Auckland Council v Samson Corporation Limited

[2023] NZHC 1351

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-996

[2023] NZHC 1351

BETWEEN

AUCKLAND COUNCIL

Appellant

AND

SAMSON CORPORATION LIMITED

First Respondent

TEDCASTLE ESTATES LIMITED
Second Respondent

Continued …

Hearing:

21, 22, 23 and 24 November 2022

Appearances:

A R Galbraith KC, T B Fitzgerald and D M Scholes for the Appellant in CIV-2021-404-996

L McEntegart and A J Steel for the Respondents in CIV-2021-404-996

D M Salmon KC, S L Cogan and L G Berryman for the Appellant in CIV-2022-404-904

A R Galbraith KC, N R Hall and J A Marshall-Mead for the Respondent in CIV-2022-404-904

Judgment:

31 May 2023

JUDGMENT OF GAULT J AND MR WARWICK REID

This judgment was delivered by me on 31 May 2023 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

AUCKLAND COUNCIL v SAMSON CORPORATION LTD [2023] NZHC 1351 [31 May 2023]

Continued …

CIV-2022-404-904

UNDER

the Land Valuation Proceedings Act 1948

IN THE MATTER

of a claim for compensation under the Public Works Act 1981

BETWEEN

YMCA North Incorporated Appellant

AND

AUCKLAND COUNCIL

Respondent

TABLE OF CONTENTS

Background  [5]

Compensation  [9]

Tribunal decisions  [13]

Samson decision  [14]

YMCA decision  [47]

Grounds of appeal

Samson proceeding  [86]

YMCA proceeding  [89]

Issues  [93]

Approach on the appeals  [95]

Entitlement to compensation – applicable legal principles  [97]

Betterment  [107]

Our site visits

Samson  [112]

YMCA  [119]

The Tribunal’s approach to assessment of compensation  [128]

The relevance of Waterview  [130]

Samson  [131]

YMCA  [151]

The nature of the covenants  [154]

Samson  [155]

YMCA  [162]

Samson case – HABU  [169]

Samson case – valuation evidence  [176]

The parties’ valuation evidence  [177]

Tribunal’s valuation conclusions  [183]

The parties’ submissions  [184]

Discussion  [189]

YMCA case – HABU  [199]

YMCA case – valuation evidence  [209]

The parties’ valuation evidence  [210]

Tribunal’s valuation conclusions  [213]

Discussion – before value  [216]

Discussion – after value  [221]

Betterment  [230]

Conclusion  [237]

Costs  [239]

[1]    These appeals and cross-appeals from decisions of the Land Valuation Tribunal (Tribunal) concern the amount of compensation payable under the Public Works Act 1981 (PWA) by Auckland Council to landowners in Auckland who have had part of their land acquired and covenanted for the purposes of the City Rail Link (CRL) tunnel.

[2]    In CIV-2021-404-996, Auckland Council appeals a decision of the Tribunal dated 14 May 2021 fixing the total compensation to be paid to Samson Corporation Ltd and Tedcastle Estates Ltd (Samson) in respect of the acquisition of part of Samson’s land at 195, 197-199 Symonds Street, Auckland at $140,000 (plus GST,    if any) together with costs and disbursements.1 Samson cross-appeals.

[3]    In CIV-2022-404-904, YMCA North Incorporated (YMCA) appeals a decision of the Tribunal dated 24 May 2022 fixing the total compensation to be paid to YMCA in respect of the acquisition of part of YMCA’s land at 149-157 Greys Avenue, Auckland at $2 million.2 Auckland Council cross-appeals.

[4]    The appeals are brought under s 26 of the Land Valuation Proceedings Act 1948 (LVPA).3 On  such  appeals,  this  Court  sits  with  an  additional  member.4  The appeals were heard sequentially rather than together, but with leave for the parties to appear on each other’s appeals given the commonality of issues. We deliver a combined judgment, dealing with each appeal separately where appropriate.

Background

[5]    The CRL is New Zealand’s first underground railway and its largest transportation project to date. It connects Auckland’s Britomart (Waitematā Station) and Mt Eden (Maungawhau Station) with two new underground stations in between, Te Waihorotiu (near Aotea Square) and Karanga-a-Hape (near Karangahape Road), via a 3.45km twin-tunnel underground rail link which will operate at a range of depths

1      Samson Corporation Ltd v Auckland Council [2021] NZLVT 5, [2022] NZRMA 217.

2      YMCA North Incorporated v Auckland Council [2022] NZLVT 9.

3      Section 95(1) of the PWA provides that any award made by the Tribunal under the PWA is final as to the amount awarded, subject to s 26 of the LVPA. Section 26 provides for appeals to the High Court.

4      Land Valuation Proceedings Act 1948, ss 3(1) and 13(1).

of  up  to  42m  below  the Auckland city centre.    The tunnels are seven metres in diameter.

[6]    Following an engagement process with landowners,5 and formal notices under the PWA,6 Auckland Council made the following acquisitions for the CRL (as broadly depicted in the images):

(a)in relation to Samson’s land, by agreement dated 11 July 2019:

(i)it acquired the stratum estate in freehold  of  approximately 306 m2 of subsurface land downwards from approximately 27-28m below ground for several metres (Samson’s Railway Land); and

(ii)it imposed a restrictive covenant over an area of subsoil above the top of Samson’s Railway Land between approximately 5m below ground and 27-28m below ground (Samson’s Covenant Area);

5      We address this engagement process further below.

6      Notice to Samson dated 1 November 2018, and notice to YMCA dated 4 April 2019.

(b)in relation to YMCA’s land, by proclamation under s 26 of the PWA dated 24 August 2020 and taking effect on 9 September 2020:7

(i)it acquired the stratum estate in freehold of approximately 1,684 m2 of subsurface land downwards from approximately 10-14m below ground for several metres (YMCA’s Railway Land);8 and

(ii)it imposed a restrictive covenant over an area of subsoil above the top of YMCA’s Railway Land between approximately 5m below the ground and 10-14m below ground (YMCA’s Covenant Area).

7      Land (Subsurface) and a Restrictive Covenant Taken for Railway Purposes for the City Rail Link Project—149–157 Greys Avenue, Auckland Central, Auckland: New Zealand Gazette. By this date, construction of the CRL was well underway.

8      1,684 m2 is 39% of the total site of 4,320 m2, acquired across four of the five titles comprising the property.

[7]    These restrictive covenants are in substantially the same terms. They prohibit the landowner from carrying out restricted work without prior written consent. Restricted work means any excavation, foundation, piles, or any work of any nature within the covenant area. The covenantee (Auckland Council or its successors) must (promptly)9 give consent if the Threshold Ground Load Differential will not be exceeded, meaning in summary that the restricted work will not (at any time) result in a net change of more than 50 kPa, measured at the top of the Railway Land. Also, the covenantee must not unreasonably withhold or delay consent where the Threshold Ground Load Differential will be exceeded provided it is satisfied (acting reasonably)10 that the restricted work will not damage or adversely affect the railway tunnels.

[8]    The Samson covenant also contains a dispute resolution clause providing for disputes over any consent to be subject to a dispute resolution process, ultimately involving referral to the Environment Court if an agreement is not otherwise reached.

9      The word “promptly” appears in the Samson covenant only.

10     These words “acting reasonably” appear in the Samson covenant only.

Compensation

[9]    In respect of Samson’s land, the compensation market valuation of Mr Lawson for Auckland Council dated 25 February 2019 was $41,016.

[10]   On 11 September 2019, Samson claimed compensation of $213,680 plus GST. Auckland Council refused to admit the claim, which was therefore required to be heard by the Tribunal. Samson filed an amended notice dated 30 October 2020 claiming

$328,240 plus GST (less $39,040 advance compensation paid).

[11]   In respect of YMCA’s land, the compensation market valuation of Mr Taylor for Auckland Council dated 2 December 2020 was $262,966 plus GST (if any).

[12]   On 14 April 2021, YMCA claimed compensation of $18,486,189.29 (plus GST, if any) from Auckland Council, made up of $18 million for injurious affection and $486,189.29 for disturbance costs.11 Auckland Council refused to admit the claim, which was therefore also required to be heard by the Tribunal.

Tribunal decisions

[13]   We summarise the Tribunal decisions in some detail at this stage given the (partly overlapping) issues in the appeals and cross-appeals.

Samson decision

[14]   As indicated, the Tribunal’s decision dated 14 May 2021 fixed the total compensation to be paid to Samson at $140,000 (plus GST, if any) together with costs and disbursements.12 This was made up of:

(a)$18,000 for the acquisition of the tunnel protected area in terms of designation; and

(b)$122,000 for the rights and interests subject to both the restrictive covenant and the acquisition.

11     There was no express claim for taking YMCA’s Railway Land.

12     Samson Corporation Ltd v Auckland Council [2021] NZLVT 5.

[15]   The Tribunal described the CRL project, Samson’s subject property, the character of the area and the impact of the CRL on that area before turning to the approach to assessing claims for compensation of this type. The Tribunal said that one of the methods utilised by the PWA, where the particular property in question has no marketable value, is to subtract the value of the residual lot from the whole lot to get a value for the land being acquired. The Tribunal referred to s 62 of the PWA and noted that s 62(1)(b)(ii) was intended to deal with the taking of part of the land.    The Tribunal concluded this contemplated a situation where a portion of the surface area of the whole of the land, and its accompanying bundle of rights, is taken, leaving a valuation of the full site and the residual land. However, it acknowledged that certain rights can be removed leaving the surface area of the land intact.

[16]   Accepting there was no general market for the product of the transaction, the Tribunal concluded that the reason the PWA uses the word “may” in s 62(1)(b)(ii) is that there are situations, of which this is one, where this particular approach will not assist in assessing the compensation payable for the land taken and injurious affection on the taken land. The Tribunal concluded that no particular purpose was served by using the “full site less residual site” approach in this case.

[17]The Tribunal said it was clear that:

(a)under s 60 of the PWA there must be an amount of compensation payable;

(b)the Tribunal’s earlier decision relating to the Waterview tunnel, Body Corporate 212138 v Minister for Land Information (Waterview),13 referred to the principle of liberality, which the Tribunal interpreted to mean that where there is a range of reasonable outcomes on the evidence it would adopt the more liberal of those to ensure that full compensation is afforded; and

13     Body Corporate 212138 v Minister for Land Information [2017] NZVLT 2.

(c)the outcome must be to achieve a full and fair compensation for the interest acquired in the land and its effect on the balance (injurious affection).

[18]   The Tribunal referred to its preliminary decision not to admit, in support of Auckland Council’s valuation evidence that there was no loss (other than nominal), expert evidence from Mr Bates-McKee to the effect that there was no evidence that deep tunnels changed property values in Seattle, Washington. The Tribunal also noted that throughout the hearing the Auckland Council valuation witnesses, and other engineers, consistently referred to the lack of any impact and sought to distinguish Waterview on its facts. The Tribunal commented on the fact that no such factual distinctions were addressed when dealing with overseas experience.

[19]   In relation to the legal approach, the Tribunal said it adopted the analysis of the background law discussed in Waterview, and then highlighted that this case demonstrated the limitations of s 66(2)(b)(ii) of the PWA and the reason for it being permissive rather than mandatory as an approach. The Tribunal raised whether the transaction should be regarded only from the vendor’s perspective, where the vendor has no particular use for the rights acquired. It observed that if viewed from the buyer’s perspective, the value of the rights acquired is significantly greater.

[20]   The Tribunal accepted that the essentiality of the land to the works was to be disregarded for the purchase, as was any pressing need to sell by the vendor. It said that it may have special value unrelated to the works that is part of the value. When considering a willing buyer and willing seller, the Tribunal considered that a balance needed to be struck between these two different aspects of value. It said in the end that balance is a practical, factual matter to be determined by the Tribunal.

[21]   Turning to the covenant, the Tribunal said it appeared to be agreed that intrusion of founding piles for a building within the acquisition level was not practical given the pile positioning, but that piles close to or at the top of the acquisition level might be acceptable, even though the levels would greatly exceed the 50 kPa change permitted in the covenant. The piles would exert around 1,000 kPa if placed at the acquisition boundary, according to Mr Millar, a geotechnical engineer for Auckland

Council, who stated that attenuation over the six metre depth to the tunnel could render this force acceptable. The Tribunal said this seemed to beg the question as to why a 50 kPa load change was covered by the covenant. The Tribunal said there was a clear difference of opinion between the geotechnical and structural engineers as to the practicality and necessity of deep piles. The Tribunal said it could not resolve such disputes, but that it was clearly arguable that deep piles is an approach to building construction within the realms of possibilities for this site.

[22]   The Tribunal said that with the covenant the complexities mount. It said that for reasons that are not entirely clear, Mr Galli (for Auckland Council) had assumed from his attendance at the Waterview hearing that a key issue was the extent to which the load bearing nature of the materials was in prospect at that hearing. He considered that provisions relating to load check would overcome these concerns. The Tribunal noted that the decision itself does not address this in any detail and certainly does not say that the Waterview decision turned on this issue. The Tribunal then referred to what it was told about the relevant depths on the Waterview site. The Tribunal noted that the reasons for a restrictive covenant to five metres under the ground (compared with seven metres in Waterview) was not discussed by any of the engineers, noting that it was unclear to the Tribunal whether this would change the effect of the covenant. The reason for the covenant to extend so far above the acquisition layer in this case was unclear. Although Mr Millar advised the Tribunal that 1,000 kPa force at the acquisition layer on piles would result in a minimal increase in pressure at the tunnel wall, over a load of 50 kPa within the covenant area the covenantee has a discretion to refuse on reasonable grounds. The Tribunal referred to Mr Millar’s evidence that it was nearly inevitable that consents would be granted to any conceivable type of development on the property, even those well beyond the current planning regime for any buildings that might possibly be constructible on the site.

[23]   The Tribunal said this raised a more fundamental question: if the control is unnecessary, why is there such a restrictive covenant? The Tribunal concluded that the 50 kPa load change was an extremely low threshold, which has no particular potential, in a piling sense, to affect the tunnel given that at the acquisition level the 50 kPa for a standard pile development would exert little, if any, additional pressure on the tunnel. The Tribunal considered the covenant appeared to be a form of control

that, on the face of it, served no purpose in protecting the tunnel. The Tribunal said that this left it in something of a quandary. Either the covenant was necessary, in the terms under which it was being imposed, in which case there was some purpose to its imposition; or if Mr Millar was right, it was unnecessary and should not have been imposed. The Tribunal said it had to assume the covenant’s purpose was to enable some level of check and control by the Council, even at that low level. It also noted that, even below 50 kPa, the claimant was required to obtain consent (although consent must be granted). It observed that, over 50 kPa, there was no particular criteria imposed in relation to the Council’s power of consent beyond that in s 166 of the Resource Management Act 1991 that the action must be reasonable but that there was also reference to mediation and the Environment Court.

[24]   After noting the terms of the restrictive covenant, the Tribunal said there were a number of matters on which it could not be clear:

(a)whether in fact the grounds for refusal of consent may go to matters under the designation itself given that the appeal is to the Environment Court;

(b)whether or not the consent granted remains extant or whether there is a sunset clause;

(c)whether a conditional consent can be given; and

(d)the limits on the obligation to alter the covenant, particularly the registered documents on the title.

[25]   Turning to the developability of the property, the Tribunal said there was no doubt that the current highest and best use (HABU) of this site was in its existing rentable formation.

[26]   In relation to the prospects of redevelopment, the Tribunal identified three possible triggers. First, in relation to planning changes, the Tribunal accepted that currently a development of a four to six storey building was not economically feasible

though that might change, depending on the height of a building and the uses to which it might be put. It noted that the current planning constraints made a development beyond six storeys unlikely but that the situation may change in the next 20 years, although the Tribunal was unable to ascertain in what ways the regime would change.

[27]   Secondly, in relation to the market value dropping close to the land value, if the current resurgence in the area continued into the medium term, the rentals may be sufficient to justify the continuing operation as the HABU. However, as the building condition further deteriorated, a point was likely to be reached in the next 20 years where redevelopment would become an economic option simply based on investment return.

[28]   Thirdly, in relation to seismic strength, the buildings were at 19% of current seismic requirements (well below the 33% requirement under the 2017 legislation, which gave a period of around 30 years for such repairs to be conducted). There was a possibility of change within the foreseeable future, and a seismic event may spur stronger action to increase seismic strength or replace buildings that are currently well below seismic levels.

[29]   Thus, the Tribunal said that any reasonable buyer purchasing this property would purchase it:

(a)primarily on the basis of its current return; and

(b)with an eye to a capital increase in due course through redevelopment (probably in the medium to long term, 15-25 years) but dependent on a number of potential events that might influence the timing of such change.

[30]   The Tribunal noted the state of flux in respect of resource management and planning issues in New Zealand through the introduction of the National Policy Statement: Urban Development (NPSUD) and also the covenant review and prospective introduction of new Acts to replace the RMA, Urban Growth and other statutes. It noted that the NPSUD itself identified six storey buildings along the

strategic corridors, but that this was yet to be incorporated into the Auckland Unitary Plan. Given the existing buildings near the site over six storeys, the Tribunal could not discount this possibility.

[31]   Under the heading ‘Conclusion as to effect of the acquisition and injurious affection’ the Tribunal said the concern as to why a restrictive covenant would apply from five metres below the surface of the land in this situation would concern a potential purchaser. It said this could be reflected as market reservation or stigma, that the covenant could affect the potential for further potential development on this site and that it added an additional layer of complexity to ownership of the site. The Tribunal considered the potential complexities in resolving the consent issues covered:

(a)the particular parties from whom consent must be obtained given the reference to successors and assignees under the covenant;

(b)the purpose of the consent and the relevance of the load check criteria given that in light of Mr Millar’s evidence there appeared to be no clear basis for the restrictive covenant in engineering terms;

(c)the building configuration and age presents clear opportunities for redevelopment – in particular the number of new/refurbished apartment buildings makes this a likely option; and

(d)loss of obtaining any regulatory/local compliance approvals and its effect on the restrictive covenant consents and their registration against titles.

[32]   The Tribunal said that the potential costs of engagement required to resolve this were demonstrated by the number of developers who had already engaged with CRL seeking some clarification. It concluded that development constraint is not an idle concern of the market but a real one.

[33]   The Tribunal said the necessity to perfect any consent with all due expedition gave rise to concerns as to the long-term validity of consent that was not incorporated

into a document under clause 3.8 of the covenant.14 It also noted that there was also a cost involved in legal change to the covenant that needed to be taken into account. The Tribunal considered that the costs to an owner would be significantly higher than the $5,000 suggested by the Auckland Council witnesses.

[34]   The Tribunal favoured an overall approach rather than addressing each of the potential heads of injurious affection separately. The Tribunal considered there were areas of conflation and overlap between the various aspects of injurious affection where stigma and concern about the future intersected with requirements for extra work. It considered that breaking down these sums into different amounts led to the potential for double-dipping.

[35]   The Tribunal concluded that in situations such as this the question of land value and injurious affection also became intermingled. This was a case that required an overall judgment of full and fair compensation. The Tribunal considered that it needed to be judged both from the view of the vendor and the purchaser on a willing buyer/seller basis for a principle of liberality.

[36]   The Tribunal considered that the proper approach in principle to questions of compensation for deep tunnels of this sort was adopted in Waterview and that formed an appropriate template for it to consider compensation here. It said that Waterview gave a reasoned approach to compensation based upon capital value of the property, which thereby ensured fairness between various claimants and a consistent approach that could be readily identified between properties. The Tribunal considered that the criteria for distinction required particular attention to explain the basis upon which the Tribunal adopted a different approach to the percentage of capital value attributed in this case.

[37]   Before doing that, the Tribunal addressed the land value and capital value.    It adopted a land value of $1.8 million as at the specified date (1 August 2019) and a capital value of $2.85 million.

14     This clause requires an amended plan following consent to restricted work.

[38]   Turning to Waterview, the Tribunal said there was a reluctance by the valuers called by City Rail Link Limited (CRLL) to discuss New Zealand cases, in particular Waterview. The failure to identify similarities or differences with overseas examples by the valuers was also unusual. In relation to Waterview and the argued distinctions, the Tribunal said it preferred the New Zealand cases to assertions, without clear explanation of the background to overseas examples, which did not identify the relevance of the differences identified. The Tribunal considered Waterview was of assistance, saying it dealt with a similar acquisition and restrictive covenant in circumstances where the New Zealand Transport Agency had a specific need for the acquisition land, and the restrictive covenant, although there was no general market.

[39]   The Tribunal said that Waterview adopted a percentage of capital value approach to compensation for acquisition and injurious affection. Nevertheless, it observed that Waterview clearly dealt with two particular scenarios:

(a)Rental buildings constructed on part of the site and utilised as student accommodation on a return on capital basis. The Waterview Tribunal provided for compensation for acquisition and injurious affection of 10% of the capital value of each of those apartments.

(b)A  balance  of  land   for   which   development   was   imminent.   The Waterview Tribunal accepted that the land value in question was affected by the potential impact of the works and adopted a figure of 17.5% having regard to the effects on developability of the land both relating to the land value itself and injurious affection.

[40]   The Samson Tribunal concluded that the Waterview 17.5% land valuation deduction for the undeveloped land was of little assistance given the HABU of the Samson property. The Tribunal adopted the Waterview decision (in respect of the apartments) in full as it related to this case, while noting aspects of Waterview that did not arise at least to the same extent as in this case. The Tribunal noted that the 10% compensation in respect of the apartments was the higher of the range of figures for payments made in settlement, adopting a liberal approach.

[41]   The Tribunal referred to Mr Galli’s evidence about the process in Waterview, noting that his impression was not reinforced by reference to the Waterview decision and that the Tribunal was unclear whether Mr Galli’s criticism was of the Tribunal decision in Waterview or of the way in which evidence was presented. The Tribunal did not accept the criticisms of the Waterview decision made by Mr Galli and various witnesses for Auckland Council.

[42]   The Tribunal referred to settlements between other landowners and CRL and did not accept Mr Galli’s explanation of the breakdown of these payments.

[43]   The Tribunal considered that the argument that the restrictive covenant in this case was preferable to the Waterview case was a moot point, but accepted there was some small benefit in this case. It considered that the differences were not so marked that they in themselves warranted a different approach to valuation than that in Waterview.

[44]   The Tribunal commented on a 2019 published paper written by Mr Galli with the assistance of Mr Ireland (another witness for Auckland Council) and Mr Howard relating to the approach to land acquisition and risk for the CRL project, culminating in their conclusion that CRLL developed a sub-surface acquisition programme that resulted in the before and after effect that could be represented in the range of 0.01% to 2.0% of the capital value of the property. The Tribunal said this approach was reinforced in the way the valuations for CRL were dealt with.

[45]   Turning to Auckland Council’s valuers’ approach, the Tribunal said that the valuers, in their original valuations, all referred to overseas tunnel information justifying the approach they had adopted. Mr Lawson acknowledged that the valuers had worked with a valuation team approach. Mr Gamby had recommended to CRL that they retain Mr Bates-McKee to advise on overseas tunnel values.

[46]The Tribunal then said:

[112]          Overall, we have concluded that the approach adopted by the valuers before us is consistent with a team approach adopted by CRL and their valuers and was determined prior to the acquisition date. For the reasons we have already set out, we conclude that approach unduly emphasised untested

information compared with the decision in Waterview, which sets a proper legal benchmark. This fits with Mr Galli’s description of a subsurface acquisition programme.

[113]          To that extent we note that the actual payments made in respect of the CRL acquisition we have seen come to a total similar to that for Waterview. The way in which the payment is represented has been organised to suggest minimal injurious affection on land value, which is not supported by reference to New Zealand or overseas case law. In short, we consider that Waterview represents  an  appropriate  point  to  begin  assessment  for   tunnels   in New Zealand, and represents a thorough addressing of the relevant law.

The differences between the situation in Waterview and the current situation

[114]          We have already concluded that there is no potential effect on the current building at 195, 197 and 199 Symonds Street due to the tunnel. It is so deep that any prospective effect from operation can be discounted for current purposes. That depth also means that the effect on the capital value is diminished, although the exact extent of that is not clear. In short, we conclude that those properties that are near the tunnel's portals would be in a similar position to the Waterview case.

[115]          Overall, we acknowledge that the entire site in this case is affected by the Restrictive Covenant and tunnel. While this is different to other sites, which have, for example, 11 % effect 27-41 Pitt Street and 42 Upper Queen Street, with 33.11 % of the land area affected. The effect on the whole site is a matter of consequence. We accept that the depth of the tunnel is also a matter of consequence. Beyond these common factors relating to the uncertainty and stigma, and potential costs for redevelopment, remain similar.

[116]          We were advised that this was the deepest site above the tunnel, however the data that has been produced to us showing the diagrams of the train line show that most of Symonds Street is in the same category, with depth figures close to those for the current site. For practical purposes we can see little distinction between them in terms of compensation (excluding disturbance payment costs and costs of proceedings).

Conclusion on compensation

[117]          Overall, for the reasons we have cited in detail, we consider that this particular site is affected to around 5% of the capital value or, say, $140,000. This is only half the effect found in Waterview.

[118]          The reason we have adopted this figure is that we recognise that, from the starting point of 10% for Waterview, there was a range of figures in that case representing lesser effects for deeper tunnels, represented in that case between 5 and 7%. Given that the actual payments in the CRL acquisition given to us can be said to approximate 10%, we acknowledge that some of those may relate to disturbance costs that have not been accounted for in this hearing.

[119]          We have concluded that a full and fair payment in this case is an award around half of that claimed by the owner, approaching 5%, because of the particular factors we have acknowledged. We acknowledge that, in particular, this case has greater risk that higher intensity building may not occur because

of the Restrictive Covenant. The depth of the tunnels and their potential for impact (or even day to day knowledge of their operation) would be unclear to the owner. Nevertheless, we consider that this outcome is within a reasonable range.

[120]          We also acknowledge that this is the first case in this area, and we would have expected the remaining matters to be resolved within the range of 5-10%, depending on the position, impact on land area, depth of tunnel and would be plus any direct disturbance costs and/ or other costs incurred.

[121]          We acknowledge that the acquisition claim was $18,000 or 1% of land value. This compensation includes the value of the acquired land and the injurious affection. We are required to show these figures separately by virtue of s 89 of the Act. Therefore, in respect of land value we attribute the maximum sum claimed by the claimants of $18,000 and award for injurious affection of $122,000. We note, in particular, the payments are made under s 60 and s 62, but not under s 66, nor under s 91(1) of the Act.

[122]          In assessing compensation, we need to achieve a full and fair payment. We agree, as in Waterview, that the principle of liberality should apply where there are a range of outcomes supported. In our view this payment, though less than that of Waterview addresses the real differences (in potential distance to a portal) while being explainable in terms of the rationale of Waterview.

YMCA decision

[47]   As indicated, the Tribunal’s decision dated 24 May 2022 fixed the total compensation to be paid to YMCA at $2 million.15 This was made up of:

(a)$800,000.00 for  the  take  and  restrictive  covenant  directly,  under  s 60(1)(a); and

(b)$1.2 million for the effect of the restrictive covenant and the injurious affection of the take on the balance of the land, under s 60(1)(b).

[48]   After outlining the site, the Tribunal noted the claim on its face only related to injurious affection but it appeared to be agreed that the value of the land taken for the tunnel itself was $168,000. The issue was the effect of the restrictive covenant and the effect  of the tunnel on the balance of the land in terms of injurious affection.  The Tribunal noted that although the parties approached the effect of the covenant as injurious affection on the balance of the land rather than a taking in itself, the gravamen of the claimant’s argument was still addressed.

15     YMCA North Incorporated v Auckland Council [2022] NZLV9.

[49]   In relation to the covenant, the Tribunal considered that Mr Taylor’s evidence for Auckland Council allowed $690,000 by way of extra costs but nothing for the covenant either as take or injurious affection. The Tribunal indicated that YMCA did not appear to dispute the acquisition layer take calculation by Mr Taylor of around

$800,000 and considered that the claim related to the effect of the covenant on the developability of the site above the covenant area and the injurious effect on the entire group of properties, being 4,320 m2. The Tribunal said the covenant layer affected four out of five of the titles, but not all the land within each of those four titles, and YMCA asserted that the properties would all be developed together and therefore would be affected by the take and covenant over the five titles as a whole. YMCA’s valuation evidence asserted a 30% to 40% effect on a total value of the site with a claim of around $17 million.

[50]   The Tribunal noted that Auckland Council also called valuation evidence from Mr Schellekens who did not agree with Mr Taylor and considered the valuation should be nil. The Tribunal nevertheless considered Auckland Council’s position to be that Mr Taylor’s valuation was correct and the payment should be in the vicinity of

$800,000. The Tribunal assumed so as the PWA contemplated that the acquiring authority would provide a valuation and that represented the values unless otherwise disputed. It considered that, to suggest that Auckland Council could then give evidence at a hearing from another witness who did not provide a valuation which would supplant the PWA valuation, seemed contrary to both the scheme and purpose of the PWA. The Tribunal foreshadowed that it also had considerable issues with the approach of Mr Schellekens.

[51]   The Tribunal turned to Mr Schellekens’ evidence that there was significant betterment to YMCA and that no payment was due.  The Tribunal concluded that  Mr Schellekens:

(a)did not give a valuation under the PWA  and that this was done by   Mr Taylor for Auckland Council;

(b)his assertion as to betterment for public works was based on a preformed view of public infrastructure funding and his continuing

work for CRL, Auckland Council and Panuku (a Council owned developer);

(c)his views on betterment were unsupported by any sales evidence and based on broad assertions of public policy;

(d)he has been involved in a number of projects associated with the CRL infrastructure including the Aotea Centre air rights (which is one of the sales referred to by several valuers); and

(e)there is no evidence to support any betterment, certainly no factual evidence as discussed in the High Court and Court of Appeal decisions in Green & McCahill,16 both of which are clearly binding on the Tribunal.

[52]   The Tribunal then noted that neither of the valuations by Mr Dean, for YMCA, or Mr Taylor, for Auckland Council, provided for betterment nor discount market comparables for betterment before valuation (excluding the works).

[53]   The Tribunal did not accept that this case was very different to  Samson.    The Tribunal saw many similarities. Although the impact on any development was more proximate in terms of time, the Tribunal considered that the same issues arose.

[54]   The Tribunal concluded that the covenantee gave a pre-approval (prior to the covenant being registered in June 2020) permitting construction of a heavy or lightweight building to eight or nine storeys above ground, and three basement levels below ground with a total gross floor area (GFA) of 39,000 m2, with double piling to terminate just above the acquisition layer. The Tribunal noted that the conditions and enforceability of this approval by subsequent owners of the land was the subject of evidence and debate which the Tribunal would discuss.

16 Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council) [2013] NZHC 507; Auckland Council v Green & McCahill Holdings Ltd [2015] NZCA 20, [2015] NZAR 849.

[55]   The Tribunal referred to this Court’s statement in Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council) regarding the need to identify:17

… the knowledge or information the hypothetical parties would have been likely to have and to have taken into account at the specified date in coming to their conclusions about the value. The nature and extent of the knowledge or information which the hypothetical party will be assumed to have had will be influenced by the nature and sensitivity of the particular issue to the value of the land in question.

[56]   The Tribunal said it applied this statement and considered that the key to this case is what factors affecting value a reasonable and prudent developer would take into account as at the specified date (9 September 2020). It said there appeared to be a large measure of agreement that this was a specialised and expensive site and would involve a developer rather than a long-term investor. The Tribunal considered that the HABU of this site as at 9 September 2020 was for an apartment development.

[57]   However, the Tribunal noted that where the parties separated was at the level of specificity about such a development. There were arguments about how many floors of parking would be required, the number of apartments and whether or not retail or business might be accommodated on one of the floors. Auckland Council came up with an indicative design of the building to indicate the type of building that was the HABU. YMCA was drawn into responding to this information with information about other alternatives. The Tribunal said that having heard all this evidence it was unanimously of the view that it was dangerous for the Tribunal, in undertaking a valuation, to assume a particular design for apartment development.

[58]   The Tribunal was satisfied on all of the evidence that a developer would be looking for the maximum flexibility they could in respect of the type of apartment development they delivered on the market, depending on:

(a)economic conditions at the time;

(b)the cost of the development;

17     Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [62].

(c)the price they can achieve from the market or they believe they can achieve from the market; and

(d)the mix of size, type, orientation and design that they believe will maximise their return.

[59]   The Tribunal said that apartment developments around Auckland demonstrate a wide variability to developers’ approaches to such matters. One example is in respect of carparking with a range of between 0.5 and two carparks per unit. The Tribunal concluded that the HABU envisaged by the PWA was not for a particular development. Instead, it found that both the YMCA’s and Auckland Council’s development topologies were within the range that a prudent developer might wish to achieve on this site, but that they are not the only configurations. The Tribunal considered that flexibility was a key issue for a prudent developer in assessing value and the adverse effect of the take and covenant on injurious affection. It found that, accordingly, arguments that a developer may not wish to put in extra levels of carparking are decisions for the developer not the Council. The Tribunal considered that, clearly, no development could intrude into the acquisition level but the unaffected balance of the site, some 2,600 m2 was available for the level of development below ground that the developer wished to achieve. It considered that the question of what level of parking might be achieved above the acquisition layer in terms of the pre-approval or otherwise was something of a moot point. The Tribunal said that is a potential constraint on the development and may impact on the design for the entire site.

[60]   After referring to the parties’ respective positions on the impact, the Tribunal referred again to Waterview. It referred to Auckland Council’s ongoing criticism of a percentage approach.

[61]   In relation to the valuation approach, the Tribunal referred to Mr Schellekens’ static residual analysis, viewing it as sometimes useful. However, it said the basic problem with static residual analysis was that it depends on a whole range of assumptions as to what affects values and the type of development that has occurred. The change of any one variable could significantly change the outcomes. The Tribunal considered that Mr Schellekens approached the matter on the basis of certain

assumptions which underpinned his entire analysis, relating to the value to a developer of the proximity of the underground public rail, without considering surface transport such as buses which were clearly available in the immediate area.

[62]   The Tribunal referred to the lack of market comparable evidence of the difference in values due to public transport and characterised Mr Schellekens’ evidence as assertions of studies undertaken both in New Zealand and overseas showing that properties near to railways had higher value but without examples nor discussion of the relevant benefits of underground versus surface transport such as buses. The Tribunal said it had seen no factual evidence that the private benefits could be established especially to apartment dwellers.  Rather, the Tribunal agreed with  Mr Schellekens that the proximity to the motorway and road system was a significant benefit of this area.

[63]   Turning to before and after valuations, the Tribunal noted that they were somewhat difficult because only a partial interest in the land was acquired and the real issue was injurious affection. The Tribunal acknowledged that often injurious affection would be picked up in the value of the property, but in this case a conclusion inevitably involved a subjective evaluation given the lack of comparable examples within the market. The Tribunal said that in Auckland Central there was a wide range of sales figures for property, including some apartments, but there were a whole series of confounding factors which  made  it  difficult  to  analyse  these  individually.  The Tribunal said that the experts and the Tribunal, using their experience, had to evaluate what they considered were appropriate adjustments for each site.

[64]   The Tribunal said that, as it had done in other cases, it considered the most comparable examples and then made appropriate adjustments to those values to try and reach a figure which gave a fair and appropriate comparison for valuation purposes. The approach needed to be robust and generally the preference of the valuers was to stick with adjustments which fit within the usual range, including corner adjustments, contour adjustments, views and the like. The Tribunal indicated that time adjustment was a difficult matter amidst the COVID-19 pandemic. It considered that the position through to September 2020 was relatively confused in New Zealand.

[65]   The Tribunal described its approach as considering the subject site, then including the surrounding properties and locality before going on to deal with the particular constraints affecting the site, including planning and development issues, then looking for the best comparable sales and adopting adjustments in relation to the properties to reach a full valuation for the whole site under s 62(1)(b)(ii). It said then it would go on to discuss the particular outcomes on the compensation payable before reaching a decision in terms of s 89 (and following).

[66]   After considering the site, and the sightlines giving rise to extremely difficult and detailed consenting requirements, and potential views from the sites, the Tribunal said there was no dispute that the subject site was best served for apartments and that there was little in the way of general retail or business in the immediate vicinity.   The Tribunal noted the transport connections and Myers Park in the surrounding area. The Tribunal referred to the planning position, COVID-19 and other factors before concluding that nevertheless it was satisfied that this site would have been seen as a prime site for redevelopment for apartment buildings. Any developer would be looking to implement a range of options depending on movements by governments, local authorities and the market towards a preference for one level of intensity or other. The Tribunal was satisfied that any reasonable developer would assume it would have to build within the existing viewshaft limitation and would assume it would have to provide some light aspect to apartments in order to make them saleable and attractive to the market.

[67]   The Tribunal considered that something in the range of 30,000 to 39,000 m2 GFA (including any parking, retail etc) would be assumed. It noted the contention that a developer would have had at least a preliminary design prior to purchase and said, overall, the judgment would be exercised in respect of providing sufficient flexibility to allow the developer to meet the market at the time the development was undertaken, probably in two to five years.

[68]   Although the Tribunal suspected there may be some who may see the tunnel underneath the site as precluding them from a purchase, the Tribunal did not see this as an impediment to a developer in terms of either saleability or developability of the site. The Tribunal did not believe there was any evidence that there would be any

direct impact of the tunnel itself in terms of noise or vibration on the surface or detectable by residents of any of the apartments. The essential issue was what could be built over the tunnels themselves.

[69]   The Tribunal did not consider there was any particular constraint over the balance of the sites in the 2,636 m2 unaffected by the acquisition or covenant. Whether a particular developer would go down more than two or three floors to provide parking was a matter for them. There was sufficient room to provide underground parking at these deeper levels given the contours of the site.

[70]   The Tribunal accepted that the take and covenant would impact some four of the five sites. It was possible that a developer may decide to re-subdivide to have the unaffected areas excluded from the titles and the affected areas included in the titles. There was a cost to this, but it appeared to be a relatively straightforward issue.

[71]   The Tribunal said the eventual issue then turned upon the need to have piles within the affected area that did not go into the acquisition area but would need to go into the covenant area, thus requiring consent. The Tribunal referred to the pre-approval and said that given that 2,636 m2 of the site is not controlled by the covenant, there appears to be some room for argument as to what proportion of the GFA is affected. Nevertheless, the simple proposition appeared to be that multiple piles that did not penetrate to the acquisition area were likely to bear any anticipated load. The Tribunal said the pre-approval appeared to be an unequivocal pre-approval for the work and it was binding upon the covenantee, whoever that may be in due course. It noted that it is not set to expire at any particular time nor is it personal to the current owner. There may be some arguments around what proportion of the load could be borne over the site and what changes might lead to changes to the approval. The Tribunal considered that the approval would be the starting point for the developer, but they would treat it with some scepticism and recognise that there would be costs involved in seeking to  rely  on  it  and/or  utilise  the  approval  granted.  The Tribunal concluded this would not require them to obtain another approval, although they may do so as a matter of precaution if this was readily granted.

[72]   The Tribunal considered that the fixation of the witnesses on a particular model design was unhelpful for the purposes of valuation. The putative developer would be seeking maximum flexibility to enable construction according to market demands and profitability of the enterprise.

[73]   The Tribunal described the before and after valuation evidence from the three valuers as being on the basis of a direct sales comparison approach where sales were analysed on the basis of price paid per square metre of land ($psm) and price paid per square metre of the floor area ratio ($psm/MFAR). Adjustments were made for location, frontage, zoning, size and contour. The Auckland Council valuers also adjusted for time (between the date of the comparator relative to the specified date) whereas Mr Dean submitted that since mid-2017 the market for development land in the CBD remained flat. The Tribunal accepted that some adjustment for time was appropriate and preferred the time adjustments adopted by Mr Schellekens.

[74]   The Tribunal then summarised the sales it considered were the best comparators with adjusted rates. Applying the Tribunal’s adjusted rates from the most comparable sales over the land area of 4,320 m2 resulted in a value range of roughly

$36.516 million to $37.38 million.

[75]   After referring to the analysis of the sales by the MFAR approach and to other sales analysed by the valuers, the Tribunal moved to consider post-dated sales. A key sale referred  to by  all  valuers  concerned  a property at 17-27 Beresford Square,   12 months  after  the  specified  date.  The  Tribunal  agreed  with  Mr  Taylor  and Mr Schellekens that its sale price needed to be adjusted for a ground lease, resulting in a sale price of $7,822 psm and, after making further adjustments for corner influence, zoning and time results, an adjusted rate of $7,743 psm. The Tribunal noted that the Courts have held that post-dated evidence can be considered primarily to confirm market movement. The Tribunal concluded that limited weight could be placed on a sale 12 months after the specified date, but the analysis supported the trends identified by the valuers and a value of the unencumbered site in the vicinity of that assessed by Mr Taylor and Mr Schellekens.

[76]   Accordingly, the Tribunal adopted a “before” value of $36.5 million exclusive of GST on the specified date (before the take and covenant).

[77]   Turning to the “after” valuation, referring again to Mr Taylor’s $860,000, the Tribunal considered the additional effect on value relating to the injurious affection on the wider property and the acquisition of the covenant. The Tribunal noted that if two properties were of equal value and one was unaffected by the covenant, the developer would see the land unaffected and without the need to obtain a consent as having a higher value.

[78]   The Tribunal said that the method under s 62(1)(b)(ii) did not assist because the change in value related to an uncommon restriction which had no established market value, referring to its Samson decision. Noting that there were differences between the adjusted figures for “before” value which were not fully explained, the Tribunal said it was in no doubt that a prospective purchaser would consider the effect of the take and covenant and assess any potential impact as being a bargaining factor in respect of the price. However, it did not agree in any way with Mr Dean’s assertion that that would affect the price by 30% to 40%.

[79]   The Tribunal said that this case was not on all fours with Waterview given that the portal to the tunnel was close in Waterview. The Tribunal said it would have thought that where an entire property was affected it would be difficult to argue for a figure above 10%. It noted that in Samson, the Tribunal adopted a figure far closer to 5% overall, including the acquisition layer and other effects, and said that in that case, however, the entire site was affected by the prospect of construction in the long term given the economic viability of the site at the time. It considered such a figure in this case would be around $1.8 million.

[80]   The Tribunal said that compensation for injurious affection had to relate to those elements of risk that would weigh on the mind of a well-informed purchaser. Compensation of $860,000, as determined by Mr Taylor, adequately compensated for the likely extra costs of the development within the restricted area. However, additional factors could impact on price. The Tribunal considered that examples

included those earlier identified,18 which may impose development constraints on the whole site and depending on design, the possibility of having to renegotiate existing land use approvals which could result  in  additional  design  and  holding  costs.  The Tribunal said that, furthermore, this is a large site and development would take some time during which there could be a change in market perception relating to the impact of covenants on title. The Tribunal said that in this case these types of issues were not seen as significant, but they could not be ignored, and that an additional amount for injurious affection was warranted.

[81]   The Tribunal said that, using the precedents of Waterview and Samson, this was a case which would justify a settlement of $860,000 plus approximately $1 million to

$2 million injurious affection for the broader effect of the acquisition layer and the effect of the covenant on the balance of this site and the broader issues. Given there was an overlap between this and the cost of obtaining the engineering consents, the Tribunal considered that the additional payment should be at the lower end of this range. Taking into account all matters, it considered an additional payment for injurious affection should be closer to $1 million.

[82]Under the heading ‘Overall assessment’, the Tribunal concluded:

[154]    Given the generality of this, we consider that a liberal outcome while being reasonable to both the Claimant and the Respondent would be a total payment of $2,000,000.00 divided as $800,000.00 for the acquisition take and injurious affection compensation and $1.2 million for the Restrictive Covenant and for the injurious affection for take and injurious affection in relation to the balance of the Claimants’ land.

[155]    In the view of a prospective purchaser we conclude he would be considering matters in broad generality and he would discount the price he would otherwise pay on the specified date by $2 million. This is likely to be relatively insensitive to any before value he concludes the land is worth.

[156]    It is clear from s 89 of the PWA that we must break the matters into separate compensations but that these are at the Tribunal’s discretion. It is clear that the concluded figure is what we conclude is equitable in the circumstances. Overall, we consider that the outcome of $2,000,000.00 is full compensation to the Claimant on a reasonable and fair basis. We therefore attribute:

(a)under s 60(1)(a) for the land and Restrictive Covenant acquisition the sum of $800,000.00; and

18 Above at [58].

(b)Under s 60(1)(b) for injurious affection from the acquisition the sum of $1,200,000.00.

[83]   Noting this would be a significant disappointment to YMCA given its position, the Tribunal said it considered there was no evidence to support the type of payment Mr Dean suggested. The Tribunal concluded that if an offer was made for Mr Dean’s suggested value of $20 million on the specified date after the take, no reasonably informed vendor would accept it. It concluded that a figure of $34.5 million in the after situation was entirely reasonable and to be expected if the property was sold after the take on the specified date.

[84]   In relation to betterment, the Tribunal said that given its conclusion that there was no evidence of any increase in value of land due to the CRL on the specified date, it was arguably unnecessary to address this issue. It did so out of an abundance of caution, saying:

[160] It is clear from the High Court decision in Green & McCahill that betterment under  s 62(1)(c)  cannot  arise  where  value is determined under s 62(1)(b)(ii). This is because the betterment in that subsection relates to the “value of the land taken”. Thus any adjustment, for increase in the value of any land injuriously affected by the work or prospect thereof, arises as a final adjustment under s 62(1)(e) of the PWA.19

[85]   The Tribunal concluded there was no evidence of any effect of the CRL works on property value as discussed in the Court of Appeal decision.20 Moreover, it concluded there was some evidence of injurious affection sufficient to justify a minor adjustment to value.

Grounds of appeal

Samson proceeding

[86]   Auckland Council’s grounds of appeal, in summary, are that the Tribunal erred in:

19     Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507.

20     Auckland Council v Green & McCahill Holdings Ltd [2015] NZCA 20, [2015] NZAR 849.

(a)concluding that a total sum of $140,000 (plus GST if any) is a full and fair payment;

(b)rejecting the before/after approach under s 62(1)(b)(ii) of the PWA;

(c)its valuation approach:

(i)by making a general assessment adopting a principle of liberality;

(ii)concluding that diminution would be to capital value, rather than land value;

(iii)rejecting Auckland Council’s valuers’ evidence as being a “team” approach and pre-committed;

(iv)taking into account the value that the acquired land had for the public work in particular, contrary to s 62(1)(d) of the PWA;

(v)its assessment of settlement agreements;

(d)its treatment of Waterview;

(e)its treatment of the Samson covenant; and

(f)its observation that it would expect future cases to be resolved within the range of 5% to 10%.

[87]   Auckland Council seeks orders discharging the Tribunal’s order and that no compensation be payable.

[88]   Samson’s grounds of cross-appeal are that the Tribunal failed to ascertain the correct capital value of the subject property and erred in fact and law when assessing compensation. It seeks to substitute the compensation amount with an order for

$328,240 plus GST (less advance of $39,040 paid by Auckland Council).

YMCA proceeding

[89]YMCA’s grounds of appeal, in summary, are that the Tribunal erred in:

(a)finding that the sum of $2 million (plus GST, if any) represented full compensation.

(b)its assessment of the “before” value of the property as $36.5 million. In particular, the Tribunal erred in relation to:

(i)HABU; and

(ii)the valuation evidence.

(c)assessing  the  “after”  value  of   the   property   as   $34.5   million. In particular, the Tribunal erred in:

(i)assessing compensation for the acquisition of the railway land at $800,000;

(ii)understating the impact of tunnels underneath the site;

(iii)understating the impact of the covenant;

(iv)understating the injurious affection reduction in value of the balance of the property;

(v)misconstruing and/or misapplying the willing purchaser/seller test.

[90]YMCA seeks compensation of $17 million (plus GST, if any).

[91]   Auckland Council’s grounds of cross-appeal, in summary, are that the Tribunal erred in:

(a)awarding compensation for the effect of the covenant and the injurious affection on the balance of the subject land in the sum of $1.2 million;

(b)concluding that an “after” value of the land of $34.5 million was entirely reasonable and to be expected if the subject land sold after the take on the specified date;

(c)concluding that “there is no doubt” that a developer would see the land unaffected by the covenant and without the need to obtain consent as having a higher value;

(d)finding that the decision in Waterview was relevant to the question of compensation in this case, particularly “applying a percentage approach”, that Waterview was a precedent for a finding of additional injurious affection and determining the outcome in this case by way of adjustment to the outcome in Waterview;

(e)finding that the Tribunal’s decision in Samson was a precedent for a finding of additional injurious affection in this case and in determining the outcome in this case by way of adjustment to the outcome in Samson;

(f)finding that where changes in market value due to the presence of the tunnel and the  covenant  are  small,  and  not  evenly  differentiated,  a conclusion as to injurious affection inevitably involves subjective evaluation;

(g)determining the outcome in this case by way of adjustment to the percentage outcomes in Waterview and Samson without proper regard to material differences between the properties;

(h)finding there was a possibility of having to renegotiate existing land use consents which would result in additional design and holding costs;

(i)finding that given the size of the site, development could take some time during which there could be a change in market perception relating to the impact of the covenant;

(j)finding that a liberal outcome while being fair to both parties would be a total compensation of $2 million for the covenant and injurious affection;

(k)finding that a prospective purchaser would discount the price they would otherwise be prepared to pay for the land by $2 million; and

(l)failing to adjust for betterment.

[92]Auckland Council seeks to set aside the Tribunal’s decision.

Issues

[93]   The issues raised in the appeals and cross-appeals in the parties’ detailed submissions overlap and may be examined as follows:

(a)the Tribunal’s approach to assessment of compensation;

(b)the relevance of Waterview;

(c)the nature of the covenants;

(d)Samson case – HABU;

(e)Samson case – valuation evidence;

(f)YMCA case – HABU;

(g)YMCA case – valuation evidence; and

(h)betterment.

[94]   Before addressing these issues, we summarise this Court’s approach on the appeals, the applicable legal principles relating to compensation and our site visits.

Approach on the appeals

[95]   Appeals under s 26 of the LVPA are by way of rehearing. This Court’s approach on such an appeal is settled following the Supreme Court’s decisions in Austin, Nichols & Co Inc v Stichting Lodestar and Kacem v Bashir.21 The appellate court  has  the  responsibility  of  considering  the  merits  of  the  case   afresh.22   The appellate court must be persuaded that the decision is wrong,23 but the weight it gives to the reasoning of the court below is a matter for the appellate court’s assessment.24 Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.25

[96]   Section 26(4) of the LVPA empowers the Court to “confirm, discharge, or vary the order of the Tribunal, or direct that the matter be referred to the Tribunal for further consideration, as it thinks fit, and generally may make such order as it considers just and equitable in the circumstances of the case.” The power of an appellate body to remit a decision back to the trial Court is generally to be exercised sparingly, and we were discouraged from doing so here. In the LVPA context, the Court has tended to refer a dispute back to the Tribunal only when it is not practical for the Court to determine the dispute itself, for example when there was insufficient evidence.26

21     Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141 at [13] and [16]; Kacem v Bashir [2010] NZSC 112; [2011] 2 NZLR 1 at [31]-[32].

22     Kacem v Bashir at [31].

23     Austin, Nichols at [13].

24 Kacem v Bashir at [31]. No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because credibility is important: see Austin, Nichols at [13], and Green v Green [2016] NZCA 486; [2017] 2 NZLR 321 at [27]-[32].

25 Austin, Nichols at [16]; Kacem v Bashir at [32].

26 Hardiway Enterprises Ltd v Palmerston North City Council [2013] 3 NZLR 848 (HC) at [79].

Entitlement to compensation – applicable legal principles

[97]   The basic right to compensation for land acquired for public work is contained in s 60(1) of the PWA:

60       Basic entitlement to compensation

(1)Where under this Act any land—

(a)is acquired or taken for any public work; or

(b)suffers any injurious affection resulting from the acquisition or taking of any other land of the owner for any public work; or

(c)suffers any damage from the exercise (whether proper or improper and whether normal or excessive) of—

(i)any power under this Act; or

(ii)any power which relates to a public work and is contained in any other Act—

and no other provision is made under this or any other Act for compensation for that acquisition, taking, injurious affection, or damage, the owner of that land shall be entitled to full compensation from the Crown (acting through the Minister) or local authority, as the case may be, for such acquisition, taking, injurious affection, or damage.

[98]   Land “acquired or taken” includes land subjected to a covenant.27 “Injurious affection” relates to the effect of the acquisition or taking of other land – it is loss suffered by other land of the owner that is not taken.28

[99]   The landowner is entitled to “full compensation”. As Woodhouse P and Roper J said in the Court of Appeal in Drower v Minister of Works and Development:29

In the ordinary use of language the nature of compensation involves rendering something equal to what has been lost. It is the provision of recompense: cf Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495 per Dixon J at p 571. And the word “full” has the added purpose of emphasising that a claimant is entitled to receive the complete equivalent of that which has been

27 ‘Land’ is defined in s 2 as including any estate or interest in land.

28 Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [71], noting that the term “injurious affection” is not defined in the PWA.

29 Drower v Minister of Works and Development [1984] 1 NZLR 26 (CA) at 29, in relation to the predecessor Public Works Act 1928. See also Ministry  of  Works  v  David  Reid  Electronics HC Dunedin M91/89 18 December 1989 at 2; and McNulty v Minister of Survey and Land Information HC Dunedin M61/92 9 July 1993 at 54-55.

taken away from him. It implies a direction that the entitlement must not be whittled down in any respect.

[100]   More recently, this Court said in Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council):30

The expression “full compensation” means such sum of money as will place the dispossessed owner in a position as similar as possible to that which the owner was in before the land was taken.31 The governing principle of compensation is the award of a monetary equivalent for that which has been lost.  The  word  “full”  can  probably  be  equated  with  the  word  “fair”.32 A claimant is entitled to receive the full money equivalent of what he has lost and in respect of each category of compensatable loss. Use of the word “full” implies a direction that his or her entitlement must not be whittled down in any respect.33

[101]   Consistent with these statements, doubts are resolved in favour of a more liberal estimate.34 This is sometimes referred to as the “principle  of  liberality”.35 This applies in circumstances of genuine doubt on a particular valuation issue, giving the benefit of the doubt to the landowner. However, it does not mean that wherever there is a conflict of evidence, the Court should always adopt the most generous position. Rather, the Court should assess the uncertainty in the overall context of achieving full compensation.36 There must be a causative link.37

[102]Section 62(1) of the PWA provides:

30 Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council) [2013] NZHC 507 at [55]. See also Ace Developments Ltd v Attorney-General [2017] NZCA 409 said at [65] (which concerned a different provision of the PWA).

31  Russell  v  Minister  of  Lands   (1898) 17 NZLR 241 (SC) at 253; and see Peter Salmon, The Compulsory Acquisition of Land in New Zealand (Butterworths, Wellington, 1982) at [11.1].

32 Riddiford v Attorney-General [2009] NZCA 603 at [24].

33 Drower v Minister of Works and Development [1984] 1 NZLR 26 (CA) at 29; P Salmon Laws of New Zealand Compulsory Acquisition and Compensation at [66]; and see Te Marua Ltd v Wellington Regional Water Board [1983] NZLR 694 (CA) at 697.

34 Tawharanui Farm Ltd v Auckland Regional Authority [1976] 2 NZLR 230 (SC) at 234 citing Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 373-374; Pryor v Minister for Land Information [2015] NZHC 3117 at [13].

35 See for example NZ Cash Flow Control Ltd v Offshore Holdings Ltd [2022] NZHC 2351 at [24].

36 Middle Hill Ltd v Minister for Land Information [2022] NZLVT 10 at [21].

37 See for example Seller v Minister of Public Works [1934] NZLR 988 (SC), where there was no evidence of loss for land taken but injurious affection was at least caused partly by work done on the land taken.

62       Assessment of compensation

(1)The amount of compensation payable under this Act, whether for land taken, land injuriously affected, or otherwise, shall be assessed in accordance with the following provisions:

(a)subject to the provisions of sections 72 to 76 of this Act, no allowance shall be made on account of the taking of any land being compulsory:

(b)the value of land shall, except as otherwise provided, be taken to be that amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise, unless—

(i)the assessment of compensation relates to any matter which is not directly based on the value of land and in respect of which a right to compensation is conferred under this or any other Act; or

(ii)only part of the land of an owner is taken or acquired under this Act and that part is of a size, shape, or nature for which there is no general demand or market, in which case the compensation for such land and the injurious affection caused by such taking or acquisition may be assessed by determining the market value of the whole of the owner's land and deducting from it the market value of the balance of the owner's land after the taking or acquisition:

(c)where the value of the land taken for any public work has, on or before the specified date, been increased or reduced by the work or the prospect of the work, the amount of that increase or reduction shall not be taken into account:

(d)the special suitability or adaptability of the land, or of any natural material acquired or taken under section 27 of this Act, for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only pursuant to statutory powers, or a purpose for which there is no market apart from the special needs of a particular purchaser or the requirements of any Government department or of any local authority:

(e)the Tribunal shall take into account by way of deduction from that part of the total amount of compensation that would otherwise be awarded on any claim in respect of a public work that comprises the market value of the land taken and any injurious affection to land arising out of the taking, any increase in the value of any land of the claimant that is injuriously affected, or in the value of any other land in which the claimant has an interest, caused before the specified date or likely to be caused after that date by the work or the prospect of the work:

(f)the Tribunal shall take into account, by way of deduction from the total amount of compensation that would otherwise be awarded, any increase in the value of the parcel of land in respect of which compensation is claimed that has occurred as a result of the exercise by the New Zealand Transport Agency of any power under section 91 of the Government Roading Powers Act 1989.

[103]   It is common ground in these appeals that while the standard test is that amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise (current market value),38 here only part of the land was taken or acquired and there is no general demand for that part so the compensation may be assessed by determining the market value of the whole of the owner’s land and deducting from it the market value of the balance of the owner’s land after the taking or acquisition (the before and after approach).39 As the Court said in Green & McCahill,40 we too do not consider this exception from the primary rule contained in s 62(1)(b) abandons the willing seller/willing buyer notional transaction approach to the assessment of compensation.

[104]In Green & McCahill, the Court also said:

[66] It should be noted that the before and after approach is  not  compulsory, even in situations where there is no general demand or market for the land taken or acquired. The exception provides that the before and after approach “may” be used. A valuer assessing compensation under the Act, and a Land Valuation Tribunal hearing a compensation claim, will have to consider whether or not the before and after approach is appropriate. There can be practical difficulties in using the before and after approach. It may be unreliable if any averaging valuation method is used, as the approach determines the difference between the two situations. If a relatively small difference is revealed by the before and after approach, another method may need to be considered.41 It may not fairly assess the loss of improvements when viewed on a broad scale.42 Indeed, the Act expressly recognises that where land taken or acquired for a public purpose is of such a nature that there is no general demand or market for the land, compensation can be assessed on the basis of the reasonable cost of reinstatement in some other place.43

38     Public Works Act 1981, s 62(1)(b). The specified date is the date on which the land vested in the acquiring public authority: s 62(2).

39     Section 62(1)(b)(ii).

40     Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [65].

41     Squire L Speedy Land Compensation (New Zealand Institute of Land Valuers, Wellington, 1984) at 32-33.

42     At 34.

43     Public Works Act 1981, s 65(1). It appears that this section is directed to the situation where the whole of a claimant’s land is taken.

[105]   Thus, reference to the before and after approach is permissive. The PWA also permits an approach based on the reasonable cost of reinstatement. However, it must be remembered that these mandated alternative approaches are exceptions to the primary current market value approach, that is the amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise. If the alternative approaches are not suitable, the primary approach should be used to assess the current market value. We accept that approach may also be difficult to apply in the absence of comparable sales data, but it remains ultimately a matter of valuation judgement. Of course, application may differ as between the value of land taken and land injuriously affected.

[106]   It is common ground that the current market value of the land is to be assessed according to the HABU, meaning that which is legally and practically possible and financially feasible. Identification of the HABU:44

… requires identification of the knowledge or information the hypothetical parties would have been likely to have and to have taken into account at the specified date in the coming to their conclusions about value. The nature and extent of the knowledge or information which the hypothetical party will be assumed to have had will be influenced by the nature and sensitivity of the particular issue to the value of the land in question.

Betterment

[107]   Section 62 incorporates the concept of betterment. Section 62(1)(c) provides that where the value of the land taken for any public work has, on or before the specified date, been increased or reduced by the work or the prospect of the work, the amount of that increase or reduction shall not be taken into account.   However,   s 62(1)(e) requires the Tribunal to take into account by way of deduction any increase in the value of any land of the claimant that is injuriously affected, or in the value of any other land in which the claimant has an interest, caused before the specified date or likely to be caused after that date by the work or the prospect of the work.

44     Green and McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [62].

[108]   In Green & McCahill, this Court described the threshold for establishing betterment as follows:45

There has to be a proven causative connection arising out of the public work or the prospect of the work that results in betterment.46 The increase in value must be causally linked in a way that is more than minor.47 Convincing evidence is required.48

[109]   On appeal, the Court of Appeal confirmed that betterment must be established as a matter of fact.49 The Court said that the use of the words “caused” or “likely to be caused” in s 62(1)(e) and “occurred as a result of” in s 62(1)(f) demonstrate that a causative link must be established.50 The need to show that “any increase in the value of the land” has been “caused before the specified date or likely to be caused after that date by the work or prospect of the work” under s 62(1)(e) effectively places an onus on the public authority pursuing the public work to establish that a betterment has resulted from the public work or from the prospect of the public work.

[110]   Recently, in Silverwood Corporation Ltd v Minister for Land Information, this Court referred to the High Court and Court of Appeal decisions in Green & McCahill as establishing that “a high evidential threshold had to be met before betterment could be deducted from a compensation award”.51 We consider this approach reflects the need to avoid whittling down the compensation and to resolve doubts in favour of a more liberal estimate, but we do not consider that a different standard of proof applies to betterment.

[111]   Where  betterment  is  established,  it  must  be  deducted.   The  language  of s 62(1)(e) and (f) are mandatory.52 This applies even in the context of compensation for “non-marketable” land.53 Where a “before and after” approach is used to determine compensation, betterment is only taken  into account as a  deduction  from

45     Green & McCahill Holdings Ltd v Auckland  Council  (as successor to Rodney District Council)

[2013] NZHC 507 at [80].

46     Finlayson v Minister of Works [1934] NZLR 456 (SC) at 467 and 470-471.

47     Napier City Council v Marist Holdings (Green Meadows) Ltd [2012] NZHC 658 at [10].

48     Candy v Thames Valley Drainage Board [1956] NZLR 416 (LVC) at 421.

49     Auckland Council v Green & McCahill Holdings Ltd [2015] NZCA 20, [2015] NZAR 849 at [29].

50 At [29].

51     Silverwood Corporation Ltd v Minister for Land Information [2022] NZHC 3483 at [78] and [83].

52     Green & McCahill Holdings Ltd v Auckland  Council  (as successor to Rodney District Council)

[2013] NZHC 507 at [80].

53     At [85(e)].

the total compensation payable under the “before and after” approach, not as a relevant factor in determining any “after taking” valuation within the “before and after” calculation.54

Our site visits

Samson

[112]   The Court conducted a drive-by site visit of Samson’s subject site and other properties suggested by counsel which feature in the evidence. This included sites relevant to the Waterview decision.

[113]   Our site inspection confirmed the Tribunal’s description of Samson’s subject property and the character of the area in general.

[114]   It is common ground that the HABU of the subject site is its existing use. However, an issue arises as to its HABU looking into the future.

[115]In relation to the sites relevant to the Waterview decision:

(a)1510 Great North Road is a three storey apartment complex on a relatively steep site below the road and over the Waterview tunnel. The building height and contours no doubt affect the foundation design and load requirements.

(b)1 Oakley Avenue is a new three storey apartment complex on the corner of Oakley Avenue and Great North Road, also situated above the Waterview tunnel. While a flatter site, the building height would also impact on foundation design requirements.

[116]   Evidently these buildings were able to be built immediately over the Waterview tunnel, which is at a shallower depth than the CRL tunnel.

54     Green & McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [78].

[117]   The development at the corner of Ash Street and Great North Road in Avondale involves a higher building as an example of development potential in the general area.

[118]   One observation is that the contours of the land both at the subject site and in relation to Waterview have an impact on tunnel depth and load bearing calculations.

YMCA

[119]   We conducted a site visit of the YMCA site, including by accessing the sixth level rooftop with substantial views over the surrounding area comprising mostly apartments of various ages, sizes and styles.

[120]   Our site inspection confirmed the Tribunal’s description of YMCA’s subject property and the character of the area in general.

[121]   The YMCA is a high-profile site (described as YMCA’s flagship asset) of 4,320 m2 spread over five freehold titles that has street frontage on three sides (Pitt and Vincent Streets and Greys Avenue). The site has a sharp apex at the southern corner at the intersection of Pitt and Vincent Streets, but towards the northern boundary the  site  widens  to  provide  a  large  area  of  generally  regular  shape.  Its frontage to Pitt and Vincent Streets is level. The site slopes down towards the north-eastern corner adjacent to Greys Avenue which is approximately seven metres below the height of the Pitt Street frontage. The ground contours indicate a building form comprising three stepped ground floor elements moving up the Greys Avenue frontage from north to south.

[122]   The building adjacent to the north-eastern boundary was under construction, being multi-level, surrounded by blue netting and scaffolding, substantially higher than the existing YMCA building, and apparently, according to the manager, built and owned by Kāinga Ora – as are a number of other adjoining flats further down the road.

[123]   Directly across Greys Avenue on the corner of Pitt Street is the Auckland City fire station and across Pitt Street is the Auckland Central St John Ambulance station. Noise from these two nearby properties would be an issue.

[124]   The shape and contour of the site does form limitations as to what can be developed on the site. This was evident from a combination of overhead plans and our site visit.

[125]   It was obvious from the surrounding improvements that the HABU of the property is an apartment complex.

[126]   There were no shops within the immediate locality, except for those located further up the hill on Karangahape Road. There are a number of different types of shops offering retail, hospitality and adult enterprises.

[127]   Within close walking distance of a few hundred metres is the proposed Beresford Square entrance to the Karangahape CRL station under construction, with a second entrance across the south side of Karangahape Road. The suggestion is that these may be utilised by the occupants of the apartments for transportation outside of the area and indeed it may be that apartment owners are a mix of occupiers that work within the city or wish to travel outside of the city utilising these points of transportation.

The Tribunal’s approach to assessment of compensation

[128]   In both Samson and YMCA, the valuers purported to assess compensation using the before and after approach in s 62(1)(b)(ii). However, in both cases the Tribunal declined to apply the before and after approach. Instead, in Samson it made a general assessment based, it seems, on a percentage of the capital value by comparison with Waterview. We infer the Tribunal meant current market value rather than capital value (the concept applicable in its rating jurisdiction). In YMCA, the Tribunal appeared to move away from a percentage but still made an assessment by comparison with Waterview and Samson.

[129]   We consider the Tribunal was entitled to decline to use the before and after approach given the inherent uncertainties in sales figures, including issues relating to GST and low and high sales prices.55 It was entitled to revert to the standard current

55     Samson Corporation Ltd v Auckland Council [2021] NZLVT 5 at [124B].

market value approach. Insofar as it did that, there would be no error of approach. However, its approach is unclear given the extent of the Tribunal’s comparison with Waterview and the lack of market sales data relevant to the “after” value. Indeed, the lack of market sales data relevant to the “after” value also renders unclear the approach of the valuers who referred to using the before and after approach even though there was no “after” sales evidence on which they considered they could rely. Before addressing the covenants and their valuation evidence, we turn to Waterview.

The relevance of Waterview

[130]   A focus in these appeals is the shadow of the Tribunal’s earlier decision in Waterview.56 That case involved compensation for a compulsory taking at a unit titled property at 1510 Great  North  Road on 13 June  2013 for the Waterview  tunnel.  The taking similarly comprised a subsurface estate for the tunnel and imposition of a restrictive covenant to protect it, requiring consent for certain activities such as excavation and construction of certain structures.

Samson

[131]   In Samson, the shadow of Waterview manifested in two ways. First, the Tribunal evidently drew an adverse inference that Auckland Council’s witnesses sought to avoid Waterview and instead relied on overseas studies, including Mr Bates- McKee’s report, to minimise compensation without addressing the underlying facts of overseas cases. Secondly, the Tribunal maintained in its decision that Waterview forms an appropriate template or proper benchmark to consider compensation for deep tunnels of this sort based upon the capital value of the property. In particular, the Samson Tribunal used Waterview’s 10% compensation in respect of the apartments as a starting point and adjusted that percentage downwards to around 5% on account of differences with Waterview.

[132]   These two aspects are evident in the Tribunal’s conclusion at [112] repeated here for convenience:

56     Body Corporate 212138 v Minister for Land Information [2017] NZLVT 2.

[112] Overall, we have concluded that the approach adopted by the valuers before us is consistent with a team approach adopted by CRL and their valuers and was determined prior to the acquisition date. For the reasons we have already set out, we conclude that approach unduly emphasised untested information compared with the decision in Waterview, which sets a proper legal benchmark. This fits with Mr Galli’s description of a subsurface acquisition programme.

[133]   Dealing first with the approach of CRLL and its valuers relevant to the Tribunal’s adverse inference, as indicated the Tribunal also said there was a reluctance by the valuers called by CRLL to discuss New Zealand cases, in particular Waterview, and that the failure to identify similarities or differences with overseas examples by the valuers was also unusual.

[134]   It is necessary to say more about the CRL landowner engagement process leading to the acquisition. As Mr Galbraith KC  for Auckland Council  submitted, the acquisition process is important because it affects what information is available to landowners and the market about the effect of the acquisition on the affected property. Any compensation assessment, and any submission about how prospective purchasers might perceive the effect of the tunnel, needs to be tested objectively against the information which was actually provided, and which was available on enquiry.57

[135]   When it designed the CRL acquisition programme, CRLL set out to create a better and more sophisticated process than that adopted in the Waterview landowner engagement process. CRLL researched international best practice.58 Its key learning was that mature rail operators offer detailed guidance to affected landowners on what the public work means for the development potential of their land, both in the applicable covenant and as part of the acquisition process itself. CRLL therefore developed a process between 2012 and 2016 that provided for detailed communication with landowners, designed to allow landowners to understand the CRL and the effect it would have on their particular property, so as to minimise any uncertainty or lack of

57    Green v McCahill Holdings Ltd v Auckland Council (as successor to Rodney District Council)

[2013] NZHC 507 at [62].

58 This included taking into account international studies such as those conducted in North America, by Mr Bates-McKee. The Council intended to lead expert evidence from Mr Bates-McKee, but the Tribunal declined to admit it. Mr Galbraith submitted the absence of the studies does not affect the logic of the Council’s case as the valuers, including Mr Smithies for Samson, accepted the studies’ core conclusion, which is that the loss of a right that does not affect the possible uses of land will not measurably affect the value of the land.

understanding  that  the  acquisition might create.    Landowners, including Samson, received a suite of site-specific material, including an overview of the CRL, including:

(a)a guide to the PWA;

(b)a description of the covenant;

(c)a valuation from a registered valuer;

(d)a geotechnical report;

(e)an urban planner’s report, and

(f)a structural engineer’s prototype building assessment. This was a working example of the foundation load embedment plan required to seek consent under the covenant, and therefore illustrated a development that could be constructed on the property notwithstanding the legal protections associated with the CRL. It illustrated to landowners and their advisers how the building assessment was undertaken.

[136]   Implementation of this process began with instructing valuers, planners, and several engineers in relation to each of the affected properties and preparing site-specific packs for each one of them. These packs were sent to landowners in 2016 and 2017.

[137]   While Auckland Council acknowledges that its engagement process was designed to eliminate or at least substantially reduce uncertainties as compared with the Waterview process, and thereby lessen or eliminate the value consequence of such uncertainties, Mr Galbraith submitted that should be reflected in a robust and appropriate site-specific compensation assessment and there is nothing conspiratorial or improper about that. He submitted it is exactly what the acquisition programme should try to do and what the PWA envisages.

[138]   We accept there is nothing improper about an engagement process designed to address uncertainties and lessen or eliminate their value consequence. Unfortunately, however, as [112] of the Tribunal’s decision indicates, the Tribunal was evidently concerned that the approach adopted by the valuers for CRLL was consistent with a team approach between CRLL and its valuers, was determined prior to the acquisition date and unduly emphasised untested information compared with the decision in Waterview. This concern was also evident during the hearing, for example, in the Tribunal’s questioning of Mr Lawson about how the valuation team had decided to use Mr Bates-McKee to provide overseas evidence  instead  of  Waterview  or  other  New Zealand cases.

[139]   Mr Lawson’s 8 June 2017 preliminary value estimate sent to Samson in the engagement pack and his 25 February 2019 compensation market valuation did not refer to Waterview. In those documents he said he was unaware of any New Zealand tunnel research studies which focus on the loss, if any, to residential or commercial properties as the result of tunnels beneath them. Given that, he drew support from overseas studies, specifically the report by Mr Bates-McKee. Mr Lawson said that Mr Bates-McKee’s studies generally indicate that there is no measurable impact from the acquisition and use of tunnels that are deep beneath properties. Mr Lawson said he concurred with Mr Bates-McKee. In relation to the “after” value, Mr Lawson considered there was limited or no discernible injurious affection.

[140]   Other compensation market valuations by other valuers similarly referred to the absence of New Zealand tunnel research studies, drew support from the report by Mr Bates-McKee and, in relation to the “after” value, considered that there was limited or no discernible injurious affection.

[141]   In Mr Lawson’s brief of evidence, he also referred to overseas tunnel studies, including Mr Bates-McKee’s report, without addressing the underlying facts of overseas cases. Mr Lawson referred briefly to a development above the Waterview tunnel to sense check insurance and finance costs, but did not refer to the Waterview decision. In his supplementary evidence, he explained that he did not rely on the Waterview decision because he considered it was factually different. He also referred to subsequent market evidence of a sale of a property nearer to the Waterview tunnel

entrance than 1510 Great North Road with no difference in price (1 Oakley Avenue). Mr Schellekens did not refer to Waterview. But neither did Samson’s valuers refer to Waterview in their evidence in chief.

[142]   We accept that CRLL engaged valuers to provide compensation valuations taking what might be called a “team approach”. Mr Lawson was part of this team, but Mr Schellekens was not. Mr Schellekens was not involved in the engagement process. While the approach adopted by CRLL was determined prior to the acquisition date, we do not accept the connotation that the expert valuation witnesses for CRLL / Auckland Council pre-determined their valuation evidence. In relation to Waterview, we accept that they (and Mr Galli) genuinely considered that it was not applicable and that overseas studies were helpful. Even so, reference to overseas tunnel experience was of limited relevance unless it addressed the underlying facts of overseas cases. This frustrated the Tribunal, understandably since the difficulty and distraction of comparing overseas cases was a factor in the Tribunal’s earlier decision not to admit evidence from Mr Bates-McKee. The approach of witnesses for CRLL to Waterview also frustrated the Tribunal and no doubt contributed to the inference that the engagement process was designed to avoid the effect of Waterview, even though it is evident that the engagement process was designed before Waterview. Mr Galli’s explanation about the engagement process, including as to his learnings from the Waterview engagement process and the perceived shortcoming of the Waterview covenant, appears to have been interpreted as a submission about the Waterview decision or at least led to questioning from the Tribunal about the Waterview decision and the decision to engage Mr Bates-McKee. The 2019 published paper authored by Mr Galli (and others) evidently contributed to an inference that the team approach was aimed at limiting compensation within a target range of 0.01% to 2.0% of the value of each property, thereby undermining the valuers whose evidence was consistent with that. Even if that 2019 paper was referring to an objective rather than the outcome,  as indicated we do not accept the connotation that the expert valuation witnesses for CRLL pre-determined their valuation evidence.

[143]   Also in fairness to the valuers for CRLL, we note that Samson’s valuers did not address Waterview in their primary briefs of evidence either. Doing so would have assisted the Tribunal, clearly seeking to compare Samson’s claim with Waterview, and

may have avoided the adverse inferences. An expert’s overriding duty is to assist the Court impartially  on  relevant  matters  within  the  expert’s  area  of  expertise.59  We accept, however, that the need for the witnesses to address Waterview depends on its factual and legal relevance, to which we now turn.

[175]   We conclude that any eye to a capital increase as at the specified date would be limited to contemplating a development such as the four storey development considered in the evidence. The value of Samson’s Railway Land and the injurious affection should only be assessed against the current use with an eye to such a development.

Samson case – valuation evidence

[176]   It is common ground that the specified date for Samson’s compensation claim is 1 August 2019.

The parties’ valuation evidence

[177]   It is convenient to summarise the parties’ valuation evidence in the following table:

65     Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagaptam [1939] AC 302 (PC) at 313; Re Whareroa 2E Block [1959] NZLR 7 (PC) at 10.

The parties’ valuation evidence (plus GST if any)
Valuer	Acquisition Value	Injurious Affection	Total Compensation
Mr Lawson (for Auckland Council)	$5,016	$30,000 ($25,000 market perception and $5,000 future cost)	$35,016 66
Mr Schellekens (for Auckland Council)	Nil	$35,000 ($5,000 load check and $30,000 market perception)	$35,000
Mr Churton (for Samson)	$18,240	$310,000	$328,240
Mr Smithies (for Samson)	$18,000	$300,000	$318,000

[178]The valuers’ compensation figures were calculated as follows.

[179]   In relation to the underlying land value if vacant on a “before” market value, the valuers ranged between $5,000 per square metre and $6,000 per square metre or

$1,520,000 and $1,824,000.

[180]   Analysed sales evidence was supplied within the city between 2017 and 2019. The valuers supplied “before” market values for the property (land and buildings) ranging from $2,840,000 to $3,000,000 (plus GST if any) based upon a capitalisation of income approach. Sales evidence throughout the city was compared and then analysed to determine a return on investment or yield or capitalisation rate. Yields fell between 4.7% and 5.07% based on the contract rent that was determined to be a market related rent once compared with rents in the locality. This totalled $141,960 plus GST for the property.

[181]   Based upon their respective land value and market value calculations, acquisition values for the Samson  Railway Land  varied from nil  (Mr  Schellekens),

66     Mr Lawson’s 8 June 2017 preliminary value estimate sent to Samson in the engagement pack was

$21,388 and his 25 February 2019 compensation market valuation was $41,016.

$5,016 (Mr Lawson based on $16.50 psm land value), $18,000 (Mr Smithies based on 1% of land value at $60 per square metre – rounded down from $18,240) and $18,240 (Mr Churton based on 1% of land value at $60 per square metre).

[182]   There was no direct sales evidence for the “after” value. The valuers assessed the “after” value as being the effect of the works reflecting any injurious affection;  in other words, the way in which the CRL tunnel and the acquisition might affect value. Injurious affection ranged from $30,000 up to $310,000 depending on methodology:

(a)Mr Lawson adopted $30,000 comprising $25,000 for loss in value as a result of negative market perception due to the existence of the tunnel and the registration of the restrictive land covenant, and $5,000 for future cost to the owner for differential design engagement with CRLL.

(b)Mr Schellekens adopted an injurious affection of $35,000 comprising

$5,000 load check and $30,000 market perception.

(c)Mr Churton adopted injurious affection of $310,000 based upon adjustments for stigma, risk of deloading, professional advice, time, insurance/finance and perception.

(d)Mr Smithies adopted injurious affection of $300,000 based upon adjustments for threshold, ground loading differential, professional advice, time cost, extra physical cost, finance and insurance implications and stigma.

Tribunal’s valuation conclusions

[183]   It is also convenient to repeat the Tribunal’s valuation conclusions in table format:

Tribunal’s valuation conclusions
Acquisition Value	$18,000
Injurious Affection	$122,000
Total Compensation	$140,000

The parties’ submissions

[184]   Mr Galbraith submitted the Tribunal’s approach departed from a principled approach to assessing compensation under the PWA. Rather than assessing whether or what difference the acquisition made to the value of the claimants’ land on the basis of the evidence, the Tribunal made “a general assessment” of compensation, said to be “on a full and fair basis and adopting a principle of liberality.” He submitted that generality and liberality are not foundations for compensation under the PWA.

[185]   He submitted the evidence did not establish that Samson suffered any quantifiable detriment as a result of the acquisition given the depth of the tunnel below the property and the evidence regarding the timing and scale of any development (referred to above). He submitted that on the evidence no or little dollar value should be attached to the injurious affection arising from the taking and covenant, because it would have no or little effect on the value of the property at the specified date. On the evidence there was no justification for the Tribunal’s conclusion that a willing buyer and willing seller on 1 August 2019 would have discounted the price of the property by 5% of its market value on account of some speculative fear about the effect of the CRL on hypothetical developments decades into the future.

[186]   Mr Galbraith submitted that if the Tribunal were correct that the CRL has generally caused 5-10% loss of market value on any property subject to a subsurface acquisition, it would mean that tens of millions of dollars of value has been lost from the Auckland property market due to the CRL. There should be an identifiable trail of properties along the length of the tunnel alignment selling for less than their neighbouring properties. The same (or worse) would be true over other tunnels, including the Waterview tunnel. This blight would be well-known and clearly identifiable in the market sales data. There is no such evidence.

[187]   He submitted that the Tribunal compounded its error by expressing the view that it expected the compensation for other properties in which subsurface land was acquired for the CRL to be resolved within the range of 5-10% of their market value. He submitted that compensation for injurious affection ought to be measured in dollar terms. In terms of future claims, he submitted that injurious affection must be assessed on a case-by-case basis. The financial consequence of any injurious affection does not inevitably scale with the value of the property, contrary to the premise inherent in the Tribunal’s proposition  of  applying  a  percentage  approach  into  future  awards.  He submitted the question in each specific case should be whether there is a demonstrable (on the evidence, not speculation) difference in the value of the landowners’ property after the acquisition, in dollar, rather than  percentage terms.  In this case, he submitted there was not.

[188]   Mr McEntegart submitted that the difference between the Tribunal’s compensation figure, representing 4.9% of value, and Auckland Council’s figure, representing 1.37% of value, is 3.5%. He submitted that in respect, especially, of assessments made on the basis of valuation judgement, rather than comparative analysis (as provided for under the before and after approach), the difference is miniscule. He submitted the Tribunal cannot be said to be wrong. Its value judgement was informed by the second tier evidence of Mr Kirkpatrick and Mr Brown and the settlement agreements. In a context of liberality, where all valuers including those on the Tribunal have resorted to valuation judgement in the absence of first tier before/after evidence, he submitted there is no sensible basis for claiming that the Tribunal’s modest figure should be replaced with Auckland Council’s improbably low one.

Discussion

[189]   We start by noting in terms of the existing use that there was no evidence the taking and covenant had an effect on the property’s current rental value. Nor was there evidence of physical detriment to the property arising from the construction or operation of the public work.

[190]   We accept a “before” value for the property of $2.85 million and turn to the limited market data relevant to the “after” value. As indicated, there was no direct sales evidence for the “after” value (so-called first tier evidence). We acknowledge some difficulty with Mr Lawson’s sales evidence made up of market yields, some of which needed adjusting for GST, and of comparisons with valuations of other properties he had made for CRLL.

[191]   We do not consider that the so-called second tier evidence of Mr Kirkpatrick or Mr James Brown assists Samson. The subjective views of purchasers as to what the properties they purchased would have been worth without the CRL covenant is not market sales data relevant to the “after” value of Samson’s land. Even as second tier evidence, it was not a reliable indicator of the quantum of compensation payable to Samson.

[192]   As in Waterview, there was some (second tier) evidence of settlements with other affected landowners. Although the compensation agreements provided for payments pursuant to different clauses, the evidence indicated that amounts for so-called disturbance payments and expenses were paid whether or not these expenses were actually incurred. Leaving aside Mr Galli’s graph which was produced during the hearing and sought to apportion part of the payments to injurious affection without a proper evidential basis, the settlement evidence suggested that the landowners concerned received between 6.3% and 10.05% of the property’s current market value albeit including an incentive payment or bonus for signing. We accept that some proportion of some settlement payments may well have comprised disturbance payments, but even so this is not dissimilar to the settlements in Waterview despite the different covenant.

[193]   Having regard to all these matters, in terms of the acquisition value of Samson’s Railway Land we agree with a value of $60 per square metre, which equates with the Tribunal’s figure of $18,000 based on 1% of the land value.

[194]   In terms of the covenant taking / injurious affection, we consider the Tribunal’s conclusion that Samson’s injurious affection amounted to $122,000 was overly influenced by its comparison with Waterview and its calculation of total compensation

based on a percentage (approximately 5%) of its before market value ($2,850,000). We consider that injurious affection claims are not necessarily scalable according to the value of the property. Nor can total claims for compensation relating to CRL be benchmarked within a 5-10% range. We acknowledge, however, that where the issue is akin to stigma or the uncertainty (rather than the cost) of obtaining consent and there is no “after” sales evidence, a valuation based on percentage of the “before” market value may be appropriate.

[195]   We conclude that there is no real uncertainty in relation to consent under the covenant for a development that is feasible and not too remote (such as a four storey development of the kind referred to in the evidence) given the evidence including Auckland Council’s load check pre-approval dated 14 December 2020. There should only be modest further cost involved. The CRLL evidence indicated that would be in the region of $5,000 whereas Mr Bosselmann said the engineering work required for the purpose of engaging with CRLL would cost at least $30,000. We accept that

$5,000 is likely insufficient to account for particular calculations and ongoing consultation or other conditions of consent once a specific development is proposed. Clause 3.8 would not account for further costs falling on Samson. However, there may be additional cost in relation to delay or dispute as to conditions or compliance with conditions. Accepting that allowance need not be made for any conceivable dispute, we consider a cost contingency of $30,000 is appropriate.

[196]   Given the Council’s valuers allowed $30,000 and $35,000 respectively for injurious affection, with our additional allowance we conclude that compensation for Samson’s injurious affection should be $65,000.

[197]   Accordingly, the total compensation payable to Samson is $83,000, reflected in the table below. We  do not consider the principle of liberality requires or justifies a higher award in this case.

Compensation category

Amount

Acquisition value of Samson’s Railway Land

$18,000 ($60 per m2)

Covenant taking / injurious affection: Plus allowance for cost

Sub-total

$35,000

$30,000

$65,000

Total

$83,000

[198]   For these reasons, we allow the appeal and substitute the compensation payable to Samson accordingly (together with costs and disbursements) and dismiss the cross- appeal.

YMCA case – HABU

[199]   The Tribunal found and it is common ground that the HABU of the YMCA site is an apartment development. YMCA says this is an apartment development of upper-mid quality comprising approximately 329 apartments over 11 levels (GFA of 32,462 m2) and 452-455 carparks over six or seven basement levels (a ratio above 1.3:1) whereas Auckland Council says the HABU is reflected in a scheme option that provides 259 apartments over 9/10 levels (GFA of 25,562 m2) and 208-215 carparks over one lower ground and two basement levels (ratio of 0.8:1) or an option that has 328 apartments and 242-246 carparks over three basement levels (ratio of 0.75:1).

[200]   YMCA says its HABU is now severely compromised as a result of the acquisition and the covenant. The absolute prohibition on encroaching into the YMCA Railway Land means it cannot have more than three basement levels and approximately 246 carparks, a ratio of 0.75:1, well below the minimum of 1.2:1 it says the market would demand for a redevelopment of this nature proximate to the motorway network.

[201]   Mr Salmon submitted that the Tribunal correctly determined that the hypothetical purchaser would be seeking maximum flexibility to enable it to construct according to the market demands and the profitability of the enterprise, but failed to fully determine what maximum flexibility actually meant in relation to the property. He submitted that maximum flexibility in terms of the building envelope applies below

ground too. He submitted the Tribunal failed to determine the number of carparks and basement levels available in the “before” scenario. In particular, he submitted the Tribunal failed to determine the critical issue of how many basement levels would, absent the covenant, be desired.

[202]   As a preliminary point, when considering impact on the HABU in the context of injurious affection, we consider it did not assist the Tribunal to have regard to the possibility of subdivision that might mitigate the impact. The evidence did not indicate such a possibility that was consistent with the HABU.

[203]   As indicated, HABU means the use of an asset that maximises the potential, legally permissible and financially feasible. We agree that the hypothetical purchaser of a site for development would be seeking flexibility – above and below ground.  We accept it would likely ascertain the GFA available under the applicable planning constraints but, as Mr Salmon acknowledged, it would not likely carry out a detailed design process. Even if the hypothetical purchaser considered development options in terms of apartment sizes and configurations and thereby identified the maximum number of carparks available under the City Centre Zone, it would not assume the development option with the most carparks and basement levels would be financially feasible let alone the desired option. Choosing a desired option involves balancing quantity and quality of apartments (including floor area, ceiling height and number of bedrooms) and of carparks and common areas, and balancing cost and return, in order to maximise profit.67 Pre-purchase, such a hypothetical purchaser would not be expected to carry out this level of detailed assessment which would be necessary to ascertain how many basement levels are desired. Nor should a claimant before the Tribunal be required to mount a multi-disciplinary case with this level of detailed assessment.

[204]   However, given the prohibition on encroaching into the YMCA Railway Land and the scale and cost of development, we accept that a hypothetical developer purchaser would likely have done a preliminary design prior to purchase in order to assess whether the market value should be discounted as a result of the prohibition.

67     The experts’ GFA ranged between 25,562 m2 and 32,462 m2 for a residential development at the site over 10-12 levels.

This would likely have included planning,  architectural  and  engineering  advice. As Mr Ireland said, a bulk and mass plan would be needed as a basis for a development impact assessment since the Threshold Ground Load Differential will be exceeded. The advisers would likely engage with CRLL. We agree the Tribunal was correct not to assume a particular design, but the real issue is whether the evidence indicated a preliminary design that maximised its potential, was both legally permissible and financially feasible and that was impacted by the prohibition on encroachment.

[205]   We accept that YMCA’s maximum carpark option was legally permissible in that resource consent was possible.68 There was dispute as to the level of market demand for carparks in new residential developments,69 in part reflecting wider debate about the trend from use of private cars to public transport, but we accept there was some evidence to support market demand for a higher ratio of carparks to apartments than the 0.75:1 or 0.8:1 that Auckland Council proposed, maybe up to around 1:1. We doubt, however, that market demand for carparks in this type of development in the CBD would be as high as 1.3:1. There was not market evidence to support such market demand. But we accept that the hypothetical purchaser would be looking for flexibility in terms of the number of carparks and therefore the number of basement levels. We also note there is scope for additional carparks below three basement levels on 60% of the site where the covenant has no application.

[206]   Even so, the evidence did not indicate that a design with 452-455 carparks over six or seven basement levels was financially feasible. Rather, the evidence indicated that excavation to the level proposed in the Buchan scheme would create significant and expensive engineering challenges at a cost of $40.3 million and delaying construction by six months or more. This would likely rule out such a maximum carpark option given the expected selling price of apartments of the size and quality involved. We do not consider the evidence indicated any potential, legally permissible and financially feasible design that was impacted by the prohibition on encroachment.

68     Risk relating to obtaining resource consent is a separate matter.

69     Noting that conversions from commercial to residential may have provision for carparks reflecting the previous use.

[207]   Accordingly, we do not accept that the Tribunal should have proceeded on the basis of a hypothetical development including up to seven levels below ground to accommodate so many carparks. That is not the HABU. However, we accept in terms of a hypothetical purchaser’s desire for maximum flexibility that a preliminary design involving more carparks than Auckland Council proposed was likely both legally permissible and financially feasible. The initial GHD scheme subject to the 2 June 2020 pre-approval had 215 carparks over four basement levels. The revised GHD schemes provided had between 306 and 319 carparks over three basement levels. While Auckland Council’s experts provided a further option with 242 carparks over three levels, the evidence did not indicate that the revised GHD schemes were financially unrealistic.

[208]   Even so, we emphasise (as indicated above) that with the revised GHD schemes there was no real prospect that development work would damage or adversely affect the railway tunnels. Thus, subject to stigma, the impact of the covenant is to be measured in terms of the costs involved in relying on the pre-approval and obtaining consent from the covenantee.

YMCA case – valuation evidence

[209]   As indicated,  the  specified  date  for  assessing  YMCA’s  compensation  is  9 September 2020.

The parties’ valuation evidence

[210]   It is convenient to summarise the parties’ valuation evidence in the following tables:

The parties’ valuation evidence (plus GST if any)
Valuer	Acquisition Value	Injurious Affection	Total Compensation
Mr Taylor (for Auckland Council)	$168,100 70	$690,000 71	$860,000 72
Mr Schellekens (for Auckland Council)	Nil	Nil after betterment	Nil
Mr Dean (for YMCA)	Nil	$12,954,000- $17,272,000	$17,000,000

[211]   The valuers’ compensation figures were calculated by reference to before and after values as follows:

Valuers’ before and after calculations (plus GST if any)
Valuer	Before Value		After Value		Difference
Methodology	Value	Methodology	Value
Mr Taylor (for Auckland Council)	$8,287 psm x 4,318 m2 land $1,292 psm x 27,699 m2 MFAR	$35,800,000	$34,940,000 (rounded down)	$860,000
Mr	$8,333 psm	$36,000,000	$35,120,000	Nil
Schellekens	x 4,318 m2	–
(for	land	betterment
Auckland Council)	$1,150 psm x 31,304 m2 MFAR73	adjustment = $32,500,000

70 Calculated at $100 psm x 1,681 m2.

71 Based on total costs of $575,000 plus a 20% contingency.

72 Rounded up from $858,100. Mr Taylor’s preliminary value assessments in 2017 and 2018 and his assessments in 2019 and 2020 ranged between $216,900 and $297,796 (plus GST if any).

73 The Tribunal said at [125] of its decision  that Mr Schellekens’ valuation showed $psm/MFAR  rates of $1,142/1,031 whereas in his evidence Mr Schellekens, prior to adjustment for betterment, adopted “a value of $36m plus GST (if any) reflecting $1,150 psm/MFAR against a 7.3:1 FAR, or say $8,375 psm”.

Valuers’ before and after calculations (plus GST if any)
Valuer	Before Value		After Value		Difference
Methodology	Value	Methodology	Value
Mr Dean	$10,000 psm	$43,180,000	Discount of
(for	x 4,318 m2	30	$30,226,000	$12,954,000-
YMCA)	land	40% 74	$25,908,000	$17,272,000
$1,439 psm x 30,000 m2	= $17,000,000
MFAR

[212]   In calculating a before value, all valuers used comparable sales evidence of properties within the broader locality using a $psm and MFAR. Mr Schellekens was the only valuer who adjusted directly for the impact of the volcanic view shaft restrictions. Other adjustments were made for location, frontage, zoning, size and contour. Messrs Taylor and Schellekens further adjusted for time between the date of the comparators relative to the specified date whereas Mr Dean submitted that since 2017 the market for development land in the central business district was flat.

Tribunal’s valuation conclusions

[213]   It is also convenient to summarise the Tribunal’s valuation conclusions in table format:

Tribunal’s valuation conclusions (plus GST if any)
Acquisition Value	$800,000
Injurious Affection	$1,200,000
Total Compensation	$2,000,000

[214]   The Tribunal’s compensation figures were also calculated by reference to before and after values as follows:

74     Based on a before value of $43,180,000 (plus GST if any) and an after value of $25,908,000.

Tribunal’s before and after calculations (plus GST if any)
Methodology	Value	Methodology	Value	Difference / Total Compensation
$36,500,000	$34,500,000	$2,000,000

[215]   The Tribunal considered the valuers’ comparator sales, after adjustments, ranged from $7,031 psm to $9,766 psm or $1,167 to $2,234 MFAR, noting the mean was $8,453 psm ($8,481 psm if the highest and lowest were excluded) and the median was $8,653 psm, over 4,320 m2 of land area for the subject site. After considering post-dated sales, the Tribunal adopted a before value of $36,500,000 excluding GST.75

Discussion – before value

[216]   In relation to the before value, Mr Salmon submitted the Tribunal erred in its identification and analysis of the comparable evidence; in particular it failed to have regard to relevant comparable evidence and applied a time adjustment when none was required. He also submitted the Tribunal failed to give adequate reasons for culling the pool of comparable transactions and failed to provide reasons in terms of a breakdown of the individual adjustments it made to the six comparable transactions.

[217]   While the Tribunal’s reasons for departing from Mr Dean’s comparable transactions and for its adjustments were generally expressed, we do not consider it was required to engage with every aspect of Mr Dean’s valuation. It was sufficient to identify the sales it considered comparable and make adjustments to those sales that it considered appropriate. This is common practice among valuers to analyse sales and make adjustments where necessary such as for location, contour, size, and site improvements as examples. We agree that a time adjustment was appropriate, and  we consider that the Tribunal did not err in its other adjustments to the comparable sales evidence.

[218]   We also consider that the before land value adopted by Mr Dean of $10,000 psm was too high. Having regard to the valuers’ range and leaving the betterment

75     This equates to approximately $8,450 psm x 4,320 m2.

issue for separate consideration below, we consider the Tribunal’s land value of

$8,450psm was realistic, indicating a market value of $36,500,000.

[219]   In terms of $psm/MFAR, given the HABU evidence we accept that Mr Dean’s MFAR of 30,000 m2 was realistic. However, a higher MFAR may result in a lower

$psm, and we do not accept that Mr Dean’s $1,439 psm is realistic for a 30,000 m2 development. At most, it might be realistic for a more spacious development such as those modelled at 25,562 m2 and 25,788 m2. A more intensive development is likely to be valued at considerably less than $1,400 psm.

[220]We agree with the Tribunal’s before market value of $36,500,000.

Discussion – after value

[221]   We first address a preliminary issue. YMCA’s claim was for injurious affection, not for the acquisition (as opposed to the covenant). As indicated, imposition of the covenant is also an acquisition for the purposes of the PWA. In any event, as the Tribunal appeared to accept, we consider the acquisition of both the YMCA Railway Land and the covenant should be included in the quantification of YMCA’s claim even though expressed as one for injurious affection.

[222]   In terms of the acquisition value of YMCA’s Railway Land, we agree with  Mr Taylor’s value of $100 psm, resulting in compensation of $168,400  for  the 1,684 m2 of land taken.

[223]   Having already addressed the relevance of Waterview and Samson, and the impact of the covenant in terms of any uncertainty of consent in relation to the HABU, it follows that we do not accept an after value based on Mr Dean’s 30 to 40% reduction in property value. Even if there were a real prospect of consent not being obtained for the HABU, there was no alternative valuation evidence based on a reasonably informed hypothetical purchaser’s assessment of that risk rather than the inability to achieve the maximum carpark Buchan scheme.

[224]   We turn to the remaining issue of the costs involved in relying on the pre-approval and obtaining consent. As Mr Taylor and the Tribunal accepted, these

costs need to be reflected in the valuation. This should include the cost of complying with conditions of consent.

[225]   Mr Taylor, by seeking to place himself in the shoes of a potential purchaser, calculated the costs at $690,000 including a 20% contingency (which at least in part was said to address stigma). This calculation was not challenged in evidence and appeared to be accepted by the Tribunal albeit subsumed into its higher compensation award.

[226]   Mr Salmon submitted that, as a condition of consent, the covenantee would seek indemnities backed by security and public liability insurance of significantly more than $20 million. The evidence before the Tribunal did not indicate it has done or would do so, nor the cost of such insurance. While a prudent developer may factor this into its contingency, there is no evidence upon which we can quantify that.

[227]   Finally, stepping back, we address stigma. Given our conclusions as to the impact of the covenant based on the engineering evidence, we consider that the

$168,400 compensation for the unused subterranean land taken for the tunnel itself (and the 20% costs contingency) sufficiently address any residual stigma concerning the tunnel and the covenant.

[228]   Accordingly, subject to any betterment, the total compensation payable to YMCA is set out in the table below.

Compensation category	Amount
Acquisition value of YMCA’s Railway Land	$168,400 ($100 psm)
Covenant taking / injurious affection:	$690,000
Total	$858,400

[229]For these reasons, we dismiss YMCA’s appeal.

Betterment

[230]   Mr Galbraith submitted that, given Mr Schellekens’ evidence, the Tribunal’s finding that there was no increase in the value of the property due to the prospect of

the CRL as at the specified date defies common sense. He submitted that given the public benefit purpose of the CRL and the direct proximity of the Beresford Square entrance to the Karanga-a-Hape station (and the nearby Te Waihorotiu station near Aotea Square), it would represent a significant public policy failure if the CRL did not provide significant benefit to the property.

[231]   As indicated, s 62(1)(c) provides that where the value of the land taken for any public work has, on or before the specified date, been increased by the work or the prospect of the work, the amount of that increase shall not be taken into account. However, s 62(1)(e) relevantly requires the Tribunal to take into account by way of deduction any increase in the value of any land of the claimant that is injuriously affected, caused before the specified date or likely to be caused after that date by the work or the prospect of the work.

[232]   The application of these provisions reveals a delineation between the taking and injurious affection. Such delineation is not straightforward in this case since the PWA provides that the imposition of a covenant is also a taking and since the valuers did not (and realistically could not) distinguish between the takings and injurious affection in the PWA sense. Strictly, a betterment deduction would only be available insofar as the increase applied to  YMCA’s  land  that  is  not  taken/covenanted.  That might require an apportionment although this issue was not addressed.

[233]   In any event, the issue in dispute is whether the Tribunal was wrong to deny an adjustment for betterment. As indicated, we do not consider that a different standard of proof applies to betterment. Even so, we agree with the Tribunal that no deduction was appropriate in this case, for three main reasons.

[234]   First, we agree with the Tribunal that the PWA contemplates that the acquiring authority will provide a valuation and that represents the value unless otherwise disputed. Mr Taylor prepared the valuation for that purpose, which did not make any adjustment  for  betterment.  Nor  did  Mr Taylor  do  so  when   giving  evidence. For Auckland Council to rely on evidence it subsequently adduced from another valuer to supplant the PWA valuation seems contrary to the scheme and purpose of the PWA.

[235]   Secondly, accepting the public benefit purpose of the CRL and the property’s proximity to CRL stations, the evidence that railway stations increase land value was general in nature, even compared with  the  New  South  Wales  case  relied  on.76  The evidence here was not based on sales evidence, let alone comparable sales evidence in the CBD. As at the specified date of 9 September 2020, the CRL was several years away. Further, while Mr Schellekens reduced his before value by

$3,500,000 on account of betterment, Mr Taylor did not make any betterment adjustment, as indicated. That too undermines the reliability of Mr Schellekens’ adjustment.

[236]   Thirdly, even if some betterment had resulted from the public work or from the prospect of the public work, Auckland Council has not established what proportion of such betterment would apply to YMCA’s land that was not taken/covenanted.

Conclusion

[237]   Even without betterment, we have concluded that the total compensation payable to YMCA should be $858,400. This is less than that awarded by the Tribunal.

[238]   For these reasons, we allow the cross-appeal and substitute the compensation payable to YMCA accordingly.

Costs

[239]   If costs cannot be agreed, the parties are to file memoranda (not exceeding four pages) and costs will be determined on the papers.

Gault J  Mr Warwick Reid

76 AMP Capital Investors Ltd v Transport Infrastructure Development  Corporation  [2007] NSWLEC 397 which concerned the effect of a proximate train station on the patronage of a shopping centre.

Solicitors / Counsel:

Mr A R Galbraith KC, Barrister, Auckland

Mr T B Fitzgerald and Mr D M Scholes (Auckland Council’s instructing solicitor), Bell Gully, Auckland

Mr L McEntegart and Mr A J Steel, Barristers, Auckland

Mr PJK Spring and Mr H G Holmes (Samson Corporation Ltd’s and Tedcastle Estates Ltd’s instructing solicitors), Keegan Alexander, Auckland

Mr D M Salmon KC, Barrister, Auckland Mr S L Cogan, Barrister, Auckland

Mr L G Berryman (YMCA North Incorporated’s instructing solicitor), Heimsath Alexander, Auckland Mr R B Lange, Ms N R Hall and Ms J A Marshall-Mead (Auckland Council’s instructing solicitor), Simpson Grierson, Auckland