Stink over council's golden turd legal battle leaves behind hefty bill

The author of the code of conduct review in question, not the Midcoast Council itself or its general manager Andrew Panuccio who commissioned the report and acted on it, has been ordered to pay the other side's costs.

That is, the $15,000 it cost councillor Peter Epov to go through the Supreme Court to stop the general manager tabling a report about him that he'd never seen, was unfair and probably biased.

It is unknown at this stage how much the council itself has spent on legal advice and representation.

The author, Paul Quealey, an accountant and partner at the firm Lambourne Partners in Hamilton, did not have his own legal representation during the Supreme Court proceedings in which his report was thrown out.

Justice Sweeney said, in the orders he made on Wednesday (July 2), Mr Quealey's report was "affected by a reasonable apprehension of bias ... is invalid and of no effect" because he had already worked on a separate, earlier complaint against Cr Epov, (also commissioned by Midcoast Council / general manager, Mr Panuccio).

Mr Quealey has not responded to the Newcastle Herald's inquiries.

Cr Epov said he was forced to escalate the matter to the Supreme Court or risk the report being discussed by councillors in a confidential setting and resulting in him being censured, unjustly, just months shy of the local government elections in September.

And it wouldn't be the first time, Cr Epov says, citing the council's earlier attempt to have him censured in 2021, ahead of the local government elections held that year, on grounds that were also tossed out.

The saga began with questions Cr Epov he put to the council after it was awarded, for the second year in a row, the Development and Environmental Professionals' Association (DEPA) 'Golden Turd Award' for "the worst HR (Human Resources) in local government".

He asked if DEPA's claims, that the council had lost 300 members of staff in just 12 months, were correct.

The council has since confirmed to the Herald that 406 staff left their posts at the Midcoast Council during 2022 and 2023.

Critics say Cr Epov was more than entitled - obligated - to raise the issue at the heart of the council's receipt of the 'golden turd award' for two years running, and that it was reasonable to critique the council on its high staff turnover given the council "may have some explaining to do".

It has been described as a "misuse" of the code of conduct to "try and shut people up".

Cr Epov agrees, saying he is a thorn in the council's side, asking "too many questions" of a council which he says is in chronic financial distress, and was the subject of a financial performance audit by the Audit Office of NSW in 2023.

In a letter to council general manager, Andrew Panuccio, himself a lawyer, on May 20, James Ryan, solicitor for Cr Epov during the golden turd award proceedings, asked the council to take Mr Quealey's code of conduct review off the agenda.

Among other things, the report defamed Cr Epov, referred to an unsubstantiated breach of the code which was itself in breach of the code, and should never have been completed in the first place given the author's "apprehension of bias", the letter says.

Mr Quealey was further mistaken, in accusing Cr Epov of breaching confidentiality, by asking the general manager questions about staff turnover, given that information was provided by DEPA, not the council itself, Mr Ryan's letter says.

The code of conduct report alleges Cr Epov acted corruptly, but provided no evidence for it, and made no consideration of whether, even if the information about staff departures had been confidential, that it should not have been, and was not entitled to confidentiality.

NSW Local Government Minister Ron Hoenig has declared his own war on the state's council code of conduct processes, describing the system as a "shambles" and vowing to have them scrapped.

Mr Hoenig confirmed in June he was working on a new statewide system that would be implemented before the local government elections.

"The current code of conduct is not fit for purpose," he said.

"I am working with the Office of Local Government to rewrite it so that democratically elected councils can get on with doing the job their communities expect them to do."

The 2023-24 NSW Budget injected $4.5 million to bolster the capacity of the Office of Local Government, develop a new code of conduct framework and improve the fiscal responsibility of councils.

A spokesperson for the Office of Local Government (OLG) said on Thursday (July 4) it was aware that the MidCoast Council had settled litigation with one of its councillors before it went all the way to a hearing in the Supreme Court.

"Neither the Council or the other party to the dispute contacted the Office of Local Government regarding the legal action or the complaint," a statement said.

"Under the Procedures for the Administration of the Model Code of Conduct for Local Councils in NSW, anyone can request that the Office of Local Government review a council's consideration of a code of conduct matter on the grounds that Procedures have not complied with, or that the relevant standards within the council's code of conduct have been misapplied by the investigator in their consideration of a matter."

The OLG did not respond to questions about the progress of the minister's promised reforms.

In response to its loss in the Supreme Court, the Midcoast Council issued a statement saying Justice Sweeney's orders "invalidated the report provided to Council, which means Council can deal with the matter afresh".

"By agreeing to the consent orders the matter was finalised quickly, minimising Council's costs.

"Cr Epov's costs are being paid for by the conduct reviewer."

The entire statement appears on the council's website.