Alexandra Miller

As part of the coalition agreements with ACT and NZ First, the Local Government (Electoral Legislation and Māori Wards and Māori Constituencies) Amendment Act 2024 (“Amendment Act”) was passed. This reintroduces the requirement that local government hold public polls to establish Māori Wards and Constituencies rather than being able to establish them by resolution. So, what are Māori Wards and Constituencies, what exactly is the change and what is the controversy surrounding the decision?

What are Māori Wards and Constituencies?

Wards refer to a geographical area within a district or city (territorial authorities). For example, Wellington City Council has five general wards; for the northern, eastern, southern, western, and central areas. Regional authorities have constituencies instead of wards which are the same concept. The Greater Wellington Regional Council has six constituencies for instance, including areas such as the Wairarapa and the Kapiti Coast.

The number of councillors for each ward or constituency depends on the resident population of each area in relation to the total population of the district, city or region.

A Māori ward (if established) comprises all persons on the Māori electoral roll within the territorial or regional area and the number of councillors is determined by a formula based on the proportion of the Māori electoral population to the total electoral population.

What has changed?

Under the Local Electoral Act 2001, if an authority decided to establish a Maori Ward, they had to notify the public of their right to demand a referendum. If 5 percent of electors agreed, a referendum was required. However, in 2021, the Labour Government removed these mechanisms so that authorities could not hold referendums and were able to establish Māori wards by resolution. National and ACT opposed this, and it was part of the coalition agreements that the 2021 changes would be repealed.

These agreements have been delivered through the passing of the Amendment Act  in July 2024. Specifically, the Act provides that authorities that either established or resolved to establish Māori wards or constituencies without polling residents, would need to decide by 6 September 2024 whether to retain or dissolve them, or affirm or rescind the resolution. If they chose to retain them or affirm the resolution, the local authority is required to hold a referendum alongside the 2025 local elections. The poll is binding and local authorities cannot establish a Māori ward if more than 50% of the valid votes cast are “No” votes.

There are 45 local councils that this change applies to. Only the Kaipara District Council chose to disestablish its Māori ward, with the Upper Hutt City Council rescinding its resolution to establish at least one Māori Ward for the 2025 and2028 local elections. The other 43 local authorities will therefore be required to hold binding referendums at the next election to determine whether to establish Māori Wards.

If an authority, who does not yet have a Maori ward, wishes to establish one, they will need to hold a referendum.

What is the Controversy?

This decision has attracted political debate. A Waitangi Tribunal report released in May 2024 concluded that the Crown had breached its Treaty obligations, and that the pre-2021 process to establish Māori wards and constituencies was discriminatory and inconsistent with treaty principles.

Local government also have certain statutory obligations to include Māori in local decision-making. There is an argument that the use of Māori wards and constituencies is a mechanism to ensure such obligations are met. Further, there has been back lash from Council’s due to the requirement they cover the cost of holding a referendum.

The argument in favour of holding referendums places the unitary nature of New Zealand’s legal system at the forefront. Creating a specific ward or constituency for Māori may be seen as favouring Māori as a minority over that of the rest of the population. In some councils, the number of Māori enrolled to vote in a Māori ward might be significantly smaller than the number of general electors in a regular ward. This could lead to the perception that each Māori vote carries more weight, potentially giving Māori voters disproportionate influence in local council decisions. This goes against the notion of “majority rule” in a democracy. There is also an argument that Wards are not required for the fulfillment of obligations owed to Māori under the Treaty and under local government law.

For further information on this case or similar issues, please contact Director Brigitte Morten.

Summary

The Court of Appeal (“CA”)has upheld the Employment Court’s decision in E tū Inc & Anor v Raiser Operations BV & Ors finding that the true nature of the relationship between Uber and its drivers, was one of employment. The Court clarified the test to be applied under section 6 of the Employment Relations Act 2000.

Background

The distinction between employer and contractor is significant, in light of the protections and benefits afforded to employees and conversely the obligations or lack thereof of businesses when engaging workers.

In E tū Inc & Anor v Raiser Operations BV & Ors the Employment Court decided that certain Uber drivers were not contractors, as their written agreement specified, but were actually employees.

This decision was appealed by Raiser Operations BV & Ors to the CA.  

The Case

The CA considered:

1.   That the Employment Court had erred in misdirecting itself on the interpretation of section 6 (the meaning of “employee”); and

2.   Therefore, it needed to consider what the result would be in applying the correct section 6 test to the facts.

Interpretation of s6

The CA identified there was an error of law in the Employment Court’s approach to the interpretation of section 6 when it found that the provision should be construed purposively. The CA held reservations about the Employment Court’s statement that it needed to ascertain who the legislation was intended by Parliament to extend minimum worker protections to and its emphasis on vulnerability. The CA confirmed that Parliament clearly intended protections to apply to employees, and the only task of the Court is to apply the test set out by the Supreme Court in Bryson v Three Foot Six Ltd.

The CA found that the Chief Judge had misdirected the section 6 test by posing it in an overly broad way due to infusing common law tests into other inquiries. The fundamental test was framed by the Chief Judge as asking “who benefitted from the work undertaken by the [four] drivers” and who was working for whose interests”. The CA considered that expressing the test in this way did not assist in distinguishing between employees and other workers. For instance, an independent contractor could be described as working in the interests of their principal. The fundamental test is focused on the central issue of identifying the true nature of the arrangements between a worker and the principal for whom they work, by asking “is the worker in business on their own account? Or are they employed in the principal’s business?”

Applicationof Test

The CA determined that given the finding under the first question, it was relevant to consider what the result would be in applying the correct section 6 test to the facts.

1 Real Nature of Relationship

The starting point was the substantive rights and obligations contained in the agreement and other contractual obligations of the parties. The CA first looked at the agreements as written (“in theory”), and then the agreement “in practice”.

The documents were complex and sophisticated, and reflective of Uber’s preferred view of the relationship including that it would provide services to drivers, with drivers paying Uber for those services via a service fee, and that drivers are not paid by Uber, but provide transportation services to riders who pay the driver for those services with Uber being a payment intermediary.

In practice, the CA found that “although the driver agreement [had] been crafted to avoid the appearance of an employment relationship, many of the provisions designed to point away from employee status [were] window-dressing”. For instance, control over when, where and how drivers carry out work, was found to be exercised by Uber through its incentive schemes.

The parties’ intentions were then assessed, with the CA confirming that the labels a party places on the relationship is not determinative of intention of the relationship. The Employment Court’s consideration of evidence relating to the subjective intentions of the drivers was considered irrelevant, as the test is what would be “known to a reasonable person observing the parties’ dealings”. The key indicators of the parties intention were found in provisions that:

a)   precluded drivers from ultimately building up any form of personal business goodwill while driving for Uber; and

b)   reserved a high level of unilateral control to Uber.

2 Common Law Tests

The second stage of the inquiry is to consider the common law tests identified by the Supreme Court in Bryson, including:

1.   Control – there are sanctions for a driver declining requests once they are logged into the app and this resulted in a high level of control from Uber. This was found to be consistent with an employment relationship.

2.   Integration – the only people working for Uber in New Zealand are the approximately 6,000 drivers (plus one policy representative). However the CA didn’t see the Employment Court’s finding that the drivers were integrated into the business when they were driving, as a strong indicator of employment status.

3.   The Fundamental Test (whether the person is working on their own account) – It was found that drivers were not in business on their own account. Uber unilaterally determines the terms of the driver agreement including performance standards and pricing, and exercises full control over the terms when a driver is logged into the app. They therefore have no opportunity to establish any business goodwill of their own while logged on which was considered “critical”.

After considering all relevant matters under the guidance of Bryson, the CA found the real nature of the relationship was that the drivers were employees. They were not carrying on their own independent transport service businesses.

Result and Significance

The Appeal was dismissed.

Whilst the Employment Court’s decision that the drivers were employees was upheld, the CA decision clarified the test to be taken in determining the true nature of a working relationship, including that the test as outlined in Bryson has not been extended. This is important guidance for both business owners and workers in determining rights and obligations.

For further information on this case or similar issues, please contact Brigitte Morten, Director

Summary

The High Court declined an application for judicial review of the Electricity Authority’s (“Authority”) decision to grant Transpower New Zealand Ltd (“Transpower”) a discretionary power to reclassify transmission assets, and Transpower’s decision to exercise that power.

Background

Buller Electricity Limited (“BEL”) is a local electricity supplier contracted to Transpower for the supply of transmission services. The Authority is the regulator of the electricity industry.

Transpower must charge for transmission services in accordance with the Transmission Pricing Methodology (“TPM”). The TPM is located within the Electricity Industry Participation Code (2010) which is secondary legislation. Transpower is required to develop the TPM, subject to the Authority’s approval. This must be consistent with guidelines issued by the Authority in 2020 (“2020 Guidelines”).

The TPM distinguishes between interconnection assets and connection assets. Broadly, interconnection assets are those providing transmission services that are not directly attributable to a single, or a few, customers, whilst connection assets are.

Following an audit process in 2020, Transpower discovered that due to the unique grid infrastructure in Buller, some of BEL’s assets were incorrectly classified as connection assets. These assets technically met the definition of interconnection assets under the TPM, but were in substance providing connection services as BEL were the only distributor that benefited from them. At this time BEL's charges were adjusted.

In 2023, Transpower proposed to include a clause in the TPM to allow the reclassification of interconnection assets to connection assets in circumstances such as this, where it was fair and reasonable to do so.

The Authority approved the 2023 TPM and Transpower decided to exercise the power to reclassify certain BEL assets. This decision was made prior to the commencement of the 2023 TPM.

BEL faced a 427 percent increase in its transmission charges.

The Case

BEL challenged two decisions:

1. The Authority’s decision to approve the inclusion of a discretionary power in clause 23 of the 2023 TPM to reclassify interconnection assets as connection assets; and
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2. Transpower’s decision to exercise this power to reclassify some of BEL’s assets as connection assets.
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The Authority's Decision

BEL argued the discretionary power (Clause23), was inconsistent with the Authority's statutory objective of promoting the efficient operation of the electricity industry for the long-term benefit of consumers. It argued that Clause 23 was inconsistent with the 2020 Guidelines, it was targeted at BEL, and the Authority's consultation process was insufficient.  

The Court emphasised that its role is not to determine questions of fact, but to focus on questions of law. The overriding consideration was whether the decision was made in accordance with the Authority’s statutory objective. Justice McQueen was satisfied the Authority thoroughly considered all relevant material and used its specialist expertise to reach a conclusion that was supported by available evidence, and that was, in its view, consistent with its statutory objective. It was not the Court’s role to determine whether the substantive conclusion was correct or not.

Transpower’s Decision

BEL argued Transpower’s decision to reclassify its assets was unlawful as it was made before the commencement of the 2023 TPM, and alternatively, if Transpower had the jurisdiction to reclassify the affected assets, it failed to properly exercise its discretion due to pre-determination of the outcome, and in failing to take account of material considerations. As a further alternative, BEL argued the re-notification of the decision was unlawful.

It is common ground that a power cannot be exercised until it has come into force. However, section 43 of the Legislation Act allows for powers conferred by legislation to be exercised before legislation comes into force in certain circumstances. The question was whether Transpower’s decision to reclassify assets prior to the commencement of the 2023 TPM, was (as under s43(1)(e)), “necessary or desirable to bring, or in connection with bringing” the 2023 TPM into operation.

The evidence showed that the TPM was approved and adopted by the Authority with the intention that it was to be utilised for the first pricing year, commencing on 1 April 2023. The Court therefore found that exercising the power prior to the commencement date was necessary or desirable in ensuring the TPM could operate fully as at 1 April2023.

In respect of the second cause of action, the Court determined BEL had failed to prove on the balance of probabilities that Transpower had closed its mind in considering whether the affected assets should be reclassified. BEL argued “reasonable in all the circumstances” required the consideration of the ability of BEL’s consumers to pay the transmission charges, highlighting that Buller District is one of the most deprived communities in New Zealand. Justice McQueen found that Transpower’s interpretation was consistent with the TPM and its purpose, and it was not required to consider socio-economic impacts.

Result and Significance

The Court dismissed BEL’s application for judicial review.

This case affirmed the Authority's broad statutory powers in regulating the electricity industry, confirming that a high bar exists for judicial intervention. The decision also clarified the application of section 43 of the Legislation Act 2019, of which there has been no previous judicial consideration of, allowing for pre-commencement exercise of powers deemed necessary or desirable to implement legislation. While BEL's challenge failed, the decision provides valuable guidance on the legal framework governing electricity transmission regulation.

For further information on this case or similar issues, please contact Director, Brigitte Morten

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