From: Thomson, Ian
Sent: Monday, 2 March 2020 9:04 AM
To: Mauger, Phil
Subject: FW: Local Authorities (Members' Interests) Act 1968 - Application for approval of contracts
Attachments: Approval for Councillor Mauger - 28Feb 2020.pdf
Dear Phil,
The Office of the Auditor-General has given retrospective approval of the sub-contract between Maugers Contracting Ltd and GSL.
Could we please have a chat about the proposed sale of soil.
Regards
Ian
Ian Thomson
Special Counsel Governance
Legal Services Unit
Te Hononga Civic Offices, 53 Hereford Street, Christchurch
PO Box 73015, Christchurch 8154
ccc.govt.nz
100 Molesworth Street, Thorndon 6011
PO Box 3928, Wel ington 6140, New Zealand
Telephone: +64 4 917 1500
Email: [email address]
Website: www.oag.govt.nz
28 February 2020
File Ref: LAMIA348
Ian Thomson
Special Counsel Governance
Legal Services Unit
Christchurch City Council
Via email:
Dear Ian
LOCAL AUTHORITIES (MEMBERS’ INTERESTS) ACT 1968 – APPLICATION FOR APPROVAL OF
CONTRACTS
Thank you for your letter of 24 January 2020 and emails of 14, 21 and 25 February 2020.
We’re pleased to hear that Council or Mauger is proactively managing any potential conflicts that may arise
between his family business, and his role as a newly-elected Christchurch City Council or.
Christchurch City Council (the Council) has sought:
• retrospective approval from the Auditor-General under the Local Authorities (Members’ Interests) Act
1968 (the Act) for Council or Phillip Mauger to be concerned or interested in a contract between the
Council and Grounds & Services Limited (GSL) (the head contract), under which payments wil be
made to Maugers Contracting Limited (MCL) with a value in excess of $25,000 for the 2019/20
financial year; and
• prior approval from the Auditor-General under the Act for Council or Mauger to be concerned or
interested in a contract between MCL and the Council for the supply of soil.
Local Authorities (Members’ Interests) Act 1968 – the disqualification rule
Section 3(1) of the Act provides that a member of a local authority is disqualified from office who is
concerned or interested in contracts with their authority under which the total of al payments to be made by
or on behalf of the authority exceeds $25,000 in any financial year (disqualification rule).
The disqualification rule also applies if a member is concerned or in interested in a contract with the authority
as a subcontractor, as if it were a contract directly with the authority. In such a case, the $25,000 limit applies
to the value of the subcontract, not the head contract.
Section 3(2) of the Act deems a member to be concerned or interested in a contract made by a local
authority with an incorporated company if the member or his (her) spouse or partner singly or between them
own, whether directly or through a nominee, 10% or more of the issued capital of the company or of any
other company control ing that company.
Section 3(3) of the Act al ows the Auditor-General to grant prior or retrospective approval of a member’s
interest in any contract, which has the effect of suspending the disqualification rule in that case.
Retrospective approval may only be granted if the Auditor-General is satisfied that:
• prior approval would have been granted had it been sought, because it is a “special case”; and
• there is “sufficient special reason” why prior approval was not sought.
Retrospective approval
In this case, the application for retrospective approval relates to a subcontract MCL entered into with GSL to
complete earthworks as part of the head contract.
You have advised that:
• The value of the subcontract is $700,000 (excluding GST).
• Council or Mauger’s interest in the head contract arises because he has a majority shareholding in
MCL (which is his family’s business).
We have decided to grant the approval sought.
Would the Auditor-General have granted prior approval to Council or Mauger?
You have told us that:
• MCL tendered for the subcontract after the 12 October 2019 local body elections. The subcontract
was awarded before the governing body of the new Council began receiving information about the
Council’s capital works programme. The Council had no involvement in GSL’s decision to
subcontract part of the head contract to MCL (if its tender succeeded).
• Council or Mauger was not involved in the discussions about or negotiations for the head contract or
the Council’s December 2019 decision to award it to GSL. The Council complied with the
requirements of the Council’s procurement policy before awarding the head contract to GSL.
Considering the reasons set out in the application and subsequent emails, we are satisfied that this is a
“special case” such that prior approval would have been granted, had it been sought. In particular, Council or
Mauger has had no involvement in the decision-making process, and, this is a subcontracting situation
where the Council does not control who the head contractor chooses.
Why didn’t the Council obtain prior approval?
You have advised that:
• Prior to the election, Council or Mauger was advised by our Office that the disqualification rule would
not apply to a subcontract MCL had with a company contracted to provide services to a Council-
controlled organisation. Given the contract with GSL was also a subcontract, it is likely Council or
Mauger considered it fell within the ambit of the earlier advice.
• Council or Mauger raised the matter in the course of a discussion with you about potential conflicts of
interest, the outcome of which was the letter of 24 January seeking retrospective approval for
2
the GSL subcontract. You had initially understood that although the subcontract was awarded post-
election, it had been tendered for prior to 9 October 2019. In fact MCL was invited to tender on 14
October – after the election but before Mr Mauger was sworn in as a Council or on 19 October 2019.
In the circumstances, we are satisfied that there is “sufficient special reason” why prior approval was not
obtained.
Approval
Under section 3(3)(aa) of the Local Authorities (Members’ Interests) Act 1968, the Auditor-General
retrospectively approves of Council or Phillip Mauger being concerned or interested in a contract
between Christchurch City Council and Grounds & Services Limited, under which payments total ing
$700,000 (excluding GST) will be made to its subcontractor, Maugers Contracting Limited in the
2019/20 financial year.
This approval is in addition to, and not inclusive of, the statutory $25,000 limit set out in the Act for the
specified year.
This approval does not suspend the normal prohibition on Council or Mauger discussing or voting on matters
(including this matter) in which he
has a pecuniary interest.
Prior approval
The application for prior approval relates to a prospective contract between MCL and the Council to supply
soil for a Council project. The prospective contract is valued at approximately $40,000.
At this stage, the Council has approached MCL but has not taken any further steps to engage a contractor to
supply the soil.
I understand that you wil approach Council or Mauger and the Council staff to clarify the process they intend
to follow before any decision is made. Whether or not approval is sought wil be considered at that point and
the appropriate steps taken.
On that basis, we wil not consider the application for prior approval at this stage. However, please do
contact me if you would like to further discuss the process.
I would be grateful if you could inform Council or Mauger of the contents of this letter.
Yours sincerely
Miriam Davie
Senior Solicitor
Copy: Andy Burns, Appointed Auditor
3
From: Thomson, Ian
Sent: Monday, 10 February 2020 8:52 AM
To: Mauger, Phil
Subject: RE: Application to the Auditor-General
Yes, but one more question – what was the date tenders closed?
Thanks
Ian Thomson
Special Counsel Governance
Legal Services Unit
Te Hononga Civic Offices, 53 Hereford Street, Christchurch
PO Box 73015, Christchurch 8154
ccc.govt.nz
From: Mauger, Phil <
[email address]>
Sent: Monday, 10 February 2020 8:37 AM
To: Thomson, Ian <
Subject: Re: Application to the Auditor-General
Hi. When I said it came out that’s when the group of 4 that the ccc invited to tender were asked to price the work. Gsl contacted me to give a subcontractor price over the next 2 weeks which I did and
gave it to them about a week before tenders closed Hope this helps
Get
Outlook for iOS
From: Thomson, Ian
Sent: Monday, February 10, 2020 7:38 AM
To: Mauger, Phil
Subject: RE: Application to the Auditor-General
Thanks Phil,
When you say “it came out” on 14 October is that the date GSL sought tenders for the sub-contracts? If so, when did Maugers submit its tender.
Sorry to be a pain.
Regards
Ian
Ian Thomson
Special Counsel Governance
Legal Services Unit
Te Hononga Civic Offices, 53 Hereford Street, Christchurch
PO Box 73015, Christchurch 8154
ccc.govt.nz
From: Mauger, Phil <
[email address]>
Sent: Saturday, 8 February 2020 9:50 AM
To: Thomson, Ian <
Subject: Re: Application to the Auditor-General
Hi it came out on 14/10/19. Awarded on 2/12/19 Thanks
Get
Outlook for iOS
From: Thomson, Ian <
Sent: Friday, February 7, 2020 1:29 PM
To: Mauger, Phil
Subject: RE: Application to the Auditor-General
Could you clarify the dates more specifically please – when Maugers lodged its tender for the sub-contract with GSL, when GSL lodged its tender for the contract with the Council, and when GSL was
notified its contract had been accepted.
Thanks
Ian
Ian Thomson
Special Counsel Governance
Legal Services Unit
Te Hononga Civic Offices, 53 Hereford Street, Christchurch
PO Box 73015, Christchurch 8154
ccc.govt.nz
From: Mauger, Phil <
[email address]>
Sent: Friday, 7 February 2020 1:14 PM
To: Thomson, Ian
Subject: Re: Application to the Auditor-General
Hi the job was tenders for after the election
Get
Outlook for iOS
From: Thomson, Ian
Sent: Friday, February 7, 2020 11:10 AM
To: Mauger, Phil
Subject: Application to the Auditor-General
Phil,
The Auditor-General’s office has asked me to clarify when GSL appointed Maugers Contracting Ltd as its subcontractor (ie. was it before or after the election).
GSL had tendered for its contract before the election, as I understand it.
Could you please confirm the position.
Regards
Ian
Ian Thomson
Special Counsel Governance
Legal Services Unit
Te Hononga Civic Offices, 53 Hereford Street, Christchurch
PO Box 73015, Christchurch 8154
ccc.govt.nz
Document Outline
