, the Delegate and the Boundaries Commission.

On 12 May 2016, the Minister announced the creation of 19 new councils which were proclaimed the same day in the Gazette. The Minister put nine proposed mergers on hold, including that relating to Woollahra Council, pending the outcome of court appeals.

Woollahra Council alleges there were flaws in the process

Woollahra Council challenged the proposal to amalgamate it with Randwick City Council and Waverley Council.

Woollahra Council claimed that the Delegate did not:

  • give reasonable public notice of the holding of the public inquiry;
  • hold a reasonable inquiry in accordance with section 263(2A) of the Local Government Act;
  • examine the proposal as required by section 218F and section 263(1) of the Local Government Act; and
  • accord Woollahra Council procedural fairness in the inquiry or examination stages.

Woollahra Council claimed that the Boundaries Commission did not:

  • conduct a review of the Delegate's report as required under section 218F(6)(b) of the Local Government Act; and
  • accord Woollahra Council procedural fairness in its review of the Delegate's report.

Woollahra Council also claimed that the Government made false and misleading representations that the KPMG reports relied upon by the Government for its decision were independent.

The Land and Environment Court decides the Local Government Act was complied with

The Chief Judge of the Land and Environment Court, Justice Preston, rejected all of Woollahra Council's grounds for challenging the council amalgamation process.

The Court held that:

  • the public notices of the holding of the inquiry contained adequate information regarding when and where the inquiry was to be held, the particular inquiry that was to be held and the purpose of the inquiry, as required under section 263 of the Local Government Act;
  • the Local Government Act does not require that the public inquiry needs to have "a structure and forensic process similar to that of an administrative trial", under section 263 of the Local Government Act;
  • the Delegate was not legally obliged to "scrutinise, test and interrogate" claims made by the Minister or the proposal;
  • the Delegate had considered in his report the financial advantages and disadvantages to residents and ratepayers, as required under section 263(3)(a);
  • the legislative function of the Boundaries Commission does not require it to express its own view on the merits of the proposal;
  • the Boundaries Commission was not required to disclose adverse submissions to affected persons under section 263 of the Local Government Act;
  • there was no denial of procedural fairness by the Delegate not disclosing the KPMG reports as the Delegate had not been provided with the reports and it was not established that these documents were so damaging or unforeseeable that required them to be disclosed;
  • the Boundaries Commission was not under a duty to accord procedural fairness under the statutory power under section 218F(6)(b);
  • the representations that the KPMG report was independent was not false and misleading as KPMG exercised professional judgment in undertaking the analysis; and
  • even if the representations were false and misleading, they did not invalidate the process as the statements were not included in notices or documents required to be produced under the Local Government Act.

Accordingly, Justice Preston dismissed the appeal and ordered Woollahra Council to pay the Minister's costs of the proceedings.

What's next?

The Woollahra Council will appeal the decision of the Land and Environment Court so this is not the last word.

The decision casts significant doubt on the likely success of the pending challenges to the council amalgamation process brought by other councils including North Sydney, Botany Bay, Ku-ring-gai, Mosman, Strathfield and Hunters Hill councils, until and unless the Court of Appeal rules otherwise.

The decision also clarifies the requirements of the amalgamation process under the Local Government Act and may clear potential hurdles for future forced amalgamations.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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