June 28, 2023
The Supreme Court has recently released judgment in Auckland Council v C P Group Ltd  NZSC 53 regarding the controversial decision by Auckland Council to impose a targeted rate on commercial accommodation providers to help fund expenditure on visitor attraction and major events by Auckland Tourism, Events and Economic Development (ATEED). Jack Hodder KC appeared on behalf of Auckland Council and Alan Galbraith KC on behalf of Millennium & Copthorne Hotels New Zealand Ltd and Katalyma Hotels & Hospitality Ltd.
The High Court had originally dismissed the commercial accommodation providers’ application for judicial review, finding that the decision to impose the targeted rate was reasonable and that the Council had complied with all of its statutory requirements in deciding to impose the rate.
The Court of Appeal reversed that decision, finding the Council had not adequately considered the distribution of benefits as required for the imposition of a targeted rate under s 101(3)(a)(ii) of the Local Government Act 2002. The Council had instead proceeded on what the Court found was a false assumption that the commercial accommodation providers could pass through the costs of the targeted rate to visitors by increasing their prices. This assumption was said to have been central to the design of the scheme, absent which there could be no proper justification for targeting a small group of ratepayers to shoulder the burden of funding tourism activities that also benefitted other sectors not subject to the rate. The Council’s decision to impose the targeted rate was accordingly found to be unlawful and, had it been necessary to decide, a finding that the decision was unreasonable would have inevitably followed.
The Supreme Court, in a decision dated 12 May 2023, unanimously allowed the Council’s appeal. In contrast to the Court of Appeal’s findings, the Supreme Court held that the Council had complied with its statutory obligations under s 101(3)(a)(ii). The ability of commercial accommodation providers to pass through the cost of the targeted rate by increasing prices to guests was both relevant and an available assumption to the Council on the evidence before it. The Court also noted that the Council had responded to concerns raised by the commercial accommodation sector by recommending modifications to the targeted rate scheme. As the Council was not required to undertaken an in-depth analysis of the distribution of burdens and benefits, it had done enough to satisfy the broad brush requirements of s 101(3)(a)(ii).
The Supreme Court further held that the Council’s decision to impose the targeted rate was not unreasonable, relying on the stringent threshold for challenging rating decisions as set out in Wellington City Council v Woolworths (No 2)  2 NZLR 537. The Court held there was no basis to distinguish targeted rating decision from general rating decisions in relation to unreasonableness, and reaffirmed that the threshold for challenging rating decisions was a high one. Given the Court’s finding that the Council had complied with s 101(3)(a)(ii), it followed that the Council’s decision to impose the targeted rate was not unreasonable. The Council had not erred in its approach to pass through; there was a rational connection between the rate and the benefits to commercial accommodation providers from ATEED’s activities; there was a close nexus between the rate and the funded activity; and compromises had been made by the Council to recognise the benefits received by other businesses and ratepayers from ATEED’s activities.
Auckland Council suspended the targeted rate in 2020 as a result of the impact of the Covid-19 pandemic on the tourism sector. The Council has not yet publicly announced when, or if, it will be reintroduced.