The Berejiklian government's council merger policy is again in disarray after a proposed merger of two Sydney councils was thrown out by the NSW Court of Appeal, enlivening the hopes of other councils with legal challenges still before the courts.
The court ruled on Monday that Ku-ring-gai Council was denied procedural fairness before its proposed merger with Hornsby Council, in part because a consultant's report into the merger was kept secret from the public and from the official asked to investigate the merger.
The decision has been cheered by those Sydney councils still fighting against amalgamation, and which were angered when Premier Gladys Berejiklian decided to scrap further forced mergers in the regions but proceed with Sydney mergers.
A spokesperson for Local Government Minister Gabrielle Upton said the government was considering the implications of Monday's decision, but confirmed it was determined to push ahead with the merger "given the clear benefits it will have for the local communities".
However, with six councils still fighting their challenges through the courts, the judgment will be closely scrutinised by all parties, raising the possibility that months or years could be added to the process.
"After today's shellacking the government should just admit defeat," Opposition Leader Luke Foley said.
Mr Foley said the government should drop further forced amalgamations and release the secret report prepared by accountancy firm KPMG.
"Thank God we've got an independent judiciary in NSW," he said.
Greens local government spokesman David Shoebridge said the court had "said the obvious, that it is blatantly unfair to forcibly amalgamate a local council on the basis of a secret report".
"This decision doesn't just affect Ku-ring-gai Council, it could dismantle every single outstanding amalgamation proposal," Mr Shoebridge said.
However, the impact of the decision on other councils' challenges remains uncertain.
Woollahra Council last year failed to convince the Court of Appeal that secrecy over the KPMG report amounted to a lack of procedural fairness. Woollahra has attempted to appeal that decision to the High Court but has not yet been granted leave.
"Finally, we have a judgment that calls the government to account for not releasing its KPMG report to the public and being up front with the community about mergers," Woollahra mayor Toni Zeltzer said on Monday.
The mayor of Mosman, Peter Abelson, said: "Mosman Council is running similar issues on the KPMG report, so we would assume that similar considerations would apply in our case."
The councils that have not yet been merged because of legal challenges are: Burwood, Canada Bay and Strathfield; Hornsby and Ku-ring-gai; Hunters Hill, Lane Cove and Ryde; Mosman, North Sydney and Willoughby; and Randwick, Waverley and Woollahra.
Representatives for Lane Cove and Strathfield councils also said there were similarities in their grounds of appeal to Ku-ring-gai's.
Based on KPMG's analysis and modelling of the merger of Ku-ring-gai with part of Hornsby Shire, the government's merger proposal stated that "around $70 million in net financial savings over 20 years" would be achieved.
But judges Robert Macfarlan and John Basten ruled on Monday that the delegate appointed to assess the proposed merger, Garry West, could not have properly carried out his assessment without access to the KPMG report.
They also found that the public interest in keeping the report secret was outweighed by the public interest in making the information available.
Judge Ronald Sackville dissented on these points.
Judge Macfarlan found Mr West "did not form his own judgment about the financial advantages or disadvantages of the proposed merger but instead adopted, uncritically, the results of the undisclosed KPMG analysis".
Judge Basten found that the financial advantages identified by KPMG for the government were a critical element in favour of the merger, but this analysis was not provided to the delegate or public.
As a result, Mr West had "constructively failed" in his statutory duty of examining the government's merger proposal.
"The council was right to assert that the delegate could not properly carry out his function of examination without having access to that material," Judge Basten ruled.
"Release of the material was also necessary for public participation in the public inquiry to be meaningful."
Ku-ring-gai mayor Jennifer Anderson said: "We believe the court's decision signals a turning point for Premier Berejiklian's government.
"If they continue with the merger process they will be flying in the face of our community and the court," Cr Anderson said.
