Cooper v Hastings District Council

[2023] NZHC 1392

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2022-441-58

[2023] NZHC 1392

UNDER

the Declaratory Judgments Act 1908

IN THE MATTER

of the Public Works Act 1981

BETWEEN

KAREN MARY COOPER

Applicant

AND

HASTINGS DISTRICT COUNCIL

Respondent

AND

AH & HM MASTERS

Interested Parties

Hearing:

On the papers

Appearances:

M Williams and C D Beattie for the Applicant

M Casey KC and A Davidson for the Respondent M B Lawson for the Interested Parties

Judgment:

21 June 2023

JUDGMENT OF COOKE J

(Recall)

[1]    These declaratory judgment proceedings have involved an application for declarations associated with a proposed compulsory acquisition of the applicant’s land by the respondent Council. Land was rezoned for residential purposes by the respondent, including the applicant’s land. Land, including the applicant’s land, was then to be taken for the purposes of establishing a road, and a stormwater detention area for a residential development in the rezoned area. The declaratory judgment proceedings were brought to determine certain issues of interpretation of the provisions of the Public Works Act 1981 (the Act) arising from these circumstances.

COOPER v HASTINGS DISTRICT COUNCIL [2023] NZHC 1392 [21 June 2023]

[2]    By a judgment dated 24 March 2023 I upheld the applicant’s arguments.1 I concluded that the relevant “public work” for compensation purposes was the work required to establish the road and the stormwater detention area. The public work was not the rezoning of the land for residential purposes. I also held that the rezoning of the land was not caused by the public works. This meant that the residential rezoning was not to be ignored for the purposes of assessing the value of the applicant’s land being taken (i.e., it was to be valued as residential land), and neither was the increase in the value of the applicant’s other land to be deducted from that compensation (i.e., no deduction arising from the increase in value of the applicant’s other land caused by the rezoning was required).

[3]    Following issuance of the judgment I received an application that I make formal declarations, and award costs, including increased costs, to the applicant. In a second judgment dated 15 May 2023 I declined the application for declarations, but granted both the applicant and the interested party costs, and in the case of the applicant, I granted increased costs.2 The increase was granted primarily because the respondent had abandoned its key argument at the hearing and advanced a new argument, but had also failed to advance a second new argument which supported its stance. That last feature, in particular, caused me to consider that costs should be uplifted as the proceedings had failed to address all relevant issues.

[4]    By memorandum dated 16 May 2023 the respondent applied to recall the second judgment. Its key point is that it did, in fact, advance the second new argument at the hearing. The applicant accepted that a ground to recall a judgment had been made out, and she renewed her application that the Court make declarations. Following the receipt of further written submissions, and a telephone conference, it was agreed that I would determine the recall application on the papers.

Recall

[5]    Recall occurs under r 11.9 of the High Court Rules 2016. The principles of recall are well established and were set out in the judgment of this Court in

1      Cooper v Hastings District Council [2023] NZHC 611.

2      Cooper v Hastings District Council (No 2) [2023] NZHC 1158 (now recalled).

Horowhenua County v Nash (No 2).3 I accept the respondent’s submission that recalling the judgment is appropriate when the Court has overlooked an issue which had been raised for determination. This qualifies as a special reason in the interests of justice to recall the judgment, deal with that issue, and make any varied orders required.4

[6]    At [19(a)] of the respondent’s defence and counterclaim dated 25 November 2022 it pleaded that all relevant provisions which effected the rezoning of land were relevant to compensation. That did not make the respondent’s second alternative argument, explained below, clear. But I accept that it is sufficient to say that the argument was within its pleading.

[7]    More significantly, I accept that [73]–[79] of the respondent’s written submissions filed in advance of the hearing advanced the argument, particularly in the following paragraphs, relating to the rules in the instrument that rezoned the land:

76.The fact that those rules preclude development must be relevant to the market value of the land.

77.Dr Cooper’s statement of defence to the counterclaim admits that all relevant provisions of the Plan are relevant to the assessment of compensation. That admission sits uncomfortably with her submission that the highest and best use of the land is for residential use and subdivision, and that the claimants are “unable to use their land in accordance with its general residential zoning”. In fact, the zoning does not provide for residential development of this land, but rather includes specific rules precluding that outcome.

78.The claimants cannot have their cake and eat it. Either the Plan provisions for the HSA are relevant, or they are not. It is not permissible to assume the land is zoned General Residential but to ‘pretend’ that the provisions restricting development within the SDA and proposed road are not there. Variation 3 could not have been confirmed on that basis, and the Plains Production Zone would have remained in place.

[8]    The position was complicated by the fact that, at the hearing, the respondent abandoned its principal argument as set out in these written submissions. But having

3      Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC); Saxmere Company Ltd v Wool Board Disestablishment Company Ltd (No 2) [2009] NZSC 122, [2010] 1 NZLR 76.

4      Y v Foulkes [2014] NZCA 396, (2014) 22 PRNZ 331 at [31]–[33].

checked my notes from the hearing I accept that Mr Casey KC indicated that the respondent maintained its written submissions on this point.

[9]    Whilst the position was confusing, I accept that it was sufficiently advanced and that I have erred in not addressing it. The dismissal of the counterclaim, and the decision not to make declarations, should not have occurred on that basis. The uplift of costs awarded also proceeded on the basis that the argument had not been advanced. The recall application needs to be granted to address these matters.

Assessment of argument

[10]   The respondent’s first argument was that the rezoning itself was the public work. This meant that the increase in value caused by the rezoning was to be ignored and the increase in value of the applicant’s land not being acquired was to be deducted. I did not accept this. The second argument was that the rezoning was inherently interconnected with the public work leading to a similar outcome. I also rejected that argument. The last argument, which I have not addressed, is that the provisions of the instrument leading to the rezoning — Variation 3 — must all be taken into account if they are relevant, including the provisions that designate the land being taken for use as roading and stormwater detention areas. Those particular provisions may significantly reduce the value of the land being compulsorily acquired.

[11]   I do not see significance in the respondent’s argument that the applicant admitted that all provisions of Variation 3 were relevant to the valuation exercise in its statement of defence to the counterclaim. What a party admits in their pleading does not change the proper meaning of the legislation, which it is the Court’s duty to identify. The primary purpose of pleadings in a declaratory judgment proceeding is to ensure procedural fairness. Moreover here the respondent’s counterclaim did not clearly identify the argument it has pursued. Alleging that all provisions of the Variation 3 are relevant is not a clear enough allegation to lead to a fatal admission, even if such admission could be thought to be binding on the Court’s interpretation of the provisions.

[12]   I understand that the respondent’s substantive argument, advanced in the alternative, is that if the provisions of Variation 3 which apply to the land being

compulsorily acquired mean that the land is not to be valued in accordance with its previous rural zoning, and is to be valued under the new residential zoning, then all provisions of the residential rezoning instrument must be taken into account. The respondent also points out that in accordance with s 85(1) of the Resource Management Act 1991 a reduction in value arising from a provision in a District Plan

— which Variation 3 is — does not give rise to a right to compensation.

[13]   I am not clear how the land would be valued under s 62(1)(b) of the Act on the respondent’s argument as it involves the “amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise”. Under Variation 3 the land is identified to be used for roading and stormwater detention. I am uncertain what the open market value of the land as roading, and stormwater detention land would be. That potential difficulty arises from the fact that the roading and stormwater detention characterisation of this land arises from the proposed public works.

[14]   In any event, I see this situation as contemplated by s 62(1)(c). This specifies that the impact of the public work “or the prospect of the work” on value is not to be taken into account. There is perhaps no better example of the “prospect of the work” than the provisions of a District Plan that contemplate and provide for that work. That view is supported by the purpose of the provision, which is to give the adversely affected landowner the market value of their land being taken, excluding the impact that the public works have on that market value.

[15]   The alternative approach advanced in the respondent’s most recent written submissions involves the land being valued as residential land, but without the provisions in Variation 3 that support that residential development. This involves assessing the likelihood of residential development in accordance with a notional discretionary resource consent application which would need to address the necessary roading and stormwater issues in some other way. Presumably the valuation would be undertaken by assessing the likelihood of such an application succeeding. It strikes me that such an application would be unlikely to succeed, and the land would effectively be valued as rural land. But in any event this scenario is not just complex, but it is entirely theoretical — the applicant’s land will never be in this situation. The

scenario does not correspond to the requirement that compensation be based on actual market value if the land were sold. If anything it is an argument that indirectly illustrates the respondent’s key point that the benefits of Variation 3 are inherently interlinked with the burdens, and that it is artificial to separate them. But the answer to that argument is that it is the legislation that requires the burdens, and accordingly only some of the provisions of Variation 3, to be ignored. That is because they are burdens arising from the public works.

[16]   To say that the applicant’s land must be valued as roading and stormwater detention area land is an argument that the applicant must accept the decrease in market value caused by the planned roading and stormwater detention areas. To say it should be valued as residential land, but without any provision for roading or stormwater as planned, is an argument that the applicant’s land must be treated as less valuable than their neighbours’ land given what the neighbours can sell their land for on the open market following Variation 3. On either approach the respondent is contending that the value of the applicant’s land needs to be reduced because of the public works.

[17]   Neither do I consider that the applicant’s approach is inconsistent with s 85 of the Resource Management Act as submitted by the respondent. It is the acquisition of the land, not the restrictions in the District Plan that give rise to the right to compensation. Once a right to compensation arises under the Act it is s 62 that regulates the basis for assessing compensation, not s 85 of the Resource Management Act. As the interested parties also submitted, had the notice of requirement machinery been used for the proposed works ss 168, 168A and 185(7) of the Resource Management Act would have applied. Section 185(7) has similar effect to s 62(1)(b). The provisions of the Resource Management Act are accordingly generally consistent with the approach contended for by the applicant.5

[18]   The respondent’s argument that the applicant cannot have their cake and eat it too is an argument that the outcome is not fair, and accordingly cannot correspond to

5      I do not address whether the definition of a designation, and ss 168, 168A or cl 4 of Sch 1 of the Resource Management Act, mean that a residential land rezoning could be a designation as submitted by the respondent.

Parliament’s intention. I do not accept this point. There might be a range of different views on what fairness requires. For example, on the respondent’s first argument the applicant would have been paid less than even the market value of this land as rural land because the applicant owned other land that was increasing in value as a consequence of the residential rezoning. That would mean that the respondent could compulsorily acquire the land for less than its value as rural land. In its written submissions it responded to the applicant’s criticism of this outcome by arguing that the question of fairness was irrelevant to the correct interpretation of the provisions.

[19]   As explained in the principal judgment, the purpose of the provisions of the Act are to secure full and fair compensation for compulsory acquisition, and whittling down that entitlement should not occur.6 But the assessment of what is fair must still correspond to what the provisions contemplate as fair compensation.7

[20]   It can be said that the applicant, the interested parties, and all other landowners whose land was rezoned as residential land have benefitted from a windfall gain. Their rural land has become more valuable. In effect all of the respondent’s arguments have been directed to the idea that this windfall gain should form no part of the compensation paid to the applicant when assessing the compensation to be paid. That is because the compulsory acquisition is necessary if this land is to be residentially developed at all. But once it is established that the rezoning of the land is not itself the public work, and that the impacts of the proposed public work are to be ignored when assessing compensation, then it can be seen that the applicant and the interested parties should be treated in the same way as their neighbours. And as the applicant and interested parties say the greater costs to the respondent involved in the compulsory acquisition may be able to be addressed by higher development contributions.

[21]   In any event it is the terms of the provisions in the Act, interpreted in light of their purpose and context, that regulates what is to be paid. My key conclusion is that the provisions in Variation 3 which contemplate and provide for the roading and stormwater detention areas are not to be taken into account when assessing the market

6      Cooper v Hastings District Council, above n 1, at [13]–[14].

7      At [15]–[16].

value of the land being acquired as this would involve taking into account the prospect of the public work contrary to s 62(1)(c).

[22]   Given these conclusions I dismiss the respondent’s counterclaim. I also now accept that the formal declarations along the lines proposed by the applicant are appropriate. I do not accept the respondent’s criticism that the form of these declarations was only advanced in reply. Paragraph (c) below arises from the conclusion I have reached on the respondent’s counterclaim seeking a declaration and the arguments in response to it. I prefer, however, the wording of that declaration proposed by the interested parties, albeit with some amendment. In particular the Court makes the following formal declarations for the reasons set out in the principal judgment, as adjusted by this judgment, which are based on those applied for by the applicant:

(a)For the purpose of ss 61(1) and 62(1) including (c) and (e) of the Public Works Act 1981, the “works” for which the Required Land is to be taken under the Advance Purchase Agreement between the parties comprises the Stormwater Detention Area and the Proposed Road.

(b)The associated rezoning of some 21 hectares in the Howard Street area is not the “work”.

(c)The Required Land should be valued by the Land Valuation Tribunal on a willing buyer willing seller basis in accordance with established valuation principles on the basis of its General Residential zoning. Where the value of the required land has, on or before the specified date, been reduced by the work or the prospect of the work, including as provided for by Variation 3, the amount of that increase or reduction shall not be taken into account.

Costs

[23]   In the second judgment I awarded costs to both the applicant and the interested parties. I also gave increased costs to the applicant.

[24]   There is no doubt that costs are still appropriate in relation to the interested parties, and I confirm my award of costs to them in the amount of $10,755 for the reasons I explained in the recalled judgment.8

[25]   In relation to the applicant, and the increase in costs awarded to them, the increase was primarily based on the fact that the argument that I have just addressed above had not been properly raised by the respondent at the hearing, and that this had meant that the costs of these proceedings had been incurred without addressing all issues. I concluded that this justified increased costs under r 14.6(3)(b)(ii) of the High Court Rules.

[26]   As indicated above, I now accept that the respondent did, in fact, raise this argument at the hearing. It is true that the respondent abandoned its key argument at the hearing, and advanced a different argument based on causation in oral submissions. But I do not consider that this alone warrants an increase in costs under r 14.6(3)(b)(ii). Indeed the abandonment of arguments which, on reflection, a party thinks cannot be sustained is to be encouraged. Whilst the respondent’s changeable stance may have been frustrating for the applicant and the interested parties, it has not caused additional cost to them in any meaningful way. It can also be said that the arguments on these matters have a degree of complexity.

[27]   So awarding the applicant increased costs was unfair to the respondent. For that reason the costs to be awarded to the applicant following my recall of the second judgment is the lower amount of $28,321.50 plus $7,050 for disbursements.

[28]For the above reasons the formal orders made are as follows:

(a)The judgment [2023] NZHC 1158 is recalled and replaced by this judgment.

(b)The judgment of the Court in [2023] NZHC 611 is varied in the manner described in this judgment.

8      Cooper v Hastings District Council, above n 2, at [25]–[30].

(c)The respondent’s counterclaim is dismissed.

(d)Declarations are made in the form set out in paragraph [22] above.

(e)The applicant and interested parties are awarded costs in the amounts referred to in paragraph [27] and [24] above.

(f)Costs lie where the fall on the recall application.

Cooke J

Solicitors:

S J Scannell & Corporation, Hastings for the Applicant Lawson Robinson, Napier for the Interested Party