Queenstown Lakes district Councillors

Council Can Control QAC

Background

Queenstown Lakes District Councillors are firmly in the driver’s seat of QAC’s airport expansion plans in Queenstown and Wanaka according to legal advice shared with FlightPlan2050.


But it’s not clear that council, or councillors themselves are aware of this, and they appear instead to passed the SOI back into the hands of QAC.


So far, we haven’t heard how councillors are going to apply this legal responsibility to ensure that their strategic objectives, rather than QAC’s “demand driven” approach, will be the driving principle for the Airport Corporation. 


Legal advice shared with FlightPlan2050 - see links below - clearly shows that since QAC has delivered the SOI to council, the Local Government Act puts them in charge. 


Given that council did not accept the SOI and its motion of 27 June states that council "remains concerned at the content of the SOI" and that it will "seek further changes" to "better reflect its and the community's concerns and expected directions", it becomes council's job to hold the pen and direct the changes. 


These communications were made independently of FlightPlan 2050, but in the interests of sharing vital information with our community, we have been given permission to share them.


This legal advice has been drafted by someone well versed in this area of law and practice and has been reviewed by a senior Queen's Counsel who is expert in this area of law.

What is the Statement of Intent?

The SOI is the legal agreement between QAC and its shareholders that sets out the objectives of the company. With QLDC owning 75.01% of the shares, it is the controlling shareholder. QAC must deliver a new SOI to Council by 30 June each year. Council must then" as soon as practicable" either accept it or modify it. If it wants to modify it, then it must do so "as soon as practicable" and "take all practicable steps" to get it done.


As a council controlled organisation, the principal objective of QAC by law is “to achieve the objectives of its shareholders, both commercial and non-commercial, as specified in the statement of intent”.


So this SOI is the controlling document, and Council sets the objectives - and QAC must comply. Those objectives can be non-commercial, such as preserving local communities' social values and retaining social licence for tourism. 

The SOI Fact Sheet

What is the SOI? What's the process? Who's in charge? What must council do? What could they change? For a simple summary use this link. 

What changes could councillors make to the SOI?

 

The link  below is to the sequence of emails between Queenstown local Cath Gilmour and council clarifying the legal process for the Statement of Intent.

Cath’s messages are written under the guidance of a friend who is well versed on this area of law and practice, who in turn had the draft reviewed by a senior QC (Queen’s Counsel) who is an expert in this area of the law. 

Mayor Jim Boult's statement - 8 Aug 2019

Six weeks before the 20 Sept start of local body election voting, the Mayor announced a dramatic "fresh approach" that council intended to take with airport development. Being no more than an offer of two studies to assess the social and economic impacts of the airport, some question whether this is a cynical election salvaging gambit, or a sincere move to reflect the serious and growing concerns in both Queenstown and Wanaka of the 'demand driven' airport growth that facilitates escalating visitor numbers ahead of visitor value.

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Who runs the show?

Council, as majority shareholder, sets the objectives for QAC. These are not for the board of QAC or its executive to decide.


The shareholder objectives are recorded in the  Statement of Intent. The board is then required to operate QAC with its principal objective being to achieve the shareholders’ objectives.


The shareholders objectives can be commercial and non-commercial. There is no imperative or obligation for council to focus solely on commercial and profit objectives.


These objectives can, for example, relate to social values - such as preserving local communities’ social values and retaining within the community the social licence for tourism.

Query to Mayor Jim Boult on need for motion

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What was the Legal Imperative requiring council to vote to receive the SOI?

At the council meeting of 27 June, the Mayor Jim Boult insisted that there was a statutory (legal) requirement for council to receive the Statement of Intent delivered by QAC or else QAC would not be in compliance with the law. This forced a vote despite the misgivings of several councilors.


Cath Gilmour later wrote to ask the Mayor the legal basis for his assertion, and insistence on the vote..

Mayor Jim Boult's response

By email, the Mayor argued that:

 

"The legislation reads:

Sec 64 (1) A Council controlled organisation must have a statement of intent that complies with clauses 9 and 10 of Schedule 8.


Clauses 9 and 10 of Schedule 8 specify the contents of the SOI. So the effect of Sec 64 (1) is that a CCO must have an SOI at all times.


Schedule 8 clause 3 Completion of statements of intent

The board must-

  • (a) Consider any comments on the draft statement of intent that are made within 2 months of 1 March by the shareholders or by any of them; and
  • (b) Deliver the completed statement of intent to the shareholders on or before 30 June each year


The effect of Schedule 8 clause 3 is that the SOI is deemed completed if both a) and b) are done.

This must be done before 30 June to allow the SOI to be in place by 1 July of the financial year to which it relates."

Was the Mayor Right?

The Mayor's response has three parts.

  1. First he points out that QAC must have a valid SOI - fair enough.
  2. Then he identifies what must be in the SOI - still good with that.
  3. Finally, he points to the preparation and delivery of the SOI - and this is where his argument falls over.


Mayor Boult's insistence that Council vote to receive the SOI appears to be based on clause(3)b - the need to  deliver the completed statement of intent to the shareholders on or before 30 June each year.


But "delivery"  is proven at law by evidence of delivery – by email, courier, post or hand delivery.


A resolution by council is not legally required as a proof of delivery. It's clear there was no legal imperative for council to pass a resolution to "receive" the SOI as QAC had already delivered it by email prior to the 30 June deadline as evidenced by the document in the council agenda papers. We assume QAC fully complied with the law by also sending a copy to its other shareholder, AIA.

The legal advice we received on this point

Cath Gilmour shared the following written advice we received on this point with the Mayor, as follows:


Delivery and Council motion

The legislation is not as clear as it should be on when an SOI becomes valid for the purposes of sections 60 and 64(1).  Contrary to your assertion, nothing is deemed, it can only be inferred. 


However, if it is the case that an SOI becomes valid on delivery by the board, what counts is the fact of delivery before 30 June, which is proven at law by evidence of delivery – by email, courier, post or hand delivery. 


The legal test of delivery does not depend on a motion by Council confirming delivery.


However, at the last Council meeting, the Mayor insisted that Council had to pass a resolution to “receive” the SOI in order to put the SOI in place for the purposes of the legislation.  This was not required at law and may have had the effect of pressuring some Councillors into feeling that they had no option but to approve your motion.

Council's response

Cath received a response from the council's legal manager on behalf of the Mayor and CEO Mike Theelen.


"Your account of the process for SOI’s is detailed. However, I don’t agree with your point in relation to the Council’s resolution last month. While not specifically required by the legislation, the resolution to receive the SOI ensured that all of the Councillors received the SOI, considered it, and resolved as a group that it had been received. This was the Council’s way of acknowledging that QAC had satisfied the requirement in Clause 3 of Schedule 8 of the LGA."

Cath replied as follows

Council’s motion on delivery

You say: “I don’t agree with your point in relation to the Council’s resolution last month”.  However, you agree that it was not required by the legislation.  You also, in effect, agree with my point that the legal test of delivery of the SOI by the board under clause 3 of Schedule 8 does not depend on a motion by Council confirming delivery.


So, in short, it is fair to say that a motion to acknowledge receipt of the SOI was not required at law.


It seems, therefore, that the point on which you disagree is my view that the Mayor’s insistence on passing the motion (wrongly claiming that it was required for the SOI to become effective) may have had the effect of pressuring some Councillors into feeling that they had no option but to approve the Mayor’s motion. 


The test of whether my view on this point is correct is to gauge from councillors whether they felt such pressure.  I am very confident that some councillors did.