South Sydney City Council v Minister for Local Government and Another

Pursuant to s 218B in Div 2A of Pt 1 in Ch 9 of the LGA the Governor may, by proclamation, alter the boundaries of one or more areas.

It is provided in s 218D that the function of the Governor, pursuant to s 218B, may be exercised only after a proposal for the exercise of the function is dealt with under Div 2B of Pt 1 in Ch 9.

By letter dated 21 November 2001, the Minister advised the council that under the provisions of s 218E(1) and s 218F(1) of the LGA he had referred a proposal to transfer land, described in the letter, to the Sydney local government area.

In the New South Wales Government Gazette No. 184 ("the Gazette"), published 30 November 2001, the Minister made an Order referring the boundary alteration proposal "to transfer the suburbs of Woolloomooloo, Potts Point, Rushcutters Bay, Elizabeth Bay and part of Darlinghurst in the South Sydney local government area to the Sydney local government area to the Local Government Boundaries Commission" under section 218E(1) and 218F(1) of the LGA . The area was more particularly defined in the Order by reference to existing boundaries of the Sydney and South Sydney local government areas, street names and other features such as the Elizabeth Bay foreshore and Rushcutters Bay Park Canal.

By the Order published in the Gazette, the Minister requested the BC to examine and report on the proposal in accordance with the LGA having regard to the following factors as required by s 263(3) of the LGA:- (a ) 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, (b) the community of interest and geographic cohesion in the existing areas and in any proposed new area,

(c) the existing historical and traditional values in the existing areas and the impact of change on them,

(d) the attitude of the residents and ratepayers of the areas concerned, (e) the requirements of the area concerned in relation to elected representation for residents and ratepayers at the local level, the desirable and appropriate relationship between elected representatives and ratepayers and residents and such other matters as it considers relevant in relation to the past and future patterns of elected representation for that area, (e1) the impact of any relevant proposal on the ability of the councils of the areas concerned to provide adequate, equitable and appropriate services and facilities, (e2) the impact of any relevant proposal on the employment of the staff by the councils of the areas concerned, (e3) the impact of any relevant proposal on rural communities in the areas concerned,

(e4) in the case of a proposal for the amalgamation of two or more areas, the desirability (or otherwise) of dividing the resulting area or areas into wards,

(e5) in the case of a proposal for the amalgamation of two or more areas, the need to ensure that the opinions of each of the diverse communities of the resulting area or areas are effectively represented,

(f) such other factors as it considers relevant to the provision of efficient and effective local government in the existing and proposed new areas.

Prior to the publication of the Order in the Gazette, the Minister issued a press release on 15 November 2001. The proposed boundary changes were described in the media release as follows:- The transfer of Woolloomooloo, Kings Cross, Potts Point, Rushcutters Bay, Elizabeth Bay, Darlinghurst, Chippendale, The University of Sydney and The Royal Prince Alfred Hospital from South Sydney Council to the City of Sydney Council.

On 26 November 2001 the chairperson of the BC wrote to the council, noting the referral to it of the proposed boundary changes and indicating it would not be holding a formal inquiry into the changes and that the "areas involved were the subject of a public inquiry and submissions process as part of the review conducted earlier this year by Professor Kevin Sproats" . An invitation was extended to the council to make formal submissions to the BC as follows:_ While the Commission will not be seeking public submissions, it will review and consider comments made as part of the 'Sproats' review which are relevant to the current proposal. However, as your Council's area is affected by the proposed changes you are invited to make a formal submission to the Commission.

The council was allowed until 5 December 2001 "at the latest" to make the submissions.

The review conducted by Professor Sproats was published in April 2001 and evaluated the structure of local government in the areas of Botany Bay, Leichhardt, Marrickville, Randwick, South Sydney, Sydney, Waverley and Woollahra. By Recommendation 4, Professor Sproats recommended that the structure of local government in the region be re-cast by creating four new councils, as illustrated on maps and described in his report. He stressed that a full re-casting of councils was his preferred option and suggested the following boundary adjustments that could be initiated if this was not acceptable:- Sydney CBD I have not been persuaded by the arguments for the contraction of boundaries of Sydney City Council to the commercial heart. I am convinced that for Sydney City to be a dynamic, liveable, global city it must have a sizeable residential component. The expansion of the City of Sydney as proposed in Recommendation 4 could be contemplated regardless of any recasting of the remaining councils. The trouble with this is that it would decimate City of South Sydney to the point of not being viable . It would also have implications for Leichhardt, Marrickville, Woollahra (if Paddington included) and Randwick (if Centennial Park included).

A minimal expansion to the east could include Darlinghurst/King Cross, Woolloomooloo, Potts Point, Rushcutters Bay, and Elizabeth Bay. This is in effect that part of South Sydney City north of Campbell, Flinders and Oxford Streets. Expansion to the west could include Glebe and Forest Lodge. [Emphasis added] 12. By letter dated 26 November 2001 the Lord Mayor of Sydney, Councillor Frank Sartor ("the Lord Mayor"), forwarded a submission to the BC which he says "reviews the advantages and shortcomings of the proposed new City of Sydney boundary, and recommends some slight modifications that would be advantageous for residents and neighbouring councils alike" . The submission made on behalf of the City of Sydney generally supported the proposals made by the State Government, subject to a number of changes, which the Lord Mayor said could be implemented by adopting the boundaries recommended in Attachment No 1 to the submission.

13. The council did not, at any time, have the benefit of viewing the City of Sydney Council's ("the CSC") submission until it was produced in the proceedings in answer to a notice to produce addressed to the respondents.

14. By its class 4 application filed in proceedings No 40219 of 2001 on 3 December 2001, the council claimed orders which had the effect of extending the time allowed for the making of submissions by the council. On 6 December 2001, after a hearing the previous day, Bignold J made the following interlocutory order:-

1. Order that the Respondents, until further Order of the Court be restrained from reporting to the Minister for Local Government its examination and report on the Minister's two boundary alteration proposals affecting the local government area of the Council that have been recently referred to the first Respondent, without affording the Council procedural fairness by having the opportunity to make submissions to the first Respondent in respect of the said proposals within a reasonable time.

15. On 14 January 2002 proceedings No 40219 of 2001 were discontinued following an undertaking by the BC and its chairperson, through the Crown Solicitor, that they would not, within the period before 28 February 2002, report or cause to report or participate in any decision to report to the Minister on the proposal for boundary changes affecting the council's local government area. The undertaking acknowledged that during the period before 28 February 2002 the council would have the opportunity to make a written submission in respect of the Minister's proposal.

16. A written submission dated 28 February 2002 was made to the BC by the council.

17. On 19 March 2002 the BC concluded its examination and purported to report to the Minister on the proposed boundary changes. In a written resolution dated 20 March 2002, the BC firstly noted it has completed examination of the boundary alteration proposal referred to it on 20 November 2001 and published in the Gazette. Secondly, it "formally and unanimously" resolved to endorse the contents of its report on its examination of the proposals "made pursuant to s 263 of the Act". The resolution also notes the contents of the report prepared by Anthony Lemish of Geac Enterprise Solutions ("Geac"), titled "Report of Data Migration Analysis of Proposed Council Boundary Alteration". Finally, it resolved to submit both reports to the Minister for Local Government for his consideration.

18. The actual recommendation in Chapter 6 of the published report is as follows;- Having considered the boundary alteration proposal, the support for reform arising out of the Sproats Inquiry, the submissions presented to the Commission by the three affected councils, the unsolicited submissions received by the Commission and other material, and having regard to the factors set out in section 263(3) of the Act, the Commission has reached its recommendation that the boundary alteration proposal should proceed.

19. The Minister forwarded a copy of the report to the council on 20 March 2002. The Minister invited any comments the council may wish to make on the BC report by close of business Friday 12 April 2002. The letter concluded with a note that "there will not be any extensions to this deadline" .

20. In a letter to the BC dated 3 April 2002 the council requested access to reports prepared by the CSC, Geac and PKF, referred to in the BC report forwarded to the Minister by the BC, in order to enable the council to make an informed and measured response to the Minister. The reply by the BC on 5 April 2002 included the following advice:- As Ms Carnegie advised your Mr Joel Johnson on 27 March 2002, PKF prepared the Commission's report, which the Minister for Local Government forwarded to you on 20 March 2002.

With regard to the Geac report, advice was sought and I understand that the Minister for Local Government has sent Council a copy of this report.

With regard to Sydney City Council's submission to the Commission, following other requests of this nature, the Commission has written to the affected councils to ascertain their agreement/ non - agreement to the release of their submissions to other parties.

21. Attempts by the council to obtain a copy of the CSC submissions have been unsuccessful. In the meantime, on 9 April 2002 the BC wrote to the council as follows:- Chapter Five of the Commission's Report, 'Examination of the Proposed Boundary Alteration to the Sydney City, Leichhardt and South Sydney Local Government Areas' titled 'The New Boundary', contains a precise and detailed metes and bounds description prepared by the Land Information Centre (pages 55 - 64) which the Commission has recommended to the Minister for Implementation.

This technical description of the proposed boundary was referred to at page 9 of the Report. I understand the metes and bounds description was also referred to in a letter from the Minister to you of 28 March 2002.

For clarity I am providing a revised page 8 which is attached. You might note that while it does not affect the metes and bounds (as outlined in Chapter Five), the narrative involving a smaller transfer area now parallels the technical description. 22. The letter dated 28 March 2002 from the Minister to the council confirmed the earlier advice to the council that comments on the BC report were required by close of business on 12 April 2002.

Matters arising under s 263(3) of the Local Government Act

When considering any matter referred to it, the BC is required to have regard to the factors identified in s 263(3)(a) to (f) of the LGA. The council alleges that the BC did not have regard to the factors in s 263(3)(a), (d) and (e2) set out above in par 7.

Clause 3(a) refers to the financial advantages or disadvantages to the residents and ratepayers of the areas concerned. The BC report addresses this issue in Chapter 15. The council complaint is that the BC purported to complete its examination without a due diligence audit of the proposed transfer areas or any impact analysis for the City of Sydney. According to the council, this is partly due to the limited time frame within which submissions were constrained. The BC accepted assurances from the CSC that "it would absorb any adverse situations arising from the proposed alteration and make it work" and an undertaking from the Lord Mayor, "to provide increased services to residents and ratepayers in the proposed transfer area without increasing rates" . The BC expressed the view that the proposed boundary alteration would not significantly affect the financial viability of the council "so long as there is a determination to lead and to formulate an appropriate strategic direction for the new environment" .

Clause 3(d) refers to the attitude of residents and ratepayers. Here again, the council raises a criticism that the BC failed to inform itself of this matter. Although the report refers to levels of opposition and support for the proposal within both the unaffected areas and the areas ear-marked for transfer, the council submits that what cl 3(d) requires is an understanding of the attitudes of residents and ratepayers of the local government areas as a whole. Mr Hemmings QC says the council claims there is no unaffected area. The BC did not hold a public enquiry or plebiscite but appears to have relied on comments by Professor Sproats in his report and "an independently conducted survey" made available to the BC by the CSC with reported survey data by the CSC's officers as well as "an independently conducted survey of 2015 residents of the local government area" provided by the council.

Clause 3(e2) refers to the "impact of any relevant proposal on the employment of the staff by the councils of the areas concerned" . Relying on a submission made by the CSC (not disclosed to the council) that it would accept all responsibilities for the transfer of relevant staff, the BC recommended that although the boundary alteration proposal may impact on the employment of staff, transitional arrangements should be developed. According to the council the BC appears to have done no more than adopt principles announced by the Minister for implementing transfer of staff assets and liabilities, without identifying the impact on any particular individuals.

Mr Hemmings reiterates that the council's submissions to the BC, both written and oral, were based only on the proposal referred to the BC on 20 November 2001 and published in the Gazette on 30 November 2001. The proposal is described consistently in the referral, the Gazette and in Chapter 1 (Introduction) of the BC report.

Mr Hemmings identifies the following inconsistencies, which he says appear in the BC report:- (a) In Chapter 1 (Introduction), there is a reference to the boundary alteration proposal announced by the Minister in November 2001 referring to "transfer to the area of the City of Sydney" sections of the area of Leichhardt, namely Glebe and Forest Lodge, and sections of the area of South Sydney, namely Woolloomooloo, Kings Cross, Potts Point, Rushcutters Bay, Elizabeth Bay, Darlinghurst, Chippendale, the University of Sydney and the Royal Prince Alfred Hospital.

(b) The published report in Chapter 2 (The Nature of the Proposal) refers specifically to a proposal that is described as involving the transfer of "what can be regarded as two distinct areas of South Sydney and Leichhardt to the City of Sydney". Thereafter follows an almost exact repeat of the description of the boundaries recommended by the Lord Mayor in Attachment No 1 to his letter dated 26 November 2001. (c) The proposal described in the revised page eight in Chapter 2 (The Nature of the Proposal) attached to the letter dated 9 April 2002 is not the same proposal referred to the BC by the Minister nor does it "parallel the technical description in chapter 5" as suggested in the letter; (d) At page 45 within Chapter 4 (Examination of the Proposal), the BC recommends the development of transitional arrangements consistent with principles outlined by the Minister "when announcing the boundary alteration proposal on 15 November 2001" ; (e) Schedule B to Chapter 5 (The New Boundary) is apparently a description of a proposed new boundary with modifications recommended by the BC. Mr Hemmings admits this is unclear but in any event no reasons are given as to why such changes are recommended and nor were any submissions invited or considered by the BC; (f) In Chapter 6 (Recommendation) it states that the BC has examined the boundary alteration proposal announced by the Minister on 15 November 2001;

(g) Neither the original nor the revised Chapter 2 proposal, the Chapter 5 proposal or the Chapter 6 proposal are the same as the proposal described in Chapter 1 upon which the council's submissions were based.

The examination of the proposal by the Boundaries Commission

The only evidence the Court has available to it in respect of the examination of the proposal undertaken by the BC is a document trail, the BC report document itself and the evidence of one of the commissioner's, namely Michelle Carnegie, who is the Acting Manager of the Executive Support Branch of the Department of Local Government and is the officer of the Department nominated as a commissioner, pursuant to s 261(2) of the LGA.

It should be noted that the media release made by the Minister on 15 November 2001 referred to areas of Darlington and Surry Hills/Darlinghurst proposed to be included in the CSC area that extended in a southerly direction beyond the boundary proposed by the Order in the Gazette. The submission made by the Lord Mayor on 26 November 2001 recommended, inter alia, that the University of Sydney (including assets to the south of Sydney Road) be placed wholly under sole jurisdiction of the City of Sydney and that Surry Hills should be transferred to the City of Sydney. The area of Darlington which incorporates that part of the University of Sydney, south of City Road, was included in the recommendation in Chapter 6 and described in detail in Chapter 5 of the report.

Minutes of a meeting of the BC on 30 November 2001 record the following two motions relevant to the subject matter of these proceedings:- 1. That in MacDonaldtown (Darlington), the boundary should not run with a road, but rather should run along the rail-line as a more concrete option. Clr Kelly moved this motion, Ms Carnegie seconded it, and the motion was carried unanimously.

2. That the whole of Surrey Hills should come within the Sydney local government area. Clr Kelly moved this motion, Clr Hall seconded it, and the motion was carried unanimously.

The meeting was attended by three members of the BC and two officers of the department of local government.

Ms Carnegie gave oral evidence in chief that following the meeting of 30 November 2001, the BC received legal advice that its role in examining the proposal was limited to the Minister's proposal as gazetted on 30 November 2001 and consequent upon receiving that advice, it did not take any further consideration of the areas the subject of motions 1 and 2 set out above.

On 30 January 2002 the BC engaged PKF Utility & Government Services ("PKF"), to undertake a boundary impact assessment of the proposal having regard to the factors outlined in s 263(3) of the LGA.

The Boundaries Commission is seeking the services of consultant/s to prepare a detailed report assessing the impacts of boundary alteration proposals, specifically with regard to the range of factors outlined in section 263(3) of the Local Government Act 1993

A confidential initial draft of this report is required by the Boundaries Commission by 28 February 2002, in word format (in electronic form plus 4 hardcopies).

The Boundaries Commission will then require a detailed analysis of all issues raised in the written submissions from the affected councils and other interested parties, and incorporation of detailed responses to these issues within the report.

A final confidential draft of the report is required by the Boundaries Commission by 15 March 2002 in word format (in electronic form plus 4 hardcopies).

Once endorsed by the Boundaries Commission, word and pdf format copies will be required in electronic form plus 50 hardcopies. The endorsed report will be distributed publicly as the Boundaries Commission's formal report on its examination of the proposals and the Commission will retain ownership of the intellectual property accordingly.

A statement in a letter to the council from the BC, dated 5 April 2002 whereby the council was advised that "PKF prepared the Commission's report" is referred to at par 20.

Ms Carnegie told the Court that at a meeting with the BC on 13 March 2002 representatives of PKF indicated that they may have difficulty finalising the draft report by 15 March as stipulated in the brief. The chairperson of the BC intimated that the commission would accept the draft on 15 March 2002 as per the contract and that after that time, Ms Carnegie would finalise the commission's report between 16 and 19 March 2002. Ms Carnegie was, in fact, assisted by three departmental officers.

The final document produced by PKF is described by Ms Carnegie as "a document that PKF had had some input into preparing but that the Commission had prepared other sections of, and directed the production of, over some time and finalised the editing of". She agreed in cross examination that what went to the BC "was a PKF report that was subjected to a number of edits up until 13 March, and then further edits by [her] and three departmental officers between 13 March and 19 March" . Ms Carnegie also said "we gave text to be included in Chapter 2 to PKF" .

In cross-examination Ms Carnegie accepted that there were no minutes of meetings or any resolution by the BC as to any of the following matters:- (a) the selection of consultants;

(b) the fixing of 15 March 2002 as the deadline for the consultant reports; (c) the refusal to extend the 15 March deadline after both consultants had indicated that the time was inadequate; (d) the letter of 9 April 2002 substituting new text for page 8 of the BC Report; (e) the refusal to hold an opinion survey or poll; (f) the refusal to make available the submissions received from the City of Sydney or others; (g) the authority of Ms Carnegie and other departmental officers to edit, add to, or delete from the BC Report.

Notwithstanding advice received by the BC following the meeting on 30 November 2001, Chapter 2 remained in a form consistent with the BC resolution of 30 November 2001 in each of the four drafts prepared by PKF and despite Ms Carnegie and three departmental officers editing the report.

The council's case (a) Whether the Boundaries Commission carried out its statutory obligations

It is submitted, on behalf of the council, that the BC did not examine and report on the proposal referred to it in November 2001 in accordance with the statutory obligation. The council contends it is clear from the terms of s 218B, s 218D and s 218F of the LGA that the power of the Minister to make any recommendations to the Governor is predicated on the BC having first properly discharged its duty to examine and report under s 263.

The council challenges the examination to the extent that, in fact, no proper examination of the Minister's proposal by the BC took place. Accordingly, the Minister having indicated that he intends to give consideration to the BC report, the jurisdictional pre-requisite to the exercise of the Minister's function, namely that the report complies with the LGA provisions, has not been fulfilled. Therefore, for the Minister to proceed with any recommendation, based upon the so-called report, would be a breach of the LGA.

In respect of this issue the council firstly relies on the content and structure of the BC report, to show there could not have been an examination by the BC of the proposal referred to it. Chapter 2 specifically states, in terms, that the nature of the proposal was the transfer of the two distinct area nominated by the CSC. Moreover, notwithstanding the statements in Chapter 6 that it had examined the boundary alteration proposal announced in the media release by the Minister, the reference to the proposal in Chapter 1, as being the boundary identified in the Order published in the Gazette on 30 November 2001, and the description in Chapter 2, Mr Hemmings says the boundary the subject of the actual recommendation in Chapter 6, as described in Chapter 5 of the report, is also inconsistent with the other references. Furthermore, the inconsistencies are not explained.

Secondly, it is alleged the BC did not examine and report on the proposal in conformity with s 263(3) of the LGA. Relying upon the evidence of Ms Carnegie the council claims the report is a consultants report as edited by departmental officers and is therefore not a report by the second respondent. In its letter to the applicant dated 5 April 2002 in response to a request to inspect the PKF report, the BC confirmed earlier advice given by Ms Carnegie that "PKF prepared the Commission's report" .

Finally, by not having proper regard to the matters in s 263(3)(a), (d) and (e2) of the LGA together with its failure to seek approval to hold a public inquiry or to conduct a survey or a poll as well as confining its real regard to the submission made by the CSC, the council claims the BC did not fulfil its statutory obligations.

Mr Hemmings says by its conduct, its unfair procedures and self-denial of access to relevant information, the BC was unable to discharge its duties pursuant to s 263 of the LGA.

The issue in this respect is relatively narrow and depends, to a large extent, upon whether the Court accepts that the BC was bound in the circumstances to give the council an opportunity to address material that was adverse to its interests. The respondents say that whether the obligation has been satisfied can only be determined after consideration of the whole process leading up to the final determination by the Minister to recommend to the Governor that the proposal be implemented. They argue that the examination and report by the BC is only part of the process and that any failure by the BC to allow any person to be properly heard can be cured by the Minister inviting further submissions, as he has done.

The ultimate determination the Court is asked to make is whether there has been a breach of the LGA or whether there is a threatened or apprehended contravention of or a threatened or apprehended failure to comply with the LGA. If the purported function of the BC is a nullity, either because it did not perform its statutory duty to examine and report on the proposal or because of its failure to adopt a process that entails procedural fairness, the Minister is not able to proceed further because the provisions of Div 2B of Pt 1 in Ch 9 of the LGA have not been satisfied. The Minister cannot exercise his function under s 218F(7) and recommend to the Governor that the proposal be implemented unless and until the subject proposal is dealt with under Div 2B in accordance with s 218D of the LGA.

In Vammeld Pty Ltd v Fairfield City Council and Another (1999) 46 NSWLR 78 the members of the Court of Appeal, although disagreeing as to the outcome, accepted that the duty of an administrative body to accord procedural fairness is one imposed by the common law and not one arising out of the interpretation of the relevant enabling statute. The duty nevertheless attaches to the exercise of the public power subject to any statutory modification of the common law in that regard. If the duty to afford procedural fairness applies to the statutory function of the first respondent then its failure to do so would have the effect that there has been no examination and report upon which the second respondent could act. If the Minister acts by relying on the report in such a case there would relevantly be a breach of the LGA.

Relying on Vanmeld, Bignold J, in South Sydney Council v Local Government Boundaries Commission and Another [2001], NSWLEC 280, unreported, apparently had no difficulty in concluding at par 50 that the common law obligation to afford procedural fairness attaches to the exercise of the statutory function conferred upon the first respondent. At par 44, Bignold J proclaimed he was firmly of the opinion that if the statutory function of the first respondent was undertaken in breach of these requirements there would be a breach of the LGA within the meaning of s 673, thereby falling within this Court's jurisdiction pursuant to s 20(1)(d) of the Land and Environment Court Act 1979 ("the Court Act"). The Courts sees no reason to disagree with His Honour.

Moreover, even if there is no primary jurisdiction to determine whether the first respondent has acted otherwise than in accordance with its common law obligations, the question falls within the ambit of the Courts ancillary jurisdiction pursuant to s 16(1A) of the Court Act (see NTL Australia Pty Ltd v Minister for Land and Water Conservation (2001) 112 LGERA 403; Scharer v State of New South Wales (2000) 116 LGERA 217). The answer to the question, whether the principles of natural justice have been served, can lead to a finding that the Minister may not rely on the BC report and that to do so will, therefore, be a breach of the LGA.

The Court accepts that it has the necessary jurisdiction to determine the issues raised by the applicant.

The Court's findings 1. Whether the Boundaries Commission performed its statutory function

Irrespective of whether the BC failed to consider and examine the proposal itself by leaving those tasks to PKF and Ms Carnegie with three departmental officers or whether it examined the proposal submitted by the CSC rather than the Minister's proposal, the legal result will be the same. In either case, the BC would not have performed the statutory task assigned to it.

It defies credulity to ask the Court to believe that what survived four drafts by PKF, the so-called examination by members of the BC and, finally, three departmental officers, with Ms Carnegie, was not what it purported to be, namely the Nature of the Proposal considered. Alternatively, if there was a mistake, as the respondents submit, then in the circumstances the Court holds grave doubts that the authors, whoever they were, applied themselves to the task of examination and report with sufficient diligence to justify a finding that the document reflects a proper fulfilment of the statutory obligation assigned to the BC under Div 2B of the LGA. Moreover, the report upon which the Minister now proposes to rely (containing the substituted page 8) has never been adopted by the BC. The re-wording of that part of the report is the unilateral act of Ms Carnegie.

Furthermore, the evidence shows that to a significant extent the BC deferred its obligations to PKF and others without having its own regard directly to all of the matters referred to in s 263(3) of the LGA. Even if the BC did understand its obligations to consider the matters specifically identified in s 263, it did little more than embrace the conclusions of others. The LGA provisions make it clear that the tasks of examination and report is assigned to the BC on the basis that it carries out the task directly.

The omissions to call a public enquiry or to conduct a survey or poll are not individually determinative of this issue but they are corroborative of the fact that, overall, the BC did not investigate the proposal to the fullest extent available to it. There is no resolution or minute as to why a request by the council to conduct a plebiscite of affected areas was declined. The approval of the Minister to a public enquiry was not pursued as, according to Ms Carnegie, it was unlikely to be granted. There is no formal record of that decision.

By dint of s 218F(1), s 263, s 264 and s 265 of the LGA, it is tolerantly clear that Parliament intended the BC to personally examine and report on the proposal referred to it. There is no express power of delegation. The function of the BC is a central feature of the statutory scheme. There is no evidence that administrative necessity indicated the BC could not perform the task, albeit with the advice of others.

Although Ms Carnegie told the Court about several meetings of the BC, when the consultants were in attendance and where the time spent was extensive, her evidence is replete with instructions to PKF such as "providing guidance and feedback", "suggesting major and minor changes" and "likely recommendations in the light of PKF's findings" and explaining "the need to specifically address each of the factors in s 263(3) of the Act" , that infer the real carriage of the examination of the proposal and content of the report was left to PKF.

The brief to PKF refers to "seeking the services of consultants to prepare a detailed report assessing the impacts of boundary alteration proposals" .

The confusing result arising from the conflicting references in the report and the crucial error in Chapter 2 supports a finding that the BC failed either to adequately understand and appreciate or to properly perform its function.

Taking into account all of the circumstances, the Court finds that neither the examination concluded on 19 March 2002, nor the report submitted to the Minister on 20 March 2002, dealt with the Minister's proposal pursuant to Div 2B of Pt 1 in Ch 9 of the LGA. Furthermore, although it physically adopted the report as its own, the BC assigned the real tasks of examination and preparation of the report to consultants.

Accordingly, it is determined that the BC has not performed its function in accordance with Div 2B of Pt 1 in Ch 9 of the LGA.

2. Whether the Commission took into account relevant factors

Following decisions of the Court of Appeal in Weal v Bathurst City Council and Another (2000) 111 LGERA 181 and Zhang v Canterbury City Council (2001) 51 NSWLR 589, it is clear that what is required is a proper, genuine and realistic consideration and not merely advertence to relevant matters. Notwithstanding the Court's determination recorded in par 61, for the purpose of dealing with this issue it is convenient to assume that the BC carried out the examination itself.

The gravamen of Mr Hemmings' submission is directed to the paucity of evidence that the BC had any real regard to the matters referred to in s 263(3)(a), (d) and (e2). He asks the Court to draw an inference that the BC did not discharge its statutory duty in the circumstances.

Mr Hutley SC makes the point, on behalf of the respondents, that Ms Carnegie was available for cross-examination in relation to consideration of financial factors undertaken by the BC, but Mr Hemmings chose not to raise the issue with her. The BC obviously had substantial material before it, including a submission from the council supported by an experts report. On the face of the report this material was taken into account and the Court is prepared to infer that it did.

The Court agrees with Mr Hutley that primarily the complaint on the consideration of the attitude of residents is a disagreement with the BC's conclusion in this respect. Here again, there was material before the BC which it relied upon to reach its conclusion. Although the BC appears to have been reluctant to conduct its own plebiscite or poll, nevertheless that is readily explained by the survey material presented to it and which it obviously considered.

By referring to transitional arrangements in regard to the employment of staff, the BC highlighted its apparent understanding of the effect of the interaction between s 218C and s 213 of the LGA which recognise the prospect of provision for or with respect to the transfer of staff. Although the council may not have been privy to the propositions advanced by the CSC in this regard, which is a separate head of complaint, nevertheless the report of the BC shows that it gave consideration to these matters.

The Court is satisfied there was a proper, genuine and realistic consideration of the matters referred to pursuant to s 263(3)(a), (d) and (e2) of the LGA.

However, the finding by the Court that the report was not a report that satisfied the requirements in Div 2B also supports a conclusion that the BC itself failed to give appropriated consideration to the factors prescribed by s 263(3). However, if that earlier finding at par 61 is not correct the respondents would be entitled to an order dismissing the claim based on the failure to comply with s 263(3).

The terms of the relevant statute in each case, the nature of the function and the administrative framework in which the statute requires the function to be performed are all material factors in determining what must be done to satisfy the requirements of natural justice (Brennan J in National Companies and Securities Commission v The News Corporation Limited and Others (1984) 156 CLR 296 at 326 and Kioa and Others v West and Another [1985] 159 CLR 550 at 584 - 585 and 616).

The respondents rely on the following passage taken from the judgment of McHugh J in Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57, unreported at par 103:- Not every breach of the rules of natural justice affects the making of a decision. The decision-maker may have entirely upheld the case for the party adversely affected by the breach; or the decision may have turned on an issue different from that which gave rise to the breach of natural justice. Breach of the rules of natural justice, therefore, does not automatically invalidate a decision adverse to the party affected by the breach.

The respondents recognise that the common law requirement of procedural fairness applies but, according to Mr Hutley, it applies to the process as a whole. Accordingly, the obligations of procedural fairness are spread across two entities, namely the Minister and the BC. Therefore, bearing in mind that the rules of procedural fairness vary with the nature of the hearing and the power exercised, he says, it is not correct under this statutory scheme to ignore the existence of the Minister's obligations when, in turn, he considers the BC report.

The respondents make a submission that even if the applicant succeeds on the argument that the decision of the BC was arrived at in a manner contrary to the common law obligation to afford procedural fairness, it will not be appropriate for the Court to declare the report a nullity where the time for evaluating whether a breach has occurred is when the Minister comes to exercise his power under s 218F(7) of the LGA.

The respondents initially rely on a decision of the High Court in Brettingham-Moore and Others v Wardens, Councillors and Electors of Municipality of St Leonards and Others (1969) 121 CLR 509 for the proposition that where a decision-making process has available at its end point an opportunity for procedural fairness the requirement for operation of the concept at some earlier stage in the process is negatived. Whereas Mr Hutley says that under the subject scheme the obligations of procedural fairness are spread across the two entities, a reading of the judgment shows that the statutory scheme considered in Brettingham-Moore , in contrast to the present, specifically provided for statutory review after preparation of the initial recommendations. Under the Tasmanian legislation the Governor was required to publish the report by the Municipal Commission in respect of re-construction of local government areas. Thereafter, a person aggrieved by the action recommended could make representations to the Governor. The High Court found in those circumstances that the commission was not bound to hear a person aggrieved by its report. The obiter remarks of Barwick CJ at p 522 assist to distinguish the present case and support the applicant's argument as follows:- …I may say that if s. 15 were not present in the Act there would, in my opinion, be much to be said for the proposition that before reporting to the Governor, the Commission was bound to hear persons in the situation of the respondents, notwithstanding the fact that the report was not self-executing and that the discretion of the Governor in Council stood between it and the carrying out of the recommendation.

…so far as my own view is concerned, I would not regard the fact that the report is not self-executing or that the discretion of the Executive is interposed between it and any actual consequence to the person in the situation of the respondent as necessarily preventing the making of the appropriate order at the instance of such a person.

It is now formally recognised that the common law rules of natural justice apply to public inquiries whose findings of their own force could not affect a person's legal rights or obligations ( Annetts and Another v McCann and Others [1990] 170 CLR 596 at 599 - 600).

The respondents are right when they say that the obligation attaches to the process as a whole. However, the Court does not accept the next step in the argument to the effect that where a decision-making process involves two steps it always means that complaint may not be made about the primary decision-making process, even when the matter can be redressed before the second decision-maker.

It is counter-productive for the respondents to argue, as they did in a submission which I understand was ultimately withdrawn, that the only material before the Minister is the BC report and that accordingly, there would be no utility in allowing the council to make submissions in response to submissions which are not before the Minister. Conversely, such an argument, if pressed, effectively supports the applicant's case. If it is correct to say it is not logical to complain if the submissions of the CSC are not before the Minister then equally it is logical to say that the applicant or any other person or body whose interests are to the contrary should be given the opportunity to address submissions at the time they are being considered by the BC, prior to the BC acting on them by reporting to the Minister.

It is nevertheless not disputed between the parties that there is no evidence of what is before the Minister except to the extent the Minister has stated he is proposing to rely upon the BC report. The applicant submits it is incumbent upon the Minister as a party to these proceedings to adduce evidence of what is before him. This has not been done and, therefore, the applicant argues it is proper for the Court to draw the inference that the CSC's submission is before the Minister and that accordingly there is a real risk of prejudice to the council ( NIB Health Funds Ltd v Private Health Insurance Administration Council (2002) FCA 40).

Irrespective of whether the adverse submissions are before the Minister, it is appropriate for the council to have an opportunity to address them before a final decision is made. The purported report by the BC takes account of the CSC submission, at least, and thus it is fair that the council be given the chance to make an alternative submission, either to the BC or the Minister. 80. The passage relied upon by Mr Hutley at p 578 of the judgment by Mason CJ, Dawson, Toohey and Gaudron JJ in Ainsworth and Another v Criminal Justice Commission [1991 - 1992] 175 CLR 564 referring to The State of South Australia v O'Shea [1987] 163 CLR 378 at 389 per Mason J, only shows that where a decision-making process involves different steps before a final decision is made the requirements of natural justice are satisfied if "the decision-making process, viewed in its entirety, entails procedural fairness" . In the present case, both steps or stages are in contention. The first step is challenged on the basis that the BC did not provide the council with the submissions made by third parties, in particular the submission by the CSC, and other adverse material. Nor did it provide an opportunity to rebut any contrary allegations contained therein. The second complaint is that the Minister has not allowed a reasonable time to make submissions before he takes the next step to refer the proposal to the Governor. Unless the Minister has a report, made pursuant to the statutory requirement, the second step is not a relevant consideration. The primary attack, therefore, is against the BC for failing to observe procedural fairness before making its report. Any prospect that the Minister will allow the council to make further submissions after viewing the material it seeks to inspect is not, in the Court's view, relevant to the issue raised against the BC. Even so, the material has not been produced except in answer to a notice to produce.

The council was clearly entitled to be heard at least in respect of the adverse material submitted by the CSC. Furthermore, the council has not been given an opportunity to review and make submissions in respect of the following:- (1) submissions by consultants;

The council is entitled to that opportunity if the material affects its interest in the manner explained by Brennan J in Kioa at p 616 - 617.

The council identifies the prejudicial or adverse material that remains undisclosed as follows:- (1) CSC or other submissions;

(2) Six (6) documents withheld by the CSC in response to a Freedom of Information Act application;

(3) Detailed reports provided and other information collected and sent to PKF for analysis after a meeting with representatives of the CSC;

(4) Information from an independently conducted survey about residents' and ratepayers' attitudes referred to at p 33 of the BC report; and

(5) Unsolicited submissions received by the BC from individuals, community groups and other interested parties.

The Court is satisfied that the BC took into account material submitted by the CSC. That material contained adverse information in circumstances where the interest of the council may be seriously affected by the exercise of the statutory power to make the report ( Re Minister for Immigration and Multicultural Affairs and Another: Ex parte Miah (2001) 179 ALR 238). The evidence also shows that Ms Carnegie and at least three departmental officers deleted or edited material in the final draft of the report to the possible detriment of the interests of the applicant. There is no formal confirmatory record of these actions by the BC. Nevertheless the council was not consulted. The council has not, at any time, been given the opportunity to address any of this material as it was entitled to in accordance with the principles of procedural fairness. In the circumstances the BC failed to observe the common law obligation of procedural fairness.

The Court relies particularly on the explanation by Kirby J in Re: Minister for Immigration and Multicultural Affairs; Ex parte "A" [2001] 185 ALR 489 at 498 as follows:- In Australia, it is a basic principle of the common law rules of natural justice that a person whose interests are likely to be affected by an exercise of power will be afforded a fair opportunity to respond to information or relevant material adverse to that person's interests which the repository of the power proposes to take into account in deciding upon its exercise. In short, a person should ordinarily be afforded the opportunity to provide evidence or material to rebut information or material tendered against that person's interests. As well, the person should be afforded the opportunity of persuading the decision-maker, by oral or written submissions, as to the significance of the adverse evidence or material and the way in which it might be reconciled with the person's claim.

The effect of the BC's failure is explained by Aicken J in Forbes v New South Wales Trotting Club Limited [1978 - 1979] 143 CLR 242 at 277 as follows:- That which is done without compliance with applicable principles of natural justice, in circumstances where the relevant authority is obliged to comply with such principles, is not to be regarded as void ab initio so that what purports to be an act done is totally ineffective for all purposes. Such an act is valid and operative unless and until duly challenged but upon such challenge being upheld it is void, not merely from the time of a decision to that effect by a court, but from its inception. Thus, though it is merely voidable, when it is declared to be contrary to natural justice the consequence is that it is deemed to have been void ab initio.

The applicant also refers to the following passage at par 43 of the judgment by Gaudron and Gummow JJ in Minister for Immigration and Multicultural Affairs v Bhardwaj [2001] HCA 11, unreported for confirmatory authority that a decision arrived at contrary to the common law obligation to provide procedural fairness is to be regarded as a nullity:- The failure of the Tribunal to give Mr Bhardwaj a reasonable opportunity to present evidence and argument had the consequence that it did not reach a decision after considering evidence and argument against the cancellation of his visa. That being so, it follows that the Tribunal did not conduct a review as required by the Act and the September decision was, thus, not a "decision on review" for the purposes of ss 367 and 368 of the Act.

In Miah, the High Court held that a failure to exercise statutory power in accordance with the rules of natural justice involves a jurisdictional error of law (see also McHugh J in Bhardwaj at par 63).

The Court agrees with the applicant that as the adverse material remains undisclosed to the council and the time for the making of submissions to the Minister has expired, the breach of the common law obligation has not been cured. Accordingly, the Court has jurisdiction under s 673 of the LGA to make a declaration in respect of the validity of the threatened act of the Minister to exercise power under s 281F(7) in the absence of a valid report (cf South Sydney Council v Local Government Boundaries Commission ). For the Minister to make a recommendation to the Governor pursuant to s 218F(7) in the circumstances will be a breach of the LGA

The question of whether the Minister was reasonable in restricting the time for making submissions in respect of the BC report does not arise in circumstances where the report itself is a nullity.

The applicant is entitled to a declaration in the form of Order 1 in the Application on the ground that the BC has not satisfied its statutory obligation to examine and report as required by Div 2B of Pt 1 in Ch 9 and s 263 of the LGA. Furthermore, the report forwarded to the Minister on 20 March 2002 is void as a consequence of the failure on the part on the BC to accord procedural fairness to the applicant. Accordingly, as the BC report is a nullity the jurisdictional pre-condition stipulated by s 218D has not been satisfied.

The Minister has acknowledged, through his counsel, that he will not act otherwise than in accordance with the Court's determination. In the circumstances the Court does not propose to make any orders, other than in the terms of the above-mentioned declaration.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.