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Local Government Act 2002

Governance and management of local authorities and community boards - Local authorities - Other governance matters

46: Members of local authority liable for loss

You could also call this:

“Council members might have to pay back money if the council loses it”

If the Auditor-General reports that a local authority has lost money, the members of that local authority might have to pay it back. This means you and the other members could be responsible for paying back the money together.

If you and the other members don’t pay the money back to the Crown or the local authority quickly enough, the Crown can take you to court to get the money back. They can do this to any or all of the members.

If the Crown gets the money back through court, they will take out the costs of going to court and then give the rest to the local authority.

You have some ways to defend yourself if the Crown takes you to court. You can prove that:

  1. You didn’t know about the act that caused the loss.
  2. You knew about it but said you were against it when it happened.
  3. You voted against it in a local authority meeting.
  4. You were involved but acted in good faith, relying on information from trusted employees or expert advisers.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM171864.

Topics:
Government and voting > Local councils
Crime and justice > Courts and legal help
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45: Local authority to respond to Auditor-General, or

“Council must answer Auditor-General's report and share it with the public”

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47: Members may be required to pay costs of proceeding in certain cases, or

“Elected officials might pay court costs if they break property rules”

Part 4 Governance and management of local authorities and community boards
Local authorities: Other governance matters

46Members of local authority liable for loss

  1. If the Auditor-General has made a report on a loss to a local authority under section 44, then, without limiting any other person's liability for the loss, the loss is recoverable as a debt due to the Crown from each member of the local authority jointly and severally.

  2. If the members of the local authority or any other person or persons do not pay the amount of the loss to the Crown or the local authority within a reasonable time, the Crown may commence proceedings to recover the loss from any or all of those members.

  3. Any amount recovered by the Crown under subsection (2), less all costs incurred by the Crown in respect of the recovery, must be paid by the Crown to the local authority concerned.

  4. It is a defence to any proceedings under subsection (2) if the defendant proves that the act or failure to act resulting in the loss occurred—

  5. without the defendant's knowledge; or
    1. with the defendant's knowledge but against the defendant's protest made at or before the time when the loss occurred; or
      1. contrary to the manner in which the defendant voted on the issue at a meeting of the local authority; or
        1. in circumstances where, although being a party to the act or failure to act, the defendant acted in good faith and in reliance on reports, statements, financial data, or other information prepared or supplied, or on professional or expert advice given, by any of the following persons:
          1. an employee of the local authority whom the defendant believed on reasonable grounds to be reliable and competent in relation to the matters concerned:
            1. a professional adviser or expert in relation to matters that the defendant believed on reasonable grounds to be within the person's professional or expert competence.

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