On 26 May 2020 the Minister for Local Government, Heritage, Culture and the Arts (Minister) issued a notice to the council of the Town of Cambridge (Town) requiring it to show cause why he should not make an order suspending the council and requiring its elected members to undertake governance training in the responsibilities and functions of a council (show cause notice).  The show cause notice was issued under section 8.15B of the Local Government Act 1995 (LG Act).

 

The Town applied to the Supreme Court for an order prohibiting the Minister from suspending the council.

 

The Minister’s powers to suspend a council under the LG Act

 

Under section 8.15C(2) of the LG Act, the Minister may issue an order suspending a council and/or requiring a council or one or more of its members to undertake such remedial action as the Minister sets out in the order.

 

Such an order can only be issued if the Minister thinks that:

 

• the seriousness or duration of a suspected failure of a council to ensure that the local government performs its functions properly; or

 

• such other factors as the Minister considers relevant,

 

make it inappropriate for the council to act, or continue to act, without intervention, as the governing body of the local government.

 

Before the Minister can issue an order under section 8.15C, he must first give the local government a show cause notice under section 8.15B.  The show cause notice informs the local government of the Minister’s intention to issue an order suspending the council and/or requiring specified remediation to be undertaken. The council is then required to give a response to the Minister.

 

The Supreme Court made a number of observations about section 8.15C:

 

• As the suspension of a council will deprive the local community of its elected representatives, it was to be assumed that there would need to be serious circumstances in order for the Minister to intervene in the affairs of a local government.

 

• In order for the Minister to intervene under section 8.15C, he must think it is inappropriate for the council to act, or continue to act, as the governing body of the local government without intervention. In other words, the Minister must think that the council is no longer fit or suitable to act as the governing body of the local government.

 

• Section 8.15C is directed to the role of a council as the governing body of a local government and its suitability to perform that role. While the Minister can consider a wide range of factors in considering whether it is appropriate for a council to continue to act, these factors must relate to the role entrusted to council by the LG Act, namely the government of the local government’s affairs and responsibility for the performance of a local government’s functions.

 

• As the day to day management of a local government is the responsibility of the CEO under the LG Act, any deficiencies in that regard will not generally provide a basis to conclude that the council should no longer act as the governing body of the local government. It would be necessary to show that the day to day management deficiencies were attributable to some failing or suspected failing of the council in its role as the governing body.

 

• Unless the failing or suspecting failing of the council in its role as a governing body is identified with some specificity, then the Minister cannot form a rational judgement as to the form of required intervention.

 

• Section 8.15C is concerned with the suitability of council as a collective body to discharge its statutory role. The conduct of specific councillors is addressed separately by section 8.15E.  While the Minister is not precluded from having regard to the conduct of individual councillors in exercising his powers under section 8.15C, there would need to be a ‘cogent connection’ between the conduct of a single councillor and its effect on the council’s role as a governing body before the power to suspend the entire council could be validly exercised.

 

The background to the Minister’s show cause notice

At the time of the Minister’s show cause notice, the Town was subject to an ongoing inquiry initiated under Division 1 of Part 8 of the LG Act.  This inquiry, which began in April 2018,  was established to consider whether the council and administration were functioning in the best interests of the community and to examine the operations and affairs of the Town in relation to the adequacy of council’s policies and procedures, land acquisition and any other issues that were determined to be relevant to these matters.

 

During the inquiry, the Town, through its lawyers, had provided details of the steps which had been taken by the Town to improve various governance arrangements and processes.

These updates were provided on four occasions between August 2018 and July 2019.  Subsequently, there was one formal complaint in April 2019 and a large number of informal complaints made about the Town outside of the formal complaint procedures.  During September and November 2019 officers of the Department gave consideration for the first time to initiating the process for suspension of the council.

 

The Minister’s show cause notice

 

The show cause notice identified three factors which had caused the Minister to think that it was inappropriate for the council to continue to operate as the Town’s governing body without intervention.  Further details of these matters were provided in a letter from the Minister’s solicitors on 14 July 2020.

 

In summary, the factors identified by the show cause notice and the subsequent particulars which were provided concerned the following matters:

 

Involvement in administrative and operational activities

 

The specific matters giving rise to the Minister’s suspicions about involvement of councillors in administrative and operational activities primarily concerned:

 

• council decisions about the employment of a specific lawyer and specific law firm outside of the usual procurement processes of the Town and the authorisation of the Mayor to provide instructions directly to lawyers;

 

• council’s authorisation of a particular councillor to assist the CEO in relation to employment arrangements in response to COVID-19, including meetings with unions and staff and the COVID-19 Taskforce.

 

In support of the Minister’s position, it was argued that obtaining legal advice formed part of a CEO’s functions under the LG Act and did not form part of the Mayor’s role.  Council’s failure to follow the Town’s procurement policy, even though it did not apply to the council, was also identified as a matter giving rise to the Minister’s suspicion.

 

Working environment and working relationships

 

The second factor addressed in the Minister’s show cause notice was an alleged failure by council to ensure that the working environment and working relationships within the Town were such that the Town’s employees were able to carry out their functions without inappropriate involvement or interference by councillors.

 

This matter primarily concerned suspicions that:

 

• the volume of requests for information made by councillors to the Town’s employees impeded their capacity to properly perform their functions;

 

• there was pressure placed on officers not to discuss current development applications with proponents; and

 

• there was interference by the Mayor in relation to development applications which prevented officers from properly performing their functions and providing professional advice in relation to the assessment of these applications.

 

Workplace culture and intimidation

 

The third factor in the show cause notice was an allegation that the council had failed to ensure that the workplace culture of the Town was free from intimidation and undue pressure on employees.  The alleged intimidation and pressure on employees was primarily identified with the conduct of the Mayor and, to a lesser extent, the CEO and one other councillor.

 

 

 

 

The Court’s findings

 

Involvement in administrative and operational functions

 

In relation to the decisions taken by council in 2018 and 2019 with respect to obtaining legal advice and authorizing the Mayor to provide instructions directly to lawyers, the Court concluded:

 

• These events were of historical interest only and had no ongoing operational significance.

 

• They were isolated examples and there was no evidence that the CEO did not ordinarily undertake this function.

 

• With one exception, the nature of the legal advice sought was unusual as it was concerned with the question of whether council could seek legal advice. Legal advice was also sought by council concerning a termination of the then CEO’s employment.

 

• Legal advice had been sought because a number of councillors were concerned with whether regulation 9 of the Local Government (Rules of Conduct) Regulations 2007 (LG Regulations) could be used to enable council to seek legal advice directly. This concern about regulation 9 suggested that council was aware of the limits of its statutory role.

 

• The 2018 motions were known to those conducting the authorised inquiry who must be taken to have concluded that it was appropriate for council to continue to act as the governing body of the Town notwithstanding these decisions.

 

• There was no material before the Minister which suggested that the obtaining of legal advice by the council had any adverse impact on the performance of the Town of any local government functions.

 

With respect to council’s April 2020 resolution authorising a councillor to assist the CEO in relation to employment arrangements in response to COVID-19, the Court again concluded that as this resolution relied on regulation 9 of the LG Regulations, it demonstrated council’s awareness that it was involving itself in matters ordinarily dealt with by the Town’s administration.  The circumstances of the April 2020 resolution were seen by the Court as unusual as they concerned a response to COVID-19.

 

The Court found that there was no material before the Minister which suggested that obtaining legal advice by council or the involvement of a councillor in administrative matters had any adverse impact on the Town’s performance of its local government functions.  Further, and in any event, the April 2020 resolution had been revoked and this was known by the Minister.

 

The Court also rejected the argument that when combined, the 2018 resolutions and the April 2020 resolutions supported the conclusion that council had had a continued involvement in the Town’s administrative affairs.

 

For these reasons the Court did not accept that the 2018 and April 2020 resolutions established an ‘intelligible basis’ for a suspicion that council had failed to ensure that the councillors had an understanding of and observed their proper role.  However, the Court went further and observed that even if it was concluded that the Minister’s suspicion was reasonably based, there was no basis to reasonably conclude that it was inappropriate for the council to continue to act as the governing body of the Town.  Further, the conduct of the Town did not provide a reason for immediate intervention in the form of suspension.

 

Finally, the Court concluded that the immediate suspension would be so disproportionate to the limited nature of the council’s suspected failures, that it would be unreasonable.

 

Working environment and relationships

 

As noted earlier, the show cause notice also identified the volume of inquiries made to the Town’s employees by elected members (principally the Mayor) and the Mayor’s involvement in operational aspects of planning as impeding employees in the performance of their functions.

 

The Court did not accept that on the information before the Minister there was a rational basis for a suspicion that the council had failed to ensure the working environment and working relationships were such that employees were able to carry out their functions without inappropriate involvement or interference.  The Court stated that while the Town’s policy for dealing with requests for information made by councillors may need to be reviewed, this was not a basis for concluding that it was inappropriate for council to continue to act as the Town’s governing body.

With respect to the Mayor’s alleged involvement in planning matters, the Court noted that it was not part of the role of council to maintain or review the Mayor’s conduct.  It had neither the authority nor the resources to do so.

The Court concluded that it had not been shown how the Mayor’s conduct provided the basis for a suspicion of a failure by council as the Town’s governing body.  Further, there was no adequate justification why the unspecified suspected failure of council was justification for its immediate suspension.  The concerns about the Mayor’s conduct did not form a rational basis for concluding that it was inappropriate for the council as a whole to continue to act as the Town’s governing body.  The Court noted that section 8.15E of the LG Act provided a mechanism for the Minister to take action in relation to the Mayor as an individual councillor, if he was satisfied of the matters to which the provision refers.

 

In short, the Court formed the view that there was no material from which it could be inferred that the Mayor’s conduct affected the council’s role as the Town’s governing body.

 

Workplace culture and intimidation

The events giving rise to the Minister’s suspicion that council had failed to ensure the Town’s culture was free from intimidation and undue pressure on employees primarily involved the Mayor and the CEO.  However, the material placed before the Minister did not identify how it was suspected that there had been a failure by the council to conduct itself in a way that ensured that the workplace was free from intimidation and undue pressure on employees.  The allegations concerning the Mayor and the CEO did not provide a sufficient basis on which the Minister could conclude that it was inappropriate for the council to continue acting as the Town’s governing body.

 

For these reasons, the Court found that the matters identified in the show cause notice did not, either individually or collectively, provide a basis to suspend the council.

 

Regulation 9(1) of the LG Regulations, on which council relied to make decisions with respect to the obtaining of legal advice and a councillor’s involvement in employment arrangements, has been amended. It now provides:

 

‘A person who is a council member must not undertake a task that contributes to the administration of the local government.’

 

Unlike its predecessor, the amended provision no longer allows the council or the CEO to authorize a council member to undertake a task that contributes to the administration of a local government.

 

For further information, please contact Andrew Roberts.

 

 

Disclaimer: The information contained in this update is not advice and should not be relied upon as legal advice. Castledine Gregory recommends that if you have a matter in relation to which legal advice is required, you consult with your legal adviser.

 

Liability limited by a scheme approved under Professional Standards Legislation.