1. Background

1. Southland Regional Council ("SRC") faced a situation whereby two members were claiming travelling allowances for travel from their homes outside the region. Councillor X lived outside the region but was elected on the basis that he would be moving to Te Anau (which he did by February 4 1999). Councillor Y who represented an Invercargill constituency, moved to Queenstown after he was elected and he was claiming a travelling allowance from there. Councillor Y was previously unentitled to claim given the proximity of his former home in Invercargill to the Council office.

2. The Council's current policy was to limit the payment of travel allowances to travel from a home situated within the region. The Council adopted this policy at a meeting on 18 August 1995 when Council resolved:

   "that Council agree to pay a travel allowance to any Councillor living within the region but outside their constituency".

3. Simpson Grierson's advice was requested. SRC particularly wanted to know whether it was ultra vires for the Council to limit the payment of travelling allowances to travel only within the region.

4. In considering this matter we reviewed the following legislation:

• Local Government Act 1974

• Fees and Travelling Allowances Act 1951

• Fees and Travelling Allowances Regulations 1952

2. Statutory Framework

1. Section 101ZZU(1) of the Local Government Act 1974 (the "LGA") states:

"any local authority may pay to its members travelling allowances and expenses in accordance with the Fees and Travelling Allowances Act 1951, and the provisions of that Act shall apply accordingly".

2. It would seem that a discretion to either pay or not pay an allowance to members is created by section 101ZZU. Once a Council chooses to exercise that discretion under section 101ZZU and pay members a travelling allowance, the payments are governed by the Fees and Travelling Allowances Act 1951 (the "FTAA").

3. Section 6 of the FTAA states that where a member of a local authority is entitled to receive payment of travelling allowances or travelling expenses, the provisions of the Act apply to that member as if the local authority were a statutory Board. It is clear from that section that the provisions apply to local authorities.

4. Section 4 of the FTAA establishes the allowances that are payable to a member of a local authority. The section applies to:

   "any member of a [local authority] who under any enactment, is entitled to receive payment of travelling allowances or travelling expenses in respect of time spent travelling in service of the [local authority]."

   The relevant enactment would be the LGA and specifically section 101ZZU.

5. Section 4(4) states:

"where a private means of conveyance is used for any such journey, there shall be paid to the member, in accordance with Regulations made under this Act, an allowance (in this Act referred to as a mileage allowance) at such rate as the Minister from time to time approves in that behalf".

6. "Any such journey" refers to travel from a members' "usual place of residence" for the purposes of attending a meeting of the local authority, or, pursuant to a local authority resolution for the purposes of transacting any business of the local authority. The mileage allowance must be paid in accordance with the Fees and Travelling Allowances Regulations 1952 ("the Regulations").

7. The Regulations set out the circumstances in which mileage allowances (allowances to cover the expense of the use of a private vehicle) are payable to members. Regulation 11 states that the Regulations apply to members of local authorities in all respects as if a local authority were a Board.

8. Regulation 5 states that where a member is entitled to an allowance under Regulation 3 (i.e. for being absent from his "usual place of residence" in order to attend a meeting), there shall be payable all locomotion expenses actually and reasonably incurred in travel.

9. The FTAA and the Regulations are both silent as to the question of whether the travel allowances are meant to cover travel only within the region or extend to travel outside the region. As stated above, Regulation 5 refers to expenses "actually and reasonably incurred in travel" and Regulation 3 makes it clear that it is travel from and to the member's "usual place of residence". There is nothing to suggest any limitations as to the location of the usual place of residence.

10. Section 7 of the FTAA states that any approval given by the Minister under this Act may be general in its application or may relate to individual members or classes of members of local authorities.

11. From this section it would appear that if the Council chose to exercise its discretion under section 101ZZU to pay allowances to members, and then under section 7 of the FTAA received an approval from the Minister of State Services regarding a mileage allowance for a specific member, the Council could apply it specifically to that member and then have a different allowance for another member.

12. In the absence of such differential approvals from the Minister, the issue is whether or not the Council has a discretion to limit the general approval as if it only applied to "places of residence" within the region.

13. We note that there is no statutory limitation on the place of residence (within New Zealand) of any person standing for election to a regional council (refer to section 101G of the LGA).

3. Council Discretion

1. We have set out below general principles and relevant case law in relation to the exercise of a discretion by Councils.

2. In the exercise of a discretionary power, what we are concerned with is the propriety of the exercise of the power. Certain principles have been established by common law, which if not observed, could lead a court to declare the decision or action to be invalid and in certain cases void as ultra vires the procedural powers of the local authority.

3. Fundamental to the valid exercise of a discretionary power is the principle that the power should be exercised on relevant grounds for the statutory purpose.

4. The guiding statement of the principle is found in Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948]1 KB 223. In this case the Council consented to a Sunday cinema showing but imposed a condition that persons under 15 years of age should not be admitted and the company challenged the validity of that decision. The Court held:

"the task of the Court is not to decide what it thinks is reasonable, but to decide whether what is prima facie within the power of the local authority is a condition which no reasonable authority, acting within the four corners of their jurisdiction, could have decided to impose".

5. In Mackenzie District Council v Electricity Corporation of New Zealand [1992] 3 NZLR 41, the Court of Appeal considered the issue of the extent of rating authorities' discretions. The Court of Appeal stated:

"Discretion is not absolute or unfettered. It is to be exercised to promote the policy and objectives of the statute. Even though the decision maker has seemingly considered all relevant factors and closed its mind to the irrelevant, if the outcome of the exercise of discretion is irrational or such that no reasonable body of persons could have arrived at the decision, the only proper inference is that the power itself has been misused".

6. From the above extracts it is clear that while the Council may have the right to exercise a discretion to pay a travelling allowance, the basis on which it exercises that discretion must be reasonable and fair and must fall within the purpose of the statute in question.

4. Conclusions

From the foregoing analysis we draw the following conclusions:

1. The Council has a discretion whether or not to pay its members travelling allowances (section 101ZZU LGA).

2. That discretion must be exercised reasonably and fairly and within the purpose of the LGA.

3. If the Council exercises its discretion to pay travelling allowances, it must do so in accordance with the FTAA (section 101ZZU LGA).

4. Section 4 of the FTAA and the relevant provisions of the Regulations are expressed in mandatory terms in relation to travel to and from the member's usual place of residence.

5. There is nothing in the FTAA or Regulations to imply any limitation on the location of the usual place of residence for the purposes of calculating travelling allowances; nor is there any express power on the Council to impose conditions on the payment of travelling allowances (contrast section 101ZZH LGA).

6. Councillors are expressly authorised by the LGA to reside outside the region (section 101G LGA).

7. There appears to be no discretion to limit the payment of travelling allowances to those travelling from a place of residence in the region, and even if there was, its exercise in all the circumstances, may be unreasonable.

8. The current Council policy does not literally operate to this effect, and in our opinion ought not to be interpreted as having this effect.

9. We acknowledge that the legal position could, in extreme situations, result in surprising outcomes (say in respect of travel by a councillor with a normal place of residence in Auckland), however this appears to be within the current policy intention of the legislation.

10. The present situation could be "resolved" in a way which approximates the Council's current intention by:

1. the affected councillors voluntarily accepting less than their entitlement; or

2. a specific Ministerial approval under section7 of the FTAA.

This advice has been released with the consent of the Southland Regional Council. The advice relates to the particular facts of the situation and deals with a particular Council policy. As such it should not be interpreted as applicable in all other circumstances.