Aokautere Land Holdings Limited v Palmerston North City Council
[2023] NZHC 356
•28 February 2023
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2020-454-18
[2023] NZHC 356
IN THE MATTER of an application for declaratory and tortious relief BETWEEN
AOKAUTERE LAND HOLDINGS LIMITED
Plaintiff
AND
PALMERSTON NORTH CITY COUNCIL
Defendant
Hearing: 13 February 2023 (by VMR) Appearances:
G J Woollaston for Plaintiff
N Jessen and A J R Sinclair for Defendant
Judgment:
28 February 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
(Strike out application)
AOKAUTERE LAND HOLDINGS LIMITED v PALMERSTON NORTH CITY COUNCIL [2023] NZHC 356
[28 February 2023]
[1] Aokautere Land Holdings Limited (ALH), is the developer of a staged subdivision of a greenfield site in Palmerston North. ALH obtained the necessary resource consents for the subdivision from the Palmerston North City Council (the Council). ALH had to construct the infrastructure for the subdivision including roading, drainage and relevantly for this proceeding, a watermain.
[2] Part of the development was to be occupied by a school operated by the Woodgate Gospel Trust (the Trust). I will return to the limited role of the Trust below.
[3] It is common ground that ALH had to construct the watermain between 1 metre and 1.5 metres below the finished level of the road, when the watermain was situated under a road. The minimum depth requirement was to provide protection to the watermain from damage by traffic.
[4] An issue arose between ALH and the Council as to the quality of ALH’s workmanship on the watermain. ALH disputed the Council had any grounds for concern. The Council says as it was intended that the roading, watermain and other infrastructure would become its property and it was concerned to ensure the work was carried out properly.
[5] The parties met in late November 2017, resulting in what the plaintiff describes in its pleadings as the “Works Adoption Agreement”, recorded in a letter of 8 December 2017. In large part, whether the name ALH has given the arrangement recorded in the letter of 8 December 2017 is accurate, is at the heart of this proceeding.
The watermain issue in more detail
[6] While in the contemporary documents the stages of the development are given various references, in the hearing, counsel called the relevant stages “Stage 1” and “Stage 2” and I will refer to them as Stage 1 and Stage 2 in this judgment.
[7] The watermain in issue in this proceeding runs the length of Johnstone Drive formed by ALH and so needed to be at the minimum depth of 1 metre to 1.5 metres. At the time of the 8 December 2017 letter, that part of Johnstone Drive, which was part of Stage 1 of the subdivision, had been formed and sealed. This proceeding
concerns that part of Johnstone Drive which, at the end of 2017, had not been sealed, being Stage 2 of the development. More accurately, as at December 2017, ALH had installed the watermain for the full length of Johnstone Drive. That part of the watermain in Stage 1 is not in issue in this proceeding. What is in issue is that section of the watermain which lay under the unsealed section of Johnstone Drive on Stage 2. It is common ground that the watermain, when installed by ALH in Stage 2, was only about 250mm below ground level under the unsealed section of Johnstone Drive.
[8] The 8 December 2017 letter concerns the Johnstone Drive infrastructure, with the only specific reference relating to the watermain, being the need for further disinfection of the watermain prior to its connection to Council’s reticulated supply. That disinfection needed to be completed by an approved contractor. The 8 December 2017 letter makes no reference to the depth of the watermain either for Stage 1 or Stage 2.
ALH’s obligations when it installed the watermain
[9] It is clear beyond doubt that responsibility for constructing the watermain and other infrastructure works in accordance with Council standards, including the minimum watermain depth, lay with ALH. The parties signed a document called “Deed governing construction of Johnstone Drive, Aokautere, Palmerston North” dated 21 November 2016 (the Johnstone Drive Deed). That Deed refers to the Trust’s desire to secure land and services for the completion of its school and recorded that ALH wished to secure resource consents to enable it to meet the interests of the Trust and its contract with the Trust.
[10]The Deed included the following clause:
[8]The performance of Stage 1 Works and Stage 2 Works are to be carried out entirely at the AHLH’s expense and in performing those works, AHLH must:
(a)Carry out the works lawfully;
(b)Carry out the works in accordance with the Council’s Standards;
(c)Provide the Council with inspection opportunities as reasonably requested by the Council or as required by the Council’s Standards; and
(d)Provide any plans reasonably required by the Council to satisfy the Council that the work is being carried out in accordance with this Deed and Council’s Standards.
[11]“The Council Standards” is widely defined as follows:
(b) The Council Standards = the Council Engineering Standards For Land Development and any other rules, and bylaws used by the Council to control the standard of land development as well as any resource consent requirements.
The inter-relationship of Stage 1 and Stage 2 works
[12] The effect of the 8 December 2017 letter is that the Council took title to the road and watermain completed under Stage 1 and the watermain only extending under the unfinished part of Johnstone Drive on Stage 2.
[13] ALH pleads that during the course of 2017, it carried out or caused to be carried out, the building of the watermain supply: “as required of it pursuant to the Johnstone Drive Deed”. This work included the watermain in issue in this proceeding. Accordingly, the watermain in issue was installed by ALH prior to the 8 December 2017 letter at a time when it was responsible for ensuring the watermain was at a depth which would mean that when the road was sealed, it would be at least one metre below the finished surface of the road.
[14] Again, ALH accepts that pursuant to the Johnstone Drive Deed, the obligation to install the watermain in accord with Council requirements was its responsibility. However, it pleads that the Council by the time of the 8 December 2017 letter assumed responsibility “For the completion and due instatement” of the watermain . Hence, ALH refers to the 8 December 2017 agreement as the “Works Adoption Agreement”.
[15] ALH pleads that the 8 December 2017 letter varied the parties’ obligations under the Johnstone Drive Deed. ALH asserts that as a result of the 8 December 2017 letter, the Council assumed an obligation to ensure the watermain, then existing under
Johnstone Drive on Stage 2, complied with all engineering requirements, in particular, the minimum coverage requirement of 1 metre to 1.5 metres.
[16] The works, subject to the 8 December 2017 letter, vested in the Council on 2 March 2018, but as already noted, at that time the watermain on Stage 2 of Johnstone Drive remained at approximately 250mm below the ground level and would have to be lowered in order for ALH to comply with its resource consent for Stage 2, which incorporated the engineering standards including minimum depth requirement of the various types of water pipes/mains.
ALH claims the Council should rectify the watermain
[17] By correspondence at the end of 2019 and in early 2020, ALH put the Council on notice that the watermain ALH installed on Stage 2 of Johnstone Drive was at an insufficient depth to achieve the required coverage. ALH asserted that notwithstanding the Council had imposed the minimum depth requirement, it nonetheless allowed the watermain to be connected to the system when it accepted the Stage 1 works. ALH asserted that the Council, as owner of the watermain, had the obligation to lower the depth of it along the Stage 2 part of Johnstone Drive.
[18] The Council’s reaction to the call that it should rectify the depth of the watermain was to say that it was ALH’s obligation to do so.
[19]Ultimately, ALH carried out the repairs itself at a cost of just under $19,000.
[20] Accordingly, the essence of ALH’s claim is that the Council “explicitly assumed responsibility” for the watermain in the 8 December 2017 letter.
ALH’s causes of action
[21] The first cause of action seeks a declaration that the Council assumed responsibility for remediation of the watermain, putting focus squarely on the effect of the 8 December 2017 letter.
[22] The second cause of action is in negligence and is a claim that the Council owed ALH a duty of care to “exercise due skill, care and attention in the instatement” of the watermain.
[23] The third cause of action is for breach of statutory duty. ALH pleads the Council has the statutory duty to ensure that the development was completed in a manner compliant with the relevant statutory requirements. ALH says the Council was in breach of that duty when it refused to rectify the watermain.
[24] The fourth cause of action is one in estoppel and is a claim that the Council “explicitly adopted and/or assumed responsibility for the due instatement via the Works Adoption Agreement”. ALH also alleges here that the Council at one point said that it had remediated the watermain and it was now at 850mm below ground level. It asserts without detail, that it relied on such “adoptions, assurances and representations”.
[25] The fifth cause of action is entitled “Relief under inherent jurisdiction of the Court”. This cause of action is an amalgam of the earlier causes of action.
Council applies to strike out ALH’s claim
[26] Mr Jessen, counsel for the Council, summarised the applicable principles by reference to the following passage:1
A court may strike out a claim if it discloses no reasonably arguable cause of action.2 It is inappropriate to strike out a claim unless “the court can be certain that it cannot succeed”.3 The jurisdiction should be exercised sparingly.4 However, as this Court said in Attorney-General v McVeagh:5 “… if the claim is doomed to failure, there can be no justification for allowing it to continue. The striking-out jurisdiction is founded on the realisation that resources are finite and are not to be wasted.”
[27] The Council submits that ALH was responsible for the installation of the watermain on Johnstone Drive. So much is common ground. The Council says at no
1 Te Whaka Ritenga O Waikato Inc v Martin [2016] NZCA548, [2017] NZAR 173 at [15].
2 High Court Rules 2016, r 15.1(1)(a).
3 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
4 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
5 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 564.
point was ALH relieved of that obligation and the 8 December 2017 letter cannot be construed as meaning the Council accepted ALH’s obligations in respect of the watermain for Stage 2.
[28] The Council submits that the various causes of action asserted are untenable as they all amount to ALH being released from its obligations under the Johnstone Drive Deed. In fairness to Mr Woollaston, counsel for ALH, he accepted that unless his client was released from its obligations under the Johnstone Drive Deed and under its resource consents in respect of the watermain on Stage 2, none of the causes of action could succeed. That was an appropriate and properly made acknowledgement.
[29] Mr Jessen submitted the 8 December 2017 letter is incapable of having the effect alleged by ALH. The letter records that it is intended to confirm the matters discussed and agreed at a meeting held on 23 November 2017. Matters other than the watermain were discussed. The full extent of the discussion of the watermain in the 8 December 2017 letter is as follows:
Johnstone Drive infrastructure vesting
It was agreed that Council would accept infrastructure associated with Stage 6F3 [Stage 1] of the Johnstone Drive roading connection on the following basis:
(a)The water supply assets only following completion of a further disinfection of the watermains prior to connection of the network to Council’s reticulated supply by an approved contractor in full compliance with Council’s ESLD;
(b)ALHL must first apply for and have granted the necessary permits for water supply and sewer connection for the subdivision;
(c)Formal creation of an easement for the conveyance of water and wastermain services across private land for that portion of Johnstone Drive not yet constructed.
This is a significant concession by Council to ALHL that is unique to this particular development whereby the success of the Woodgate Gospel Trust’s development depends on the vesting of the infrastructure in the Council.
[30] As noted below, an attachment to the letter set out the amendments to the Stage 1 resource consent required to give effect to the agreement; one amendment being the deletion of a condition as described below.
[31] At the outset of the hearing, I confirmed with counsel that ALH did not allege that the record of the agreement in the 8 December 2017 letter was incomplete or inaccurate or that ALH was relying on a representation made at or prior to the late November 2017 meeting. None are pleaded nor raised in the affidavits filed in support of ALH’s summary judgment application, which it withdrew. Mr Woollaston did not claim there were other representations or arrangements made prior to or at the November 2017 meeting that could be relied on. The 8 December 2017 letter stands on its own. Accordingly, there are no factual disputes clouding what the letter means.
What does the 8 December 2017 letter mean?
[32] ALH’s claim depends on it being able to show that the Council became subject to an obligation, enforceable by ALH, to make the watermain installation undertaken by ALH comply with the coverage requirements for the Stage 2 works being constructed by ALH. With the Johnstone Drive Deed expressly placing all obligations in relation to the subdivision works on ALH, it needs to show its obligation was replaced by some new arrangement shifting the obligation onto the Council.
[33] ALH’s starting point is the 8 December 2017 letter. It is common ground that the letter records an agreement that the watermain and the land forming Stage 1 of the Johnstone Drive was to vest, and did vest, in the Council. Under the 8 December 2017 letter, ownership of the watermain only for Stage 2 also vested in the Council. Ownership of the Stage 2 land that would become Johnstone Drive remained with ALH.
[34] Mr Woollaston was unable to point to anything arising simply from the fact of ownership of the watermain by the Council which imposed on the Council an obligation to undertake work on its watermain to permit ALH to satisfy the terms of its Stage 2 resource consent.
[35] ALH, in its Stage 2 resource consent (issued after the 8 December 2017 letter), had to ensure the finished ground level of Johnstone Drive was 1 metre to 1.5 metres above the watermain it had installed. ALH accepted that requirement when it accepted and acted upon the terms of its Stage 2 consent.
[36] Mr Woollaston submitted that the deletion of condition six of the Stage 1 consent agreed in the 8 December 2017 letter, was a means of giving effect to the parties’ agreement and amounted to the Council accepting the watermain was compliant, both in respect of Stage 1 and Stage 2. The submission was that to the extent the Stage 2 works were dependent on work completed on the watermain at Stage 1, given the Stage 1 work had been completed and was now owned by the Council, ALH was absolved from ensuring that the watermain would be compliant for Stage 2.
[37] Condition six provided that ALH would, prior to requesting approval under s 224 of the Resource Management Act 1991 (the Act), provide a written statement from the “approved Technical Representative” confirming the works had been carried out in accordance with the engineering plan, that the physical works met the Council’s engineering standards and that all the requirements of engineering standards had been provided.
[38] On its face, all condition six provided was that the approved Technical Representative, who was to be a professional surveyor or chartered professional engineer, would not have to provide the required written confirmation. That the Council dispensed with this requirement made sense as the Council’s opinion (disputed by ALH) was that the watermain had not been completed in accord with its requirements. The Council could hardly maintain that position yet require a professional surveyor or chartered professional engineer to provide a written statement of compliance.
[39] The release of condition six cannot be construed as the Council accepting as a matter of fact that all requirements under the Stage 1 resource consent had been met. Further, it can certainly not be construed that if that was not the case that ALH was not only discharged from its responsibilities under the Johnstone Drive Deed and the Stage 1 resource consents, but those responsibilities were taken on by the Council and could be enforced by AHL.
[40] Through accepting the vesting of the watermain, it was said the Council accepted all extant deficiencies in the watermain meaning ALH’s obligations in
respect of Stage 2 works, dependant on Stage 1 watermain work, were curtailed. Even if this submission was correct (and I do not consider it is), it does not follow from that submission that the Council then had an obligation enforceable by ALH to step in and rectify the depth of the watermain for the Stage 2 part of Johnstone Drive.
[41] ALH did not assert that the minimum coverage requirement for Stage 2 had been released by the Council by the 8 December 2017 letter. Nor could it when the Stage 2 consent and the conditions it imposed was issued after the 8 December 2017 letter. ALH accepted the minimum coverage condition existed for the Stage 2 work.
[42] I am unable to find an arguable basis for the Council releasing ALH under its obligations under the Johnstone Drive Deed or under the Stage 2 resource consent. Nothing in the 8 December 2017 letter suggests the Council was accepting an obligation to carry out work to benefit ALH at Stage 2. Nor did the Council in releasing ALH from the obligation to comply with condition six of the Stage 1 consent by itself, or in combination with the factors just mentioned, place itself under an obligation to do anything. The Johnstone Drive Deed is a carefully drafted and detailed document. As noted, the 8 December 2017 letter makes no reference to the Deed. The Council, in order to advance the completion of Stage 1 to assist the completion of the school for the Trust, provided a limited release in respect of condition six of the resource consent.
[43] What ALH in substance asserts in this proceeding is that by virtue of the 8 December 2017 letter, it had an indemnity from the Council in respect of its own poor workmanship (or that of its contractors) in respect of the watermain. Such cannot be found in the 8 December 2017 letter or arising only from the fact the Council took ownership of the watermain.
[44] It follows that I am satisfied that the application to strike out the plaintiff’s proceeding is granted.
[45] None of the other causes of action raised by ALH can succeed. A duty of care in tort will not be imposed where to do so would contradict how the parties have allocated their respective duties and obligations – here by way of the Johnstone Drive
Deed and through ALH applying for its Stage 2 consent and accepting without challenge the conditions under that consent.
[46]The claim of breach of statutory duty and estoppel add nothing further.
[47] In respect of the estoppel claim, I comment only on the reference that the Council is said to have, at one point, claimed it remediated the watermain to make it 850mm below ground level. This is a reference to a line item in a Schedule of Work carried out by the Council in respect of the watermain. It records various items of work conducted commencing from April 2018. There is reference to pressure tests, disinfection work and there is one item for 6 July 2018 in respect of a connection from one lot across to another. The remedial work done is described as “Lowered the watermain under the road to reduce risk of damage from heavy vehicles new depth is 850mm”. This was a localised piece of work addressed in evidence. The work was in respect of a “rider main” and not the main watermain. The work was undertaken as “a common-sense response to mitigate a risk of damage posed to [the Council’s] asset”.
[48] That the Council chose to do this work on its own asset is its own business. It does not found an obligation on the Council to rectify the depth of the watermain on Stage 2 enforceable by ALH. It is not a representation of anything. In any event, it is apparent ALH was not aware of this work undertaken in July 2018 so cannot have relied on it. When ALH first raised that it considered the obligation to rectify the watermain lay with the Council, that proposition was promptly rejected.
[49] Accordingly, there can be no alteration of position by the Council in respect of this isolated work and in any event, the work undertaken was not, and did not, comply with the coverage requirements for a watermain. A rider watermain needs to have coverage of 750mm to 1000mm. This work concerned a different type of pipe in any event.
Costs
[50] There is no reason why costs should not follow the event on a 2B basis and I so order along with disbursements as fixed by the Registrar.
Associate Judge Lester
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