The Timaru, Whangarei and Waimakariri District Councils unsuccessfully challenged the Government’s Three Waters reforms. They sought declarations recognising important common law principles related to democratic local governance and property rights.
The Government’s proposed Three Waters reform aims to change how drinking water, wastewater and storm water services are provided. These services are currently provided by local authorities to their communities through infrastructure assets the councils own.
At the time these proceedings were lodged, the Government sought to shift the delivery and operation of three waters services from local councils to four new multi-regional water service entities. Future reforms intended to transfer council-owned infrastructure assets to those entities, however local councils would not be compensated for the value of their assets. As part of their Three Waters ‘reset’ in April 2023, the Government has proposed a smaller set of ten regional entities to replace the previous four mega-entities. The ten regional water services entities would be established based on existing local authority boundaries. The ‘reset’ has delayed the Three Waters reforms by two years and is due to come into force in 2026.
The Timaru, Whangarei and Waimakariri District Councils (the Councils) oppose the proposed reforms. They are concerned the reforms will cause a loss of local democratic accountability and deprive the Councils of assets that local communities have funded over generations.
The Councils sought three declarations in a bid to challenge the implementation of the Three Waters reforms:
A. Local government is an important and longstanding component of the democratic governance of New Zealand.
B. Important and longstanding principles and features of the democratic governance of New Zealand at the local level include:
a) Local infrastructure assets are owned and/or controlled, and related services are provided by local councils;
b) Local councils are responsive/and democratically accountable to their communities for the provision of infrastructure assets and related services;
c) Local councils owe (or may owe) fiduciary-like obligations to their communities; and
d) Their communities have wholly or materially funded local government infrastructure assets.
C. The Councils’ rights of ownership in relation to infrastructure assets include the following:
a) The exclusive ability to prevent others from interfering with such assets;
b) The exclusive possession or control of such assets;
c) The exclusive ability to manage and operate, and/or enter into contracts about such assets;
d) The exclusive ability to modify or replace the assets;
e) The exclusive ability to use such assets as security for borrowing; and
f) The exclusive entitlement to receive compensation if their ownership of the assets is removed by legislation.
A declaratory judgment is a formal statement by a court pronouncing the rights or legal position of the parties as they stand. The Crown submitted that the declarations sought were too abstract and general to come within the jurisdiction of the Declaratory Judgments Act 1908. The Crown contended that the Court’s jurisdiction extended to legal rights but not to ‘components’, ‘principles’, or ‘features’ of local government.
Mallon J took a broad view of the ‘catch-all provision’ under the Act which permits the Court to make declarations concerning legal rights. Her Honour agreed with the Councils that the common law includes fundamental values and principles. The declaratory relief sought to establish that the Three Waters reforms disturbed important constitutional law principles affecting the Councils and their communities. The Court accepted that they fell within the broad ‘stand-alone’ jurisdiction for declarations of legal rights.
Having determined that it had jurisdiction to make the declarations sought, the Court assessed whether it should do so in light of the relevant discretionary factors.
Both the Crown and the Court accepted that local government is an important and longstanding component of the democratic governance of New Zealand. Mallon J held the declarations sought do not accurately reflect this principle. The Local Government Act 2002 already defines the purposes and principles of local government, including democratic accountability. Her Honour disagreed this principle required local authorities to own or control local infrastructure assets, nor is it a ‘feature’ that cannot be changed. Just as Parliament conferred those functions and powers, it can remove them. It is for Parliament to decide whether local councils retain the ownership and control of local infrastructure assets and related services, and how those services should be delivered. The Court agreed with the Crown’s arguments and held the proposed declarations were constructed abstractly and devoid of any utility.
The Councils relied on the common law principle of the right not to be forcibly deprived of property without compensation unless there is legislative authority. The Court acknowledged that it is a principle of statutory interpretation to construe statutes in recognition of this right. The Councils submitted that they were entitled to receive proper compensation if they were to lose ownership of their Three Waters assets through legislation. The Crown argued that this right is limited to the deprivation of private property. The Crown also submitted that the Councils’ ownership rights sit within a complex legislative and regulatory framework that has always been subject to the sovereignty of Parliament, which the Councils’ declarations failed to acknowledge.
The Court agreed with the Crown’s arguments. The declarations sought were framed too generally and inaccurately captured the full framework of local government ownership rights regarding infrastructure assets. Mallon J accepted that “the Three Waters reforms involve a form of expropriation for which compensation could be given, but whether it is, is ultimately a matter for Parliament”.
Mallon J held that granting the declaratory relief would be an inappropriate exercise of the Court’s discretion. To do so would be inconsistent with the principle of non-interference because the “courts should not try to dictate, by declaration or a willingness to award damages or any other form of relief, what should be placed before Parliament”. While the declarations had been carefully framed to avoid the principle of non-interference, they nevertheless aimed to influence the legislative process.
The Councils submitted that Parliament should not proceed with the reforms without being properly informed of the important principles and rights addressed in the declarations. The Court held the declarations were unnecessary for such a purpose. If the reforms proceed, Parliament would be doing so knowing that they are expropriating councils’ water services assets, diluting the councils’ control of those assets, and removing the local democratic accountability inherent in the governance and management of those assets.
The Councils’ application for declaratory relief was dismissed.
The Timaru and Waimakariri District Councils have filed a notice of appeal and intend to challenge the High Court decision to refuse the declarations. The Councils announced they intend to approach other local authorities who may wish to join the proceedings. Whangarei District Council decided to join the appeal in August 2023.
Following the change of Government after the 2023 general election, the Timaru District Council voted on January 30 2024 to withdraw the appeal. This came after the declared intent of the incoming Local Government Minister to repeal the Three Waters reforms.
For further information on this case or similar issues, please contact Director Brigitte Morten
