Daisley v Whangarei District Council
[2022] NZHC 1372
•10 June 2022
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2015-488-109
[2022] NZHC 1372
BETWEEN MALCOLM JAMES DAISLEY
Plaintiff
AND
WHANGAREI DISTRICT COUNCIL
Defendant
Hearing: 2-6 August, 9-13 August, 16-17 August, 1 December and
15 December 2021
Counsel:
J A Farmer QC and E L Smith for plaintiff
P A Robertson and S M Mautner for defendant
Judgment:
10 June 2022
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 10 June 2022 at 3.30pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Tailored Legal Solutions Ltd, Dargaville for plaintiff Heaney & Partners, Auckland for defendant
DAISLEY v WHANGĀREI DISTRICT COUNCIL [2022] NZHC 1372 [10 June 2022]
INTRODUCTION
Mr Daisley buys a quarry [1]
The Council acts to stop the quarrying [4]The Council insists the quarrying activity is unconsented [6]
Ms Currie inspects the Council’s files – a 1988 land use consent is found [9] Mr Daisley sells the quarry – the Council grants Ark a variation to the 1988 LUC [12] Mr Daisley sues the Council [13]
The Council denies Mr Daisley’s claims [17]
The claim against Mr Daisley’s former lawyer [18] SUMMARY OF FINDINGS [21]
THE FACTS [30]
Mr Daisley’s contracting experience and plans [31]
Vertical integration of quarrying with the contracting business [34]
Buying the Knight Road property [37]
The Council issues a LIM saying no resource consent had been found [42]Mr Daisley starts removing the stockpile – the Council says, “Stop!” [44]
The Council issues further abatement and infringement notices [51]
The March 2006 resource consent application [61]The mineral rating issue [64]
The Council requires Mr Daisley to notify the application [70]
The evidence in support of the application [72]The Council opposes the resource consent application [76]
The resource consent application is refused [79] The significance of the Council’s repeated denials that a consent existed [83] The terms of the 1988 land use consent [86]
The Ark existing use and resource consent applications in 2011 [90] The Council grants Ark’s application for a varied 1988 LUC [96] The counterfactual [98]
The 1988 LUC was not unconstrained [98]
But the Council would probably have granted Mr Daisley an amended consent [101] The Council continues its attempts to prevent quarrying by Mr Daisley [102] The Council applies for an enforcement order under the RMA [107]
The enforcement proceedings in the Environment Court [110] THE PLEADINGS [114]
Three causes of action are pleaded [115]
The alleged statutory duties [117]First cause of action – breach of statutory duty by carelessness [120]
Second cause of action – common law negligence [123] The Council’s pleaded response to the first and second causes of action [126]
THE CLAIMS IN NEGLIGENCE
The elements of a negligence claim [133]
Enforcement of a statutory duty by a private law claim for damages [134]
The general principles [136]
Breach of statutory duty by carelessness [137]
A common law duty of care informed by the statutory duties [142]
Is a common law duty of care available under the RMA? [144]
Did the Council owe Mr Daisley a common law duty of care? [150]
The relevant statutory duties [154]
Section 35 of the RMA [154]
Section 322 of the RMA [155]
Does a breach of the Council’s admitted duty under s 35 exist independently of a breach of
s 322(4)? [156]
Privative provisions in s 41 LGOIMA [175]
Common law duties are imposed on the Council in regard to information about resource
consents [181]
Was the Council negligent in breach of its common law duties of care? [187]
Where and how was the record of the 1988 LUC held by the Council? [187]
How readily discoverable was the consent file in 2005? [191]
The archiving of the 1988 LUC [206]
The Land Information Memorandum November 2004 [211]
Issuing the first abatement notice on 21 February 2005 [215] What should Mr Barnsley have done before issuing the first abatement notice? [218] What happened after the abatement notice was issued? [227]
When did the Council breach its common law duties to Mr Daisley? [230]
Proof of damage [232]
Continuing breach and continuing loss [238]
Summary of conclusions thus far [241]
Contributory negligence and causative potency [244]
Contributory negligence [247]
The Council’s submissions [252]
Mr Daisley’s position [267]
Conclusions on contributory negligence and causative potency [271]
Conclusions on negligence cause of action [276]
THE CLAIM FOR EXEMPLARY DAMAGES
Third cause of action – misfeasance in public office [279]
The Council’s response to the misfeasance allegations [287] Did any Council officer know the consent existed? [297] Did the Council have corporate knowledge of the granting of the consent? [309] Were the Council’s officers wilfully blind or reckless [313] The Council’s persistent view: Mr Daisley had to prove that a consent existed [324] Conclusion on misfeasance exemplary damages claim [335] Exemplary damages awarded [341]
AFFIRMATIVE DEFENCES [346]
The Council’s defence under the Limitation Act 1950 [351] Did the negligence cause of action accrue only when the 1988 LUC was discovered? [355] The development of the reasonable discoverability doctrine [360]
Consideration of reasonable discoverability in New Zealand caselaw [365]
The proceeding is not barred by s 4 of the Limitation Act 1950 [374]
Section 28(b) Limitation Act – plaintiff’s alternative argument [381] QUANTUM [401]
Loss of profits considerations [406]
How should Mr Daisley’s losses be assessed? [407]
The Daisleys’ business model [411]
Mr Daisley’s oral agreement with Bruce Patterson [423] The geology – what was the capacity of the quarry to support Mr Daisley’s plans? [436] Mr Andrew Loader [439]
Mr Steven Price [444]
Mr Sandy Ormiston [450]
Steven Price reply brief [463]
Joint statement on geological issues [465]
Conclusions on extent of available mineral resource [472]
Support for the Daisleys’ business model [476]
Critique of Daisley/Patterson proposed business arrangement by Council witnesses [481]
Mr Bernard Chote [481]
Mr Vincent Pooch [487]
The response to the Council’s views [490]
Findings about how the Daisleys’ business model might have operated [494] Getting the quarry up to full operating capacity [499] Demand, potential sales and pricing [503]
Mr Patterson’s calculations [514]
Assessment of potential revenue and earnings before tax [521]
Estimated demand for product [521]
Estimated costs of production [535]
Assumptions underlying the revenue assessment [538]
Estimating the costs of production [543]
Estimated total net earnings before tax [545]
Adjustments to take account of the assessment risks [546]
Resource consent conditions [549]
Decision on loss of profits [550]
Loss of value of business operations/goodwill [551]
Damages for loss of the value of the land [555]
General damages for distress resulting from financial difficulties [560] Damages for direct losses and expenses incurred in responding to the Council’s actions [561] Claim for interest [564]
ORDERS [566]
Settlement with Mr Daisley’s former lawyer [567]
Costs [568]
INTRODUCTION
Mr Daisley buys a quarry
[1]In December 2004, Mr Jimmy Daisley bought a quarry.
[2] The quarry was part of a farm property at Knight Road, Ruatangata near Whangārei (the Knight Road property) and Mr Daisley was aware that it had been operated for several decades as, among other things, a source of metal for subdivisional activity undertaken by the vendors, Barry and Glenise Drake (the Drakes). Mr Drake had represented to Mr Daisley, correctly, that the quarry operations conducted on the property had not been challenged, disputed or prohibited at any time. It was a condition of the sale and purchase agreement that the Drakes, for a period up to four months from the settlement date, were entitled to use the stockpiled metal and undug metal in the quarry for maintenance and roading on an adjoining property that the Drakes were then subdividing.1
[3] Rule 28.6(a) of the Whangārei Proposed District Plan permitted the removal or disturbance of up to 500 bank cubic metres (BCM) of brown rock or other materials in any 12-month period without a resource consent, but Mr Daisley had bigger plans.2 He intended not only to extract metal from the quarry for use in his own earthworks contracting business, Daisley Contracting Limited (Daisley Contracting), but also to sell quarried minerals commercially to local farmers and other contractors.
1 In this judgment, the terms “material”, “metal”, “minerals”, “aggregate” and “rock” are used interchangeably to refer to the organic material extracted from a quarry without specifying, unless relevant, the type of rock concerned.
2 Aggregate in its original state in the ground is measured in terms of bank cubic metres. A “bank cubic metre” (BCM) is the volume of one cubic metre of material in situ prior to blasting and excavation. For resource consent purposes, the permitted extraction rate is conventionally expressed in terms of BCM. When exploited by extraction, the in-situ material is blasted and, unless it is being sold on a “run of pit” basis, then crushed into various sizes (depending on intended end use) and graded before being stockpiled and loaded onto trucks for transportation. “Run of pit” metal is that which is taken directly from the site by an excavator or wheel loader without requiring further crushing or processing. Around 15 per cent of the extracted material, measured in loose cubic metres (LCM), is wasted during the crushing or processing of the loose rock. The conversion rate from BCM to LCM varies depending on the type of material, but one BCM is said to convert to around 1.55 LCM on average. Because the material is priced per tonne, it is necessary to apply a conversion rate for cubic metres to tonnes; the rate varies according to the nature of the material but I have taken a conversion rate of 2.4 to convert the volume of material in situ (BCM) to tonnage as preferred by the Council’s experts and accepted by Mr Daisley’s expert, Mr Price.
The Council acts to stop the quarrying
[4] On 4 February 2005, however, only seven weeks after Mr Daisley took over the Knight Road property, Mr Gary Barnsley, a monitoring officer in the environmental services section of the Whangārei District Council (the Council), issued to Mr Daisley a letter requiring him to cease quarrying activity on the property until resource consent had been obtained.3 On 21 February 2005, Mr Barnsley, in his capacity as an enforcement officer appointed by the Council under the Resource Management Act 1991 (the RMA), issued an abatement notice under s 322(1)(a)(i) of the RMA directing Mr Daisley to cease the use of the Knight Road property for the disturbance or removal of all brown stone and other material in excess of 500 BCM in any 12-month period. Mr Barnsley threatened enforcement action under the provisions of the RMA.
[5] The stated reasons for the abatement notice included the assertion that the removal of the material from the Knight Road property was neither expressly allowed by a resource consent nor an existing use right.
The Council insists the quarrying activity is unconsented
[6] Thus began a long-running legal dispute between Mr Daisley and the Council over Mr Daisley’s right to operate the quarry. Over the ensuing five and a half years, the Council issued further abatement and infringement notices and began enforcement action in the Environment Court. Mr Daisley took action to set the notices aside and opposed the enforcement proceeding but the Council maintained its position that his quarrying activities were unlawful.
[7] When Mr Daisley applied in March 2006 for a resource consent to remove 50,000 BCM of material from the quarry each year, the application was opposed by Council officers. It was refused on the grounds that no prior resource consent existed for quarrying activities on the site and no written confirmation of any existing use rights had been issued by the Council. It was said that a new consent for quarrying
3 The letter was addressed to Mr Daisley because it was apparent to Mr Barnsley that the quarrying activity had been undertaken by Daisley Contracting. A similar letter was sent to Mr Drake “as the legal owner” of the property, the Council then being unaware of the transfer to Mr Daisley on 24 December 2004.
would adversely affect the existing amenity, given the Council’s plans to encourage the development of lifestyle housing blocks in the area.
[8] Mr Daisley continued to contest the Council’s position, at considerable cost in time and money, but never realised his plan to establish a significant commercial quarry at the Knight Road property. In July 2009, under pressure from Westpac Bank to retire his increasing indebtedness to the bank, Mr Daisley resolved to sell the property.
Ms Currie inspects the Council’s files – a 1988 land use consent is found
[9] Meanwhile, the Council was continuing with its enforcement action against Mr Daisley for his allegedly repeated breaches of the abatement and infringement notices. On 18 September 2009, Ms Laura Currie, a lawyer employed by Mr Daisley’s then solicitors, sent an email to Council officer Mr Barry Shortland attaching a copy of the title to the Knight Road property. Ms Currie said she wished to view:
… all files relating to the quarry operation, including rates, any infringement notices, mineral extraction records etc.
[10] Within 30 minutes of receiving Ms Currie’s emailed request, Mr Shortland rang her office to say that he had found five files from the property and that there were three more he was recovering from the archives. When Ms Currie inspected the files on Monday, 22 September 2009, she found a 1987-1988 file that included the records of a successful application for the Council’s consent to operate a quarry for the extraction of red brown rock on the Knight Road property. A land use consent (the 1988 LUC) under s 72 of the Town and Country Planning Act 1977 (the TCPA) had been issued in February 1988 to the then lessees of the quarry, Henry and Charles Adams (the Adams brothers). The 1988 LUC was not limited by time and it is now common ground between the parties that such rights as may have been conferred by it ran with the land. The circumstances of the storage of the 1988 LUC are addressed more fully at [187] to [205].
[11] Mr Daisley’s affidavit filed in opposition to the Council’s enforcement proceedings on 28 September 2009 contained copies of the Council’s records proving the issuing of the 1988 LUC. In response, the Council withdrew the last abatement
notice issued on 28 November 2008 and the subsequent infringement notices, but the legal battle between Mr Daisley and the Council over Mr Daisley’s right to operate the quarry did not end then and there. The enforcement proceedings continued until they were withdrawn by the Council on 4 July 2011.
Mr Daisley sells the quarry – the Council grants Ark a variation to the 1988 LUC
[12] On 2 December 2009, the day before an intended mortgagee sale of the Knight Road property, Mr Daisley agreed to sell the property to neighbours Paul and Karen Keller at what Mr Daisley says was a “forced sale” price with a significant 25 per cent reduction on the market value. He says there was no allowance in the price for the value of the quarry because of the ongoing enforcement action by the Council, despite Ms Currie’s discovery of the 1988 LUC. The transaction settled on 29 January 2010, with the Kellers’ company, Ark Contractors Limited (Ark), registered as the new proprietor. In May 2011, the Council granted Ark a variation to the 1988 LUC (on a non-notified basis) that authorised the annual removal of 50,000 BCM of material from the Knight Road quarry.
Mr Daisley sues the Council
[13] Mr Daisley issued this proceeding by a statement of claim filed on 14 August 2015, just a month short of six years after Ms Currie found the consent.
[14] Mr Daisley says the Council’s repeated denials that a valid consent existed, and its continued obstruction of his intended quarrying activities between February 2005 and January 2010, were unlawful and in breach of the Council’s statutory and common law duties towards him. He claims, moreover, that Council officers were guilty of misfeasance in public office in that they knowingly and deceptively denied the existence of a valid consent, or were wilfully blind to the existence of the consent, and misled the Hearings Commissioner about its existence when Mr Daisley applied for a resource consent in 2006. He also says that the terms of the 1988 LUC permitted the excavation of an unlimited volume of rock over an unlimited period.
[15]As a result, Mr Daisley says he has suffered:
(a)lost earnings;
(b)the loss of a valuable business operation (including goodwill and royalties);
(c)a loss on the value of the Knight Road property; and
(d)the costs associated with resisting the Council’s infringement and enforcement actions.
[16] In their closing submissions in support of the claim, Mr Farmer QC and Ms Smith quantify the losses as totalling $20,945,891. Mr Daisley also seeks awards of exemplary damages, interest and costs.
The Council denies Mr Daisley’s claims
[17] The Council denies Mr Daisley’s claims almost entirely. Although it now admits it was negligent in some respects, it disputes the nature of the duties owed to Mr Daisley. It asserts particularly that Council officers dealing with Mr Daisley did not know about the 1988 LUC, much less deliberately mislead Mr Daisley and others about its existence. The Council argues that, if it is held to have breached any duty to Mr Daisley:
(a)the claims are time-barred;
(b)the operation of a commercial quarry on the Knight Road property was never a viable prospect;
(c)Mr Daisley did not suffer any compensable loss; and
(d)Mr Daisley’s damages claim is, in any event, grossly exaggerated.
The claim against Mr Daisley’s former lawyer
[18] The statement of claim filed in August 2015 named Mr Daisley’s former lawyer as second defendant to the proceeding. Mr Daisley had been advised by his lawyer that he had no basis for suing the Council. In the latest iteration of his claim, Mr Daisley alleged that the lawyer had acted in breach of the implied term of their retainer that they would exercise reasonable care and skill in performing their duties to Mr Daisley, or alternatively that they owed Mr Daisley a duty of care in tort to similar effect. The claim also alleged breaches of fiduciary duty.
[19] These allegations formed the basis of a claim against the lawyer for damages for the losses suffered by Mr Daisley, consistently with the damages claimed from the Council.
[20] The proceeding against the lawyer was settled by agreement prior to trial and the lawyer was removed from the proceeding. The Council pleads as one of its affirmative defences that, in the event that the Council is found liable to Mr Daisley, any losses claimed against the Council must abate to the extent that those losses have been satisfied by the settlement as between Mr Daisley and his lawyer. That is a matter that will require further consideration in the light of this judgment.
SUMMARY OF FINDINGS
[21] For the reasons given at regrettable length below, I have found the Council liable in negligence to Mr Daisley and awarded him damages.
[22]The Council owed Mr Daisley common law duties of care to:
(a)exercise reasonable care and skill in keeping the records of resource consents reasonably available for inspection;
(b)exercise reasonable care and skill in the provision of information about such matters; and
(c)conduct reasonably diligent inquiries into the existence of a resource consent whenever that was in issue.
[23] The Council breached its common law duties to Mr Daisley continuously from November 2004 to September 2009 by:
(a)failing to keep a copy of the 1988 LUC in its register of the current files related to the Knight Road property so as to make it “reasonably available at its principal office”;
(b)failing through its officers to conduct diligent searches for the existence of a consent:
(i)on 21 February 2005 when the first abatement notice was issued;
(ii)when Mr Daisley made the 2005 application for resource consent;
(iii)when the Council opposed Mr Daisley’s 2006 application for a resource consent on the grounds that there was no existing consent and required him to publicly notify the application;
(iv)at the time of the subsequent abatement notices and the enforcement application to the Environment Court; and
(v)every time the Council provided Mr Daisley with an incorrect response to a request for information about the existence of a consent.
[24] The Council’s negligence was the real and effective cause of loss suffered by Mr Daisley, including:
(a)loss of profits from his inability to establish a commercial quarrying business;
(b)loss of value of the Knight Road property; and
(c)loss incurred through costs directly related to the consequences of the Council’s negligence.
[25] I have disallowed Mr Daisley’s claims to recover losses of goodwill and the value of the quarrying business.
[26]I have held that Mr Daisley was not contributorily negligent.
[27] I have held that the Council was guilty of misfeasance in public office and that it should pay exemplary damages of $50,000.
[28] I have dismissed the Council’s defence under s 4 of the Limitation Act 1950 that the proceeding was commenced out of time, because:
(a)the cause of action accrued continuously from September 2006 until September 2009; or, alternatively
(b)section 28(b) of the Limitation Act applies with the result that the limitation period did not begin to run until September 2009 when Mr Daisley discovered the Council’s equitable fraud in denying the existence of a valid resource consent.
[29]I have awarded Mr Daisley:
(a)damages of $4,089,622 for loss of profits;
(b)damages of $90,000 for loss of the value of the Knight Road property;
(c)damages of $50,000 for recovery of direct costs incurred as a consequence of the Council’s negligence;
(d)interest to the date of judgment; and
(e)exemplary damages of $50,000.
THE FACTS
[30] In understanding the facts and identifying the issues for determination, the starting point must be Mr Daisley’s business background and his intentions in purchasing the Knight Road property.
Mr Daisley’s contracting experience and plans
[31] By 2000, Jimmy Daisley had been in business as a rural and agricultural contractor for some 20 years providing services such as harvesting, haymaking, fencing, trucking, digger operations and similar work. His evidence that he had built a solid and financially profitable business and had developed a good reputation with many loyal clients was supported by evidence from local farmers, developers and contractors. Over time, he built up a farming business alongside his contracting work and acquired property interests with a view to commercial operation and subdivision. By the late 1990s, he owned properties on Maungakaramea Road and Valley View Road near Whangārei. Mr Daisley had also accumulated items of plant such as excavators, tractors, trucks, trailers and other equipment used in the delivery of contracting services and his cartage business.
[32] In 2002, Mr Daisley was joined in the business by his son Scott (together, the Daisleys). They found their respective personalities and skill sets to be complementary with Jimmy focusing on business development, networking, sales and negotiating contracts while Scott acted in the role of a business operations manager, taking responsibility for the delivery of the services for which they had contracted.
[33] Jimmy Daisley was born and raised in Northland, in the Hokianga district, and his business has been centred in rural Northland. He described his experiences of business relationships, arrangements and commitments in rural Northland as being forged on the basis of trust, often on a handshake and often without complete documentation. It was what he called a retention of the “old school” business philosophy of a gentleman’s agreement in which you stuck to your commitments. Although his experience in dealing with the Council over his quarrying plans has
caused him to become slightly more cynical about these matters, he said that his approach was common amongst his business contemporaries up to and including the early 2000s. It was against that background that the Daisleys started to look at the development of their businesses in about 2002.
Vertical integration of quarrying with the contracting business
[34] Mr Daisley explained that, over time, he had extended his business to include the cartage and haulage of products and materials for his clients, including silage, hay, limestone, topsoil and metal for farmers and developers, as well as fencing equipment and building materials for developers and builders. Picking up, carting and depositing truckloads of rock, aggregate, metal and topsoil had become a significant part of the business. By 2002, Mr Daisley was becoming increasingly frustrated with the difficulties in obtaining access to quarries and metal supplies for the purposes of supplying his clients. He said, for example, that the large corporate quarries, such as Winstone Aggregates, would routinely close at 4 pm on weekdays and would not open at the weekends, meaning that smaller operators such as he could not compete with the larger corporate contracting businesses for priority in supply.
[35] The Daisleys decided that it would be helpful to the business, and also to other local contractors with whom they had good working relationships, to have access to a privately owned quarry that was not within the control of the large corporates. That way, access could be guaranteed to their customers, pricing would be competitive and sympathetic, and they would not experience the same delays in waiting for the delivery of services.
[36] Mr Daisley considered that they had the equipment required to operate a small- to-medium sized quarry, to meet client demand for quarried material and provide a source of metal for other contractors to supply their clients. Mr Daisley spoke to a local real estate agent, Mr Parry, who was familiar with the rural market in Northland and let him know what he was looking for.
Buying the Knight Road property
[37] Around that time, Mr Parry told Mr Daisley about the Knight Road property. Mr Parry said that it was essentially a farming property, which had been part of Mr Drake’s family farm for generations. He said there was an operational quarry on the farm that had not yet achieved its potential; the advertisement specifically referred to “a metal pit for contractors”. Mr Daisley said that, when he inspected the property, he was surprised to find that it was a good size and that the quarry was “pretty much in the middle of it”. He could see that it had been operated over time and that there were some reasonable faces available to operate with various levels of rock available in the stockpiles and in the face of the quarry.
[38] Mr Parry showed Mr Daisley a copy of the rates assessment and tax invoice for the first instalment of mineral rates for the 2004 to 2005 rating year. He explained that those rates applied to the quarry only and that rates were separately payable on the balance of the land.
[39] The vendor, Mr Drake, explained to Mr Daisley that the property had been in his family for several decades, having first been leased from the Crown and then owned from about 1961. Mr Drake’s father had opened the quarry in 1964 and the quarry had continued to operate in the 1980s when Mr Drake took over the farm. Mr Drake said that the Council had been carting metal out of the quarry for use on local roads and that other contractors had leased the quarry from him over the 1980s and 1990s. He did not have any interest in the operation of the quarry himself, but he did see it as an asset to the community. Mr Drake was not aware of any formal consent for the operation of the quarry but said that he was not sure it needed one because it had been established since the 1960s. Mr Daisley was satisfied, however, that the Council knew about the quarry because Mr Drake had told him that the Council had been using it to obtain metal for local roads and because of the mineral rates
assessment.4 Mr Drake said there had never been any issue with the operation of the quarry.
[40] Around this time, farm properties in the locality were being converted into lifestyle blocks and Mr Drake had subdivided and developed a number of properties with the driveways, accessways and private roads being formed by metal from the Knight Road property.
[41] Discussions with the Northland Regional Council encouraged Mr Daisley to believe there would be no difficulty in operating the quarry, as most of the environmental issues regarding the waterways could be mitigated or overcome. Mr Daisley then discussed the proposed purchase with an experienced Auckland contractor and property developer, Mr Bruce Patterson, who was a long-standing friend. Mr Patterson had also experienced difficulty with ready access to rock and aggregate for his developments and he confirmed that the quarry on the Knight Road property had viable commercial potential. I address more fully below the proposals Mr Daisley and Mr Patterson developed for Mr Patterson to have priority access to metal from the Knight Road property.
The Council issues a LIM saying no resource consent had been found
[42] On 11 November 2004, at Mr Daisley’s request, the Council provided a Land Information Memorandum (LIM) under the Local Government Official Information and Meetings Act 1987 (the LGOIMA). The LIM proved to be misleading in two significant respects in stating:
5: ANY PERMIT, CONSENT, CERTIFICATE, NOTICE, ORDER OR REQUISITION AFFECTING THE LAND OR ANY BUILDING ON THE LAND PREVIOUSLY ISSUED BY THE WHANGAREI DISTRICT COUNCIL:
No information applicable to this property was found.
…
4 Mr Drake did not give any evidence about Council use of material from the quarry, and his letter of 25 February 2005 in support of Mr Daisley’s first resource consent application did not refer to it. See [441] below, however, where there is an account of the Council’s predecessor, the Whangārei County Council, having operated the quarry for a period. Mr Drake confirmed to Mr Daisley that the Council had insisted on maintaining a mineral rates levy on account of the commercial use of the quarry.
7: INFORMATION RELATING TO THE USE TO WHICH THE LAND MAY BE PUT AND ANY CONDITIONS ATTACHED TO THAT USE:
No information applicable to this property has been found.
[43] Mr Daisley says he was not surprised to find that the LIM contained no notice regarding consent for the quarry. He had accepted that the Council was aware of the commercial operation of the quarry through the information he received from Mr Drake and believed he would have, at least, existing use rights.
Mr Daisley starts removing the stockpile – the Council says, “Stop!”
[44] The purchase of the Knight Road property was settled for a price of $520,000. To meet the purchase price and fund his business activities generally, Mr Daisley arranged bank facilities with Westpac Bank that included a term loan of $430,000 and an overdraft of $60,000, along with other facilities. The arrangements were secured by first mortgages over properties held by Mr Daisley at Maungakaramea Road and the Knight Road property, together with a general security agreement over plant.
[45] The transaction was settled on 24 December 2004. During January 2005, the Daisleys worked the Knight Road quarry, principally transporting stockpiled metal to Mr Drake’s subdivision as agreed in the sale and purchase agreement. That activity generated neighbours’ complaints to the Council which prompted Mr Barnsley to visit the property on 3 February 2005 and issue his cease and desist letter of 4 February 2005. Mr Daisley was annoyed and confused by Mr Barnsley’s allegations that he had extracted more than the 500 BCM of material permitted under the District Plan without a resource consent. He said that the only work he had done on the property since settlement was to begin moving the stockpile for Mr Drake and doing preparatory work on the quarry prior to beginning excavation. Since he had not excavated any material, he considered he was within the annual limit and felt he had been stopped from quarrying before he could even get started.
[46] Mr Daisley says that he believed at the time, and remains convinced, that the letter and subsequent abatement notice, and other action taken by Mr Barnsley, were vindictive and spiteful. He says that in previous dealings he had not seen eye to eye with Mr Barnsley on a number of things and that Mr Barnsley had conducted himself
like a schoolyard bully. As a result of their clashes in the past over other properties he owned, Mr Daisley said there was no love lost between Mr Barnsley and him.
[47] Mr Barnsley recorded in a file note dated 21 February 2005, the day of the first abatement notice, an allegation that another Council officer, Andrew Lucas, and he were threatened and verbally abused by Mr Daisley while in the process of serving the abatement notice on him. They had attended at Mr Daisley’s office in Maungakaramea Road at a pre-arranged time and, according to Mr Barnsley’s note, discussed Mr Daisley’s quarrying activities in a fairly calm manner. Mr Barnsley said that initially Mr Daisley was accepting of the Council’s determination that resource consent was required, although he did not agree with that position, but became very agitated and threatening when Mr Barnsley produced the abatement notice. Mr Barnsley said that Mr Daisley brought into question his “birth, heritage and parentage”, using profanities and displaying a very aggressive manner. They left when told by Mr Daisley in no uncertain terms that they should leave the property.
[48] The next day, the team leader in the monitoring and policy section of the Council, Mr Grundy, rang Mr Daisley about the reported incident. He recorded that he had told Mr Daisley that abusive language and threatening behaviour towards Council staff was not acceptable, but Mr Daisley started yelling and screaming, describing Mr Barnsley in profane terms.
[49] When cross-examined at the hearing by Mr Robertson on behalf of the Council, Mr Daisley denied that he had behaved in that manner. He also denied abusing Mr Grundy in the subsequent telephone conversation.
[50] Since Mr Barnsley and Mr Grundy did not give evidence, the recorded accounts of their interactions with Mr Daisley could not be tested, but I am satisfied on the evidence that there were heated exchanges, consistent with a fraught relationship between Mr Daisley and Mr Barnsley at a very early stage of the quarry operation.
The Council issues further abatement and infringement notices
[51] After the first abatement notice was issued on 21 February 2005, both Mr Daisley and Mr Drake wrote to the Council challenging the notice. Mr Daisley promptly made a resource consent application on 5 March 2005, but it was rejected as being incomplete. The Council explained what information was required for the application to proceed.
[52] On 16 March 2005, Mr Drake wrote a letter to the Council setting out something of the history of the use of the quarry, which he said had varied from year to year because of weather and the rural economy. He estimated that output varied from approximately 1,000 BCM per annum to 20,000 BCM per annum. He considered the quarry to be an asset to the area given that “good brown metal suitable for farm use” was no longer available from either of the nearby Kara quarries.
[53] He said that the Daisleys had gone out of their way to keep neighbours informed of the progress being made with the clean-up of the quarry, the widening of the road and culverts and the building of silt ponds. Noting that his wife and he live close to the quarry, he said they gave their full support for the continuing operation.
[54] Mr Daisley lodged an appeal against the first abatement notice and obtained a stay of the abatement notice to 30 September 2005.
[55] Mr Daisley had appointed Mr Alf Morris as quarry manager. Mr Morris had previously worked at the quarry and lived in the house that was closest to the quarry at that time. He could see right into the quarry and did not find it intrusive. The continued work on the quarry under the stay drew further complaints from other neighbours, however. In Mr Morris’s view, the complaints were exaggerated; he said he could rarely hear the noise from the quarry in his house.
[56] Many exchanges of correspondence followed between Mr Daisley’s lawyers and the Council over the abatement notice and the operation of the quarry generally. Mr Daisley’s lawyers prepared the documents necessary to make a further resource consent application and sought an extension of the stay pending the filing of a resource consent application to the Council. Despite the opposition of the Council, the stay was
extended until 15 November 2005 but, on 14 November 2005, the Council reported to the Environment Court that the abatement notice had been directed to the wrong property; the notice was subsequently withdrawn. The Council noted, however, that fresh abatement proceedings would be instituted against Mr Daisley in relation to “the correct property” as the Council considered that a resource consent was required for the activity then being undertaken by Daisley Contracting. A further abatement notice was issued on 16 November 2005.
[57] Infringement notices were served upon Mr Daisley on 22 December 2005, despite complaints by the Daisleys that they had not received copies of the original abatement notice.
[58] On 10 January 2006, Mr Lucas, a member of the Council’s monitoring team, wrote to Mr Daisley saying that since Mr Daisley had first been informed of the need to obtain resource consent for his operation on 4 February 2005, and had not formulated a consent application in the following 11 months, quarrying activities on the site must cease. A further infringement notice was issued on 26 January 2006. The Daisleys considered that the Council had overlooked the start of a new year and believed that they had a new annual permitted activity allowance of up to 500 BCM available for extraction as of right under the District Plan.
[59] Nevertheless, they continued their preparation of a resource consent application, which included obtaining experts’ reports in respect of noise, vibration, effects on amenities and landscape values, and engineering reports for the proposed benching of the excavation cuts. They were also required to formulate a quarry management plan.
[60] On 17 February 2006, blasting was carried out at the quarry to satisfy the requirements of the Northland Regional Council in the maintenance of the property, including providing a sediment pond, and also to determine the depth, quality and availability of good quality rock.
The March 2006 resource consent application
[61] On 24 March 2006, because of the denials by the Council that a consent existed, a 10-page application was made on behalf of Daisley Contracting for a resource consent to extract up to 50,000 BCM of minerals, including 10,000 BCM of topsoil and overburden during each 12-month period. The application was supported by a 10-page quarry management plan (the 2006 Quarry Management Plan) with an attached sketch map dated 14 October 2005 and labelled Future Quarry Map. The Plan was intended to manage the potential environmental effects of expansion of the existing quarry. It recognised that consent was also required in terms of both the Regional Water and Soil Plan and the Revised Proposed Whangārei District Plan.
[62]The 2006 Quarry Management Plan noted:
The material historically extracted from the quarry is primarily heavily weathered and fractured greywacke (brown rock), although some underlying blue rock is expected to be encountered during expansion of the working faces.
[63] The question of whether the quarry had been, and was at the time of the application, operational was an issue identified by Council officers when the application was filed. Mr Daisley’s proposal referred to the quarry having been registered with the Mines Department as Drakes’ Quarry and noted that Quotable Value New Zealand (QV) recorded an average extraction of 5,600 BCM per annum, meaning that existing use rights applied under s 10 of the RMA. It was suggested in the application that it was unlikely that extraction would reach the proposed maximum volume during normal operations and that traffic volumes were calculated to comply with a proposed limitation of 30 daily movements. Other suggested limitations related to the environmental impact of the quarry were included in the proposal and an application for consent under the Regional Water and Soil Plan was lodged with the Northland Regional Council. The initial summary of the application prepared by Council officers noted that it was claimed that quarrying operations on the site had “been undertaken over the last 41 years to varying degrees”.
The mineral rating issue
[64] On 4 April 2006, however, Mr Lucas sent an email to Mr Daisley’s planning consultants saying:
The Monitoring Team have noticed a discrepancy with Daisley’s application for a quarry on Knight Road. He claims the quarry is Drakes Quarry, and has been used by roading and various others during its history. There is, however, one small problem with this claim - Drakes Quarry (used by roading and various others) is on Drake Road, about 15km northwest of Daisley’s highly illegal quarry on Knight Road.
[65] Mr Lucas referred to a mistake having been made in the rates assessment for the Knight Road property by QV. He suggested that the volumes of extracted minerals referred to in Mr Daisley’s application related to the “Drakes Quarry” that was not located on Mr Daisley’s property and that such volumes could not, in any event, have come from Mr Daisley’s Knight Road quarry. He said the matter was being investigated. Notwithstanding that claimed error, the Council continued to invoice Mr Daisley for mineral rates.5
[66] Quotable Value responded to Mr Lucas on 29 September 2006 about the possible confusion in extraction volumes reported in its records. A valuer engaged by QV said that, after comparing QV’s historical extraction tonnage figures held on its file with those of the Ministry of Commerce, it appeared that the extraction figures supplied to QV:6
… may have inadvertently been in relation to the quarry on Drakes Road rather than the Daisley Quarry, often referred to as Drakes quarry.
[67] QV concluded, however, that because the records held by QV were historical, there was no way of confirming the disparity “to a certainty”. The letter concluded:
Regardless of these factors, we are happy that value [sic] given to the Mineral assessment of the property is an accurate reflection of the mineral interest as at 01 September 2003.
5 The invoice dated 15 July 2006 levied a sum of $391 for the first instalment in the rating year ending on 30 June 2007.
6 This point is confirmed by Mr Andrew Loader, a former inspector of mines, who gave evidence that the quarry on the Knight Road property was “commonly known as Drakes [sic] Quarry (as opposed to Drakes Road Quarry)”. See [441] below.
[68] On 19 June 2006, the Council told Mr Daisley that it would not progress the resource consent application until the Regional Council’s consent regarding the diversion of water courses was resolved.
[69] While Mr Daisley’s planners addressed the issues raised by the Regional Council, the Whangārei District Council received further complaints about quarrying activities on the Knight Road property. The Council said it had decided not to take further enforcement action pending the granting of a resource consent application.
The Council requires Mr Daisley to notify the application
[70] On 15 September 2006, the Council determined that the effects of the quarrying proposed in Mr Daisley’s resource consent application would be more than minor and that it was necessary to publicly notify the application.
[71] A judicial committee of the Council conducted a hearing of the application on 28 November 2006, eight months after it had been lodged.
The evidence in support of the application
[72] Mr Daisley’s submission in support of the resource consent application noted that the request for consent had been modified to a maximum extraction of up to 30,000 BCM of material in each 12-month period, allowing for a further 10,000 BCM of overburden and topsoil to be removed or relocated. The submission addressed the existing use claims, referring to Mr Drake’s evidence and to the mineral rates assessment having been imposed on the property since “at least 1975”, consistently with the reference to mineral interests in the legal description of the property. Mr Daisley acknowledged the confusion between the rating records of the quarry on the Knight Road property and the quarry at Drake Road and suggested that it was probable both were legitimate quarries with existing use rights. Mr Daisley noted that Mr Morris had been employed at the quarry for two decades. The submission also addressed the issues regarding blast noise, vibration and land stability, traffic noise and dust and the environmental impact which he said would be minimal.
[73] Mr Morris’s statement supported the application and discussed the extent of prior quarrying activity over the 20 years of his involvement. Mr Drake’s evidence was to a similar effect. He said:
The quarry has been used for farm and local roading metal since 1965. The site is ideally suited for such an operation. We commend the Daisley team on their efforts to get this farm quarry up to standard, and the behaviour of the trucks on the road. The problem of dust in Knight Rd. is not Daisleys problem any more than anybody else using the road.
[74] A resource planner engaged by Mr Daisley, Mr Murfitt, gave evidence outlining the history and characteristics of the site and, notably, commented on what he considered to be the relevant permitted baseline. Mr Murfitt’s conclusion was that the activity had been established and had been in continuous use since 1965 and that the effects of the activity formed part of the working rural environment. He considered that the site was an appropriate one for expansion wherever possible to avoid adverse effects and that, because the District Plan made specific provision for this activity as a restricted discretionary activity, there was no need to undertake a plan change as suggested by the Council’s planner.
[75] Mr Murfitt said the future environmental effects would be no more than minor. He concluded overall that the effects of the proposal “would be the same or similar in character, intensity and scale as currently experienced when the activities were operated in terms of the mitigation measures outlined in the proposed management plan”. In Mr Murfitt’s view, the proposal was not contrary to the relevant objectives and policies in the District Plan and represented sustainable management of an important resource as intended by s 5 of the RMA.
The Council opposes the resource consent application
[76] In their submissions, the Council’s representatives asserted that no resource consent currently existed for quarrying activities on the site and no written confirmation of any existing use rights had been issued by the Council under s 139A of the RMA.
[77] The Council’s summary of the submissions raised in opposition to the application, including by Council officers, included claims that:
(a)given the number of existing quarries in the area, the demand for further quarries had not been demonstrated and the volume of material within the site had not been determined;
(b)the traffic would have impacts on both the safety and physical condition of Knight Road and it was likely that more than 30 vehicle movements would result;
(c)insufficient consideration had been given to current and future residents and land use, and the fact that the character of the area had changed and was continuing to change into lifestyle development;
(d)the activities would generate noise effects on a countryside environment, including both residents and animal life, and the acoustic report had not taken into account the amphitheatre effect of the setting;
(e)considerable amounts of dust would be created by quarry traffic, having an effect on nearby houses and their roof water supply in what was described as a “high wind zone”;
(f)the hours of operation were too long and open during the weekend and holidays causing constant disturbance, particularly for nightshift workers who require it to be quiet during the day;
(g)the proposal would have adverse visual impacts and scar the surrounding landscape, bush and mountains;
(h)the activity would affect several covenanted bush blocks in the vicinity and regenerating wildlife corridors, and no ecological report had been supplied with the application;
(i)the establishment of the quarry activity at the scale proposed would affect the resale value of nearby properties;
(j)land stability issues existed in the area and surrounding properties may be further affected by blasting and vibration from rock-crushing machinery;
(k)security of hazardous material, machinery and explosives was an issue as access to the site was very easy;
(l)there had been no iwi consultation;
(m)not enough of a buffer zone was provided for the proposed scale of activity; and
(n)the existing water tables would be disrupted and the sediment control measures may affect water bodies.
[78] That these issues were raised by objectors and the Council highlights the difficulties faced by Mr Daisley in being forced to argue an application for consent to a new activity rather than an application for variations to the conditions of an existing activity intended to address environmental impact concerns.
The resource consent application is refused
[79] The decision of the Hearings Commissioner refusing the resource consent application was released on 2 February 2007. The reasons given for the refusal were:
(a)there would be significant adverse effects from road traffic that were considerably greater than those expected from typical use of a rural property;
(b)the proposed activities did not sit comfortably within the surrounding environment and the incompatibility would become more pronounced as the surrounding environment became fully developed for its intended lifestyle outcomes;
(c)conflict between the incompatible nature of the quarrying and an intensive pattern of development that was in place regarding the locality would not be avoided;
(d)a limitation to 30 traffic movements per day was “not a particularly helpful matter in relation to the permitted baseline assessment for the proposed activity”;
(e)the objectives and policies of the District Plan concerning amenity values, minerals and mineral extraction area rules generally did not support “the establishment of quarrying activities of the scale proposed” in the locality;
(f)the nature and scale of the proposed activities were not remedied or mitigated in terms of the maintenance and enhancement of amenity values and the quality of the surrounding environment.
[80] The Hearings Commissioner recorded that the question of existing use rights was the subject of considerable discussion and evidence at the hearing. He noted that Mr Drake had given evidence about the use of the quarry since 1965 but said that Mr Drake “was also very clear that no consents were obtained at that time”. It was said that Mr Drake had taken over the property in 1978 and did not think any consent was required to continue activities. It was also noted that the Council began rating the property as a commercial quarrying operation during the 1980s. While observing that there was conflicting and inconclusive evidence regarding the rate of extraction of minerals from the site up to the time of the application, the Commissioner said:
No resource consent currently exists for quarrying activities on the site and no written confirmation of any existing use rights under section 139A of the Act has been issued by the Council.
[81] It is clear from the detailed reasons for the decision that the Commissioner considered that the use to which the quarry had been put previously was relatively low-scale. He said:
Despite the difficulty in determining whether or not existing use rights can be claimed, at best the applicant appeared to be claiming a minimum of 6,000m3 per annum. This figure is well short of the revised 40,000m3 figure the subject of the current application. Insufficient information was put forward to enable an assessment of the character, intensity and scale of effects and the difference if any between the 1965 operations and the more recent operations.
[82] The Commissioner said it was largely academic what activities had taken place in the past because the application did not rely exclusively upon any existing use rights and that the application had been lodged for an increase in activities. Thus, it was said, the proposal needed to be considered and determined “on its merits”. I infer that the Hearings Commissioner meant that the application would be addressed as if there was no consent or presumption in favour of Mr Daisley. It was concluded that, although quarrying activities had taken place on the site in the past, the scale of those activities and the effects had varied from year to year and that any existing use rights that might have been proven would not, on the evidence presented, avoid the necessity for a resource consent for the activities then being sought by Mr Daisley.
The significance of the Council’s repeated denials that a consent existed
[83] The Council’s insistence throughout 2005 and 2006 that no prior consent for the quarrying existed required Mr Daisley and his advisers to focus attention on existing use principles. That meant that Mr Daisley carried the burden of proving the extent of the existing use.7
[84] But if the Council had acknowledged in 2006 that Mr Daisley had the benefit of a consent granted in 1988, the nature of the inquiry into the implications of the quarrying proposed by Mr Daisley would have been altered fundamentally. Instead of approaching the notion of commercial quarrying on a scale not previously undertaken against the background of a district plan that encouraged the development of residential lifestyle blocks, the Hearings Commissioner would have been obliged to consider an existing consent to quarry that ran with the land and, therefore, was available to Mr Daisley as the owner.
7 Britten v Auckland Council [2011] NZEnvC 357 at [8]–[13]. See the fuller discussion of the issue of the burden of proving existing use and prior consent at [324]–[331].
[85] The point is best illustrated by pausing in the narrative of relevant events and considering the markedly different approach taken by the Council in addressing the application made by Ark, the purchaser of the Knight Road property from Mr Daisley, when it applied in May 2011 for a resource consent amending the terms of the 1988 LUC. It is first necessary to understand the terms of the 1988 LUC which provide the background.
The terms of the 1988 land use consent
[86] The 1988 LUC was granted in terms of the application made by the Adams brothers, which was to operate a quarry for the extraction of red brown rock. The site of the proposed quarry was described as being “in a gully approximately 300 metres from Knight Road with the working face 30 metres from a small stream”.
[87] Comments received from the Northland Catchment Commission indicated that the Adams brothers could have considerable difficulty in containing overburden. The planning officer recommended approval of the application subject to obtaining consent from the Northland Regional Water Board in regard to the methods to be used for removing and replacing soil.
[88] Moreover, and importantly, Mr Daisley’s claims to recover losses because he was prevented from carrying out commercial quarrying were founded on the proposition that, if the Council had disclosed the existence of the 1988 LUC when Mr Daisley applied for a LIM prior to the purchase of the Knight Road property, Mr Daisley would have been able to carry out quarrying in terms of what he argues was an unconstrained resource consent. Apart from what Mr Daisley submits was an immaterial description of the metal permitted to be taken as “red brown rock”, the 1988 LUC did not impose any conditions that limited the volume of rock that could be extracted, the hours of operation or the period during which the consent applied. The Council’s position is that, at best, the terms of the 1988 LUC would have enabled Mr Daisley to quarry only red brown rock from a limited area of the property that was not the site of his proposed quarrying activity.
[89] The scope of the consent was the subject of debate between the Council and the experienced barrister, Mr Matthew Casey QC, who acted for Ark when it applied
in January 2011 for an existing use certificate with amended conditions and in May 2011 for an amended resource consent. Mr Daisley is correct, however, in saying that the 1988 LUC contained no limitation on the volume of material that could be removed from the quarry, either annually or in total.
The Ark existing use and resource consent applications in 2011
[90] On 17 January 2011, Ark applied to the Council for an existing use certificate under s 139A of the RMA, founded on the use of the 1988 LUC. The submissions of Ark’s counsel in support of the application noted, however, that the use that was then being carried out on the land was the quarrying of blue rock rather than red brown rock and that the quarry pit was in a different location on the site from that shown on the plan that accompanied the 1988 application. It is noteworthy that the application was for the extraction of up to 50,000 BCM of material and was based on the 2006 Quarry Management Plan that Mr Daisley had submitted in support of his 2006 resource consent application.
(d)interest in terms of [565]; and
(e)exemplary damages of $50,000.
Settlement with Mr Daisley’s former lawyer
[567] As discussed at [18] to [20] above, Mr Daisley’s claim against his former lawyer was settled by agreement prior to trial. To the extent that any sums recovered from the former lawyer included compensation for losses covered by the award of damages against the Council, Mr Daisley is not entitled to recover twice. I do not
know the amount recovered from the settlement. Counsel shall have until 24 June 2022 to confer and file a joint memorandum or, if agreement cannot be reached, separate memoranda addressing the implications for this proceeding of the settlement. If necessary, I shall issue a supplementary judgment.
Costs
[568] Mr Daisley is entitled to costs which I reserve for the exchange of memoranda. Unless costs can be agreed, Mr Daisley’s memorandum should be filed and served no later than 17 June 2022 and any memorandum from the Council in response shall be filed and served not later than 27 June 2022. Costs shall then be dealt with on the papers unless otherwise indicated.
Toogood J
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