Chisholm v Waiheke Island Country Club Limited Ca32/02

IN THE COURT OF APPEAL OF NEW ZEALAND

CA32/02

BETWEEN	ADRIAN DAVID CHISHOLM
First Appellant

AND	WAIHEKE ISLAND COUNTRY CLUB LIMITED
Second Appellant

AND	GULF PROPERTIES LIMITED
Third Appellant

AND	AUCKLAND CITY COUNCIL
Respondent

Hearing:	20 November 2002
Coram:	Tipping J Hammond J William Young J
Appearances:	G J Judd QC for Appellants D J Heaney and N Edelman for Respondent
Judgment:	29 November 2002

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

Introduction

The appellant, Mr Chisholm, and the two appellant companies with which he is associated, contend that Chambers J was in error when he dismissed their claim for damages against the respondent, the Auckland City Council (the Council). The claim was based on four causes of action; misfeasance in public office, negligence, breach of s27(1) of the New Zealand Bill of Rights Act 1990, and breach of s9 of the Fair Trading Act 1986. The Fair Trading Act dimension is not pursued on appeal but the other three dimensions are.
The case involves the disposal of septic tank waste (septage) on Waiheke Island. The Council proposed to use part of the Waiheke Island Golf Course as an emergency disposal site. The second appellant owned a piece of land adjoining the golf course. It was planning to develop that land as a tourist and visitor facility. The Council’s proposed use of the golf course site was seen as impacting adversely on the development of the appellant’s land. In the event no septage was ever deposited on the golf course site. An alternative site became available. By then, however, Mr Chisholm’s project had fallen through as a result, he said, of the withdrawal of investor support. He blames the Council for that misfortune and sued them for what he and his companies claimed to have lost.
The misfeasance cause of action, as refined and presented in this Court, rested on the proposition that two Council officers, Messrs McQuillan and Paterson, had made certain decisions on the Council’s behalf maliciously, ie. intending, and for the purpose of stopping Mr Chisholm’s project. The Judge held that malice had not been established. Hence the cause of action failed. The appellants contend that the Judge should have found malice to have been established, as that was the only inference which could be drawn.
The negligence claim failed because the Judge found that the Council owed no duty of care in the relevant respects. The Bill of Rights cause of action failed because the Judge held that s27(1) was not engaged. We will address the malice issue first, for the purpose of which it will be necessary to set out the background in more detail.

Malice/background

Mr Chisholm embarked on his development project in 1997. Resource consent applications were made to the Council in September of that year. At the time there were two septage disposal sites on the island, one owned by Mr Hadlow and the other by Mr Kerrod. On 27 November 1997 Mr Hadlow indicated he was not intending to renew his current resource consent for septage disposal. It was due to expire on 31 December 1997. This decision was of concern to the Council because the Kerrod site could not cope with all the septage on its own.
Mr McQuillan was the group manager of Utility Planning, the responsible division of the Council. Mr Paterson was the stormwater manager. They decided their division would look for an emergency disposal site and would, for that purpose, invoke the Council’s powers under s330 of the Resource Management Act 1991. They look legal advice which was to the effect that s330 could validly be invoked. A public notice was inserted in the New Zealand Herald seeking information about possible sites. The Council pursued its own investigations.
As 31 December 1997 approached the Council’s anxiety increased. Mr Nelson, who was an engineer in another division, and was involved in the inquiries, came to the view that the golf course site appeared to be the most satisfactory option. It has to be noted that this initial selection of that site was made by someone other than Mr McQuillan or Mr Paterson, and furthermore by a person who was never said to harbour ill-will towards Mr Chisholm. When the golf course site was suggested by Mr Nelson, Messrs McQuillan and Paterson both agreed it was the best option.
The Council formally decided to use the golf course site in early January 1998. An article in the New Zealand Herald of 7 January 1998 confirmed that the Council would use its s330 powers to dispose of septage on the golf course site. Mr Chisholm read the article and asked for an urgent meeting. It became apparent at the meeting that Mr Paterson had no prior knowledge of Mr Chisholm’s proposed development. Mr McQuillan was not available to attend the meeting as he was on holiday. The Council reviewed the position in the light of Mr Chisholm’s concerns but decided to continue. Mr Chisholm was advised that earthworks would be commenced the following day. There was a protest on the golf course during the course of which Mr Chisholm was arrested for trespass. The charge was later withdrawn.
On 9 January 1998 a further meeting took place attended by Mr Chisholm, Council representatives, and lawyers advising the Council. As a result the Council agreed to give Mr Chisholm three days notice of any intended deposit on the golf course site. This would give him enough time to apply to the Environment Court for an order preventing such deposit. The preparatory earthworks continued. The very next day, 10 January 1998, Mr Chisholm erroneously came to the view that this continuation was a breach of the agreement. He instructed his solicitor to apply for an interim enforcement order. That application was heard on 13 January 1998 by Judge Kenderdine who ordered the Council to stop all work on the basis that it could not exercise its s330 powers because the disposal problem could have been foreseen. Work duly stopped. Being concerned at this turn of events, Council officers, including the Chief Executive, met the Council solicitors to decide what to do. They decided to appeal to the High Court against Judge Kenderdine’s decision. In addition, it was decided that in terms of its view that the Judge was wrong, the Council should also make the resource consent application mandated by s330A.
The next event of moment, and it became central to Mr Chisholm’s case, was a meeting which took place between Council officers and their legal advisers on 16 March 1998. There was a long argument about privilege in respect of notes taken at the meeting and discussions at the meeting itself but, in the end, the Council decided to waive privilege. It is not necessary for us to go into that saga any further.
The Judge found that at this meeting Mr McQuillan had made a remark to the effect that he was, if nothing else, going to dump a truck load of sludge on the site. This was the key point in Mr Chisholm’s contention that Mr McQuillan was motivated by malice against him in making, in particular, the decision reached at that meeting to proceed with the appeal, the resource consent application, and the other steps necessary to allow disposal of septage on the golf course site. The Judge’s conclusion concerning Mr McQuillan’s remark and the suggested inference of malice was expressed in this way:
My conclusion, however, is that Mr McQuillan did say something along the lines suggested by Mr Herald [another Council employee]. I do not think Mr Herald has just made this up. How then does one explain no one else remembering it? In particular I trust the evidence of Messrs Cone and Kirkpatrick implicitly. They were in all aspects of their evidence careful, measured, and, in my view, thoroughly reliable. The answer, I think, is that Mr McQuillan’s sentence was a throwaway line, perhaps said partly for amusement. We all have experience in meetings where sometimes outrageous or flippant comments are made without any intention that they be taken seriously. The reason none of the others remember the statement is that it was not a serious contribution to the debate and not perceived to be. Flippant comments, particularly if not truly funny, tend to escape from memory within hours, if they last that long.
In short, therefore, I find that, while the comment was probably made, it was never intended by Mr McQuillan to be taken seriously and it was not taken seriously, which is why everyone else has forgotten it was ever said. It was a throwaway line, perhaps expressing Mr McQuillan’s frustration that the golf course site had caused such a lot of problems to the council one way or another. I do not consider that the fact that this sentence was probably said indicates that Mr McQuillan had maliciously made the decisions which Mr Chisholm now challenges.

The central focus of the appeal was an attack on the way the Judge dealt with this issue. We will return to that topic after completing the relevant narrative.

There were further discussions with Mr Chisholm during the course of which the Council informed him that independent commissioners would hear his resource consent application, he being concerned at the objectivity of the Council. He was also informed that the Council was still looking for alternative sites in the hope that his concerns could be satisfied. It was at this point that Mr Chisholm instructed his solicitor to stop all work on the resource consent application because his investors had lost confidence. It is not necessary to explore the reasons for that loss of confidence, which were said to go well beyond the septage disposal issue.
In early April an alternative site was found. The Council’s resource consent application in respect of the golf course site was therefore withdrawn and the appeal against Judge Kenderdine’s decision was abandoned. The Council did, however, apply to the Environment Court for a declaration as to the proper interpretation of s330. In June 1998 the Court held, on fuller argument than had been available to Judge Kenderdine, that the Council’s s330 powers could validly be exercised, even if the problem was foreseeable.

Malice – the meeting on 16 March 1998

Those present at the meeting included Mr Herald, who had made the note for which privilege was originally claimed, Mr McQuillan, Mr Paterson and two solicitors who were present to advise the Council, Messrs Kirkpatrick and Cone. Mr McQuillan denied making the remark attributed to him in Mr Herald’s note but the Judge found that he had made it, albeit in a light-hearted way. The primary purpose of the meeting was to work out what course the Council would follow in the light of Judge Kenderdine’s adverse decision. Among the issues was whether the Council should continue with its appeal and whether its resource consent application for the golf course site should be maintained.
Mr Judd made much of the fact that Mr McQuillan was the only person at the meeting who wanted to proceed with the golf course site. The others were of the view that the site should no longer be regarded as appropriate. It was therefore very material to determine what may have been motivating Mr McQuillan in his view. In that respect the evidence of the legal advice which the Council received at the meeting is of major importance. The Judge accepted the evidence of Messrs Kirkpatrick and Cone. The latter said he had advised the Council that the resource consent application should be made because it was a requirement of the Resource Management Act that if the Council exercised emergency powers, it must, following that exercise, immediately make application for resource consent. Hence the Council had a duty to continue with that process.
Mr Chisholm’s allegation that Mr McQuillan decided to proceed with the resource consent application in order to harm his development proposals, is extremely difficult to reconcile with Mr Cone’s evidence. Furthermore, Mr Cone said that he had other reasons for giving the advice he did. One was that the Council had no alternative site at that point and it would therefore be unwise for the Council not to continue with the resource consent application until an alternative had been found. The appeal to the High Court was clearly motivated by the Council’s concern at the correctness of Judge Kenderdine’s ruling, which of course had an impact far wider than the case in hand.
We turn now to consider the basis upon which Mr Judd argued that Chambers J had wrongly declined to find that Mr McQuillan was motivated by malice. The first proposition was that the general background, ie. the difficulties which Mr Chisholm was causing the Council, provided a reason why Mr McQuillan did not like Mr Chisholm. Second, it was pointed out, as noted earlier, that Mr McQuillan was the only person at the 16 March 1998 meeting who wanted to proceed with the golf course site. Third, counsel relied on the fact that Mr McQuillan had been found to have made the sludge remark in spite of denying it in evidence, and fourth, that no good reason was given, either at the meeting or afterwards, for Mr McQuillan’s wish to continue processes directed to the golf course site. Mr Judd argued that the Judge had not asked himself the right question in the passage from his judgment cited above, that question being whether he could infer from Mr McQuillan’s sludge statement that he had a malicious state of mind. It was suggested that the Judge should have expressly examined Mr McQuillan’s words, their context, and all other relevant considerations and expressed himself, if that was his view, on the basis that he could not draw the suggested inference.
Mr Judd also argued that the Judge’s reasoning was unsound in so far as he relied on the fact that others at the meeting had not remembered the sludge remark, and that, in coming to his conclusion as to the way in which Mr McQuillan intended the remark to be taken, the Judge had moved from reasonable inference to speculation. We find ourselves unable to accept any of these submissions. We consider that the Judge’s reasoning process was clear and sound. We are not brought to the view that his conclusion on this issue was erroneous.
To take an adverse view of the Judge’s precise mode of expression would be to elevate semantics over substance. It is quite clear from the tenor of the Judge’s words that on the evidence as a whole he was not persuaded to draw an inference of malice. Having independently considered the matter ourselves, we are of the same mind as the Judge. We consider the evidence of what occurred at the meeting, in combination with all other relevant evidence, falls well short of proof to the necessary level for a serious allegation of the present kind, that either Mr McQuillan or Mr Paterson were motivated by malice against Mr Chisholm in what they did and decided. We reach that conclusion on the basis of the transcript. The Judge had the additional advantage, not inconsiderable in a case such as the present, of being able to see and hear the relevant parties giving evidence.
Furthermore, there is an additional difficulty in accepting the assertion that Messrs McQuillan and Paterson were motivated by malice. Neither of them was cross-examined on the basis that their conduct or decisions were so motivated. Counsel representing Mr Chisholm at trial (not Mr Judd) did not expressly tax either Mr McQuillan or Mr Paterson with the essential allegation. There are one or two oblique and vague references to it but nowhere was the serious allegation made against the two men clearly and directly put to them. In these circumstances this is a further reason for not interfering with the conclusion to which Chambers J came on the point.
We have considered all the matters which Mr Judd conscientiously raised in support of his client’s appeal. We do not propose to refer specifically to any other point, save for counsel’s reference to the following paragraph in the judgment:
I now turn to the allegations Mr Chisholm makes which are said to show that Mr Paterson’s decision was actuated by malice. The first point to note is that all the allegations relate to acts said to have been done after the decision was made. There is no evidence of any ill-feeling between Mr Paterson and Mr Chisholm prior to the making of the sludge decision. Nor is there any allegation of such ill-will. I accept that that is not decisive because later actions could indicate a secret state of mind at an earlier time, but the absence of prior conflict between Mr Paterson and Mr Chisholm is nonetheless highly significant.
This reference to the position of Mr Paterson immediately followed a finding by the Judge that Mr Paterson struck him as a fair and honest witness. That finding comes close to precluding a conclusion that he was motivated by malice. Mr Judd submitted that the Judge’s reference to there being no evidence of any ill-feeling prior to the sludge occasion, put the matter too high. That may strictly be so; but the point is of no moment because we are of the clear view that there was insufficient evidence to find Mr Paterson was motivated by ill-will.
Mr Judd further submitted that the Judge was also in error in saying that there was no allegation of such ill-will against Mr Paterson. There was such an allegation but we think the Judge’s reference to there being none is probably a reflection of the fact that Mr Paterson was not properly taxed in cross-examination with any such allegation. It is elementary that he should have been if the Judge was to be invited to draw such an inference against him. Again the ultimate point is that there was clearly insufficient evidence to find malice against Mr Paterson.
Having given all Mr Judd’s points, including the small bore/large bore issue, careful consideration, we conclude that Chambers J was right. He was entitled to find that Mr McQuillan made the sludge remark light-heartedly and that it was thus no evidence of a malicious mind. On that basis the evidence as a whole fell well short of establishing malice against Mr McQuillan. In Mr Paterson’s case, the evidence fell shorter still.

Negligence

As pleaded, the duty of care which the appellants claimed the Council owed them was framed in this way:
The defendant owed the plaintiffs a duty to take reasonable care that it did not compromise the plaintiffs’ private interests in their plans to develop a country club on Waiheke Island before:
(i)deciding to undertake earthworks preparatory to the depositing of septic sludge and sewage;
(ii)carrying out any such decision.
There were other formulations but they do not require separate attention because, in presenting the appeal, Mr Judd argued that the Council had the rather different duty to keep the appropriateness of the decision to invoke s330 constantly under review, and to implement its decision to invoke s330 with reasonable care in that sense. The essence of the allegation had thus become that the Council continued to use its emergency powers when there was no longer any emergency, and after it became aware of the harm being caused to Mr Chisholm’s interests.
The first problem with that formulation is that it is not fairly within the pleading upon which the case went to trial in the High Court. The duty of care now alleged raises issues such as the balance of risks on each side and there is little or no evidence addressed to that question. As Mr Judd properly recognised, the case would require a retrial if such an allegation were to be pursued. That would hardly be fair from the Council’s point of view, it already having been occasioned the expense of a trial which lasted in all some 27 days. In addition, we consider it highly debatable whether such a duty as that now asserted was owed by the Council which was concerned to preserve its position on an important matter of law. In view of the change of focus in this Court, we do not need to address the Judge’s conclusion that the Council owed no duty as originally pleaded and indeed no submissions were directed expressly to that issue. We can, however, say that we have little doubt that Chambers J came to the correct conclusion on the basis of the case as presented to him.

That said, we consider it would be quite inappropriate for Mr Chisholm to be allowed to recast his case in the hope of faring better at a retrial. Mr Judd argued, albeit faintly, that the Judge should have taken some initiative in suggesting a better formulation of Mr Chisholm’s case before him. That is an untenable proposition. The Judge had no such obligation, a fortiori when the basis of the duty now asserted on appeal is itself highly problematic. It is not as if some entirely obvious point was not being taken. Even then, when the party later complaining is represented by counsel, the circumstances justifying a complaint about non-intervention by the Judge must be rare indeed. On this head we are not persuaded that the appellants should have any relief on appeal.

Bill of Rights

Section 27(1) of the Bill of Rights provides:
Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person’s rights, obligations, or interests protected or recognised by law.
This is what the Judge said about its relevance to the present case:
Section 27 has nothing to do with this case. The council, when its officers were making the sludge decision, was not involved in making ‘a determination’ in respect of the plaintiffs’ rights, obligations or interests. It made a decision based on what it perceived to be a public health risk on Waiheke. That involved using the golf course site. It did not involve in any shape or form ‘a determination’ of the rights of any neighbour. Those neighbours retained whatever rights they had. Indeed, the plaintiffs exercised their right to apply to the Environment Court for an interim enforcement order. That court did properly observe the principles of natural justice. It heard the plaintiffs and it heard the council. It made a determination following that hearing. As it turned out, that determination was in the plaintiffs’ favour. The council, while disagreeing with that decision, obeyed it. It is true that the council appealed that decision but that is the right of every litigant. Bringing an appeal in accordance with the law could never amount to a breach of s27. With respect, this cause of action is quite misconceived.
We agree with the Judge’s assessment. Mr Judd argued that His Honour’s approach was unduly narrow and was not consistent with the spirit in which statutes like the Bill of Rights should be interpreted. We cannot agree. However liberally s27(1) might be read, it cannot encompass the decision which the Council made to invoke its s330 powers. Mr Chisholm’s essential complaint is that this decision was made in breach of the principles of natural justice in that he was not heard or not sufficiently heard before the decision was taken.
The key question, as the Judge recognised, is whether the Council’s decision to invoke its s330 powers was “a determination in respect of [the appellants’] rights, obligations or interests protected or recognised by law”. The word “determination” in its context has an adjudicative connotation. Whatever the width of the phrase “in respect of”, and Mr Judd made detailed submissions in that respect, s27(1) is not engaged unless the determination in issue is of an adjudicative character. Section 27(1) is not expressed on the basis of a determination which may have some indirect general impact on another person’s rights etc. We cannot accept Mr Judd’s submission that it should be so construed. That would widen its scope beyond its purpose, which is primarily to affirm the general rule in relation to the operation of the principles of natural justice. If Parliament had intended s27(1) to have the very wide reach contended for by Mr Judd, it would no doubt have spoken differently. The expression “public authority” takes some colour from the word “tribunal” with which it is conceptually linked. This point reinforces the adjudicative tenor of s27(1). In making its decision to invoke its s330 powers the Council was not making a determination which qualified as such for s27(1) purposes. The appellants cannot succeed on this aspect of their appeal.

Conclusion

For the reasons given the appellants fail on all three issues. Their appeal is accordingly dismissed with costs to the respondent in the sum of $5000 plus disbursements including the reasonable travel and accommodation expenses of both counsel, to be fixed if necessary by the Registrar.

Solicitors
Hughes Robertson, Palmerston North, for Appellants
Heaney & Co, Auckland, for Respondent

[2002] NZCA 377

29 November 2002