- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Tablelands Regional Council v Minister for Local Government  QSC 88
TABLELANDS REGIONAL COUNCIL
THE HONOURABLE JACKIE TRAD MP, MINISTER FOR INFRASTRUCTURE, LOCAL GOVERNMENT AND PLANNING
MAREEBA SHIRE COUNCIL
SC No 226 of 2015
Supreme Court at Cairns
22 April 2016
14-15 December 2015
ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – GENERALLY - where the Tablelands Regional Council de-amalgamated and was replaced by two new local governments – where a dispute arose over the division between the two new councils of the former council’s cash balance – where a comprehensive process to determine the final cash split was undertaken – where the dispute was referred to and decided by the Minister under Local Government (De-amalgamation Implementation) Regulation 2013 (Qld) – where the applicant makes application for statutory review of the Minister’s decision pursuant to s 20 Judicial Review Act 1991 (Qld) – where the applicant alleges there was no evidence or other material to justify the making of the decision – where the applicant alleges the decision was an improper exercise of power because of Wednesbury unreasonableness or because the Minister failed to take into account a relevant consideration – whether even if the Minister did err it would be inappropriate to grant the application
LOCAL GOVERNMENT - REGULATION AND ADMINISTRATION - CONSTITUTION, AREA AND BOUNDARIES - REARRANGEMENT OF EXISTING AREAS - CONSEQUENCES OF REARRANGEMENT - ON ASSETS AND LIABILITIES – where the Tablelands Regional Council de-amalgamated and was replaced by two new local governments – where a dispute arose over the division between the two new councils of the former council’s cash balance – where in the first instance the dispute was determined by the Minister under Local Government (De-amalgamation Implementation) Regulation 2013 (Qld) – where the applicant makes application for statutory review of the Minister’s decision pursuant to s 20 Judicial Review Act 1991 (Qld) – whether the Minister erred in her decision
Acts Interpretation Act 1954 (Qld) s 35C(1)
Judicial Review Act 1991 (Qld) s 20, s 24, s 32, s 48
Local Government (De-amalgamation Implementation) Regulation 2013 (Qld) s 3, s 5, s 12, s 18, s 20, s 21, s 24, s 26, s 27, s 30
Associated Provincial Picture House Ltd v Wednesbury Corporation  1 KB 223, cited
Curragh Qld Mining Ltd v Daniel (1992) 34 FCR 212, cited
Intero Hospitality Projects P/L v Empire Interior (Australia) P/L & Anor  QCA 83, cited
Kostas v HIA Insurance Services P/L(2010) 241 CLR 390, distinguished
McLean v Gilliver  1 Qd R 637, cited
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, cited
Minister for Immigration & Citizenship v SZIAI (2009) ALR 429, cited
Minister for Immigration v Li (2013) 249 CLR 332, cited
Minister for Immigration v Rajamanikkam (2002) 210 CLR 222, considered
Prassad v Minister for Immigration (1985) 6 FCR 155, cited
Television Capricornia Pty Ltd v Australian Broadcasting Tribunal (1987) 13 FCR 511, followed
Videto v Minister for Immigration and Ethnic Affairs (1985) 8 FCR 167, considered
S Fynes-Clinton for the Applicant
M Hinson QC and S McLeod for the First Respondent
D Gore QC with J Lyons for the Second Respondent
MacDonnells Law for the Applicant
Crown Solicitor for the First Respondent
King & Company for the Second Respondent
- On 15 March 2008 the Atherton, Eacham, Herberton and Mareeba Shire Councils amalgamated, becoming the Tablelands Regional Council. In 2013 residents of the former Mareeba Shire Council area voted at a de-amalgamation poll for Mareeba’s de-amalgamation from the Tablelands Regional Council. Consequently, on 1 January 2014, the Tablelands Regional Council (“the former council”) was de-amalgamated and replaced by two new local governments: the new Mareeba Shire Council (“MSC”) and the continuing but smaller Tablelands Regional Council (“TRC”).
- In the wake of the de-amalgamation a dispute arose between the two new councils over an asset re-allocation adjustment of $5.487M (“the disputed amount”), perceived by TRC to be the alleged value to it of certain assets that it did not have the benefit of. The adjustment effected the apportionment of cash reserves between the councils.
- The Local Government (De-amalgamation Implementation) Regulation 2013 (Qld) (“the regulation”) provided for the logistical aspects of de-amalgamation, including the transfer of assets and liabilities. Under the regulation it fell to the first respondent (“the Minister”) to make a decision about the disputed matter.
- On 8 April 2015 the Minister decided that the allocation of the former council’s cash balance of $52,077,050 would be $26,024,048 to TRC and $26,053,002 to the second respondent, MSC. The decision preserved the effect of the asset re-allocation adjustment. The applicant, TRC, is aggrieved by that decision because TRC’s share of the former council’s cash balance was wrongly reduced by the disputed amount, or so it alleges.
- TRC makes application for statutory review of the Minister’s decision, pursuant to s 20 Judicial Review Act 1991 (Qld) (“JRA”), on grounds that:
- there was no evidence or other material to justify the making of the decision (grounds 1 and 2); and
- the making of the decision was an improper exercise of the power conferred on the Minister by the regulation, because:
- the decision was so unreasonable that no reasonable person in the position of the Minister could have made it (ground 3); and
- the first respondent failed to take into account a relevant consideration (ground 4).
- The applicant seeks orders setting aside the decision of the first respondent and remitting the matter of dispute to the first respondent for proper adjudication.
- It is helpful to review the relevant regulatory framework for de-amalgamation and the factual background of the matter before analysing the evidence and grounds advanced in this review.
The De-amalgamation Regulation
- The regulation’s purpose is to implement the de-amalgamation of certain local government areas, including that of the former council.
- The regulation’s purpose is to be achieved by a number of actions stipulated in s 4, including:
“(d) providing for a transfer mechanism, including a transfer manager, transfer methodology and transfer committee, to transfer employees, assets, liabilities and documents from the continuing local governments to the related new local governments…”
- The regulation provides for the appointment of a transfer manager for the new local government, who would, pursuant to s 15, “have all the functions necessary or convenient to facilitate the establishment of the new local government”. The transfer manager becomes the acting chief executive officer on the “changeover day” which the regulation defines to mean 1 January 2014.
- The regulation provides for the chief executive of the responsible government department to make and publish a transfer methodology directed, inter alia, at ensuring the proper transfer of assets and liabilities from a continuing local government to the related new local government. By the regulation’s definitions the TRC is a “continuing local government”, the MSC is a “new local government” and as between each other they are said to be “related” local governments.
- A transfer committee, consisting of a chief executive officer of the continuing local government and a transfer manager for the new local government, is established by the regulation. Its role is to make decisions as provided for under the transfer methodology. Its functions, listed in s 27, relevantly include at s 27(a):
“(a) to decide the assets and liabilities that are to be transferred to the new local government”.
Minister the Decision Maker
- If the transfer committee is unable to decide on a matter which it has the function to decide, then s 30 provides for the Minister to decide the matter:
“30.Adjudication by Minister
- This section applies if the transfer committee is unable to make a decision about a matter mentioned in section 27.
- Either member of the committee may refer the matter to the Minister.
- The Minister must, after considering the submissions of each member of the committee, make a decision about the matter.” (emphasis added)
- In this case the “matter mentioned in s 27” which the committee was unable to make a decision about and which the Minister therefore had to decide was a matter mentioned in s 27(a), that is, deciding the assets and liabilities to be transferred to the new local government.
The Transfer Committee
- The transfer committee for TRC and MSC met from time to time from around 24 May 2013 until its final meeting on 26 September 2014. Mr Ian Church, the chief executive officer of TRC, represented TRC on the transfer committee throughout that period. Mr Peter Franks, the CEO of MSC, represented MSC to 3 February 2014 and Mr Rod Ferguson, the transfer manager and later acting CEO of MSC, represented it after that time.
- The transfer committee was obliged by s 23 of the regulation to “take all reasonable steps to comply with the transfer methodology” published by the department’s chief executive.
- The published de-amalgamation transfer methodology provided, inter alia, that:
“The transfer committee must decide the split of assets and liabilities between the continuing and new council to determine the opening balance sheet position of the new council.”
- The methodology went on to explain that the Queensland Boundaries Commissioner’s de-amalgamation report had included a financial analysis prepared by the Queensland Treasury Corporation (“QTC”) which included opening balance sheet positions as at 1 July 2012 based on the actual financial position of each council at amalgamation in 2008 along with a break-up by new and continuing council area from 16 March 2008 to 30 June 2012. Because of the significant effort and cost involved in reaching that position the methodology recommended that the transfer committee give consideration to using the QTC analysis to determine a starting position for the break-up of cash and debt.
- At its meeting on 21 June 2013 the transfer committee decided against using QTC’s analysis and resolved to engage an independent consultant on the premise that the outcome of the process resolved by the transfer committee would “result in a more technically correct and independently assessed apportionment of debt, cash and reserve balance components of the balance sheet to be transferred”. The minutes relevantly record:
That the transfer committee:- …
D.Engage an independent consultation reporting to the transfer committee to determine the debt, cash and reserve balance components of the balance sheet to be transferred from the continuing Tablelands Regional Council to the new Mareeba Shire Council and that such engagement be in accordance with the Scope of Works and process set out in Appendix 1.
E.Note that following the completion of this independent expert report to the transfer committee:-
a.the continuing Tablelands Regional Council will have that report independently reviewed by its internal auditors on behalf of the Tablelands Regional Council;
b.the Transfer Manager will have that report independently reviewed by an independent financial consultant on behalf of the future Mareeba Shire Council …”
Crowe Horwath Engaged
- On 16 July 2013 the transfer committee decided to engage accountancy firm WHK, which thereafter became known as Crowe Horwath (“CH”), as the independent consultant.
The Interim Report
- On about 24 January 2014 CH published its interim report. It contained an interim reconstruction up to 30 June 2013. It was only of provisional effect because the ultimate exercise had to embrace events up to the end of 2013.
- The transfer committee considered the interim report on 29 January 2014. The committee resolved to receive the report subject to a number of actions including:
“c.That MSC and TRC look into the assets split and capital acquisitions and funding as at 31 December and provide further advice back to the transfer committee on any issues.”
- TRC had the interim report reviewed by its internal auditors, Pacifica. The review was to assess the reasonableness of the methodologies applied to the unallocated amounts within the separated profit and loss, balance sheet and cash-flow prepared by CH. Pacifica’s resulting report of January 2014 was not before the Minister. Even if it had been it is unlikely to have been material to the Minister’s decision. Pacifica’s report noted that the process and approach adopted by CH appeared logical and reasonable. It noted that it was understood from discussions with the transfer committee delegates that further internal review of some matters, including fixed assets and capital expenditure, was required.
- After the issue of the interim report a further revised scope of work was issued to CH for a determination of the final cash and reserve balances to be allocated as at 31 December 2013. The scope, which was not later put before the Minister, noted a number of issues arising from reviews of the first report by MSC and TRC. One such issue noted in the scope as having been raised by both TRC and MSC was:
“Capital funding needs to be reconciled to the asset register in terms of the capital expenditure incurred by each council area during amalgamation and the source/(s) of funding for those expenditures.”
- The document, in dealing with the format of the report to be given, instructed:
“In so far as the work undertaken [in] the Initial Scope of Works … is concerned, the transfer committee would like to see a more detailed analysis of the capital acquisitions and disposals since amalgamation. That is to say that a reconciliation should be prepared identifying all capital acquisitions and disposals by area (MSC/TRC) and the funding source or type for those transactions (eg externally funded (loan, donation, grant funding) or internally funded (preserves, contributions, revenue). Ideally any external funding of capital should be reconciled with the corresponding income items.”
- Lachlan Peden, one of TRC’s members of the De-Amalgamation Finance Working Team assisting the transfer committee, deposed that the aforesaid analysis was not undertaken by CH but was undertaken by MSC finance staff and checked and agreed to by TRC finance staff. He deposed that after this analysis, some further amendments were made to correct asset allocation error.
The Final Report
- On 8 September 2014 CH issued a version of its final report, entitled De-amalgamation Cash-flow Recreation, for the period up to 31 December 2013.
- On 16 September 2014 CH forwarded to the transfer committee a reconciliation of the location of capital assets for the years 2010, 2011, 2012 and 2013. It noted the previous incorrect allocation of some assets.
- The final report of CH was emailed to the transfer committee on 19 September 2014.
The asset re-allocation adjustment
- The final report at part 7 contains tables for each council headed “Reconciliation of cash allocation from 30 June 2013 to 31 December 2013”. Each council’s table records its total cash allocation as calculated in the first report as at 30 June 2013. The tables then list variously described amounts under the headings “Add” and “Less” and, applying those additions and deductions to the total cash allocation as at 30 June 2013, calculate the total cash balance allocation for each council as at 31 December 2013.
- In the reconciliation table for MSC the “add” list includes an amount of $5,487,883.04 described as “re-allocation decrease in PP&E” (“PP&E” is property plant and equipment). In the TRC reconciliation table the same amount is included in the “less” list described as “re-allocation increase in PP&E”. The final report therefore contained an adjustment in respect of cash allocations of about $5.4M in MSC’s favour because of a re-allocation in respect of PP&E (“the asset re-allocation adjustment”).
- It is this asset re-allocation adjustment which is the source of the dispute in this case.
- The asset re-allocation adjustment, unlike other adjustments, was not discussed in the report. As much was acknowledged by CH by the following entry under the reconciliation tables:
“The majority of the above movements for both councils have been discussed in the body of this report with the exception of the relocation increase in PP&E for TRC and the corresponding decrease in PP&E allocation for MSC. This has resulted due to the firming up of the location of some assets and to which council will own them moving forward.”
- TRC was reluctant to accept the asset re-allocation adjustment because of what has turned out to be a misunderstanding of the process which gave rise to it; a process which had not been explained in the report.
The referral to the Minister
- At a transfer committee meeting of 26 September 2014 it was decided that the determination of the cash split be referred to the Minister. The minutes record:
The final Crowe Horwath De-amalgamation Cash-flow Recreation Report as at 31 December 2013, which determines distribution of cash reserves, be referred to the Minister for determination of a cash split, pursuant to Section 30 of the Local Government (De-amalgamation) Regulation 2013.
The reason for the non-acceptance of the Report is that the TRC CEO believes that, while the majority of the report is acceptable, there are material flaws in certain sections, including item 5.4 “Capital Expenses” and item 5.5.2 “increase/decrease in asset re-evaluation”, resulting from the use of incorrect methodologies which have led to an incorrect allocation of cash between the two Councils at 31 December 2013. The MSC CEO’s position was that the independent assessor’s report, CH, should be accepted. However, he believes that if the report is to be reviewed, then it should be done so in its entirety as there are other components which could affect the outcome.
Both CEOs are to provide submissions and information once requested to do so by the Minister.” (emphasis added)
- The department’s senior project officer of finance and funding, Mr Mark Snow, deposes that the following materials were provided to the Minister to decide the matter:
- a briefing note;
- draft letters to each council’s CEO for the Minister to sign;
- a submission by Mr Church of TRC dated 7 October 2014;
- a submission by Mr Franks of MSC dated 15 October 2014;
- CH’s final report, entitled De-amalgamation Cash-flow Recreation and dated 1 September 2014;
- a copy of an email trail of 26 November 2014; and
- a summary/chronology of the process adopted by the transfer committee and of the department’s consultation prior to briefing the Minister.
TRC’s submission to the Minister
- The submission to the Minister by Mr Church for TRC raised some issues that are presently irrelevant. These included a later abandoned concern about the use CH should have made of 2008/9 audited financial statements.
- On the issue of the asset re-allocation adjustment Mr Church’s essential theme was that it was not accepted because there was no evidence in support of it. He submitted:
“The rationale for not accepting the final cash allocations is relatively simple. The Crowe Horwath report contains a reduction to TRC’s final allocation of cash in respect of assets that are presumed to be transferred from MSC to TRC. …
TRC has no objection to reimbursing MSC for assets owned by MSC prior to amalgamation which have subsequently been transferred to TRC as part of the de-amalgamation. However, TRC has not been able to identify where these assets, and what their relative values, are. Due to the quantum of re-allocation I feel that Crowe Horwath and MSC should be able to readily identify these assets and provide me with evidence to substantiate such a movement in assets between council areas. …
Our contention is that any material movement or adjustment to cash should be able to be substantiated. I have not received a verifiable list of assets transferred from MSC to TRC to substantiate the cash adjustment of $5.487m included in the Crowe Horwath report. I believe that any transfer of assets between councils need to be traced back to the assets actually held at the beginning of amalgamation by each council. If it can be shown that these assets were held by one council at amalgamation and then a different council at the conclusion of de-amalgamation then I am prepared to accept this movement as an adjustment to cash.
Throughout this process both councils have sought to verify the movements in cash due to asset acquisitions. MSC finance staff prepared a reconciliation showing the actual cash asset acquisitions for each council during the period of amalgamation. My staff have reviewed and accepted this reconciliation. The $5.487M asset adjustment which transfers cash from TRC to MSC is over and above the cash acquisitions shown in the reconciliation prepared by MSC. I believe that any adjustments to cash over and above the agreed numbers should be supported by identified asset movements between councils and/or any identified corrections in the cash acquisitions reconciliation.”
MSC’s submission to the Minister
- MSC’s submission identified a number of areas where it arguably ought have received more favourable outcomes than provided for by the CH report. Its essential theme was that the outcomes provided for by the CH report were the product of an agreed methodology.
- Its submission concluded:
“If it is decided to review the Crowe Horwath report then it is our contention that the entire report should be reviewed, as it would not be reasonable to review the application of an agreed methodology in one situation without the opportunity to review the methodologies applied in others.”
Consultation by department with CH
- The department’s briefing note’s “attachment 6 – supporting detail” included information about the department’s consultation with Mr Nathan Finney of CH, with the consent of both councils, “with the aim to obtain additional information on the matter referred for adjudication”.
- That information included:
“In relation to Mr Church’s advice that the 2008-09 audited PP&E movements should be used to order to be consistent with the approach taken in years from 2010 onwards, Mr Finney advised that:
- The re-allocation increase in PP&E ($5,487,883), disputed by TRC, does not relate to use of the 2008-09 audit work papers, but rather has resulted due to the firming up of the location of some assets and which council will own them moving forward.
- The re-allocation increase is the net result of misallocation corrections in both directions between TRC and MSC.
- The 2008-09 audit work papers were never used in the engagement. It was determined and agreed by representatives of both councils during the preparation of the report up to 30 June 2013 that the 2008-09 asset register could not be relied upon to provide an accurate breakup of assets (and associated expenses) between councils, even though it agreed to the financial statements as a whole. …”
In relation to the 2008-09 asset register issue, Mr Finney advised that while TRC view this as an error, his view is that it is a methodology related issue. TRC have proposed a number of alternative methodologies which, for one reason or another have been flawed (as an example leaving wip out of the calculations entirely, or not reconciling to the 1 July 2009 opening balances). Each time CH received an alternative proposed methodology it was investigated and delayed the issuing of the final report by weeks and added considerable cost to the exercise. Each time CH elected not to use a methodology proposed by TRC another alternative methodology was put forward which started the whole process again. Each time a new methodology was put forward it still failed to answer the obvious and pressing issue of what new information had come to light that could definitively provide an allocation based on fact that could be verified and reconciled. This could not be agreed between the councils and therefore has escalated.”
- Because the latter passage exhibits some discontent by CH with TRC, I should for balance record the evidence suggests a mutual discontent by TRC with CH. The appendix also reported on information provided by Mr Finney in respect of other matters of no present relevance.
- The department’s briefing note to the Minister recommended the decision which was in the end result made by the Minister, namely that the final cash split be $26,024,048 to TRC and $26,053,002 to MSC. The briefing note explained the effect of that split was consistent with the CH report, save that CH had identified a “genuine proven error” after its final report in respect of the allocation of capital works in progress, the correction of which triggered a variation in the calculated cash split. The correction for that error is not in issue.
- As to the more substantive dispute, the briefing note did not favour any departure from CH’s calculation of the final cash split, essentially because a methodology had been agreed to and it ought not be departed from. In that regard the briefing note said:
“It was a legitimate decision of the Transfer Committee that independent consultants CH be engaged to determine the apportionment of the TRC balance sheet items between the continuing TRC and new MSC. Information provided indicates that this assignment was carried out in accordance with agreed methodologies and there is evidence of continued consultations between the Transfer Committee, council staff and CH throughout the project.
The Department considers that CH has undertaken a comprehensive process to determine the split of the balance sheet items and calculation of the final cash split, including the split of Plant, Property and Equipment (PP&E) assets. The Department does not consider the TRC-CEO submission provides sufficient information to conclusively demonstrate that CH has misstated TRC’s fair allocation of cash at de-amalgamation.
Given the depth and complexity of the analysis undertaken by CH, it is the Department’s view that the only way to conclusively determine whether an adjustment should be made to the final report would be to initiate a detailed financial review of the PP&E allocation in the CH report. The information provided to the Department by CH also suggests that a review of the report, based on the adopted methodology, would be unlikely to yield any significant change to the final cash allocation between TRC and MSC.
It is the Department’s view that if the findings of the CH report were to be rejected on the basis of the CEO-TRC submission, that as part of any review, weighting and consideration should also be given to the CEO-MSC submission, that as the Transfer Committee engaged CH to determine the apportionment of the TRC balance sheet between the continuing TRC and new MSC, that the report should be adopted, even though MSC believe that the final cash allocation is less than what it should be receiving.
Given that both councils have now been operating as de-amalgamated entities for over 12 months, any additional review would further delay the final decision and financially and operationally inconvenience both parties.”
Minister’s decision and reasons
- The Minister’s decision, notified to the parties by correspondence dated 8 April 2015 was:
“As required under section 30(3) of the Regulation, it is my decision that the $52,077,050 cash balance as at 31 December 2013, as advised in the Crowe Horwath report presented to the Transfer Committee on 26 September 2014, be allocated on the basis of $26,024,048 to Tablelands Regional Council and $26,053,002 to Mareeba Shire Council.”
- By letter dated 17 April 2015 TRC requested a statement of the Minister’s reasons pursuant to s 32 of the Judicial Review Act.
- The Minister provided her reasons by correspondence of 13 May 2015. After dealing with introductory matters the Minister stated her reasons:
“My detailed reasons regarding the matter in dispute are as follows:
- Section 27(a) of the Regulation specifically provided that a key function of the Transfer Committee was to decide the assets and liabilities (including this disputed cash amount) that were to be transferred to the new MSC.
- It was a legitimate decision of the Transfer Committee that independent consultants CH be engaged to determine the apportionment of the TRC balance sheet items between the continuing TRC and new MSC. TRC and MSC (as minuted by the Transfer Committee) agreed to the engagement of CH to determine the final allocation of cash between the two councils as at 30 June 2013 (interim report) and 31 December 2013 (final report).
- I am advised that information provided indicates that this assignment was carried out in accordance with agreed methodologies and there is evidence of continued consultations between the Transfer Committee, council staff and CH throughout the project.
- CH’s final report determined that the allocation should be $27.5M (53 per cent) to TRC and $24.6M to MSC (47 per cent). The final report included a reconciliation of changes in the cash allocation from the interim report. The reconciliation noted an adjustment of $5.5M for a re-allocation increase in Plant, Property and Equipment (PP&E) from TRC to MSC, which forms the basis of the Transfer Committee dispute.
- I am advised that TRC’s submission did not accept the adjustment, arguing that it had been calculated using incorrect methodologies and on the basis of incomplete 2008/09 asset data. CH advised that this value actually represented the net adjustment made as asset location and ownership details were firmed up between the interim and final reports. I understand that CH also advised that the 2008/09 asset register was not taken into account as the register’s asset numbering and classification system changed significantly between 2008/09 and 2009/10, which made accurate reconciliation between the two years impossible.
- MSC’s submission and further correspondence supported the CH view that the 2008/09 asset data was unreliable and unable to be used during the engagement.
- I am advised that CH has undertaken a comprehensive process to determine the split of the balance sheet items and calculation of the final cash split, including the split of PP&E assets. I do not consider that the TRC’s submission provides sufficient information to conclusively demonstrate that CH has misstated TRC’s fair allocation of cash at de-amalgamation.
- On 26 November 2014, CH advised the Transfer Committee members that it believed that an error was found to have been included in the final report and determination. Correction of the error ($1,469,082) would decrease TRC’s allocation to $26,024,048 (50 per cent) and increase MSC’s to $26,053,002 (50 per cent). CH advised the Department that the error had been previously identified, agreed and adjusted during their engagement but had [not] been included in the final report due to genuine human error.
Given that this is a genuine error, relating to information previously identified and corrected during the engagement, and that CH itself agrees that the adjustment was overlooked in error, this adjustment has been taken into consideration in making my final decision. No other material errors or omissions have been identified subsequent to the delivery of the CH report.”
Evidence on the review reveals TRC’s concerns were misconceived
- A variety of affidavits were filed in the application and became exhibits at the hearing. In the sequence of filing the deponents were:
- Lachlan Peden, an accountant employed as TRC’s Executive Projects Officer and Senior Business Analyst and a member of the De-amalgamation Finance Working Team which assisted the transfer committee.
- Anthony Archie, an accountant employed as MSC’s Management Accountant and from October 2013 a member of the De-amalgamation Finance Working Team which assisted the transfer committee.
- Stephen Stavrou, an accountant from Deloitte, engaged by MSC to provide expert evidence in this matter.
- Mark Snow, an accountant and Senior Project Officer of the Finance and Funding unit of the Department of Infrastructure, Local Government and Planning, who deposed to the information obtained and placed before the Minister.
- Michael Delaney, an accountant from BDO, engaged by TRC to provide expert evidence in this matter.
- Supplementary affidavits from Mr Peden and Mr Archie were also filed. All of the above witnesses other than Mr Snow were cross-examined on the review.
- It is apparent from the affidavits of Mr Peden and Mr Archie, who were each members of the De-amalgamation Finance Working Team, that their team did substantial work on behalf of the transfer committee in consultation with CH.
Mr Peden’s analysis
- The principal affidavit of Mr Peden outlined the process that the transfer committee had followed, including its dealings with CH. Some of its content was objected to, including an exercise in which Mr Peden attempted to analyse the sources of an adjustment in the amount of $6.956M – that being the quantum of the adjustment about which the application complained before the figure was amended to the figure of about $5.4M. Mr Peden’s work identified an adjustment figure of $6.976M that, by coincidence, was close to the amount initially complained of in the application but had a quite different source. The near coincidence in the total figures is misleading in that the amount initially complained of was the total of the $5.4M disputed amount and a $1.469M adjustment that flowed from an unrelated error identified after the matter was referred to the Minister and is not challenged as erroneous.
- The work undertaken by Mr Archie, whose evidence is discussed below, demonstrated that the asset re-allocation adjustment arose from a quite different foundation than the potential foundation identified by Mr Peden.
- This revealed the irrelevance in the end result of Mr Peden’s attempted analysis. However, albeit as matter of formality, I do not uphold the objection to Mr Peden’s analysis because that would be to conclude the applicant was not entitled to adduce evidence tending to show, as Mr Peden’s evidence did, that there was no actual movement of assets approaching the value of the disputed amount. That was relevant to a part of the applicant’s no evidence ground. The fact that, as will be seen, that ground must fail, does not render evidence relevant to the doomed attempt to prove it inadmissible.
Mr Archie’s analysis
- I turn next to what Mr Archie’s work revealed. Mr Archie had access inter alia to the working papers and de-amalgamation workbooks created by CH in the course of preparing their reports. He reviewed that and other material, including council registers. Having done so he identified the components of the disputed amount, summarised by him in tabular form as follows:
Reason for Adjustment
Correction to Allocation of PP&E Assets
Correction to Allocation of Intangible Assets
Adjustments to Split of PP&E Assets
Assets reclassified as Intangible Assets
Incorrect Application of MSC Depreciation
Disposals – PP&E Assets
Disposals – Intangible Assets
Crowe Horwath Balancing Item
The correction to the allocation of PP&E assets was a net amount reflecting the value of PP&E assets that were wrongly allocated between MSC and TRC in CH’s first report but identified and allocated correctly in the final report. The corrections to those allocations were summarised by asset class in the below table by Mr Archie:
Plant & Equipment
Roads & Bridges
- The most significant of the above involved roads and bridges and in turn the most significant component of that category was a misallocation of 52 portions of Gunnawarra Rd, with a total value of $6,301,257, which had been wrongly allocated to MSC in the first report.
- As to the other corrections, the correction to the allocation of intangible assets reflected the value of intangible assets allocated in the final report on the basis of agreement to methodology reached at De-amalgamation Finance Working Team Meetings in late July 2014. The adjustments to the split of PP&E assets reflected the value of PP&E assets the subject of a revised split decided by the De-amalgamation Finance Working Team after the first report. The reclassification of assets as intangible assets resulted from a decision of the De-amalgamation Finance Working Team in respect of assets previously classified as PP&E assets. The incorrect application of MSC depreciation adjustment reflected an error in the allocation of the reversal of depreciation for MSC allocated assets. The adjustment for disposals of PP&E assets reflected the value of PP&E assets disposed of between 1 July and 30 December 2013. The adjustment for disposals of intangible assets reflected the value of intangible assets disposed of between 1 July and 30 December 2013. The net amount of $246,267 was a balancing item included by CH so that the $5,487,883 adjustment could be applied equally to both MSC and TRC.
- Apart from the adjustment for disposals post 1 July, the adjustments by CH, identified by Mr Archie, were part of a process of correction of allocations adopted in the interim report. Those corrections flowed in part from the identification of error between the interim and final report and in part from methodology decisions by the De-amalgamation Finance Working Team between the two reports. By far the major component of the adjustments resulted from, to adopt CH’s words in its final report, “the firming up of the location of some assets and to which council will own them moving forward”.
Mr Archie’s analysis correct
- Mr Stavrou verified the accuracy of Mr Archie’s work. Mr Peden accepted the accuracy of Mr Archie’s identification of the information founding the asset re-allocation adjustment, as does the applicant.
- It is clear from Mr Archie’s analysis that the asset re-allocation adjustment overwhelmingly involved CH’s correction of its previous allocations reflected in the first report and not any actual movement or transfer of assets from MSC to TRC after the first report. TRC’s reluctance to accept CH’s conclusions on the basis it could not identify such movements or transfers was therefore misconceived.
CH’s methodology explained
- The misconception that there would have to have been such movements or transfers to justify CH’s asset re-allocation adjustment may in part have arisen from confusion about how variations in the allocations of assets could result in a variation in the allocation of cash.
- As to the latter point, the opinion adduced by TRC from Mr Delaney was, in summary, that the asset re-allocation adjustment was and should have been treated as a cash transaction with the consequence there should not have been any adjustment to cash.
- I do not accept that opinion because, while well reasoned, it is based on flawed factual foundations. Those flaws were identified in the supplementary affidavit of Mr Archie. For instance, Mr Delaney’s opinion appears to be premised on the figures in the first report being conclusive as to the final cash split, as if the figures in the final report relate solely to movements in the ordinary course between 30 June and 31 December 2013. That is not what actually occurred. It was not possible, as Mr Delaney’s approach appears to assume, to calculate the movements in the ordinary course between 30 June and 31 December 2013 by subtracting each of the figures in each of the separated financial statements in the first report from the corresponding figures in each of the separated financial statements in the final report. The variations therein did not merely reflect interim trading movements. They were the result of corrections to past allocations as a result of the identification of error and methodology decisions in the interim.
- Most critically, contrary to Mr Delaney’s understanding, the methodology adopted by CH meant an asset re-allocation adjustment would also cause a cash adjustment. Mr Archie explained:
“[B]ecause of the methodology which the parties agreed that Crowe Horwath should use, the allocation of asset balances, other than cash, did have an impact upon the cash allocation between TRC and MSC because cash was, in effect, the balancing item…” (emphasis added)
- That methodology (“the trial balance methodology”) was also explained by Mr Stavrou, who testified of CH’s work:
“[I]t was clear to me from … both the interim report and the final report and, in particular, their workings in the Excel spreadsheets … the method they used for their scope of reconstructing the cash flows was not to identify each and every cash transaction. I believe … that was something near impossible to do based on accounting records to go through over several years … to identify transactions recorded in a system that are only cash as distinct from non-cash… . Their method of going about this was to do, effectively, a mathematical exercise where they took the trial balance, excluded the cash amount from the top, then left with a trial balance that … is out of balance and it balances to the cash number. They’ve then gone through the methodology of allocation on each and every line item of the profit and balance sheet, all the accounts that make up the trial balance, allocated those to the two councils, and then by deduction … inherently those two trial balances which exclude the original line of the … cash add up to a number that’s not nil, and that by definition must be the cash balance … that’s left over.” (emphasis added)
- Information from CH’s working spreadsheets tendered at the hearing of the review clearly illustrates that the trial balance methodology was used by CH. For example, in the spreadsheet for the final report (the period to December 2013) the total for cash and cash equivalents is recorded at the outset as a sum of $52,077,050, with no allocation or division of it as between MSC and TRC. The net community equity (that is, not including the total cash and cash equivalents) calculated in respect of each council is $326,119,402 to MSC and $398,172,692 to TRC and the total community equity calculated in respect of each council is $350,703, 325 to MSC and $425,665,819 to TRC. The gap between those net and total figures attributable to each council is $24,583,923 for MSC and $27,493,127 for TRC, which matches the total of $52,077,050 ascribed for cash and cash equivalents.
- This confirms, in summary, that CH individually calculated the allocations of all community assets excluding cash and cash equivalents and by deducting the totals of those allocations from its calculation of each council’s total community equity arrived at a remaining figure or balance, representing each council’s allocation of cash or cash equivalents. The exercise giving rise to CH’s so-called de-amalgamation cash flow recreation has effectively involved the recreation of cash flow by inference rather than by specific analysis of all cash transactions during the amalgamation period.
- I note, to remove doubt, that CH’s spreadsheet’s for the first report (the period to June 2013) reflects the trial balance methodology was used for that report also.
- The use of this trial balance methodology necessarily means, as Mr Stavrou confirmed, that an adjustment in the non-cash allocations will impact commensurately upon the amount of the remaining cash balances attributable to each council. If there was a correction in the asset allocations, which reduced MSC’s calculated net community equity and increased TRC’s calculated net community equity, that would not change the overall remaining cash balance. But it would increase MSC’s share of the remaining cash balance and decrease TRC’s share of the remaining cash balance, by the amount of the correction. Such a correction, in the disputed amount of about $5.4M, occurred here. That is why, in addition to some other uncontroversial adjustments, the cash allocations of each council were varied by that amount in the final report.
Much ado about nothing
- These facts, once understood, demonstrate this dispute did not ever involve an adjustment for the actual movement of assets between councils. In truth it involved no more than a book-keeping correction, principally consequent upon a realisation that existing assets, mainly a road, had earlier been attributed to the wrong council in the work of those conducting the so called cash flow recreation.
- In hindsight TRC’s misconception of the basis for the asset re-allocation adjustment might have been avoided had the adjustment been explained more effectively in the final report. However, in fairness to CH, it likely perceived each council would have had a good grasp of the minutiae of the methodologies being used, particularly by reason of CH’s progressive consultation with the De-amalgamation Finance Working Team.
- This heralds a lingering debate, dispensed with in ground 2 below, as to whether the use of the trial balance methodology was known of and agreed to.
Discussion of Grounds
- The applicant’s amended grounds of review involve similar complaints cast slightly differently to bring them within different legal bases for review. As will be seen, consideration of those complaints has been simplified by the above discussion of the evidence on the review.
- That is not because this is a merits review. This matter is not a merits review and falls to be determined on the grounds of statutory review advanced. However, once the uncontroversial reality of what did occur is understood it is more readily apparent that TRC’s allegations of error by the Minister are artefacts of its misconception of what CH did.
Ground 1 – No evidence the assets existed or were acquired
- Ground 1 of the review, as amended, warrants quoting in full to demonstrate the high level of particularity at which it is cast:
“1.There was no evidence to or other material to justify the making of the decision because:
(a)the total cash amount to be split between the Applicant and Mareeba Shire Council was agreed by the transfer committee pursuant to s 27 of the Regulation at $52,077,050;
(b)the split of that cash between the Applicant and Mareeba Shire Council was agreed by the transfer committee, except for one matter of dispute;
(c)that matter of dispute was whether the cash otherwise to be allocated to the Applicant should be decreased, and the cash otherwise to be allocated to Mareeba Shire Council should be correspondingly increased, by an amount representing the value of Property Plant and Equipment assets (“PP&E assets”) held or acquired by the Applicant on de-amalgamation, but previously held or acquired by Mareeba Shire Council, or previously attributed to Mareeba Shire Council in the interim cash flow reconstruction to 30 June 2013;
(d)that matter of dispute was the only matter of controversy on which the First Respondent had to adjudicate under section 30 of the Regulation;
(e)the amount in dispute is represented by a cash adjustment in favour of new Mareeba Shire Council of $5,487,883.04 (the “disputed amount”) identified in the final report of accountants Crowe Horwath as at 31 December 2013; was $6,956,962.04 comprised of:
(ii)a further amount of $1,469,079 (rounded) which Crowe Horwath stated in material before the Minister to be a correction of the cash adjustment required as a result of previous ‘human error’;
(f)the First Respondent’s decision was, in substance and effect, that that the disputed amount of $6,956,962.04 should be paid, in cash, to Mareeba Shire Council;
(g)that decision was based on a finding or acceptance of a particular fact critical to the decision, namely, that PP&E assets with a value of $5,487,883.04; $6,956,962.04
(i)owned by the former Mareeba Shire Council immediately prior to amalgamation on 15 March 2008; or otherwise
(ii)acquired during the life of the amalgamated Tablelands Regional Council and previously but incorrectly attributed to Mareeba Shire Council as an acquisition for cash in the interim cash flow reconstruction as at 30 June 2013 carried out for the purpose of de-amalgamation,
had been identified as being owned or retained by the Applicant upon de-amalgamation on 1 January 2014;
(h)that fact was critical to the decision because the only possible justification for paying the disputed amount to Mareeba Shire Council was that it represented: compensation to Mareeba Shire Council for the acquisition of the PP&E assets by the Applicant;
(i)compensation to Mareeba Shire Council for the acquisition by the Applicant as at 1 January 2014 of PP&E assets owned by the former Mareeba Shire Council immediately prior to 15 March 2008; or
(ii)restoration to Mareeba Shire Council of cash which had been incorrectly treated in the interim cash flow reconstruction as at 30 June 2013 as having been spent during the life of the amalgamated Tablelands Regional Council for the acquisition of PP&E assets to be owned by Mareeba Shire Council, in circumstances where the acquired assets were actually to be owned by the Applicant upon de-amalgamation;
- that fact did not exist, because: no such PP&E assets exist or have ever existed.
(i)there are no PP&E assets which were owned by the former Mareeba Shire Council immediately prior to 15 March 2008 but owned by the Applicant on 1 January 2014; and
(ii)there are no PP&E assets to the value of $5,487,883.04, or any amount of that order of magnitude, acquired during the life of the amalgamated Tablelands Regional Council and attributed to Mareeba Shire Council as an acquisition for cash in the interim cash flow reconstruction as at 30 June 2013 carried out for the purpose of de-amalgamation, in circumstances where the acquired assets were actually to be owned by the Applicant upon de-amalgamation.”
- This ground in effect perpetuates TRC’s above discussed misunderstanding of the reason for CH’s asset re-allocation adjustment. It is premised on the non-existence of facts that TRC wrongly assumed were the reason for the asset re-allocation adjustment.
- TRC’s assumption that the asset re-allocation adjustment resulted from the actual transfer or movement of assets, as distinct from it being a mere book-keeping correction, is illustrated in the terms of its submission quoted earlier. For example Mr Church’s submission complained of not having received “a verifiable list of assets transferred from MSC to TRC” and that any adjustments should be supported by “identified asset movements between councils”.
- The non-existent facts TRC’s ground 1 complains of are that there were assets to the value of the disputed amount owned by MSC prior to amalgamation or acquired during amalgamation and attributed to MSC as cash acquisitions, which assets were to be owned by TRC on de-amalgamation. Put in that way those facts are non-existent.
- However this ground’s success hinges upon those non-existent facts being critical to the Minister’s decision. That is because a ground per s 20(2)(h) JRA, that there was no evidence or other material to justify the making of the decision, is subject to s 24, which provides the ground is not taken to be made out unless the decision was “based” on the existence of a particular fact and the fact did not exist.
- Contrary to TRC’s assumption, the non-existent facts it refers to did not have anything to do with CH’s asset re-allocation adjustment in the first place and there is no evidence that they in turn had anything to do with the Minister’s decision. The applicant submitted the fact “was necessarily implicit or assumed” in the Minister’s decision that the disputed amount represented transactions concerning PP&E assets that were the subject of cash movement. In reality that fact was erroneously implied or assumed by TRC and there is nothing in the Minister’s reasons to suggest she made the same implication or assumption.
- Because there is no evidence the Minister’s decision was based on the non-existent facts complained of this ground must fail. Nonetheless, before leaving this ground, it is as well to deal with a number of other submissions by the applicant of arguable relevance to this and other grounds.
- The underlying theme of a miscellany of other submissions advanced by the applicant was the Minister should have decided the dispute in a manner confined to how the dispute was characterised by TRC.
- The applicant submitted the Minister failed to have identified an “evidentiary basis to support the proposition that PP&E assets existed to support the $5.4 million adjustment to cash, about which TRC complained, and which it clearly and specifically submitted to be unsupported by the existence of such PP&E assets”. The applicant submitted the Minister should have, but failed to, inquire into “the very dispute that was put before her”, namely where the disputed amount was in the recreated cash flows.
- The extraordinary effect of the applicant’s submissions is that since TRC complained it could not identify the existence of assets supporting CH’s asset re-allocation adjustment the only way the Minister could correctly decide against TRC would be to identify those assets. Such submissions cast the dispute that the Minister had to decide at a highly confined level of particularity, essentially requiring it to be decided on TRC’s terms. That does not make the applicant’s task easier, as Gleeson CJ warned in Minister for Immigration v Rajamanikkam:
“The higher the level of particularity at which a fact is identified, the harder it may be to demonstrate that the decision was based upon the existence of that fact, or that there was no evidence or other material to justify the decision…”
- The applicant’s submissions went on to in effect assert the failure to decide the dispute on the terms advanced by TRC amounted to a failure to adjudicate the dispute as required by s 30. The applicant emphasised the word “adjudication” appears in the heading of s 30, “Adjudication by Minister” and the heading of a section forms part of the section.
- The applicant referred to Kostas v HIA Insurance Services P/L, which arose out of an appeal from the NSW Consumer, Trader and Tenancy Tribunal. The applicant relied by analogy on the observations of French CJ when, having noted the Tribunal’s procedural freedom was qualified by the requirement to observe procedural fairness, his Honour said:
“The Tribunal’s modus operandi must also serve its function, which, in this case, was to hear and determine a building claim. That function implies a rational process of decision-making according to law. A decision based on no information at all, or based on findings of fact which are not open on information before the Tribunal, is not compatible with a rational process.”
- It cannot be doubted the decision-making process or modus operandi of a decision maker must be apt to the function the decision maker is tasked to perform. However the above observations relate to a quite different, effectively judicial, process of decision-making. It is true, as s 30’s heading suggests, that the decision-making in which the Minister was required to engage has an adjudicative quality. It had an adjudicative quality in the sense that the Minister’s function was to arrive at a decision “after considering the submissions of each member of the committee”. However that is not the same as the “process of decision-making” which is implicit in a Tribunal’s function of having to hear and determine a claim. Moreover it cannot elevate the issues raised in submissions to the Minister as dictating the pathway of decision-making.
- The matter the Minister was obliged by s 30 to make a decision about was a matter mentioned in s 27. As already discussed the relevant matter, identified in s 27(a), involved deciding the assets and liabilities that were to be transferred to the new local government. It is reasonable to more precisely identify the matter to be determined as being that identified by the above quoted minutes of the transfer committee in resolving on 26 September 2014 to refer the matter for determination. That matter was the “determination of a cash split” between the councils. It falls comfortably within the bounds of a decision to be made under s 27(a).
- However it does not follow that the Minister’s determination of the cash split fell to be decided by confining that decision to deciding whether evidence existed of facts which TRC speculatively and, as it turns out, wrongly, assumed were essential to CH’s calculation of the cash split.
- The Minister was entitled to and did have regard to evidence allowing her to conclude the cash split advanced by CH was appropriate. She noted CH’s report included a reconciliation of changes in the cash allocation from the first report and the reconciliation noted the asset re-allocation adjustment. She noted CH had carried out its assignment in accordance with agreed methodologies.
- The applicant submitted the Minister in effect stopped at the point of saying the adjustment was the product of an agreed methodology and thus “disabled herself from considering … whether there were any facts or materials which would assist her in dealing with the applicant’s contention at its own level of particularity, namely that this adjustment is unsupportable by reference to any associated assets”. But the Minister did not stop at observing agreed methodologies were followed. She went on in the fifth dot point of her reasons to specifically refer to the information from CH that the adjustment “actually represented the net adjustment made as asset location and ownership details were firmed up between the interim and final reports”. This suggests an appreciation that the adjustment was not the product of the actual transfer or movement of assets but of corrections to some earlier allocations in the work which had given rise to the interim report.
- The Minister also found there was evidence of continued consultations between the transfer committee, council staff and CH throughout the project and that CH had undertaken a comprehensive process to determine the calculation of the final cash split. The Minister went on to say after reference to that comprehensive process:
“I do not consider that the TRC’s submission provides sufficient information to conclusively demonstrate that CH has misstated TRC’s fair allocation of cash at de-amalgamation.” (emphasis added)
- The Minister’s reference to a “fair allocation” of cash echoes the reassurance of a “Scenario Testing” process, which was described in some detail in the “Result” section of CH’s final report and warrants some elaboration now.
- CH had noted the final result it had calculated would be de-amalgamation cash balances of $24,583,923 to MSC and $27,493,127 to TRC, that is, apportionments of 47.2 per cent and 52.8 per cent respectively. It then explained:
“During the allocation process and in planning this engagement we ran a number of scenario tests to determine suitable allocation methodologies and to view whether one allocation methodology could be applied across all of the different transaction categories. It was determined that any one allocation methodology would not provide the most equitable outcome due to the different drivers experienced by each transactional category.” (emphasis added)
- The report then tabulated for completeness three scenarios by which the entirety of the allocations were calculated by reference to average ratable properties, to road network and to QTC’s proposed percentages. It explained of those scenarios:
“Each of these scenarios were deemed to be inappropriate as a stand-alone methodology due to the fact that each methodology was not a driver for all transactions and as such would not give an equitable allocation. The most equitable of the above is the rateable properties which is why we have used this allocation as the ‘fall-back’ allocation methodology where no more suitable methodology could be identified.”
- The report went on to explain that after the allocations were completed CH applied a number of cross checks to those results “to ensure that the results produced were logical and made sense based on the over-riding desire to ensure that community equity was maintained”.
- The report described three of those cross checks in some detail, namely the “percentage of cash brought into the group compared to that on leaving”, the “percentage of community equity brought into the group compared to that on leaving” and the “working capital analysis”. Of the second of those the report said:
“Percentage of community equity brought into the group compared to that on leaving: This test was also designed to highlight any large variances which would then be identified and fully investigated. The result of this analysis after all allocations were made identified that MSC brought in 46% of the community equity and will leave with 45% of the community equity, while TRC brought in 54% of the community equity and will leave with 55% of the community equity.
This method of reviewing the allocation is by far the best indication of a fair and equitable allocation as it takes into account all financial factors of the councils operations including increase in asset market values, money spent in one council area over another, and all expenses and income over the review period. For example if the amalgamated council spent funds improving the capital assets of the one area at the expense of another area the allocation methodologies will pick this up and ensure that the area that didn’t receive the additional funds will receive a larger cash balance as compensation for not receiving the benefit of improved capital assets. The fact that the above test shows that the percentage of community equity is close to being maintained over the review period indicates that the allocations discussed in the report below have been made on an overall equitable basis.” (emphasis added)
- This exercise in testing the apparent fairness of the overall outcome would inevitably have been of significance to the Minister in considering a dispute centred on a very specific aspect of the cash split calculated by CH. The broader picture was that the overall outcome for each council allocated in CH’s final report involved a tolerable variance in each council’s percentage of community equity brought into the group compared to that on leaving. This suggested the cash split calculated by CH was unlikely to have involved an error of such magnitude as to give rise to an unfair allocation. That illustrates the Minister was aware of evidence of a reliably comprehensive process undertaken by CH in concluding TRC’s submission had not demonstrated CH had misstated TRC’s fair allocation of cash at de-amalgamation.
Ground 2 – No evidence re agreed methodology
- Ground 2 of the review, as amended is:
“2.In addition to the matters stated in paragraph 1, there was no evidence or other material to justify the making of the decision because:
(a)the decision was based on a finding or acceptance of a particular fact critical to the decision, namely, that the identification of the disputed amount as representing the value of the PP&E Assets was carried out by accountants Crowe Horwath in their report as at 31 December 2013 in accordance with methodologies agreed by the transfer committee;
(b)that fact was critical to the decision because the First Respondent did not undertake any separate factual investigation of her own about the dispute but, in effect, decided the dispute by accepting that the existence and value of the PP&E assets were identified in the Crowe Horwath report (as modified to account for the asserted error) by use of a methodology agreed by the transfer committee;
(c)that fact did not exist because the transfer committee and Crowe Horwath neither discussed nor agreed on a methodology for identifying assets owned by the former Mareeba Shire Council immediately prior to 15 March 2008, or otherwise previously attributed to new Mareeba Shire Council in the cash flow reconstruction for the purposes of de-amalgamation, but owned or retained by the Applicant upon de-amalgamation on 1 January 2014.”
- This ground, like ground 1, is premised on the no evidence ground in 20(2)(h) JRA:
“(h) that there was no evidence or other material to justify the making of the decision;”
- Such a ground is significantly limited by the operation of s 24 which relevantly provides:
“The ground mentioned in section 20(2)(h) … is not taken to be made out – …
(b) unless –
(i) the person who made, or proposed to make, the decision based, or proposes to base, the decision on the existence of a particular fact; and
(ii) the fact did not or does not exist.”
- The heavy burden cast upon an applicant by s 24 was highlighted in Television Capricornia Pty Ltd v Australian Broadcasting Tribunal by Wilcox J, in analysing s 5(3)(b) Administrative Decisions (Judicial Review) Act 1977 (Cth), which is largely the same as s 24(b) JRA. In observations which have been referred to with appellate approval, his Honour said:
“[W]hen Parliament turned to non-jurisdictional findings of fact in s 5(3)(b), it required the applicant for review to show more than there was no evidence before the decision-maker of the fact found, or assumed, as the basis of the decision. The applicant was required to negative the fact.”
- That heavy burden on the applicant is particularly relevant in ground 2 because it is the absence of evidence of the fact that CH acted on agreed methodology rather than whether the Minister’s decision was based on that fact, which became the main issue.
- By ground 2, at least on its terms, the applicant again seeks to cast the dispute at an unjustifiably confined level of particularity, consistently with TRC’s misunderstanding of what CH did. The ground in effect alleges the Minister’s decision was premised on the existence of a specific agreed methodology to identify the existence and value of the assets TRC wrongly assumes CH regarded as having been transferred or moved to calculate the asset re-allocation adjustment. For reasons already explained it is plain there was nothing so specific in play and the adjustment was just a product of book-keeping corrections occasioning a consequential impact upon the cash split consistently with the trial balance methodology being used. The applicant’s inaccurately confined casting of the dispute as to agreed methodology, built upon TRC’s misunderstanding of what occurred, makes relevant the observations already made by me in respect of ground 1 and I will not repeat them.
- It became apparent in oral submissions the applicant was implicitly broadening the literal effect of this ground to contend the Minister proceeded on the false basis of fact the disputed amount was allocated in accordance with an agreed methodology. The Minister’s decision was based on the disputed amount having been allocated in accordance with an agreed methodology.
- In effect the applicant says the methodology used was not the agreed methodology. As to what the applicant says the actually agreed methodology was, the applicant highlighted the following passages. First, in the covering email of TRC’s Mr Church to the department forwarding the TRC submission to the Minister, Mr Church said:
“In summary, the purpose of the Crowe Horwath engagement was to understand the movements in cash that have occurred since amalgamation, so that TRC was confident in the final cash split to be paid to MSC.”
- Second, in MSC’s submission to the Minister, Mr Franks said:
“[T]he Transfer Committee … engaged Crowe Horwath as an independent contractor to recreate the cash flow to establish the Balance Sheet (including cash) transfers to each Council as a result of de-amalgamation.”
- Third, in CH’s final report, which was before the minister, CH described the tasks it was engaged to undertake as including “Re-creation of cash flow, profit and loss and balance sheet … by apportioning actual transactions recorded by the TRC”.
- The applicant submitted these passages demonstrated the Minister was told the role of CH was to apportion cash by recreating and allocating movements of cash, that is, it was a cash flow recreation exercise. It appears to be assumed by the applicant’s submissions that the use of the trial balance methodology was not a cash flow recreation exercise and therefore it was not an agreed methodology. That assumption is incorrect.
- It must be borne in mind the purpose of the cash flow recreation exercise was to identify, on the hypothetical basis the TRC and MSC had been operating as separate entities, what each council’s share or split of the cash reserves of the amalgamated entity should be. It may be accepted the potentially impracticable exercise of reviewing every past cash transaction is one potential method of recreating cash flow for that purpose. It certainly is not the only way. The trial balance methodology used in this case was, as already explained, another, probably more practicable way of recreating cash flow. The fact it did so by inference, as to what the cash flow must have been, rather than direct evidence of what the cash flow was, did not prevent it fulfilling the purpose of the exercise.
- The applicant attached particular importance to the content of the third dot point of the Minister’s decision, to the effect CH’s “assignment was carried out in accordance with agreed methodologies”. The applicant complains that proposition was wrong and that the source for its inclusion in the briefing note, and in turn the reasons, was not apparent. However the applicant has not established the proposition was wrong, as it must to meet s 24(b).
- It may be TRC perceives the methodology used - the trial balance methodology – was not the methodology it understood CH was initially engaged to apply. But the Minister did not say CH carried out its role in accordance with the methodology CH was initially engaged to apply. She said CH carried out its role “in accordance with agreed methodologies”. Such an assertion rests quite comfortably with the prospect that methodologies varied and evolved consensually as this complex project progressed.
- In that context it will be recalled the respective council representatives were not merely appraised by CH via its interim report and its final report and CH actually had ongoing interaction with representatives of the transfer committee. There was obviously ongoing communication, as is demonstrated by the evidence of liaison between CH and the De-amalgamation Finance Working Team which was working on behalf of the transfer committee. For example, as Mr Archie deposed, the De-amalgamation Finance Working Team provided CH with data, clarified issues and questions raised by CH and “determined the appropriate methodologies which” CH “were to use in carrying out their engagement”.
- The applicant complains about the reference in the third dot point of the reasons to evidence of continued consultations throughout the project, apparently because the applicant took issue with the asset re-allocation adjustment from the moment it learned of it. That misconceives the significance of the reference to continued consultations being in the same sentence in which the Minister referred to the assignment being carried out in accordance with agreed methodologies.
- In context the significance of the reference to continued consultations is not to falsely suggest the applicant must have agreed to the asset re-allocation adjustment. Rather it is to reinforce the accuracy of the proposition the assignment was carried out in accordance with agreed methodologies, the point being the consultations would have been a check on any unauthorised variation in methodology. The fact of the continued consultations is a further insurmountable obstacle to the applicant negativing the fact of agreement on methodology. Far from demonstrating an absence of agreement the occurrence of ongoing consultation makes it probable there was at least implicit agreement to the use of the trial balance methodology, even if it might not have been the methodology contemplated when CH was first engaged.
- For all of these reasons ground 2 must also fail.
Ground 3 – Wednesbury unreasonableness
- Ground 3 of the review, as amended, need not be set out because its supporting particulars are similar to allegations in earlier grounds. In summary, ground 3 complains the Minister’s decision was so unreasonable that no reasonable person in the position of the Minister could have made it - so called Wednesbury unreasonableness.
- Most of the arguments relevant to this ground have already been canvassed and rejected above, for reasons I will not repeat.
- Additionally to those other arguments the applicant submitted in support of its allegation of unreasonableness that on the state of the information before the Minister the only reasonable course of action was to refrain from a decision pending “inquiry as to whether the disputed cash movement was or was not included in any of the workings or figures in the Crowe Horwath report”.
- In support of the proposition that a decision-maker may need to make further inquiry the applicant referred to comments by Toohey J in Videto v Minister for Immigration and Ethnic Affairs, which were expressly confined to a decision that a prohibited citizen be deported. His Honour said:
“In such a case it may be that the material placed before the Minister or his delegate contains some obvious omission or obscurity that needs to be resolved before a decision is made.”
- It is unnecessary to determine whether a lack of information may make a decision taken without making further inquiry so unreasonable that no reasonable person could make it. Even if it might, this is not a case in which the circumstances compelled a need to make further inquiry before making a decision. That TRC framed its grievance by complaining it had not been given enough information about the specific asset movements to verify CH’s adjustment as correct did not oblige the Minister to seek out and consider information of that detail. Such a detailed inquiry was not an essential step in accepting, as the Minister did, that CH had applied agreed methodology and that the adjustment it made represented the net adjustment made as asset location and ownership details were firmed up between the interim and final reports.
- Further, as the exercise conducted by Mr Archie eventually demonstrated, TRC did in fact have sufficient information about CH’s work to confirm its accuracy – in the working papers CH provided. Had the tedious exercise eventually undertaken by Mr Archie been commissioned by the Minister before making her decision, its outcome would only have served to confirm that TRC’s concern was misconceived and that the decision commended to the Minister by her department was correct.
- For these reasons and the reasons already given in progressing through the earlier grounds, this ground must fail.
Ground 4 – Failure to take into account a relevant consideration
- Ground 4 of the review, as amended, need not be set out in full because it largely replicates the theme of particulars alleged in earlier grounds.
- This ground alleges a failure to take into account a relevant consideration. Such a ground can only succeed if the decision-maker failed to take into account a consideration the decision-maker was bound to take into account in making the decision.
- The ground asserts “the only possible justification” for the disputed amount to be paid to MSC was either that it was compensation for the acquisition by TRC of former MSC assets or it was restoration to MSC of cash incorrectly treated as spent on assets to be owned by MSC but actually to be owned by TRC on de-amalgamation. It is alleged the disputed amount represented neither of those possibilities, a consideration the Minister failed to take into account.
- The above possibilities are not “the only possible justification” for the asset re-allocation adjustment. The manner of their casting perpetuates TRC’s misconception of the reason for and methodology behind the asset re-allocation adjustment. It is incorrect to refer to cash compensation or restoration as if directly connected to specific assets when cash was calculated as a balancing item as part of the trial balance methodology. The adjustment was a book-keeping correction which effected the calculation of the cash split by reason of the methodology adopted.
- The ground must fail at the first hurdle because it is premised on a failure to take account of a misconception, not a relevant consideration, let alone a consideration the Minister was bound to take into account.
Discretion to decline to exercise discretion
- The application must be dismissed because all of the grounds have failed.
- In the event I am wrong in concluding any of the above grounds must fail, I would in any event dismiss the application in the exercise of my discretion, pursuant to the broad power conferred by s 48 JRA, to dismiss an application the court considers it would be inappropriate to grant.
- That is because, as was shown by the evidence adduced at the hearing, including evidence that was not before the Minister, the asset re-allocation adjustment was, as a matter of fact, correctly made. Further, it was made in accordance with a methodology – the trial balance methodology – that was apparently fair and, after corrections were made, likely gave rise to a fair calculation of the allocation of cash reserves as between TRC and MSC. It is apparent the alternative methodology of re-tracking all cash transactions during the amalgamation period is likely impracticable. Even if there exists some other alternative, practicable and fair methodology it would be unlikely to give rise to a materially different final cash allocation than that arrived at by the apparently fair methodology in fact used by CH. It follows there is no injustice to remedy by, and no utility in, abandoning the fair outcome already arrived at and embarking upon a new process to determine the cash split.
- Nor is such a process needed for the sake of public accountability and transparency, to re-assure ratepayers there has been a fair split. While not a merits review, the way in which the issues and evidence happen to have been ventilated in this review has amply fulfilled any arguably lingering need in that regard.
- For those reasons, even if there were some reviewable error in the Minister’s decision making, it would be inappropriate to grant the application.
- Some objections were advanced to the admissibility of some affidavit evidence but the parties were content for the matter to proceed and for any ruling on objections not to be made until my determination of the case. I have already dealt with one of the objections and another was withdrawn.
- It is unnecessary to itemise the remaining objections or to dispense with them individually. Their essential theme was to resist the admissibility of evidence, which was not before the decision maker, about the councils’ dealings with CH, about the process undertaken by CH and about witness analysis of that process.
- I do not uphold any of the objections because, even though such evidence was not before the Minister, it was nonetheless relevant for one or both of two broad purposes.
- First, grounds 1 and 2, the no evidence grounds, are not confined to the evidence before the decision-maker. As Black CJ explained in Curragh Qld Mining Ltd v Daniel:
“It could hardly have been intended that an order of review would be available only where the non-existence of the particular fact could be established from the material before the decision-maker because, in order otherwise to make out the ground the material itself must be deficient.”
- The court’s properly informed consideration of the applicant’s arguments advanced in the context of grounds 1 and 2 required a proper understanding of the councils’ dealings with CH and of the process undertaken by CH, particularly the method and reasoning actually involved in CH arriving at the asset re-allocation adjustment. Knowledge of these matters, beyond the information before the Minister, was relevant to determining whether there was substance to the complaints in ground 1 and 2.
- Second, it will be recalled the second respondent submitted even if any of the applicant’s ground were to succeed I ought nonetheless exercise my discretion to dismiss the application because it would be inappropriate to grant it. Gaining an informed understanding of the process actually undertaken, so as to know whether it was in fact correct, fair and unlikely to be materially improved upon, was relevant to whether there was any utility to the granting of the application. The extraneous evidence was relevant for that purpose.
- Each of the applicant’s grounds having failed, the application must be dismissed.
- It will be necessary to hear the parties as to costs if costs are not agreed.
- My orders are:
- Application dismissed.
- I will hear the parties as to costs at 9.15 am 11 May 2016, unless the parties notify the court in the meantime that costs are agreed.
 The TRC effectively retains responsibility for the old local government areas of the former Atherton, Eacham and Herberton Shire Councils.
 Per ss 20(2)(h), 24 JRA.
 Per ss 20(2)(e), 23 JRA.
 Each ground was accompanied by lengthy particulars which need not be recited here.
 S 3.
 S 12.
 S 18.
 S 5.
 Ss 20, 21.
 S 5.
 S 26.
 S 24.
 Affidavit of Lachlan Peden -.
 Affidavit of Lachlan Peden Ex LP1, pt 6.1 p 16 (page numbers cited in this judgment are the deponents’ paginations).
 Affidavit of Lachlan Peden Ex LP2 p 30.
 Affidavit of Lachlan Peden Ex LP7 p 95.
 Affidavit of Lachlan Peden Ex LP9 p 136.
 Affidavit of Lachlan Peden Ex LP9 p 138.
 Affidavit of Lachlan Peden Ex LP12 p 151.
 Affidavit of Lachlan Peden Ex LP14 p 193.
 Affidavit of Lachlan Peden Ex LP15 p 195.
 Affidavit of Mark Snow Ex MS6, pp 65, 66.
 Affidavit of Mark Snow Ex MS6, p 66.
 Affidavit of Lachlan Peden Ex LP17 p 242.
 Affidavit of Mark Snow Ex MS4, pp 10, 12.
 Affidavit of Mark Snow Ex MS1, p 3.
 Affidavit of Anthony Archie Ex AA8 p 61.
 Ibid -.
 Ibid , Ex AA8 p 64.
 Ibid Ex AA8 p 70.
 Ibid , -.
 Affidavit of Mark Snow Ex MS6 p 66.
 The applicant’s initial objection to Mr Stavrou’s affidavit was withdrawn.
 R 1-23 L30.
 Affidavit of Michael Delaney [2.1].
 Supplementary affidavit of Anthony Archie , .
 Ibid .
 R 1-62 LL24-43.
 Ex 5 & 6.
 Ex 6.
 Ex 5.
 R1-62 L36 – R1-63 L9.
 The applicant’s written submissions articulated these non-existent facts in a number of different ways, at -, but they were in substance, as was acknowledged, merely variations on the same factual theme.
 R2-45 L29, R2-48 L33.
 Applicant’s written submissions .
 R2-37 L28.
 (2002) 210 CLR 222, 235.
 Ibid .
 Acts Interpretation Act 1954 (Qld) s 35C(1), applicable to regulations per s 7.
 (2010) 241 CLR 390.
 R 2-31 L5.
 Ibid 396 (citations omitted).
 The Tribunal which heard the claim in Kostas may not have been bound by the laws of evidence but, as the footnote to the above passage indicated, it was subject to mechanisms for referral and appeal in relation to decisions on questions with respect to matters of law.
 R 2-50 L15.
 Affidavit of Mark Snow Ex MS10 p 77.
 Affidavit of Mark Snow Ex MS10 p 78.
 Affidavit of Mark Snow Ex MS6 p 37.
 Ibid pp 37, 38.
 (1987) 13 FCR 511.
 Curragh Qld Mining Ltd v Daniel (1992) 34 FCR 212, 223; Minister for Immigration v Rajamanikkam (2002) 210 CLR 222, 234.
 Supra 520.
 R 2-33 L1.
 Affidavit of Mark Snow Ex MS4 p 7.
 Affidavit of Mark Snow Ex MS5 p 18.
 Affidavit of Mark Snow Ex MS6 p 30.
 R 2-34 L37. R 2-35 L9, R 2-35 L40.
 R 2-36 L5.
 R2-38 L20.
 R2-39 L41.
 Associated Provincial Picture House Ltd v Wednesbury Corporation  1 KB 223; explained in Minister for Immigration v Li (2013) 249 CLR 332.
 R 2-56 L27.
 (1985) 8 FCR 167.
 Ibid 178.
 As to which see the High Court’s discussion, inter alia, of Prassad v Minister for Immigration (1985) 6 FCR 155, 167-170 in Minister for Immigration & Citizenship v SZIAI (2009) ALR 429, 434-436.
 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, 39.
 So described in Intero Hospitality Projects P/L v Empire Interior (Australia) P/L & Anor  QCA 83, .
 See for example McLean v Gilliver  1 Qd R 637, 648.
 Curragh Qld Mining Ltd v Daniel (1992) 34 FCR 212, 223-4.
 Ibid 223.
- Published Case Name:
Tablelands Regional Council v Minister for Local Government
- Shortened Case Name:
Tablelands Regional Council v Minister for Local Government
 QSC 88
22 Apr 2016
No Litigation History