Casata Limited v Minister for Land Information
[2022] NZHC 243
•22 February 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-000492
[2022] NZHC 243
UNDER the Land Valuation Proceedings Act 1948 IN THE MATTER OF
a claim for compensation pursuant to the Public Works Act 1981
BETWEEN
CASATA LIMITED
Appellant
AND
MINISTER FOR LAND INFORMATION
Respondent
Hearing: 12–13 October 2021
[Further joint memorandum received 15 February 2022]
Appearances:
J E Hodder QC and L M Lincoln for Appellant M J Bryant and K F Gaskell for Respondent
Judgment:
22 February 2022
JUDGMENT OF EDWARDS J
This judgment was delivered by me on 22 February 2022 at 12.00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Counsel: J E Hodder, Wellington
Solicitors: Bell Gully, Wellington
Crown Law, Wellington
CASATA LTD v MINISTER FOR LAND INFORMATION [2022] NZHC 243 [22 February 2022]
TABLE OF CONTENTS
Relevant facts [5]
No 27 [18]
No 7 [28]
The Tribunal decision [33]
Approach to appeal [43]
Casata’s claim and measure of loss [46]
Did the shadow prevent Casata from either selling or redeveloping its land? [66]
No 7 [66]
No 27 [74]
Did Casata suffer the reinvestment loss claimed? [80]
Does the claim fall within s 60(1)(c) of the PWA? [85]
Does the claim fall within s 66 of the PWA? [109]
Result [124]
[1] The appellant (Casata) says that a shadow cast by the announcement of a public works project impaired its ownership rights in respect of two properties owned in Pito- One Road, Petone (referred to as No 7 and No 27). Both properties were required under the Public Works Act 1981 (PWA) for the Petone-Grenada Link Road between the Hutt Valley and Porirua (the Project).
[2] Casata claims compensation in the sum of approximately $4.2 million for losses it says were sustained in the shadow period. The shadow period commenced with the announcement of the Project on 13 February 2014 and ended with the settlement of the purchases of No 27 and No 7 on 28 February 2017 and 27 March 2017 and respectively. The losses are claimed in addition to the sums of $5,665,000 for No 27 and $990,000 for No 7 paid by the Crown for the market value of the land.
[3] The loss claimed by Casata has been calculated using a hypothetical reinvestment model. The model assumes that Casata was able to sell its properties as at February 2014 and then four months later reinvest the proceeds of sale, together with borrowed monies, into a new property from which it would receive rental income and capital appreciation.
[4] The Land Valuation Tribunal (Tribunal) rejected Casata’s claim on the basis that there was no evidence that that shadow interfered with Casata’s ability to deal with its properties, and no evidence to support the hypothetical investment model used to assess loss. Casata now appeals.
Relevant facts
[5] Casata’s core business is commercial property investment. It has a focus on owning land subject to long term ground leases and makes its money from rental returns and capital gains. Mr Wall is one of Casata’s two directors and was personally engaged in the negotiations regarding the acquisition of No 7 and No 27.
[6] At the time it was incorporated in 1993, Casata purchased No 7 and No 27 from the New Zealand Railways Corporation. The two blocks of land were among a number of land titles purchased by Casata at that time. These blocks of land were
subject to long term ground leases to what is now known as Waka Kotahi NZ Transport Agency (Waka Kotahi).
[7] No 27 was the larger of the two blocks at 12250 m2. That property had been leased to a car yard, but that lease had terminated in October 2013. As at February 2014, it had earthquake prone buildings on site. A Council notice required the buildings to be either strengthened or demolished by 30 December 2018.
[8] No 7 was an empty lot comprising 2157 m2. It was placed on the market in 2011, taken off the market, and then actively marketed for sale from around May 2013. It was still on the market when the Project was announced in February 2014.
[9] Mr Wall was told about the Project at a meeting on 11 February 2014 with representatives from Waka Kotahi. He was provided with a letter and draft public information pack. The letter stated that Waka Kotahi was investigating a transportation link between Hutt Valley and Porirua, and that Casata’s properties had been identified as being potentially directly affected by the options for the proposed route. Waka Kotahi indicated in that letter that it was in the early stage of developing a preferred option and that it hoped to have firmed up its land requirements by mid- 2015.
[10] At the February 2014 meeting, Mr Wall told Waka Kotahi’s representatives that the buildings on No 27 were earthquake prone, untenantable, and that Casata had plans to construct a new commercial building on site which could be worth $22 million. In his evidence before the Tribunal, Mr Wall said that he relayed to Waka Kotahi that Casata would be claiming compensation from the Project announcement date for its jeopardised redevelopment plans and that Casata would be happy to sell or lease the land to Waka Kotahi.
[11] The Project was publicly announced two days later, on 13 February 2014 and consultation on the proposal was sought. Casata refers to this date as the “causation date”, being the commencement of the alleged shadow period.
[12] Waka Kotahi’s proposal was to create an interchange which would link the Hutt Valley and Porirua. Four options were put forward. At that time, it appeared that all of No 27 would be required, with only a small part of No 7 to be taken. However, the proposal was to close off an access road to No 7 which would compromise the utility of that land. As it ultimately transpired all of No 7 was required for the Project.
[13] Mr Wall was frustrated by what he was being told. In his evidence before the Tribunal he said he had been through 13 years of difficult dealings with Waka Kotahi over other properties in the area, and he considered the Project should have been included in previous public works so as to minimise disruption to landowners.
[14] On 1 August 2014, Casata was sent a Project update by Waka Kotahi advising that it had received more than 1,400 submissions in response to the request for feedback and that the preferred option for the route was expected to be confirmed at the end of 2014 with a resource consent application lodged at the end of 2015.
[15] Casata sought an update on progress from Waka Kotahi on 10 December 2014. Waka Kotahi responded noting that nothing had particularly changed in terms of the impact on No 7 and No 27. At that stage it was anticipated that Waka Kotahi would commence the consenting process in late 2015. Achieving the necessary consents could then take a year from when the application was lodged, but once they were in place, Waka Kotahi would be able to start having conversations with landowners regarding potential acquisition.
[16] Mr Wall met with a representative from Waka Kotahi on 17 February 2015. Mr Wall said in evidence that he offered Waka Kotahi the choice of either buying No 27 at that time for $6 million or Casata proceeding with its development in which case Waka Kotahi would be purchasing the land and new buildings for $20 million. According to Mr Wall, the response was that Waka Kotahi would wait until its processes were finished and would pay $20 million for the land and new buildings if it had to.
[17] Mr Wall emailed Waka Kotahi on 3 September 2015 referring to the February discussion and asking whether Waka Kotahi still intended to wait until its processes were finished. He advised Waka Kotahi that demolition consent for the buildings on No 27 had been recently obtained. Another meeting was held on site on 8 September 2015 where discussions followed the same line.
No 27
[18] Waka Kotahi representatives interpreted Mr Wall’s email of 3 September 2015 as a request that Waka Kotahi purchase his property at that stage. Waka Kotahi initiated an advance acquisition process and appointed Mr Hoffmann of The Property Group Ltd to negotiate the acquisition of No 27 on its behalf. At this stage the Project still remained in the investigation phase and a designation or notice of requirement had not been issued.
[19] On 20 October 2015 there was a meeting between Mr Wall and Mr Hoffmann. Mr Wall advised Mr Hoffmann that he had redevelopment plans for No 27. Mr Hoffmann stated that given the parties were now in negotiations for an advance purchase, Waka Kotahi expected the acquisition would be of a vacant site at current market value and the parties would negotiate on a good faith basis. Mr Hoffmann suggested that each party should obtain an independent market valuation following which the parties would exchange reports.
[20] Casata commenced demolition of the buildings at No 27 in October 2015 with practical completion achieved in early November 2015. Demolition costs exceeded
$200,000. Resource consent for the redevelopment of No 27 was lodged on 24 November 2015 and the consent was granted on 1 February 2016.
[21] In November 2015, Waka Kotahi announced its preferred route for the Petone- Granada Link Road. There was further correspondence between Mr Wall and Mr Hoffmann in November 2015. Mr Hoffmann reiterated the steps to be taken in agreeing compensation including obtaining a formal valuation of the land. Mr Wall wrote in turn noting that the redevelopment of No 27 was at an advanced stage. Mr Hoffmann sought details of Casata’s redevelopment plans which he suggested could be provided to the respective valuers.
[22] Waka Kotahi received an independent market valuation for No 27 from Mr Veale of TelferYoung (Wellington) Ltd on 14 December 2015. On the same day, Mr Hoffmann emailed Mr Wall recommending that Casata seek valuation advice and requesting that Casata confirm it had discontinued incurring costs in its redevelopment of No 27.
[23] Mr Wall responded on 22 December 2015 stating that Casata was in the business of creating long term rental streams and confirming that it was continuing with the redevelopment as planned. Mr Wall said that as far as he was aware there was no legal impediment preventing Casata from constructing the building, but if there was, then he should be advised immediately.
[24]Mr Hoffmann emailed Mr Wall on 19 January 2016 stating:
(a)That the parties were negotiating towards an advance compensation agreement and Waka Kotahi was genuinely concerned about reducing the uncertainty that the prospect of work created for Casata.
(b)It did not appear reasonable for Casata to continue with its plans for a development on the land and querying whether Casata was genuine in its offer to sell to the Crown.
(c)A recommendation to Waka Kotahi that a s 18 notice be issued had been made given Casata’s clear intention to carry out the works on the land with the purpose of making the acquisition more costly. (Section 18(1) of the PWA provides for a notice of the Minister’s desire to acquire the land to be served, with an invitation to the owner to sell the land and provision for good faith negotiation. The effect of s 71 and s 18 combined is that if the Tribunal considers a claimant has done anything on the land after service of the s 18 notice with the purpose or effect of rendering the execution of the public work more difficult or costly, then the Tribunal may make a deduction from the amount of compensation to be awarded).
(d)Confirmation that Casata would discontinue development works was requested by 29 January 2016, failing which it would be necessary to issue a s 18 notice.
[25] On 25 February 2016, Mr Wall advised that Casata had suspended redevelopment of No 27. A “redevelopment information package” was provided, including a statement that the former buildings had been demolished, resource consent for the new building had been issued and drilling to test for foundation design had been completed. Mr Wall also said that there was a tenant for the property (although the tenant’s identity was not disclosed on grounds of commercial sensitivity) and the project was 100 per cent cash funded. This information was provided to Mr Veale who advised that his valuation remained unchanged.
[26] Casata’s valuation of No 27, prepared by Mr Horsley of Colliers, was forwarded to Waka Kotahi in August 2016 with another updated valuation from another valuer forwarded in November 2016. Mr Veale provided an updated valuation for No 27 on 8 December 2016.
[27] The agreement for an advance purchase of No 27 was signed on 16 February 2017. The agreement was for $5,350,000 plus GST (if any). The settlement date was 28 February 2017 with the property transferring to the Crown on that date. During expert witness conferencing on 8 August 2019, the valuers agreed the market valuation for No 27 as at February 2017 was $5,665,000, and an additional $315,000 was paid in February 2021.
No 7
[28] In March 2016, Mr Wall emailed Mr Hoffmann advising that they had two parties who were interested in purchasing No 7, however, given Waka Kotahi’s intention to buy the land, Casata could not in good faith deal with those parties. The offers indicated a market value for the land of $950,000 to $985,000.
[29] Negotiations for an advance purchase of No 7 commenced two months later with valuations being exchanged in May 2016. The valuations were only $5,000 apart and agreement in principle to the sum of $990,000 (being the figure nominated in the valuation prepared by Casata’s appointed valuer) was reached on 13 May 2016.
[30] On 30 May 2016, Casata executed a lease of No 7 with Safe Scaffolding Ltd. On 23 June 2016, Casata advised The Property Group that it had received an offer for No 7 for $990,000 plus GST. On 11 July 2016, Casata sought assurances from The Property Group that if it sold the land to the interested party, a s 18 notice would not be issued, therefore allowing the interested party to redevelop the land. The Property Group replied declining to provide the assurances sought.
[31] During the following months, investigations into potential contamination of the land at No 7 were carried out. Some contamination was found on site, but this did not affect the valuations provided by either party. An advance compensation agreement for No 7 was signed on 17 March 2017, with settlement taking place on 27 March 2017. The agreement provided for compensation in the sum of $990,000 plus GST (if any) and was subject to an existing lease.
[32] Both advance compensation agreements were without prejudice to Casata’s rights to claim compensation for additional losses it said it had suffered. Ongoing correspondence did not resolve the issues and on 8 August 2018 Casata served a notice of claim for compensation on the Crown. Legal proceedings were filed on 28 September 2018.
The Tribunal decision
[33] The Tribunal comprised of Judge B Dwyer and two valuers, Mr Gordon and Mr Stevenson.
[34] After referring to Mr Wall’s evidence and that of the two valuers, the Tribunal summarised Casata’s claim as follows:1
[35] Put simply, the bulk of Casata's compensation claim is based on the proposition that had Casata received settlement monies for sale of Nos 7 and 27 within four months (being an agreed negotiation/settlement period) of notice of NZTA's potential interest in the properties in February 2014, it would have reinvested those funds together with borrowed monies equivalent to 35 percent of the sale proceeds (a total of $7,503,769) in an investment from which it would have received income and capital appreciation.
[35] The Tribunal considered that the issues to be determined substantially depended upon the resolution of two factual issues:2
(a)Whether the shadow actually interfered with Casata’s dealing with the properties in the manner claimed; and
(b)Assuming that Casata’s rights were interfered with as contended, whether Casata actually suffered the alternative investment loss calculated by Casata’s expert, Mr Cameron.
[36] Before addressing those two issues, the Tribunal observed that Waka Kotahi was not in a position to complete the acquisition of the properties at the time the Project was announced in February 2014. The Tribunal acknowledged Mr Wall’s frustration at the delay. However, it noted that Waka Kotahi could not commit to the purchase of either property until investigations into a substantial engineering project involving various development options and the consideration of 1,400 submissions were completed.3
[37] The Tribunal started with No 7 in considering the first question posed. It found that there was insufficient evidence to satisfy the Tribunal members that the shadow cast over that block of land actually interfered with the sale of the property which Casata had continued to pursue after February 2014.
1 Casata Ltd v Minister for Land Information [2020] NZLVT 18.
2 At [45].
3 At [46].
[38] The position in relation to No 27 was more complicated. Nevertheless, the Tribunal found that nowhere in the evidence was there any suggestion that Casata was contemplating a sale of No 27 and reinvestment elsewhere. Nor was there evidence that it had attempted to investigate that potential course of action prior to obtaining resource consent to construct a distribution centre on that property.
[39]The Tribunal’s views on the first question were summarised as follows:
[57] In summary, our view of the effects of the shadow on Numbers 7 and 27 is that:
·We are not satisfied that there was any potential sale of No 7 to a third party (other than the Crown) which was precluded, prejudiced or upset by notice of the project prior to the two potential sales notified by Mr Wall to NZTA on 5 March 2016 at which time NZTA had signalled the intention to acquire the land;
·Insofar as No 27 is concerned, the evidence before the Tribunal was that the effect of the public notification was delay in the advance of Casata’s intentions for demolition of the derelict buildings on the land, construction of a distribution centre and the lease of that distribution centre to a tenant with whom agreement had been reached but whose identity Casata could not reveal. If Casata had pursued that proposal undelayed by the announcement, it appears that the earliest at which the new distribution centre might be available for occupation (using a comparable timeline to that actually undertaken by Casata commencing in March 2015 when it applied for its demolition consent) would have been about October/November 2015 as calculated by Mr Wall. There was no potential sale/reinvestment lost in the intervening period because Casata had never sought to do that.
[40] As to the second question, the Tribunal was not satisfied as a matter of fact that Casata would have taken the equity from a sale of both properties and reinvested it in the property market.
[41] The Tribunal noted that the loss scenario advanced by Casata “was hypothetical in every sense of that word”.4 There was no evidence that Casata had turned its mind to the possibility of an alternative investment as hypothesised by Casata’s expert in his loss calculations.5 Nor was there any evidence that an alternative investment property bearing the features identified by Casata’s expert in his calculations was in fact available for purchase by Casata between mid-June 2014 and
4 At [59].
5 At [60].
the date of confirmation of Waka Kotahi’s intention to acquire.6 Accordingly, the Tribunal was not satisfied that Casata had actually suffered the alternative investment loss which formed the basis of its claim.7
[42] The Tribunal’s conclusions on the appropriate basis for assessing loss, including the issue of mitigation, were recorded as follows:
[64] We determine that the appropriate basis for assessing loss is determining the actual loss suffered by Casata in this case. In that regard we are not satisfied that Casata actually lost:
·The opportunity to sell No 7 and invest the proceeds of sale in an alternative investment until the two sales under negotiation at the time NZTA confirmed its intention to purchase No 7;
·The opportunity to sell No 27 and invest the proceeds of sale in an alternative investment. No 27 was never on the market for sale other than to NZTA at a price ($6,000,000) not supported by valuation;
·The opportunity to purchase an alternative investment property bearing the features identified in Mr Cameron's calculations of loss.
[65] We determine that Casata was required to mitigate its losses, as is any claimant. We are not satisfied that it ever turned its mind to the question of whether it should have done that by borrowing against Nos 7 and 27 or alternatively by resort to its own cash resources as there is no evidence that it ever considered or pursued the purchase and financing of an alternative investment. On a very simple, practical level we were not given any adequate explanation for the delay on the part of Casata in providing its valuation of No 27 to the Crown (November 2015-August 2016), a step which it would have been well aware was necessary to push negotiations along. In December 2015 Casata's position was that an advance agreement was not acceptable. We are not satisfied that Casata took reasonable steps which might have mitigated the loss which it now claims.
[66] For all of the foregoing reasons we are not satisfied that the hypothetical losses Casata might have suffered meet the tests of causation, remoteness and reasonableness.
Approach to appeal
[43] The appeal is by way of rehearing.8 The Court must reach its own conclusions as to the merits of Casata’s claim. However, Casata bears the onus of satisfying this Court that it should make a different decision from that of the Tribunal.9
6 At [61].
7 At [62].
8 Land Valuation Proceedings Act 1948, s 26.
9 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].
[44] The parties approached the appeal by considering three issues in the following order:
(a)The legal basis for Casata’s claim (that is, whether it was available as a matter of law under s 60(1)(c) or s 66 of the PWA);
(b)The appropriate basis for assessing Casata’s loss, including the question of mitigation;
(c)Whether the claim met the requirements of causation, remoteness and reasonableness.
[45] However, I consider the starting point is the Tribunal’s decision and whether it was wrong to dismiss the claim on the basis that Casata had not proved its loss, and the hypothetical loss did not meet the tests of causation, remoteness and reasonableness. To understand the Tribunal’s findings, however, it is necessary to consider Casata’s claim in more detail including the model used to assess loss. I have therefore approached the issues in the appeal in the following order:
(a)An analysis of Casata’s claim;
(b)Whether the Tribunal erred in dismissing the claim;
(c)The legal basis for the claim.
Casata’s claim and measure of loss
[46] Casata seeks compensation under s 60 or s 66 of the PWA. It claims $4.16 million (plus costs and GST if any) in addition to the payments for the market value of the land and other costs.10
10 The costs of demolition and obtaining resource consent were already accounted for in the market value of the land. Payment of legal and valuation fees has also been approved.
[47] The essence of Casata’s claim is that but for the Project, Casata would have converted its non-revenue generating assets at No 7 and No 27 into assets providing an income stream. The shadow cast by the Project prevented this.
[48] The precise articulation of Casata’s loss assumes some importance in this case and deserves closer analysis. A key plank of Casata’s appeal is that the Tribunal misunderstood the basis of Casata’s claim and conflated the effect of the shadow with the approach to assessing loss. In particular, Casata says that the Tribunal erred in requiring it to prove the existence of the shadow. Mr Hodder QC submits that the existence of the shadow “is not a fact-specific phenomenon”. Rather, it is “a general consequence of the potential market forces related to the land being impacted by the prospect of lawful state action culminating in compulsory acquisition”.
[49] The existence of a shadow period has been recognised in several cases. In Director of Buildings and Lands v Shun Fung Ironworks Ltd, the Privy Council allowed a claim for business losses incurred in the shadow period.11 This case has been followed in others where claims for lost rentals sustained as a result of the shadow have been entertained.12 In Gold Star Insurance, the Tribunal accepted that on the basis of Shun Fung, a claim for compensation was available for losses sustained in the shadow period, but the claim was ultimately declined.13
[50] At the conceptual level at least, the impact of the shadow can be readily understood. Until there is a legal commitment by the Minister to acquire land, landowners under the shadow of public works face significant uncertainty. Their ability to confidently plan their affairs is undermined because they are forced to deal with their land with one eye on the possibility that the land will be taken or affected in the future. The reality of public works means that landowners like Mr Wall are often placed in this position for a long period of time.
11 Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 (PC) at 139.
12 See Hamilton and Hamilton v Minister of Lands [2012] NZLVT 2; and Pattle & Pattle v Secretary of State for Transport [2009] UKUT 14.
13 Gold Star Insurance Co Ltd v Minister for Land Information [2013] NZLVT 1 at [33].
[51] Casata says that once the existence of the shadow is accepted, it is then a question of how to measure the loss that then flows. Casata has used an objective hypothetical alternative reinvestment model as a proxy for its loss.
[52] However, I do not think it is sufficient to simply rely on the existence of a shadow in making a claim for compensation. The PWA provisions are designed to compensate for actual loss. As the Privy Council in Shun Fung affirmed, claims for loss in the shadow period must still meet the three conditions for compensation, that is, they must be causally linked, not too remote and reasonable in the circumstances.14 That means the shape, extent, shade and depth of the shadow must be particularised and then proved in any one case. So too the particular loss that is said to flow. The nature and impact of the shadow on Casata, and the loss that then flows, necessarily involves a factual enquiry.
[53] In this case, Casata framed its claim on the basis that the shadow had prevented it from extracting revenue from its land by either redeveloping No 27 or selling both parcels of land. Mr Wall put it this way in his brief of evidence:
[31] The detriment to Casata’s business was immediate. We could not realistically proceed as usual under the conditions of high uncertainty that had been created by NZTA. Casata effectively lost its property rights overnight.
[32] In particular, it was obvious that our intended development at 27 Pito- One Road would become redundant if the land was acquired by the Crown. The plans were essentially, from the date of that first meeting, put on hold pending certainty from NZTA.
[33] The announcement also limited Casata’s ability to sell the Properties and reinvest the funds elsewhere. Given my past experience with the PWA process, I was aware that the Crown could prevent any redevelopment by threatening to and/or issuing a Notice of Desire under s 18 of the PWA. Very few (if any) purchasers want to buy land for development where the Crown could prevent redevelopment by issuing a section 18 notice and where a final decision as to whether the land was in fact required was unknown.
[34] In other words, our ability to develop or sell the land and reinvest in alternatives had been compromised. If that had not occurred, we were in a position to have immediately started development works. …
[54] The loss that was said to flow from the failure to sell or redevelop the land was a lost opportunity to profit from the land by reinvesting the equity released from selling
14 Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 (PC) at 137–138.
the land in another investment. That lost opportunity forms the basis of Casata’s alternative reinvestment model used to assess loss. The model is premised on Casata selling both parcels of land at the date the Project is announced. After allowing a four- month period for the negotiation and acquisition of another property, the proceeds of sale are then reinvested, together with borrowed monies equivalent to 35 per cent of the sale proceeds, in an investment from which Casata would have received rental income and capital appreciation.
[55] The claim therefore includes rental income foregone on the hypothetical reinvestment properties during the shadow period and the loss of capital appreciation on the hypothetical reinvestment properties during that same period. Casata also claims reimbursement of redevelopment costs incurred on its uncompleted development of No 27 (excluding the costs of demolition and obtaining resource consent, which were accounted for in the market value of the land), and reimbursement of Council rates on both properties. Interest on these amounts is claimed in addition.
[56]The claims are summarised in the following table:
7 Pito-One Road Rental income foregone from reinvestment $296,683 Interest on reinvestment loan -$68,052 Holding Income from Safe Scaffolding lease -$19,677 Interest on net cashflow to 27 March 2017 $9,300 Total Business Compensation $218,254 Add: Additional capital increase foregone through reinvestment $348,604 Add: Unrecovered operating expenses paid $18,940 Add: Market land value at February 2016 $990,000 Compensation Claim $1,575,798 Less: Advanced Compensation Paid -$990,000 Balance of Compensation Claim due $585,798 Plus: Interest from 27 March 2017 to 21 September 2021 $76,856.80 Total of Claim due for No 7 $662,654
27 Pito-One Road Rental income foregone from reinvestment $1,594,412 Interest on reinvestment loan -$352,206 Interest on net cashflow to 28 February 2017 $79,445 Total Business Compensation $1,321,651 Add: Additional capital increase foregone through reinvestment $1,403,323 Add: Unrecovered operating expenses paid $96,795 Add: Abortive redevelopment costs $263,333 Add: Market land value at February 2017 $5,665,000 Compensation Claim $8,750,102 Less: Advanced Compensation Paid -$5,665,000 Balance of Compensation Claim due $3,085,102 Plus: Interest from 28 February 2017 to 21
September 2021
$413,482.56 Total of Claim due for No 27 $3,498,584
[57] There are several points to be made about Casata’s asserted loss and the model used to asses it.
[58] First, and at the risk of repeating a point made earlier, I consider Casata was required to particularise its claim, prove that the shadow caused it loss which was not too remote and reasonable in the circumstances, and then quantify its claim. Effectively what Casata was saying in this case was that the announcement of the Project in February 2014 meant that it could not release equity by either redeveloping or selling the land at that date. The loss that was said to flow from that alleged harm was the lost opportunity to invest the proceeds of sale in another investment from which rental returns and capital appreciation would have accrued.
[59] The articulation of the claim in that way raises questions about the appropriateness of Casata’s model to assess the loss from an inability to redevelop No 27. Mr Hodder submits that using a model premised on a sale in February 2014 to approximate loss from an inability to redevelop No 27 is justified because calculating loss for a thwarted redevelopment involves more variables and contingencies which
are difficult to quantify. The reinvestment approach is said to give rise to a much simpler and more reliable valuation exercise.
[60] The proposition that the reinvestment approach involves less variables and is simpler to calculate was accepted by Mr Apps, the Crown appointed expert at trial. I have no reason to disagree. But ease of calculation cannot lead to the adoption of a model that is removed from the harm or damage alleged. Casata’s model is premised on Casata being unable to sell No 27 in February 2014. That loss is different in kind to a loss sustained as a result of an inability to redevelop No 27 as originally planned. One counterfactual does not act as a proxy for the other and ease of calculation does not make it so.
[61] That leads to another issue with Casata’s model. As Mr Hodder submits, the use of a counterfactual to assess loss is not unusual and it necessarily involves a hypothetical component. But the relevant counterfactual for the assessment of loss in this case is what would have happened but for the effect of the shadow. While that assessment involves hypothetical elements, it must nevertheless be grounded in fact. In the absence of a factual or evidential foundation, the assessment becomes entirely speculative. It becomes an assessment of what could have happened, rather than what would have happened in any one case.
[62] This point is exemplified by an alternative scenario suggested by Mr Apps. Rather than assuming a leveraged investment, Mr Apps re-performed Casata’s calculations on the assumption that Casata borrowed against both properties over the affected period, and then used that release in capital to invest in another property. On Mr Apps’ calculation, that change would have resulted in a significant reduction in the overall compensation claimed. Calculations of loss, even on a hypothetical counterfactual, must still be bounded by the realities of what would have happened but for the threat of acquisition.
[63] I do not consider objective and observable market inputs are a good substitute for those realities. To that extent I do not accept Mr Cameron’s expert evidence that the appropriate measure of loss must use such inputs to quantify the opportunity forgone as a result of the shadow. The counterfactual used to assess loss must be based
on what Casata would have done with the land had the announcement of the Project not been made. In that respect, the correct measure of loss includes elements that are subjective in nature and particular to Casata’s factual circumstances.
[64] Another point flows from this analysis. Casata had to prove its loss. Casata had to prove that its ownership rights had in fact been impaired in the way alleged, and that the loss flowing from that impairment was not only caused by the shadow but was a loss that was not too remote and was reasonable. Accordingly, Casata had to produce some evidence from which it could be inferred that, but for the shadow, it would not have suffered the loss alleged. That is, it would have sold the properties in 2014 and reinvested the proceeds together with borrowed monies in an investment from which it would have received rental income and capital appreciation.
[65] It follows from the above points that I do not consider the Tribunal erred in its approach to Casata’s claim. It was for Casata to articulate the loss that was said to have been suffered as a result of the shadow, and then prove that loss. The Tribunal concluded that there was no evidence that the shadow prevented Casata from either selling or redeveloping its land, and no evidence that it would have reinvested the proceeds of sale. Whether it was right to do so is considered next.
Did the shadow prevent Casata from either selling or redeveloping its land?
No 7
[66] Casata’s claim in relation to No 7 was that the shadow prevented it from selling its land in February 2014. At the time the Project was announced in February 2014 it appeared that only part of No 7 would be required, although access was likely to be restricted. As the options for the proposed route narrowed, it became obvious that the entire block of land would be required.
[67] The Tribunal accepted there was genuine and active interest in the purchase of No 7 in early 2016 which was prejudiced by the shadow of acquisition.15 This was reflected in correspondence around this time from Casata’s marketing agents in which
15 Casata Ltd v Minister for Land Information [2020] NZLVT 18 at [48].
they said it was proving difficult to convert initial inquiries into offers due to the impact of the Project. However, the Tribunal found a lack of evidence as to the extent of inquiry for the purchase of No 7 prior to this date, and the lack of any evidence as to the loss of any realistic opportunity for sale due to either restricted access or potential acquisition during this period. The Tribunal concluded:
[52] In short, there is insufficient evidence to satisfy us (on the balance of probability or to any lesser standard) that the shadow cast over No 7 by the announced investigation of the project actually interfered with the sale of that property which Casata continued to pursue after February 2014 (as it had done unsuccessfully for nearly three years prior to that) up until NZTA confirmed that it wished to purchase No 7.
[68] Casata does not suggest that the Tribunal’s findings were wrong in fact, or that the evidence has been misstated. The conclusions are consistent with the evidence adduced at trial as I explain further below.
[69] There was evidence before the Tribunal of sales of other parcels of land owned by Casata in the vicinity of No 7 and No 27 which were not affected by the Project. Those properties included those at 3 Pito-One Road and 2–12 Western Hutt Road. To the extent this evidence is relied on to show that the shadow thwarted a sale of No 7, then I do not consider it assists. The fact that some properties sell, and others do not, may be due to a variety of factors such as the nature or quality of the property and the price at which it is offered. Therefore, it cannot be safely assumed that a failure to sell No 7 is attributable to the shadow, and not some other factor particular to the land.
[70] In fact, the evidence showed that No 7 had not sold prior to the Project being announced. The property was first offered for sale in 2011. It was then taken off the market but was again offered for sale in 2013. As at the date of the announcement in February 2014, it remained on the market. Evidence called on behalf of Casata suggested that the market had been quite flat up until 2013 due to the downstream effects of the global financial crisis however, it was starting to pick up towards the end of the year. That evidence was not sufficient to show that No 7 failed to sell as a result of the shadow either. It was not enough to show a causal link between the shadow and the inability to sell. Something more was required.
[71]There was evidence of offers to purchase No 7 made in March 2016 (for
$950,000 and $985,000) and June 2016 (for $990,000). I accept Mr Wall’s evidence (as did the Tribunal) that these offers did not proceed because of uncertainties due to the Project and what could be done with the land. However, Casata’s claim was premised on it being unable to sell the land in 2014 following the announcement of the Project and the commencement of the shadow period. Casata’s entire loss assessment pivoted on a hypothetical sale at that date. Evidence of offers made two years after this time is not evidence that Casata was unable to sell its land in February 2014 due to the same uncertainty.
[72] In any event the compensation paid ($990,000) was at or above the 2016 offers received for the land. This is not a case where the market moved against Casata in the shadow period. Casata received full market value for the land which matched or exceeded the offers it had received.
[73] I consider the Tribunal was correct to find there was insufficient evidence to show that the shadow had caused Casata to suffer the alleged loss in relation to No 7.
No 27
[74] Casata’s claim in relation to No 27 was that the shadow prevented it from selling the land as at February 2014 or redeveloping it as originally intended.
[75] The Tribunal found that there was no evidence that Casata was contemplating a sale of No 27 and reinvestment elsewhere. Nor was there any evidence that Casata had attempted to investigate that potential course of action. The Tribunal found that the land at No 27 was not on the market in February 2014, and nor was it put on the market after the Project announcement.16
[76] The Tribunal also found that the effect of public notification was a delay in the advance of Casata’s redevelopment plans, with the earliest a new building might have been put on site being October or November 2015. The Tribunal found there was no
16 Casata Ltd v Minister for Land Information [2020] NZLVT 18 at [53] and [56].
potential sale/reinvestment lost in the intervening period because Casata had never sought to do that.17
[77] Those factual findings are not challenged on appeal. They correlate with my view of the evidence. The only evidence of any intention to sell No 27 was Mr Wall’s statements to Waka Kotahi that they could either purchase the land for $6 million or he would proceed with the redevelopment and they could purchase it later down the track for $20 million. That is not evidence that Casata was attempting to sell No 27 prior to the announcement of the Project. Rather, it is evidence of Mr Wall’s reaction in response to the announcement. It falls short of showing that but for the shadow, Casata would have sold No 27 as at February 2014.
[78] Casata claimed that the shadow had prevented it from pursuing its redevelopment. As discussed, the Tribunal found that the impact was delay. Again, there is no basis to disturb those factual findings. A delay to the start of demolition of the buildings (which occurred after negotiations had commenced for an advance purchase agreement) is different to being prevented from undertaking a redevelopment at all. Casata’s loss model was not calibrated to ascertain the loss (if any) arising from a delay in pursuit of the redevelopment of No 27. Further, and as already observed, I consider the model to be a poor proxy for alleged loss arising out of a prohibition on redevelopment of the No 27 site more generally.
[79] In sum, I agree with the Tribunal that the evidence fell short of showing that the shadow prevented Casata from selling the land or from redeveloping it. At most, the shadow resulted in a delay to Casata’s redevelopment plans. But there was no evidence before the Tribunal regarding the loss (if any) which flowed from that delay.
Did Casata suffer the reinvestment loss claimed?
[80] On the assumption that Casata’s rights had been interfered with, the Tribunal went on to consider whether Casata had actually suffered the alternative investment loss claimed.
17 At [57].
[81] The Tribunal found that it was not satisfied as a matter of fact that Casata would have taken the equity and reinvested it in the property market. There was no evidence that Casata had turned its mind to the possibility of an alternative investment. Nor was there any evidence of an alternative investment property (with the features identified by Casata’s expert) being available for purchase four months after the announcement date. It concluded that the loss scenario advanced by Casata was “hypothetical in every sense of that word”.18
[82] Casata challenged these findings on the basis that the Tribunal had misunderstood Casata’s claim for loss and the basis upon which it was assessed. But it did not challenge the findings of fact. As explained in the previous section, I reject the challenge to the Tribunal’s approach. Accordingly, there was insufficient evidence to substantiate Casata’s counterfactual as a realistic assessment of what would have happened but for the shadow impairing its rights. The Tribunal was correct to reject Casata’s claim on this basis.
[83] The Tribunal went on to consider the questions of mitigation and reasonableness. It concluded that there was no evidence that Casata had taken steps to mitigate its loss and no evidence to explain, for example, the delay in submitting a valuation for No 27 during the negotiations for an advance compensation agreement.19 I do not consider it necessary to separately consider these questions. Mitigation and reasonableness both presuppose the establishment of loss. So too questions of quantification. Casata has been unable to meet that first threshold of proving its loss and so these other questions do not arise.
[84] These findings are sufficient to dispose of the appeal, which must be dismissed. However, the bulk of the parties’ submissions were directed towards the legal basis of Casata’s claim. It is appropriate that I say something about the competing contentions on that basis, and in the event this case goes further. In doing so, however, I acknowledge the difficulties and dangers in assessing the legal basis for a claim that cannot be proved on the evidence. My observations on the following questions should be understood on that basis.
18 At [59].
19 At [65].
Does the claim fall within s 60(1)(c) of the PWA?
[85] Casata’s claim is advanced under s 60(1)(c) of the PWA. Section 60 sets out the basic entitlement to compensation. Section 60(1) relevantly provides:
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.
[86]“Land” is defined in the PWA to include any estate or interest in land.20
[87] The entitlement under s 60 is to “full compensation”. The Court of Appeal explained what is meant by “full compensation” and the principle of equivalence in Ace Developments Ltd v Attorney-General:21
… it is well established that the principle underlying the compensation provisions of the Public Works Act is full compensation. The purpose of the provisions is to ensure the person to be compensated is given a full money equivalent of their loss. The word “full” has the added purpose of emphasising that a claimant is entitled to receive the complete equivalent of that which has been taken away from them. The claimant has the right to be put, so far as money can do it, in the same position as if their land had not been taken.
20 Section 2.
21 Ace Developments Ltd v Attorney-General [2017] NZCA 409, [2017] 3 NZLR 728 at [65] footnotes omitted.
[88] It has been suggested that a claimant’s entitlement to full compensation means that any doubts about the value of that compensation should be resolved in favour of a more liberal estimate than in other cases.22 Mr Hodder placed emphasis on this principle when interpreting the provisions of the PWA.
[89] The assessment of compensation is governed by s 62 of the PWA. The primary rule is that compensation is to be measured by reference to the value of the land taken on the “specified date”. The “specified date” is relevantly defined to mean the date in respect of which the land has been taken or vested in the Crown.23
[90] The value of land is to be determined by the amount which the land might be expected to realise if sold on the open market by a willing seller to a willing buyer on the specified date.24 That is subject to exceptions, including where 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 s 62 or any other provision of the PWA.25
[91] Section 62(1)(c) provides that where the value of the land has been increased or reduced by the work or the prospect of work on or before the specified date, then the amount of the increase or reduction should not be taken into account. Other subsections also provide for what should be included and excluded by way of deduction from the total amount of compensation otherwise to be awarded.
[92] The respondent says that Casata’s claim does not fall within s 60(1)(c) because the Project announcement did not amount to an exercise of a relevant statutory power that caused physical damage to or interference with the properties. Further, the respondent says that Casata is unable to establish a good cause of action at common law.
22 Peter Salmon The Compulsory Acquisition of Land in New Zealand (Butterworths, Wellington, 1982) at [14.1]. See also Tawharanui Farm Ltd v Auckland Regional Authority [1976] 2 NZLR 230 (SC); and Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 373–374.
23 Section 62(2).
24 Section 62(1)(b).
25 Section 62(1)(b)(i).
[93] The respondent’s position is supported by a settled line of authority. In Superior Lands Ltd v Wellington City Corp, the Court of Appeal confirmed that compensation for damage caused by the exercise of a statutory power was confined to damage resulting from an act of physical interference to the land.26
[94] Similarly, in Strongman Electric Supply Co Ltd v Thames Valley Electric Power Board, the Court of Appeal held that the damage must be of the sort actionable but for the exercise of statutory powers.27 The stated purpose of that rule is to prevent the owner of land being in a better position than they would have been had they suffered the same damage by a similar act done otherwise than pursuant to a statutory power.28
[95] The respondent’s position receives support from the decision of McGechan J in Colin Geddes Ltd v Wellington Regional Council.29 That case has some similarities to the present in that it related to a claim for compensation from the date of notification that the plaintiff’s land was required to the date that the land was compulsorily acquired three years later. The claimed loss was a diminution in the value of the land due to a falling market. As to the plain meaning of s 60(1)(c) the Judge said:30
There is a logical progression in the area dealt with in s 60(1). Paragraph (a) covers land taken. Paragraph (b) covers land retained but injuriously affected after other land is taken; and paragraph (c) covers land owners whose land has not been taken at all. In this last case, the compensation relates to land which “suffers … damage”. The paragraph envisages operations under statutory power, not involving the taking of the owner’s land. … As a matter of ordinary language, the plaintiff has considerable difficulties in forcing a delayed taking resulting in loss due to a falling market within s 60(1)(c).
[96] McGechan J considered the policy of the Act also supported this conclusion. The Judge held that the scheme of the Act is to fix compensation at a “specified date”.31 It envisages a previous process, including service and publication of notice, endeavours to negotiate in good faith towards a taking for at least three months and
26 Superior Lands Ltd v Wellington City Council [1974] 2 NZLR 251 (CA) at 257.
27 Strongman Electric Supply Co Ltd v Thames Valley Electric Power Board [1964] NZLR 592 (CA) at 604–605.
28 At 600.
29 Colin Geddes Ltd v Wellington Regional Council HC Wellington CP129/94, 15 May 1996 at 13– 15.
30 At 11–12.
31 At 12.
taking within 12 months.32 The Act therefore recognises that that there will be an interval between public knowledge of desire to take and the actual taking with value assessed at the later date.33 On that basis, and as a matter of ordinary language, the plaintiff had considerable difficulties in forcing a delayed taking resulting in loss due to a fallen market within the scope of s 60(1).34
[97] Casata does not claim for a diminution in value (and nor could it have given that market values increased in the shadow period), but there are nevertheless some parallels between the two cases. If McGechan J’s interpretation of s 60(1)(c) as covering cases that do not involve the taking of land is accepted, then Casata’s claim would fall outside s 60(1)(c). Furthermore, Casata’s claim could be characterised as a delayed taking. It is a claim that the land should have been acquired in February 2014 when the Project was announced rather than three years later. Like the applicant in Colin Geddes, Casata would also face considerable difficulties in forcing a delayed taking within s 60(1)(c).
[98] However, there are factors weighing in the opposite direction and in favour of Casata’s claim. Mr Hodder submits that the requirement that the damage be from the exercise of a statutory power is met by the powers in relation to roads under the Government Roading Powers Act 1989 (formerly called the Transit New Zealand Act 1989), and the Land Transport Management Act 2003. The former statute provides for the power to construct roads, highways and motorways. The latter statute governs the planning and funding of a land transport system. The power to plan, propose, and notify the Project arose under these statutes rather than the PWA.
[99] There are also cases which suggest the door is not fully closed on a claim for loss sustained during the shadow period. The Privy Council allowed such a claim in Director of Buildings and Lands v Shun Fung Ironworks Ltd.35 The Privy Council found that the paralysing effect on the claimant’s operations caused by the prospect of resumption was to be regarded as losses caused by the resumption itself.36
32 At 12.
33 At 12.
34 At 12.
35 Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 (PC).
36 At 137–139.
[100] Further support for Casata’s claim arises out of the Court of Appeal’s decision in Cockburn v Minister of Works and Development.37 In that case the appellant had intended to subdivide his farm into 20-acre blocks for sale. He was served with a notice that the land was to be taken under the Public Works Act 1928. Approximately two and a half years later, the notice taking the land was withdrawn. When the appellant sought to proceed with the subdivision of his land, a change to the District Scheme in the intervening period meant that he was unable to subdivide.
[101] A majority in the Court of Appeal held that in exercising his powers under the Act to take the land, the Minister had interfered with the appellant’s right as owner to subdivide the land. The diminution in the value of the land resulting from the loss of subdivisional potential was damage for which the Minister was obliged to pay compensation under s 52 of the Public Works Act 1928 (which has close similarities to s 60(1) of the PWA). The Court explained why this loss was compensable:38
What is said is that an immediate result of the temporary sterilisation of the appellant's ability to exercise his full rights of ownership of this particular land is that the subdivisional potential which he would otherwise have realised has been lost. Or to put it another way, there was a diminution in the value of the property resulting from the existence of the land during the currency of the notice to take.
I am satisfied that to hold any such established loss to be compensable is consistent with an ordinary reading of the third limb of s 42; it reflects what may fairly be considered to be the underlying policy concern of the legislation that, if taking authorities are to be empowered to withdraw from the taking process and by the exercise of their powers they have affected the ability of landowners to deal with their land, they are obliged to pay compensation for any resulting diminution in the value of the land; and it is supported by the authority of Pike’s case.
[102] The Court also held that the requirements for physical interference with the land was not an immutable rule and the earlier cases establishing such a rule were distinguished on their facts.39 By extension, it may be argued that the requirement that there be an actionable cause of action is not an immutable rule either.
37 Cockburn v Minister of Works and Development [1984] 2 NZLR 466 (CA).
38 At 471–471.
39 Superior Lands Ltd v Wellington City Council [1974] 2 NZLR 251 at 257.
[103] Casata also relies on Hamilton and Hamilton v Minister of Lands,40 and Pattle v Secretary of State for Transport.41 In the former case the Tribunal allowed a claim for lost rental income during the course of negotiations with the Crown when the unit remained untenanted.42 In the latter case, the Upper Tribunal (Lands Chamber) said there was no reason in principle that a claim could not be made for lower rents received during the shadow period.43
[104] The claimants in Pattle argued that they had not proceeded with a proposed redevelopment given the continuing uncertainty and the associated “blight” caused by the Channel Tunnel Rail Link.44 Instead, to mitigate their losses, the claimants re-let existing units on the subject property at a lower rental.45 Applying the principles set out in Shun Fung, the Lands Chamber said there was no valid reason in principle to disallow a claim for lost rents.46
[105] As Mr Bryant for the respondent submits, however, there are distinguishing features of the cases relied on by Casata to establish its claim. Most notably, those cases were for actual losses sustained during the relevant period and the impact of the shadow and the nature of the loss said to flow from that was different in kind to what Casata alleges in this case. In addition, the exception to the physical damage rule set out in Cockburn has been limited to cases involving a withdrawal from the taking process.47 Arguably, there is no policy need to extend the Cockburn principle to cases where land is in fact taken, as in Casata’s case.
[106] So, what conclusions may be drawn from these as cases as to the legal basis for Casata’s claim? I consider they show that the door in s 60(1)(c) is not firmly shut against a claim for loss sustained in the shadow period. As a matter of broad principle, such a claim is consistent with the requirement that claimants receive full compensation and the principle of equivalence which underpins the PWA.
40 Hamilton and Hamilton v Minister of Lands [2012] NZLVT 2.
41 Pattle v Secretary of State for Transport [2009] UKUT 141 (LC).
42 Hamilton and Hamilton v Minister of Lands [2012] NZLVT 2 at [77]–[80].
43 Pattle v Secretary of State for Transport [2009] UKUT 141 (LC) at [35]–[38].
44 At [4].
45 At [4].
46 At [38].
47 See for example Colin Geddes Ltd v Wellington Regional Council HC Wellington CP129/94, 15 May 1996.
[107] Similarly, the fact that land is subsequently taken may not be fatal to a claim, but it will make the claim much more difficult to prove. Where, as in this case, the claim is closely associated with the taking of land and market value for that land has already been paid, it may be more difficult to bring it within s 60(1)(c). The scheme of the Act is that compensation for the taking of land is fixed as at the date of acquisition and according to the market value of the land. It strains plain meaning to suggest that the Act provides for compensation to be paid for a delayed taking, particularly if there has been an increase in market values in the interim.
[108] Ultimately, whether a liberal interpretation will be taken to the meaning of “damage” and the “exercise of a statutory power” to accommodate a claim in the shadow will depend on the nature of the alleged impact and associated loss. The claims in Shun Fung, Cockburn, Pattle and Hamilton may be understood in that light. That means that any compensation to be paid under s 60(1)(c) is for actual damage sustained. Casata has been unable to prove that the shadow has caused it to suffer tangible loss in this case. In the absence of such evidence, an assessment of whether the claim would otherwise have fallen within s 60(1)(c) cannot be made.
Does the claim fall within s 66 of the PWA?
[109] The alternative basis for Casata’s claim is s 66 of the PWA. That section provides:
66 Disturbance payments
(1)Subject to subsection (2) of this section, the owner of any land taken or acquired under this Act for [a public] work shall be entitled to recover compensation for any disturbance to his land and in particular to recover, where appropriate,—
(a)All reasonable costs incurred by him in moving from the land taken or acquired to other land acquired by him in substitution for the land taken or acquired, including—
(i)Repealed.
(ii)The reasonable valuation and legal fees or costs incurred in respect of the land taken or acquired:
(iii)The reasonable valuation and legal fees or costs incurred in respect of the land acquired in substitution, but not exceeding the reasonable valuation and legal fees or costs which would be incurred in respect of land with a market value equal to the land taken or acquired:
(iv)The actual and reasonable costs incurred by him in transporting his goods and chattels and those of his family from the land taken or acquired to the land acquired in substitution, but not exceeding the reasonable costs of such transport by road over a distance of 80 kilometres, or such greater distance as is necessary to reach the nearest land that reasonably could have been acquired in substitution:
(b)An allowance for any improvements not readily removable from the land taken or acquired which are of particular use to a disabled owner or any disabled member of an owner's family and which are not reflected in the market value of the land.
(2)No person shall be entitled to compensation under this section unless—
(a)He was not a willing party to the taking or acquisition; or
(b)He was a willing party to the taking or acquisition principally because the land had been notified.
[110] In Wellington City Corp v Berger Paints NZ Ltd, Richmond J reviewed the history of disturbance claims.48 His Honour concluded that compensation for disturbance is only one example of a wider class of recoverable loss not directly based on the value of the land.49 In assessing a claim for disturbance, the correct approach for the Court is to decide what part of the claim is not based on the value of the land, but is nevertheless loss which is directly consequent on the taking of the land and is not too remote.50
[111] This approach reveals some difficulties for Casata in bringing its claim within s 66. While Casata presents its claim as one of business losses, the very nature of
48 Wellington City Corp v Berger Paints NZ Ltd [1975] 1 NZLR 184 (CA) at 203–205.
49 At 205.
50 At 205.
Casata’s business means any losses are intertwined with the value of the land. They are losses that are said to arise from an inability to extract value from the land by either selling it an earlier date or redeveloping it as originally planned. Such a claim is more directly connected with the compulsory acquisition of the land than, for example, relocation costs which are “downstream flow on effects” and do not relate directly to the property acquired by the Crown.51
[112] The Court of Appeal’s decision in Ace Developments presents some further hurdles for Casata. The substantive claim in that case involved land compulsorily acquired under the Canterbury Earthquake Recovery Act 2011. Ace claimed compensation based on the relocation of its car yard business. The claim included the costs of acquiring substitute sites, demolishing existing buildings on those sites, constructing a new building, and leasing fees. It also included the difference in land value between the replacement site and the site that was taken.52
[113] The Associate Minister (the decision-maker under the relevant Act) accepted the advice of an expert panel and determined that the claim should be assessed by reference to the market value of the land taken.53 That resulted in compensation which was approximately $5 million less than what Ace sought. Ace appealed to the High Court and applied to adduce fresh evidence on appeal. The Court of Appeal’s decision was an appeal of the High Court’s decision declining that application.
[114] One of the issues in the appeal was whether Ace’s relocation costs were recoverable under Part 5 of the PWA. Ace contended that its relocation costs were recoverable under either s 66 or s 68 of the PWA.54 In addressing the claim under s 66, the Court noted that the section was “intended to state existing law and to provide some clarity by giving examples of available disturbance payments”.55 In interpreting those listed examples of recoverable disturbance payments, the Court said:56
51 Ace Developments Ltd v Attorney-General [2017] NZCA 409, [2017] 3 NZLR 728 at [48].
52 At [8]–[9].
53 At [11].
54 At [66].
55 At [68].
56 Ace Developments Ltd v Attorney-General [2017] NZCA 409, [2017] 3 NZLR 728 footnotes omitted.
[69] We accept that the list of recoverable costs is not exhaustive. However, we agree with [the High Court] that the interpretation of the words “all reasonable costs” must be coloured by the list. The costs are incidental costs, additional to the payment of market value for the land taken, not a substitute for it. If Parliament had intended the capital cost of acquiring the substitute land to be recoverable as a disturbance payment, it would surely have said so. It would be an extraordinary omission to have left out what would likely be the biggest cost of all.
[115] The Court concluded that the cost of acquiring a substitute property was not compensable. The difference between the value of the taken property and the value of the substitute property was economic or consequential loss and thus not recoverable under Part 5 of the PWA.57 However, the costs of demolishing the existing buildings on the substitute site and developing it, as well as the leasing fees, did fall within the concept of a disturbance payment. Recoverability would depend on whether the costs were reasonable and not too remote.58
[116] Casata’s claim is not on all fours with the claim made in Ace. A claim that an owner was prevented from selling or redeveloping its property, is not the same as a claim for relocation costs. Nevertheless, there are some parallels between the components of the Casata model which assumes a hypothetical purchase of another property, and the claim made by Ace. It would be odd if a claim calculated on the basis of a hypothetical reinvestment in another property was allowed under s 66, whereas the actual cost of acquiring another property and the differential in value between the two properties, fell outside the scope of the section.
[117] The Court of Appeal’s approach to the interpretation of s 66(1)(a) does not assist Casata either. Casata’s heads of loss do not fit neatly into the list set out in s 66(1)(a), and nor are they analogous. On their face, they are not costs which arise out of the disturbance of the land.
[118] That same conclusion was reached by the Tribunal in Gold Star Insurance Co Ltd v Minister for Land Information.59 That claim arose out of the Waterview motorway project. Gold Star’s properties were purchased in 2003. They planned to develop the property and were successful in obtaining a change of zoning to allow
57 At [82].
58 At [77]–[78]
59 Gold Star Insurance Co Ltd v Minister for Land Information [2013] NZLVT 1.
them to do so. Waka Kotahi opposed the re-zoning at the time.60 Resource consent applications for an 83-unit residential development were granted on 17 October 2005.61 On 15 August 2010, Waka Kotahi issued a notice of acquirement, and a notice of desire to acquire the property was issued some three months later.
Compensation was subsequently agreed.62
[119] The claimants sought costs incurred by Gold Star, and its director, in the shadow period. Those costs included holding costs (consisting of debit interest payments incurred by Gold Star’s director on a mortgage secured to purchase shares), rates, maintenance costs and resource consent extension fees. The claim also extended to abortive expenditure for the development.63
[120] In reliance on Shun Fung, the Tribunal held that while disturbance payments or losses occurring prior to acquisition were claimable, the types of claims made by the claimants in Gold Star were not disturbance payments within the meaning of s 66.64
[121] More specifically, the Tribunal held that rates and maintenance costs were simply burdens associated with the ownership of the land and did not fall within s 66.65 The Tribunal also held that as a matter of valuation principle, costs associated with resource consents and costs associated with development of the property would be matters taken into account in the valuation assessment of compensation payable for the actual taking of the land.66 The Tribunal expressed sympathy for the hardship suffered by owners in these circumstances which could sometimes lead to substantial and unfair consequences. Nevertheless, that was the nature of public works, and any remedy for that unfairness was not available in the PWA forum.67
[122] Casata seeks to distinguish this case on the basis that the advance compensation agreement in that case specifically limited the category of costs recoverable. That is
60 At [5].
61 At [6].
62 At [7].
63 At [9]–[10].
64 At [33] and [35].
65 At [43].
66 At [45].
67 At [48]–[49].
not a valid point of distinction in my view. The Tribunal did not reach its decision by reference to the advance compensation agreement. Rather, its determination was reached (and reasoned) on an interpretation of s 66.
[123] I agree and respectfully adopt the Tribunal’s reasoning in Gold Star. Casata’s claims could not fall within the meaning of disturbance costs. Specifically, the claim for rates cannot be sensibly classified as a disturbance payment. They are normal costs associated with the ownership of land. Similarly, the abortive redevelopment costs are not disturbance payments either. If Casata had been able to prove its claim, I would have found that it fell outside the scope of s 66 of the PWA.
Result
[124]The appeal is dismissed.
[125] The respondent is entitled to costs. If costs cannot be agreed, then a memorandum in support shall be filed and served 10 working days after delivery of this judgment, with a memorandum in opposition filed five working days thereafter. Memoranda shall be no more than five pages in length. Costs shall be determined on the papers.
Edwards J
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3
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