Federated Mountain Clubs of New Zealand Incorporated v Griffin Hydro Limited
[2023] NZHC 2917
•18 October 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001251
[2023] NZHC 2917
UNDER the Declaratory Judgments Act 1908 and Part 18 of the High Court Rules BETWEEN
THE FEDERATED MOUNTAIN CLUBS OF NEW ZEALAND INCORPORATED
Plaintiff
AND
GRIFFIN CREEK HYDRO LIMITED
First Defendant
THE MINISTER OF CONSERVATION
Second DefendantTHE DEPARTMENT OF CONSERVATION
Third Defendant
Hearing: 18 September 2023 Appearances:
M Smith for the Plaintiff
M Wright for the First Defendant
R Elvin and R Fistonich for the Second and Third DefendantsJudgment:
18 October 2023
JUDGMENT OF GORDON J
This judgment was delivered by me
on 18 October 2023 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Crown Law, Wellington
Gilbert Walker, Solicitors, Auckland Rout Milner Fitchett, Solicitors, Nelson
THE FEDERATED MOUNTAIN CLUBS OF NEW ZEALAND INC v GRIFFIN CREEK HYDRO LTD [2023] NZHC 2917 [18 October 2023]
Introduction
[1] The plaintiff, The Federated Mountain Clubs of New Zealand Inc (FMC), seeks a declaration under the Declaratory Judgments Act 1908 as to the interpretation of a concession granted by the second defendant, the Minister of Conservation (the Minister), to the first defendant company, Griffin Creek Hydro Ltd (GCHL).
[2] In 2011, the Minister, via her delegate, granted a concession under pt 3B of the Conservation Act 1987 (the Act)1 in the form of an easement in gross (Concession) to GCHL. The Concession permits GCHL to construct and operate a small, run-of-river, hydroelectric power scheme2 on conservation land3 in the Griffin Creek valley located on the West Coast of the South Island approximately 40 kilometres east of Hokitika. The scheme is not yet in operation. GCHL has constructed an access track but has not yet constructed the hydroelectric plant.
[3] FMC seeks a declaration that the Concession limits the volume of water GCHL may extract from Griffin Creek to 1.2 cubic metres per second (cumecs). A second declaration was originally sought but is no longer pursued as there is now no live dispute.4
[4]The three defendants oppose the declaration.
The parties
[5] FMC was founded in 1931 and advocates both for recreation broadly and the associated environment on behalf of approximately 22,000 members and 100 clubs. FMC says it has a particular interest in Griffin Creek as its members include the
1 At the time the concession was granted the Conservation Act 1987 as at 7 July 2010 applied. The most recent version is as at 24 August 2023. There is no material difference between the two versions for present purposes. Unless otherwise specified, any reference to the Act is a reference to the Act as at 7 July 2010.
2 With a “run-of-river” scheme there is no dam.
3 Conservation land is land held under the Conservation Act 1987 for conservation purposes.
4 In its statement of claim FMC sought a second declaration that: “Condition 9 of the Concession requires GCHL’s extraction of water to cease whenever the flow recorded by the flow-monitoring device above the outlet site (below the powerhouse) specified in Condition 8 falls below 0.8 cubic metres per second (or such other amount in the future determined as the mean annual low flow using the process specified in Condition 9)”. In their statements of defence each defendant admitted that the Concession regulates the residual flow in that manner.
canyoning community, who (since the Concession was granted) have discovered and now use Griffin Creek as a canyoning site.
[6]GCHL has an interest as the Concession holder.
[7] The Minister is the decision-maker who granted the Concession (via a delegate). The third defendant, the Department of Conservation (Department), is the landholder and the administrator of the Concession.
Background
Application for and grant of the Concession
[8] On 8 January 2009, Richard Morgan, the sole director and shareholder of GCHL, made an application on behalf of GCHL to the Department pursuant to ss 17R and 17S of the Act5 (the Application). The Application sought a concession in the form of an easement to construct and operate a hydroelectric power scheme (Scheme) based on Griffin Creek. Parts of the Scheme (headworks, penstock and an access track) would be undertaken on public conservation land managed by the Department. Other parts of the Scheme are on neighbouring land not managed by the Department.
[9] The Application includes a general description of the activity under the heading “E. Description of Service/Activity”, under which the activity is referred to as “The construction and operation of a hydroelectric power scheme based on Griffin Creek which is a tributary of the Taramakau River.”
[10] In the section headed “G. Details of Proposed Activity”, GCHL states that the proposed scheme will generate a maximum output of 1.3 megawatts (MW). There are then details under the sub-heading “Headworks” regarding the: intake; settling tank; monitoring equipment; penstock; and track/boardwalk. There is also reference to the power station, which is to be on adjoining Crown land rather than conservation land,
5 The Application was made under the Act as at 1 November 2008. There is no material difference between ss 17R and 17S in that version and the Act as at 7 July 2010 under which the Concession was granted.
and a river gauge which is to be installed in the creek bed just below the intake to monitor water flow.
[11]Also in section G there is the following:
Residual Flow of Griffin Creek
The average Annual Flow is calculated 2.5 cubic metres per second (cumecs). The Annual Mean Low Flow is calculated at .8 cumecs. These flow rates have been calculated by transposing flow rates from the Taipo River. There is a NIWA river gauge at the Taipo River Bridge 2 kilometres northeast of Griffin Creek. Once the scheme has been fully developed there would be a ‘take’ of
1.2 cumecs.
When in times of low rainfall the flow at the river gauge (below the intake) falls below .6 cumecs (600 litres per second) the automatic control equipment at the power station will be set to shut the turbine down.
[12] It is the last sentence of the first paragraph in the extract above in the Application that FMC relies on as part of its argument that the Concession limits the volume of water GCHL may extract from Griffin Creek to 1.2 cumecs.
[13] Department officials considered the Application and prepared a First Determination Report to the Community Relations Manager West Coast Tai Poutini Conservancy6 dated 26 August 2010 (First Determination Report).
[14] The First Determination Report analyses the Application against the statutory requirements and recommends the delegate, in principle, grant the Concession. The report also contains the following:
Freshwater
The applicant estimates that the mean annual flow and the median annual flow for Griffin Creek is 3.5m3/s (3,500 litres per second) and 2.3m3/s, respectively, and the mean annual low flow is 0.8m3/s (800 litres per second). [Information supplied by email April 6th 2009, which is different from the mean annual flow of 2.5m3/s stated in the application submitted in January 2009.]
6 The Minister’s delegate.
[15]There is also a section on water take as follows:
Water take
Once the scheme has been fully developed, the applicant proposes to divert 1.2m3/s from the stream to the hydropower scheme (48% of the mean annual flow).
The 300kW turbine would require a flow of at least 0.3m3/s and the 1000kW turbine would require 0.9m3/s. The two turbines can be shut down independently as the flow in the creek falls.
To determine the actual flow rates on Griffin Creek, a NIWA approved flow gauge would be installed just below the intake site (but above the settling take outlet/weir outlet) once the hydropower scheme is operational. However, until the actual flow rates are known for Griffin Creek, the applicant proposes to turn off the larger turbine when the residual flow drops below 0.9m3/s and the flow below the intake would increase to just under 1.8m3/s. The smaller turbine would continue to operate. If the flow continued to decrease, the smaller turbine would shut down when the residual flow would be 0.6m3/s.
[16]Under a further heading “Freshwater” in a different section it is stated:
Freshwater
The amount of water proposed to be taken from the creek at the intake point when both turbines would be operating (1.2m3/s) represents 52% of the median annual flow and when the smaller turbine would be operating (0.3m3/s) represents 13% of the median annual flow. The water take of 0.3m3/s to operate the smaller turbine would occur most of the time (as the cut off point is around the mean annual low flow). The water take for both turbines of 1.2m3/s would occur at least 50% of the time, as the cut off point for the take above the intake is 2.1m3/s (the median annual flow being 2.3m3/s).
[17] The First Determination Report concludes that the proposed Scheme is consistent with the purpose for which the land is held and there is no reason why the easement could not be granted subject to the applicant’s acceptance of the proposed special conditions and the outcome of the public notification process. On 15 September 2010 the Minister’s delegate approved the report.
[18] The intention to grant the Concession was publicly notified. Three submissions were received in response, none of which raised any concerns relating to limits on water take or the recreational use of the river. The submissions are summarised in a final report which also addresses outstanding issues such as the appropriate amounts of activity fees and the bond.
[19] The Minister’s delegate, Michael Slater, then Conservator, West Coast Tai Poutini Conservancy, approved the granting of the Concession on 7 February 2011.
[20] On the same day Mr Slater and Mr Morgan signed a “Concession Document (Easement)”. The Concession grants GCHL “an EASEMENT to carry out the Concession Activity on the Easement Land subject to the terms and conditions contained in this Concession and its Schedules”.
[21]The Concession Activity is set out in Schedule 1 as follows:
Concession Activity
This easement covers the construction phase and the ongoing operation, maintenance and repair of the hydro-electric power scheme at Griffin Creek, and authorises the activities listed below:
(i)Taking of water from Griffin Creek.
(ii)Construction, use and maintenance of an intake structure, settling tank, surveillance equipment, solar panels and shed.
(iii)Construction, use and maintenance of an access track, pipeline structure to convey water and data cable.
(iv)Vegetation clearance associated with the construction of the intake structure, pipeline and access track, and subsequent vegetation trimming required to maintain access to them.
[22] It is to be noted that item (i) above does not place a limit on the water take. The absence of a limit in the description of the Concession Activity is relied on in the submissions of all the defendants in opposition to the declaration.
[23] Schedule 2 contains standard conditions. Schedule 3 contains special conditions, the following of which are relevant:7
1.The Concessionaire must not undertake the Concession Activity unless or until the final Construction and Operational Plan is approved in writing by the Hokitika Area Manager. In considering the Construction and Operation Plan, the Grantor would check that it does not differ substantially in regard to location, scale or level of effect to the application lodged by the Concessionaire and to the Concession Activity as described in the Department’s First Determination Report. The Concessionaire must ensure that the Construction and Operational Plan is prepared by a suitably qualified person. The
7 Special condition 1 was varied in 2021. Refer [31]–[33] below.
Grantor may require the plan to be audited by a suitably qualified person.
2.Once audited and approved by the Grantor, the Construction and Operational Plan including a timeline must form part of the Concession, and the Concessionaire must not deviate from this plan without the prior written approval of the Hokitika Area Manager.
…
8.The Concessionaire must install a continuous flow monitoring device above the outlet site (which is located below the powerhouse). Flow must be recorded to an accuracy of ± 10%, and at no less than 15 minute time intervals. An electronic copy of these records must be provided to the Grantor annually.
9.Extraction of water must cease whenever the flow recorded at the flow-monitoring site specified in Condition 8 falls below the mean annual low flow, which is agreed to be 0.8m3/s. Once two years of data under Condition 8 has been obtained, a new minimum residual flow based on a revised mean annual low flow may be used following agreement by the Grantor and the Concessionaire.
[24] I note, without discussion at this point, conditions 8 and 9, which are relied on by all defendants to support their submission that there is no limit on water take and that water flow is addressed and controlled by these conditions regarding residual flow.
[25] In August 2012 GCHL submitted a Construction and Operational Plan (2012 COP) as required by special condition 1 of the Concession referred to in [23] above. On 13 September 2012 the Department’s Hokitika Area Manager approved the 2012 COP. In doing so he agreed to a minor variation relating to the access track width (wider than what had been provided for in the Concession) and construction.
[26] The 2012 COP did not address water take or minimum flow. Under special condition 2 of the Concession (refer [23] above) the 2012 COP became part of the Concession when it was approved.
[27] I mention here as part of the chronology, as far as the Department is aware (as stated by Timothy Shaw, Senior Ranger Supervisor in the Department’s Hokitika District Office) the first known canyoning use of Griffin Creek was on 6 March 2013, more than two years after the Concession was granted. That use was by Neil Silverwood, a member of the Executive of FMC, and another canyoner. Mr Silverwood states in his affidavit that Griffin Creek is now of significant
recreational value to canyoners. He describes it as one of the premier canyoning sites in New Zealand.
[28] It appears that GCHL cut an access track in around 2013. In a letter dated 6 August 2013 from the Community Relations Programme Manager in the Department to Mr Morgan, there is reference to a telephone conversation between the Manager and Mr Morgan during which, as recorded in the letter, Mr Morgan is said to have acknowledged that he was aware of a number of breaches of what was agreed to in the 2012 COP. As a result, remedial work was agreed to.
[29] In February 2018 GCHL applied to the Department to vary the Concession. This application followed a variation to resource consents granted by the West Coast Regional Council in October 2017 (see [34] to [38] below). The proposed changes recorded in a document headed Griffin Creek Hydro Summary of Changes included the following:
2. Residual flow lowered from 800L/s to 456 L/s to be in line with WCRC resource consent (Existing DOC Concession, special condition 9). Maximum water abstraction rate to change from 1200L/s to 2500L/s.
[30] GCHL withdrew the application to vary the conditions on 13 March 2019, prior to it being determined by the Department. That withdrawal was preceded by a letter from GCHL’s solicitors dated 20 November 2018 recording GCHL’s position that the Concession does not limit water take.
[31] In February 2020 GCHL again applied to vary the Concession. The delegated decision-maker approved that variation on 24 May 2021. The variations to the Concession require consequential changes to the 2012 COP because they introduce new criteria relating to measures to manage potential adverse effects of the Concession Activity. A construction and operational plan (COP) must meet these criteria before it can be approved. None of the criteria relate to the imposition of a specified limit on water take or minimum flow.
[32] GCHL has not yet submitted an updated COP for approval. Mr Morgan says once FMC lodged its application for the declaration, (26 July 2022) GCHL’s
application for funding for the Scheme had to be put on hold and the Scheme could not be progressed until the present application for a declaration is determined.
[33] The deed of variation provides that the COP must “not differ substantially in regard to location, scale or level of effect to the Application (and subsequent approved variation application/s) lodged by the Concessionaire and to the Concession Activity as described in the Department’s First Determination Report (and subsequent approved reports to the Decision-Maker)”.
Resource consents
[34] The Concession requires GCHL to ensure that appropriate resource consents are obtained prior to the commencement of the Concession Activity and that GCHL complies with the conditions of those consents throughout the term of the Concession. The Concession further provides that if any conditions attached to any resource consent are, in the opinion of the Minister, incompatible with the Concession, the Grantor may review the provisions of the Concession and, at the Minister’s discretion, the Concession may be varied accordingly.
[35] In 2017 GCHL applied for and was granted variations to its resource consents from West Coast Regional Council. The resource consent recording the variation is dated 6 October 2017 and refers to the three types of resource consents as follows:
Resource
consent no.
Type of resource
consent
Purpose RC10269/1
Land Use Consent
To disturb the bed of Griffin Creek for the construction of structures associated with hydro electricity generation, Wainihinihi.
RC10269/2
Water Permit
To take and use surface water from Griffin Creek for hydro electricity generation, Wainihinihi.
RC10269/3
Water Permit
To divert water from Griffin
Creek for hydro electricity generation, Wainihinihi.
[36] One of the three conditions changed was condition 13, which was varied to increase the maximum rate of water abstraction from 1,200 litres per second (1.2 cumecs) (as previously granted) to 2,500 litres per second (2.5 cumecs).
[37]The general conditions applying to all resource consents include the following:
1.Works and activities shall be carried out in general accordance with the details contained in the consent application, the change of conditions application (received 11 May 2017) and additional information submitted to the Consent Authority.
[38] As an affected person, the then Operations Manager of the Hokitika District Office of the Department had given his approval to GCHL’s application to vary the resource consents in a letter dated 17 July 2017. The letter notes that the Department’s approval is specific to the application for change of resource consent conditions and is for the purposes of s 95 of the Resource Management Act 19918 (RMA) only. The letter further states that the approval is not indicative of any associated concession (ie under the Act) or other statutory approval which might be required from the Department.
Issues
[39] FMC does not challenge the decision-making in relation to the Concession. In other words, there is no challenge to: the public notification or consultation regarding the Application; the Department’s assessment of the Application in relation to conservation values (including recreational values); or the approval of the 2012 COP.
[40]The claim is limited simply to the interpretation of the Concession.
Preliminary admissibility issue
[41] FMC relies on a primary affidavit and reply affidavit of Neil Silverwood. GCHL objects to specific statements of opinion in Mr Silverwood’s primary affidavit and the entire reply affidavit.
8 Section 95 addresses public notification and limited notification.
[42] Ms Wright, counsel for GCHL, submits that although Mr Silverwood is not an expert witness and has not sought to qualify himself as one, he purports to give a range of opinions as evidence about the effects of abstracting 2.5 cumecs of water from Griffin Creek. The specific statements of opinion GCHL takes issue with are:
(a)The importance of the environmental values of Griffin Creek and the surrounding catchment, and the effects of the Scheme on Griffin Creek’s environmental values.
(b)The importance of the natural character values of Griffin Creek and effects of the Scheme on natural character, including an artist’s impression showing possible dewatering of Griffin Creek.
(c)The significance of Griffin Creek’s canyoning values and the effects of the Scheme on Griffin Greek’s canyoning values.
(d)The opinion that those effects will increase the more water is taken from Griffin Creek and the smaller the amount of residual flow remaining.
(e)A specific statement of opinion regarding the effect on the natural amenity and recreational values of Griffin Creek of the Scheme taking up to 2.5 cumecs of water.
[43] Ms Wright further submits that all of Mr Silverwood’s reply affidavit is opinion evidence regarding effects on natural character and environmental and recreational values and is therefore inadmissible.
[44] In the alternative, if the Court determines that Mr Silverwood’s opinions are admissible, Ms Wright submits that no weight should be placed on them and the expert evidence provided by GCHL’s expert hydrologist, Monique Harvey, should be preferred.
[45] Mr Smith, counsel for FMC, says the evidence was filed for the purpose of establishing FMC’s standing and is also relevant when the Court comes to consider the exercise of its discretion as to whether or not to make a declaration. Mr Smith
acknowledges that Mr Silverwood is not an expert in hydrology. He says, however, the purpose of the evidence is to provide context for FMC’s concerns. Mr Smith submits that whether a water take in excess of the level referred to in the Application would have the effect Mr Silverwood expresses is not an issue for the Court. He acknowledged in oral submissions, for that reason the evidence is not relevant.
[46] Leading on from that submission Mr Smith submits that the evidence of Ms Harvey about the effect of different levels of water abstraction is similarly not relevant. Mr Smith makes the same submission in relation to the evidence of Mary Mitchell, an electricity sector regulatory analyst and adviser, who also swore an affidavit as an expert witness on behalf of GCHL.
[47] In reply, Ms Wright submits the evidence of Ms Harvey and Ms Mitchell is relevant and admissible in relation to the criteria the Court considers when determining whether a term limiting water take can be implied.
[48]I first address the issues relating to Mr Silverwood’s evidence.
[49] The Evidence Act 2006 provides for the admissibility of expert opinion evidence as follows.
23 Opinion rule
A statement of an opinion is not admissible in a proceeding, except as provided by section 24 or 25.9
[50] Section 25 governs the admissibility of expert opinion evidence and s 4 defines an expert as a person who has specialised knowledge or skill based on training, study, or experience. Expert evidence is defined in s 4 as the “evidence of an expert based on the specialised knowledge or skill of that expert and includes evidence given in the form of an opinion”.
[51] Statements about the significance or importance of an environmental feature and predictions about how an activity will impact that feature are opinions.
9 Section 24 is not relevant here.
[52] Mr Silverwood has served on the FMC Executive for five years. He says he is personally familiar with Griffin Creek. He was involved in the first canyoning exploration of Griffin Creek in March 2013 and he has been there a number of times since then. He says he has been involved in FMC’s advocacy to protect Griffin Creek.
[53] Mr Silverwood may have expertise in recreation and canyoning based on his experience and I would accept that he can describe the canyoning experience in Griffin Creek. The caveat that I would apply to that evidence, however, is that his evidence is that of an advocate rather than an independent expert. But as to making predictions about how any particular level of water take will impact Griffin Creek, that is not evidence that Mr Silverwood can give. He is not an ecologist, landscape architect or hydrologist.
[54] Accordingly, the statements of opinion by Mr Silverwood in his first affidavit as to: the effects of the Scheme on Griffin Creek’s environmental values; the effects on the natural character of the area; the effects on canyoning values; that the effects will increase the more water is taken from Griffin Creek; his specific statement of opinion regarding the effect of taking up to 2.5 cumecs of water; and any photographs illustrating those purported opinions in Mr Silverwood’s primary affidavit, are all inadmissible.
[55] All of Mr Silverwood’s reply affidavit is opinion evidence on the above issues from a non-expert and is therefore inadmissible.
[56] As to the affidavits of the two experts, Ms Harvey and Ms Mitchell, I do not accept Mr Smith’s submission that their opinions are irrelevant to the issues the Court needs to decide. As will be apparent from a later section of this judgment, their evidence is able to be taken into account when the Court considers whether a term limiting water take can be read into the Concession as an implied term.
Overview of parties’ submissions
Plaintiff ’s submissions
[57] Mr Smith submits that the natural and ordinary meaning of the Concession is that the Concession Activity authorised is the taking of up to 1.2 cumecs of water from Griffin Creek and that figure operates as a limit on GCHL. FMC’s position is that the proposed water take is a key aspect of the description of the Scheme and was material to the Department’s consideration of the Scheme.
[58] Mr Smith submits that contrary to GCHL’s argument, the volume of water proposed to be taken cannot be described as mere contextual information in relation to an application to take water, where the volume of water take is the key subject matter of the consent. Mr Smith refers to the part of the Application referred to in [11] above and submits it contains two restrictions: maximum water take and a requirement that all take is to cease if the residual flow drops below a specified level. He makes the point that these two items were not contained in some secondary part of the Application but in the description of the activity.
[59] Mr Smith submits in any event, special condition 1 of the Concession expressly requires that GCHL’s COP does not differ substantially in regard to location, scale or level. He says that this expressly “locks in” the scale of the activity, including the water take set out in the Application and described by the Department in granting the Concession.
[60] Mr Smith relies on the well-established principle in the RMA context that the scope of the consented activity is confined by the terms of the application and that regard can and must be had to the application in interpreting a resource consent. Adopting the summary of the legal principle in Millar v Ashburton District Council,10 Mr Smith says that: first, the scope of the Concession Activity is confined by the Application; second, the detailed description of the proposed activity in the Application includes specifying the volume of the water take; third, the description of the water take is adopted in the First Determination Report; and fourth, by imposing
10 Millar v Ashburton District Council [2016] NZHC 3015 at [71].
special condition 1, the Minister required that the consent activity not differ in regard to location, scale or level of effect to the Application and to the Concession Activity.
[61] Mr Smith further submits, again applying RMA principles, that even where there is no ambiguity on the face of the consent and the consent does not refer back to the application or supporting documentation, in ascertaining the scope of the consent, the Court is entitled to have regard to the purposes of the application as specified in the application and supporting material.11
First defendant’s submissions
[62] Ms Wright submits that FMC’s submissions are based on an incorrect interpretation of the Concession because the Concession is an easement. Ms Wright emphasises the distinction between approaches to interpretation under the RMA and under the Act. She submits the Concession is to be interpreted in accordance with the law of easements.
[63] Ms Wright submits the plain meaning of the easement is that it does not limit the volumetric flow rate of water that may be abstracted by GCHL. She points to the minimum flow requirement in special condition 9 of the Concession as being the measure implemented to manage the hydrological effects of abstracting water. GCHL’s position is that relevantly, the Concession does not contain a requirement to monitor the total volumetric flow abstracted by GCHL, nor a limit on the volumetric flow that may be taken by GCHL. Ms Wright submits the former would be a necessary requirement for there to be any limit on the take of water.
[64] Ms Wright submits that neither special condition 1 nor the 2012 COP change the plain meaning. She says that special condition 1 does not require the COP to address the volumetric flow of water to be extracted from Griffin Creek, and even if it did address abstraction volume, whether that differs substantially is a matter for the Grantor to determine in accordance with special condition 1. Further, it would still not equate to a specific volumetric flow limit.
11 Aotearoa Water Action Inc v Canterbury Regional Council [2018] NZHC 3240 at [129] and [145].
[65] Ms Wright also submits that there is no ambiguity in the Concession such that recourse to extrinsic evidence assists in its interpretation. She says rather than attempting to resolve an ambiguity, FMC is seeking to infer an entirely new term, which does not meet the requirements for an implied term.12
[66] Ms Wright further submits that if the parties had intended there to be a limit on the volumetric flow of water able to be abstracted, it can be expected that a condition to that effect would have been included.
[67] Ms Wright makes the argument that even if RMA principles do apply, not every statement in an application for a resource consent operates as a constraint on the scope of the application or the consent. She therefore says a contextual reference to the level of water take in the Application does not translate to a constraint on the activity authorised by the Concession.
[68] Finally, in the event the Court determines that FMC’s interpretation is correct, GCHL says the Court, in exercising its discretion to issue a declaration, should consider the minimal effect on Griffin Creek of an abstraction limit compared with the significant adverse effect on the Scheme’s contribution to renewable electricity generation and security of supply for the West Coast of the South Island.
Second and third defendants’ submissions
[69] Ms Elvin, counsel for the Minister and the Department, advances seven broad reasons as to why the Concession does not limit GCHL’s water take to 1.2 cumecs.
[70] First, the principles relied on by FMC relevant to the interpretation of resource consents granted under the RMA are not directly applicable to the interpretation of the Concession which exists under a different statutory context. The Act is the appropriate statutory starting point for the interpretation of the Concession.
[71] Second, the Concession is an easement in gross and therefore the law concerning the interpretation of easements applies. Where possible, an easement
12 BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 (PC) [BP Refinery].
should be interpreted to give effect to the intention of the parties to create a valid easement.13
[72] Third, easements are typically interpreted using principles of contractual interpretation. A plain reading is to be preferred with reference to extrinsic materials in particular circumstances.14
[73] Fourth, on a plain reading of the Concession it does not impose an upper limit on the take of water. An implied limit based on supporting material would require reading in a term that is not apparent on the face of the document. The courts have set a high bar for the implication of terms into a contract.15 This high threshold is not met in the present case. If the Court does find it appropriate to consider extrinsic material as an aid to interpretation, then the Application, First Determination Report, and the 2012 COP do not support the meaning put forward by FMC.
[74] Fifth, the decision-maker had a broad power to impose an upper limit on water take but chose not to, instead only imposing a condition for a minimum flow rate. Ms Elvin submits this was the primary means chosen to protect the relevant conservation values.
[75] Sixth, if the decision-maker intended to impose an upper limit on the take, it is expected they would have done so explicitly.16
[76] Seventh, water take is a matter for the RMA. The Act and the Concession itself require the Concessionaire to obtain relevant consents or water permits under the RMA in addition to the Concession.17
13 Schmuck v Opua Coastal Preservation Society Inc [2019] NZSC 118, [2019] 1 NZLR 750 per O’Regan J at [63]–[66], adopting the approach in Regency Villas Title Ltd v Diamond Resorts (Europe) Ltd [2018] UKSC 57, [2019] AC 553.
14 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]– [63].
15 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.
16 Attorney-General v Holland HC Hamilton CIV-2006-419-1650, 16 May 2007 at [61].
17 Conservation Act, s 17P.
Conservation Act – statutory framework
[77] It is necessary to set out the statutory framework of the Act in some detail so as to provide context for the defendants’ various submissions in opposition. This includes the argument that the scheme of the Act is such that the RMA approach, namely that the scope of the consented activity is confined by the terms of the application, is not the correct approach under the Act.
Functions of the Department
[78]The long title of the Act provides it is:
An Act to promote the conservation of New Zealand’s natural and historic resources, and for that purpose to establish a Department of Conservation.
[79] Section 6 of the Act sets out the functions of the Department which include at s 6(a):
(a)to manage for conservation purposes, all land, and all other natural and historic resources, for the time being held under this Act, and all other land and natural and historic resources whose owner agrees with the Minister that they should be managed by the Department;
[80]Conservation is defined in s 2 as follows:
conservation means the preservation and protection of natural and historic resources for the purpose of maintaining their intrinsic values, providing for their appreciation and recreational enjoyment by the public, and safeguarding the options of future generations
[81] “Preservation” is defined as meaning in relation to a resource, the maintenance of its intrinsic values so far as is practicable. “Protection” is defined in s 2 as meaning, in relation to a resource, its maintenance so far as is practicable in its current state, but includes its restoration to some former state and its augmentation, enhancement or expansion.
[82] “Conservation area” is also defined and includes any land or an interest in land held under the Act for conservation purposes.
[83] “Stewardship area” (applicable here) includes a conservation area that does not fall within specified categories.
[84] Section 25 of the Act provides that every stewardship area shall be so managed that its natural and historic resources are protected.
[85]Natural resources are defined in s 2 as follows:
natural resources means—
(a)plants and animals of all kinds; and
(b)the air, water, and soil in or on which any plant or animal lives or may live; and
(c)landscape and landform; and
(d)geological features; and
(e) systems of interacting living organisms, and their environment;— and includes any interest in a natural resource
[86] As can be seen, water is linked to plant or animal habitat in the above definition.
[87]“Recreational” is not defined.
Part 3B of the Act – concessions
[88] Part 3B of the Act governs the granting of concessions. It applies to every conservation area.18
[89] This includes the land in the present case in relation to which the Concession has been granted. As already noted, that land is within a “stewardship area”.
[90] Any activity in a conservation area must be authorised by way of a concession unless certain exceptions are met.19 A concession is not required for an individual or group undertaking any recreational activity (not for specific gain or reward).
18 Section 17O(1).
19 Section 17O(2).
[91] “Concession” or “concession document” are defined in s 2 in the same terms to mean a lease, licence, permit or an easement granted under pt 3B of the Act and includes “any activity authorised by the concession document”. “Concessionaire” is defined in s 2 to include a person who is the grantee of an easement under pt 3B of the Act.
[92] Section 17P of the Act provides that pt 3B of the Act “does not relieve any person from any obligation to obtain a resource consent under the Resource Management Act 1991”.20 Relevantly, that includes any necessary water permit for activities relating to water.21
[93] Section 17Q of the Act gives the Minister the power to grant concessions in the form of a lease, licence, permit or easement in respect of any activity (in practice this power is, in most cases, exercised by a Department official under delegation from the Minister, as was the case here).
[94] Section 17S specifies the required contents of an application for a concession. At the time of the Application and the grant of the Concession, s 17S(1) and (2) required information including a description of the proposed activity, a description of its potential effects and any action that the applicant proposed to take to avoid, remedy or mitigate any adverse effects of the proposed activity.
[95] The circumstances in which the Minister’s intention to grant a concession is to be publicly notified, were specified in s 17T(4) and (5) of the Act.
[96] The matters to which the Minister is required to have regard in considering any application for a concession are set out in s 17U. At the time the Concession was applied for and granted those matters included:22
(a)the nature of the activity and the type of structure or facility (if any) proposed to be constructed:
(b)the effects of the activity, structure or facility:
20 This provision is subject to limited exceptions that are not relevant in this case.
21 Resource Management Act 1991, s 87(d).
22 Section 17U(1).
(c)any measures that can reasonably and practicably be undertaken to avoid, remedy, or mitigate any adverse effects of the activity:
…
(f) any relevant oral or written submissions received as a result of any relevant public notice issued under section 49 of this Act:
…
[97] “Effect” is defined in s 2 of the Act as having the same meaning as it has in the Resource Management Act 1991.23
[98] When granting a concession the Minister is given wide-ranging powers under s 17X of the Act to impose such conditions as the Minister considers appropriate for the activity, structure, or facility, including conditions relating to or providing for the activity itself, the carrying out of the activity, and the places where it may be carried out.24
[99] The Minister has a broad discretion under s 17ZC, on request or on their own motion, to vary any conditions in a concession where:25
(a)the variation is the result of a review provided for in the concession document; or
(b)the variation is necessary to deal with significant adverse effects of the activity that were not reasonably foreseeable at the time the concession was granted; or
(c)the variation is necessary because the information made available to the Minister by the concessionaire for the purposes of the concessionaire’s application contained inaccuracies that materially influenced the decision to grant a concession and the effects of the activity permitted by the concession require more appropriate conditions;—
[100]A concessionaire is bound by every such variation.26
23 The Resource Management Act provides the meaning of effect as including: any positive or adverse effect; any temporary or permanent effect; any past, present, or future effect; and any cumulative effect which arises over time or in combination with other effects — regardless of the scale, intensity, duration, or frequency of the effect, and also includes any potential effect of high probability and any potential effect of low probability which has a high potential impact.
24 Section 17X(a).
25 Section 17ZC(3).
26 Section 17ZC(3).
[101] Where a variation is of a minor and technical nature and does not materially increase the adverse effects or will result in a reduction of the adverse effects or the duration of the activity, then by agreement the Minister and the concessionaire may vary any conditions in the concession document without public notification.27 Alternatively, the concessionaire may at any time apply to the Minister for a variation or extension to the concession. Such an application is to be treated as if it were an application for a concession.28
[102] As is apparent from the above provisions, the Act provides a broader scope to vary concession conditions than is available under the RMA for variation to resource consent conditions.29
[103] Concessions that are in the form of easements may be registered under the Land Transfer Act 2017. (In the present case the Concession provided that the easement would not be registered). For the purpose of granting any easement over any conservation area, the Minister is deemed to be the registered owner of the conservation area.30
[104] Where a concession document includes a right to transfer, sublease, assign, mortgage or otherwise dispose of the concessionaire’s interest, the concessionaire may not do so without the consent of the Minister.31
[105] Finally, if an applicant for a concession who has been granted a concession fails to sign the concession document within one month after being required by written notice to do so, the Minister may cancel the grant of the concession.32
Approach to interpretation of concessions
[106] There is limited case law to assist as regards the approach for interpreting a concession under the Act. Ms Elvin refers the Court to Franz Josef Glacier Guides
27 Section 17ZC(1).
28 Section 17ZC(2).
29 Resource Management Act, ss 127 and 128.
30 Section 17ZA(1).
31 Section 17ZE(1).
32 Section 17ZD(1).
Ltd v Minister of Conservation where the High Court interpreted a concession in the form of a licence, rather than an easement.33 The Court adopted a plain reading of the words “tracks … in the Park” to avoid an approach that “would rob [the clause] of any practical effect”.34 However, there is no other discussion in that case regarding the approach to be taken.
Nature of a concession
[107] The Concession states it is an easement in gross. In general terms an easement in gross: may be registered under the Land Transfer Act against the title of the burdened land;35 binds the covenantor’s successors in title;36 and the benefit of the easement in gross may be assigned.37 This general position is modified under the Act whereby the consent of the Minister is required for any transfer, sublease, assignment, mortgage or other disposition of the concessionaire’s interest.38
[108] Herein lies the primary difference between a concession and a resource consent. The latter is neither real nor personal property.39 By contrast, a concession may be granted not only in the form of an easement but by other instruments that also create an interest in land, for example leases and some licences.
[109] It is apparent not only on the face of the Concession that it is an easement but it is also reinforced by its terms. There is provision for disputes to be resolved between the parties such as through negotiation and mediation. This reflects the contractual nature of a concession. Resource consents do not provide for dispute resolution as between the consent authority and the holder of the consent.
33 Franz Josef Glacier Guides Ltd v Minister of Conservation HC Greymouth CP14/98, 13 October 1999.
34 At [48].
35 Land Transfer Act 2017, s 108; Conservation Act, s 17ZA. Although in this case, as noted in [103] the Concession provided that the easement would not be registered.
36 Property Law Act 2007, s 291(3)(b).
37 Section 291(4).
38 Conservation Act, s 17ZE(1).
39 Resource Management Act, s 122.
Case law on interpretation of easements
[110] In New Zealand the interpretation of easements and covenants affecting land has been undertaken with the same objective, purposive approach used for other commercial contracts.40 The principles are well known. The proper approach to interpretation is an objective one, including background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.41 Contractual language must be interpreted within its overall context. Purposive or contextual interpretation is not dependent on there being an ambiguity in the contractual language.42 The fact that parties are aware their contract might be relied upon by a third party may justify a more restrictive approach to the use of background in some instances.43
[111] Finally, the text is centrally important. “If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant.”44
[112]There is a high bar for the implication of terms into a contract.45
[113] In Schmuck v Opua Coastal Preservation Society Inc where the Supreme Court was considering the validity of easements under the Reserves Act 1977, the Court held that where possible, an easement should be interpreted to give effect to the intention of the parties to create a valid easement.46 The Court further held that documents referred to in the easement instrument are admissible in interpreting the easement.47
40 Body Corporate 341188 v District Court at Auckland [2015] NZCA 393, (2015) 16 NZCPR 667 at [18] citing Ohinetahi Ridge Ltd v Witte (2004) 5 NZConvC 193,938 (CA) and Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 where leave to appeal to the Supreme Court was refused in 2008: Big River Paradise Ltd v Congreve [2008] NZSC 51, [2008] 2 NZLR 589.
41 Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 14, at [60].
42 At [61].
43 At [62].
44 At [63].
45 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 15; BP Refinery, above n 12.
46 Schmuck v Opua Coastal Preservation Society Inc, above n 13, at [66] accepting the submissions of counsel at [63]–[64].
47 At [59].
[114] This is not a case which requires a consideration of the boundaries for the admission of extrinsic evidence in construing an unregistered concession.48 All parties are agreed that the Court is not limited to a consideration of the Concession alone. They agree the Court may also consider the Application and the First Determination Report. That is because the deed of variation refers to both of those documents and all agree that those two documents are part of the factual matrix. Where the parties part company is what the admission of the two documents means for the interpretation of the Concession.
Plain meaning
[115] The Concession authorises the “Concession Activity”. That is, “the construction phase and the ongoing operation, maintenance and repair of the hydro- electric power scheme at Griffin Creek” and the authorisation of listed activities including the “taking of water from Griffin Creek”. The Concession Activity does not specify the volume of water that may be taken.
[116] The authorisation is expressed to be “subject to the terms and conditions contained in this Concession and its Schedules”.49 The Act defines a “concession” and a “concession document” to mean the same thing and the two terms are used interchangeably in the Act. I accept Ms Wright’s submission that this supports the interpretation that it is the Concession document itself that determines what is authorised by the Concession.
[117] There are other parts of the Concession that support the defendants’ position that the Concession Activity is subject only to the expressly stated terms and conditions in the Concession (and thus what is said in the Application about water take is not to be read in as a limitation).
48 See Green Growth No. 2 Ltd v Queen Elizabeth The Second National Trust (2018) NZSC 75, [2019] 1 NZLR 161 at [133] where there was similarly no need in relation to a registered instrument.
49 Emphasis added.
[118] For example, in the preamble or background section there are the following two clauses:50
F.The Concessionaire wishes to carry out the Concession Activity on the Easement Land subject to the terms and conditions of this Concession.
…
H. The parties wish to record the terms and conditions of this Concession and its Schedules.
[119]In the following section “Operative Parts” it is stated:51
I.In exercise of the Grantor’s powers under the Conservation legislation the Grantor GRANTS to the Concessionaire an EASEMENT to carry out the Concession Activity on the Easement Land subject to the terms and conditions contained in this Concession and its Schedules.
[120] There is also the fact that, as is apparent from the above references, the Concession uses a schedule of special conditions to specify the conditions that apply to the Concession.
[121] Schedule 2, which contains standard conditions, sets out the “compliance obligations” on the Concessionaire in clause 13.52 Those obligations include obligations in external documents such as related legislation, a relevant conservation management strategy or conservation management plan, or any statement of general policy. The “compliance obligations” do not refer to the Application or the First Determination Report.
[122] There is an express requirement to cease taking water when the flow falls below 0.8 cumecs in special condition 9 (at [23] above). There is an associated requirement to monitor flow above the outlet site in special condition 8 (at [23] above).
[123] But the Concession does not contain a limit on the water take nor, what would necessarily be a related condition, a requirement to monitor the total volumetric flow abstracted by GCHL.
50 Emphasis added.
51 Emphasis added in italics.
52 Incorrectly headed as clause 5 in the Concession.
[124] I accept Ms Wright’s submission that on its plain wording the Concession provides for a hydroelectric power scheme, including the taking of water, without any limit on the amount of water that may be taken. Further, on its plain wording, the hydrological effects of taking water are controlled by a requirement to cease taking at a specified minimum flow with an associated condition requiring the installation of a continuous flow monitoring device.
[125] I turn to consider whether special condition 1, requiring approval by the Grantor of a COP before the Concession Activity can be undertaken (set out in [23] above), changes what thus far is the plain meaning.
[126] Special condition 1, as varied in 2021, sets out (non-exhaustively) measures the COP must address to manage potential adverse effects. The list includes such matters as vegetation and rock clearance, public safety, and effects on wildlife including fish. There is no reference to abstraction of water. In other words, it is not necessary for the COP to address the volume of water to be abstracted.
[127] The discretion reserved to the Grantor under special condition 1 is a further indication that a limit on water take is not to be read into the Concession Activity. The Grantor has the discretion to approve the COP where it “does not differ substantially in regard to location, scale or level of effect to the Application (and subsequent approved variation application/s) lodged by the Concessionaire and to the Concession Activity as described in the Department’s First Determination Report (and subsequent approved reports to the Decision Maker)”.
[128] In the event the revised COP does address the volume of water to be taken and with reference to the First Determination Report, the issue of whether the activity “differs substantially” is a matter for the Grantor to determine in their discretion. That will be a question of fact or a mixed question of fact and law for the Grantor to consider at the time. It is not for this Court to step into the Grantor’s shoes and exercise their discretion to determine that a specific take level is required to satisfy special condition 1.
[129] In summary, on a plain reading, I do not consider there is any ambiguity in the Concession as to whether the Concession imposes a limit on water take. It does not.
Extrinsic evidence: the Application and First Determination Report
[130] I now turn to consider whether the Application and First Determination Report change the plain meaning. The Application refers to the Scheme having a water take of 1.2 cumecs when complete. The issue is whether that indicates an objective intention for the Concession to be subject to such a condition.
[131] First, if the parties had intended there to be a limit on water take, it is to be expected any limit would have been included by way of a condition. In his affidavit, Mr Morgan of GCHL refers to the Application and discussions with the Department. He says:
8. In the application, I included the statement that “once the Scheme has been fully developed there would be a “take” of 1.2 cumecs”. That was not expressed as a “take” limit. I do not recall any discussion with DOC about a “take limit” of 1.2 cumecs or any other number. Instead, the focus was on the residual flow requirement, and DOC ultimately granted the Concession with a higher (than the .6 cumecs I had applied for) residual of 0.8 cumecs. DOC’s process involves telling the applicant what its decision is likely to be, including conditions, and seeking the applicant’s feedback. A “take limit” was just not an issue that came up.
[132]On the other side of the contractual arrangement is the Minister’s delegate.
[133] As is apparent from [98]–[100] above, the Minister (or their delegate) has wide powers to impose conditions. Michael Slater, formerly the Conservator for the West Coast Tai Poutini Conservancy, as the delegate of the Minister, made the decision to grant the Concession. If Mr Slater considered that a limit on the volume of water that could be taken was required, then he could have imposed such a limit. Instead of doing so he imposed a condition relating to minimum flow.
[134] Attorney-General v Holland supports the proposition that if Mr Slater had intended to impose a limit on the amount of water that could be taken, then he could
have been expected to have done so explicitly.53 In Holland the Court was considering an easement for the taking of water from a stream on Department land. The easement did not contain an explicit limit on take. In the High Court the Department’s position was that the words “subject to the provisions of s 21 of the Water & Soil Conservation Act 1967” in the easement meant that water could only be taken under the easement for the purposes of domestic needs, needs of animals and firefighting purposes (being the only purposes for which water could be taken without express permission under the Water & Soil Conservation Act). Justice Potter did not accept that submission and said:54
If there had been an intention to place a specific limit on the quantity of the take, it could have been expected that in the terms of the grant there would have been reference to a maximum take rate, a maximum volume per day and protection of the minimum flow in the stream, or similar specific provisions. The Department would have had available to it information about the flow in cubic metres from the spring.
[135] Mr Slater has sworn an affidavit in opposition to the application for a declaration. Mr Slater says that at a high level his key areas of focus in considering the Application (and any application generally) for a concession were about understanding: the relevant conservation purposes and values; the impact or effect the proposed Concession Activity would be likely to have on those purposes and values; and how any mitigations might minimise or reduce those impacts or adverse effects to an acceptable level, to allow the maintenance of the relevant values and the upholding of conservation purposes.
[136] Mr Slater also says the First Determination Report, in its assessment of the impact of the proposed Concession Activity and measures to mitigate those impacts, does not identify the total volume of water to be taken from Griffin Creek as a factor that would impact on the relevant conservation values. Instead, it identifies the maintenance of a set minimum flow as being important to protect the conservation values. I accept that Mr Slater correctly states the contents of the First Determination Report in that regard.
53 Attorney-General v Holland, above n 16.
54 At [61].
[137] In the First Determination Report there is an analysis of the Application, the effects of the proposed Concession Activity and measures to mitigate those effects. The proposed mitigation measures do not include a limit on take. Nor do the proposed special conditions, which are attached to the report, include any condition limiting take.
[138] It is apparent from the First Determination Report that it was considered that the relevant conservation values would be protected by the maintenance of a set minimum flow rather than there being a set upper limit on the volume of water that might be taken.
[139] For example, although the First Determination Report mentions the proposed amount of water to be extracted in the section discussing the effect of the proposed activity on fresh water and proposed mitigation measures, the only mitigation measure discussed is the requirement for a cut off point to maintain a certain minimum flow. The report states:
The applicant proposed a cut off in taking water when the residual flow is 0.6m3/s, which is lower than the mean annual low flow rate (0.8m3/s). It is the view of the Department that to protect the environmental values of Griffin Creek, the minimal residual flow should be above the mean annual low flow rate and thus the cut off point for the removal of water should be at least 0.8m3/s of water below the point of the intake.
[140] Alongside that proposed condition the First Determination Report recommends conditions requiring the flow rate to be monitored and reported. There is no recommended condition requiring the monitoring of the rate of water to be abstracted.
[141] It seems clear that it was considered that the taking of water from Griffin Creek was to be controlled by stating the amount of water that must remain in the Creek and requiring water take to cease if it drops below that level. That is the mechanism for protecting the environmental values of Griffin Creek.
[142] I accept Ms Wright’s submission that it is also relevant that the Concession provides through special condition 4 that there will be additional controls under the resource consents for the Scheme which must be obtained and complied with. That
suggests an objective intention for the volume of water take to be addressed through the mechanism of resource consents.
[143] In conclusion, on an analysis of the Application and First Determination Report together with the Concession itself, it is apparent that the objective intention was that the Concession would be subject to a cease-take clause with its associated monitoring requirement and not to a limit on the amount of water that could be taken.
Implication of a term
[144] I next consider whether a term to that effect might nevertheless be implied. In order for a term (here a limit on water take) to be implied in a contract the following principles as set out in Bathurst Resources Ltd v L & M Coal Holdings Ltd apply.55 In summary:
(a)The legal test for the implication of a term is a standard of strict necessity, a high hurdle to overcome.
(b)The starting point is the words of the contract. If a contract does not provide for an eventuality, the usual inference is that no contractual provision was made for it.
(c)An unexpressed term can only be implied if the Court finds that the term would spell out what the contract, read against the relevant background, must be understood to mean.
(d)The inquiry is an objective one.
(e)Implication of a term does not depend upon proof of the parties’ actual intentions.
(f)The conditions in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings are a useful tool to
55 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 15, at [116].
spell out what the contract must be understood to mean.56 Conditions four57 and five58 of BP Refinery must always be met before a term will be implied. Conditions one to three59 can be viewed as analytical tools which overlap and are not cumulative.
[145] I start the analysis with BP Refinery’s conditions four and five which must always be met in order to imply a term in a contract. First, condition four requires that the term must be “capable of clear expression”. On its face the term that FMC seeks to imply is capable of clear expression. But I accept Ms Wright’s submission that the condition by itself would have limited effect without an associated obligation to monitor the volume of water abstracted. Consideration accordingly needs to be given to whether the implied term should also include an obligation to install a monitoring device and undertake ongoing flow monitoring. FMC has not established (or even argued) that a monitoring term should be implied. There is therefore a question as to whether the limit that FMC seeks to apply is in fact capable of clear expression so as to be a practically achievable and enforceable term of the Concession.
[146] Condition five of BP Refinery is that the term must not contradict any express term of the contract. In this case the limit on water take in the implied term would contradict the discretion of the Grantor in special condition 1. Implying a specific take limit is inconsistent with the provision in that condition for addressing the scale or level of effect and is inconsistent with the evaluative assessment by the Grantor who applies the “substantially differ” test.
[147] As Ms Wright points out, the proposed implied term is also potentially inconsistent with special condition 9 (at [23] above) under which, after two years of data has been collected, a new minimum residual flow may be used by agreement between the Grantor and Concessionaire. If the mean annual low flow were to be varied a different water take may become appropriate as a consequence. The Concession does not provide a mechanism for adjusting a take limit if that were to
56 BP Refinery, above n 12.
57 The term must be capable of clear expression.
58 The term must not contradict any express term of the contract.
59 The implied term must be reasonable and equitable; the term must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; and the term must be so obvious that “it goes without saying”.
become necessary following a change to the residual flow in the cease-take clause. This also counts against the implying of a condition imposing a hard limit on water take.
[148] I address together BP Refinery’s conditions one to three: the implied term must be reasonable and equitable; the term must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; and the term must be so obvious that it goes without saying.
[149] GCHL’s expert, Ms Harvey, gives the opinion that for a scheme that does not involve any storage of water (as is the case here where there is no dam) and where there is a reasonable number of “freshes and floods” so that a reasonable level of flow variability is retained, changing the maximum take does not affect Griffin Creek provided the cease-take condition is complied with.
[150] Ms Harvey also says that the effect of taking more than 1.2 cumecs is that more water is available for generation on some days when the flow in Griffin Creek is higher, but the environmental effects would not change provided the cease-take condition is complied with.
[151] As against that, the evidence of GCHL’s other expert, Ms Mitchell, is that the contribution that the Scheme makes to electricity supply security, lower electricity prices and resilience of surrounding communities, varies substantially depending on water flow and associated Scheme capacity. She says with a flow of 2.5 cumecs, the Scheme’s capacity would be 4.1 MW, generating an estimated average 20 gigawatt hours (GWh) of electricity annually. If, however, the water flow is 1.2 cumecs, the installed capacity is 1.9 MW with annual electricity volumes of 11-12 GWh. The difference between the two, applying the higher take of 2.5 cumecs (authorised by the resource consent) can be quantified as the supply of power to over 1,000 households.
[152] Given the lack of any measurable detriment without the implied term against the detriment if a take limit is implied, it is not reasonable or equitable to imply the term.
[153] I accept Ms Wright’s characterisation of the “business efficacy” in the context of this case. That is, it is concerned with whether the contract effectively manages effects on conservation values while providing certainty to the Concessionaire as to what is authorised. The cease-take clause is designed to manage effects and when that is read together with the lack of any meaningful benefit to Griffin Creek from implying a term that places a limit on water take, the term is not necessary to give business efficacy to the easement. It is effective without it. Finally, the condition is not so obvious that “it goes without saying”.
[154] In conclusion, the high hurdle for the implication of a term as argued for by FMC is not met.
Statutory schemes under the Act and the Resource Management Act
[155] In the course of this judgment I have already addressed some differences between the Act and the RMA. There are further differences which support my view that the principle in the RMA and environmental law context that the scope of an activity is confined by the terms of an application and that a consent cannot grant more than what was applied for, does not apply to concessions under the Act. There are the following further differences.
[156] Under the Act, what is authorised by the Concession is an “activity”.60 In this case the activity is the construction and operation of a hydroelectric power scheme. I accept there are various aspects of the activity listed including the taking of water but the activity itself is for a hydroelectric scheme.
[157] By contrast, under the RMA, there is a direct focus on the taking of water. The functions of regional councils include controlling the taking, use, damming, and diversion of water, and the control of the quantity, level, and flow of water in any water body, including the setting of any maximum or minimal levels or flows of water and the control of the range, or rate of change, of levels or flows of water.61
60 “Activity” is defined in s 2 to include a trade, business or occupation.
61 Resource Management Act, s 30(1)(e).
[158] As well, a regional council may, if appropriate, establish rules in a regional plan to allocate the taking or use of water,62 and make an order to avoid over-allocating water.63
[159] As can be seen from the two water permits granted as resource consents by the West Coast Regional Council in this case,64 what is authorised is not an overall activity but rather the taking, using and diverting of water. Inherent in the statutory provisions for the taking (or other use) of water is that a specific volume or rate of take will be set by the regional council when granting the resource consent. That was the case here.65
[160] Given the functions of the regional council as regards the taking or use of water, it must be the case that a resource consent application would not be considered to be complete if it did not specify the volume of water to be taken. Again, given a regional council’s function, it is logical that any reference to an abstraction volume in an application for a resource consent would constrain the scope of both the application and the consent.
[161] By contrast, the role of the Minister and the Department, where an activity occurs in a conservation area, is the preservation and protection of natural and historic resources in accordance with the Act. It is accepted there may be overlap between features such as water and values such as natural character that would also be relevant to a regional council’s considerations. But the difference in the statutory schemes is that the RMA is expressly and directly concerned with regulating the quantity, level and flow of water in any water body. By contrast, the Act is more broadly concerned with the preservation and protection of natural and historic resources. Water quantity, flows, levels, and allocations are not necessarily key considerations. That follows also from the reference to water in the definition of natural resources in the Act where water has its meaning narrowed to water “on which any plant or animal lives or may live”.66
62 Section 30(1)(fa).
63 See Policy 11 in Ministry for the Environment National Policy Statement for Freshwater Management 2020 (ME 1720, 23 February 2023) at 10.
64 Refer [35] above.
65 Refer [36] above.
66 Conservation Act, s 2.
[162] The evidence of Mr Slater is consistent with that difference between the two statutes. He viewed the Application through the lens of conservation values. He said:
In considering whether to grant approval to a concession application, my focus would have been on protecting conservation values so as to be consistent with conservation purposes, as required by the Conservation Act. Level of take would only have been relevant to the extent that it impacted on these purposes and values.
[163] Further, the Act does not require an applicant to specify the volume of water that it proposes to take. So long as the application adequately describes the “activity” and its effects on conservation values, that is sufficient. By contrast, it is logical that an application under the RMA to take water must specify the volume of water because taking (or other uses) of water is only allowed where it is expressly authorised by a resource consent or rule in a plan.67
[164] These additional differences in the statutory context between the Act and the RMA indicate that what would be necessary information in an application for a resource consent to take water is not necessarily required in an application for a concession which would involve using water. It follows then that simply because an applicant makes reference in their application under the Act to the volume of water proposed to be extracted, that does not operate as a constraint on the scope of the consent as it would under the RMA.
Details in Application – contextual or central
[165] Counsel for all defendants make the alternative submission that if the Court were to accept FMC’s position that RMA principles apply, not every statement in an application for a resource consent operates as a constraint on the scope of the application and, consequently, on the consent. In this case, the defendants’ position is that the reference to the proposed water take is contextual only and thus does not operate as a constraint on the activity authorised by the Concession. Given my decision that the principles regarding the interpretation of resource consents do not apply when interpreting a concession, it is not necessary to consider this alternative submission.
67 Resource Management Act, s 14.
Result
[166] For all the above reasons, the Concession does not limit the volume of water that Griffin Creek Hydro Ltd may extract from Griffin Creek to 1.2 cumecs.
[167]The application for a declaration is accordingly refused.
Costs
[168] Prima facie, the three defendants as the successful parties are entitled to costs. However, as I did not hear submissions on costs, costs are reserved.
[169] If the parties are able to agree costs then a joint memorandum is to be filed within 20 working days of the date of this judgment. If there is no agreement as to costs, the defendants are to file and serve their memoranda of submissions within five working days of the date for the joint memorandum. FMC is to file and serve its memorandum within five working days of the date of service of the last defendant memorandum.
[170] Submissions are not to exceed five pages (excluding any attachments). I will determine costs on the papers.
Gordon J
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