Flath v Minister for Land Information
[2024] NZHC 1739
•27 June 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-797
[2024] NZHC 1739
UNDER Part 5 of the Public Works Act 1981 and s 26 of the Land Valuation Proceedings Act 1948 IN THE MATTER OF
A claim for compensation and an appeal
BETWEEN
TORDIS KATHARINA FLATH, STEPHEN BRENT MACKAY AND SAS
CORPORATE TRUSTEES LTD
ApplicantsAND
THE MINISTER FOR LAND INFORMATION
Respondent
Hearing: 21 June 2024 Appearances:
C M Stevens for Applicants G H Allan for Respondent
Judgment:
27 June 2024
JUDGMENT OF GRICE J
(Application for Leave to Appeal)
Introduction
[1] This is an application for leave to appeal a judgment allowing in part an appeal from the Land Valuation Tribunal (the Tribunal). The appeal related to compensation payable by the Crown to the applicant landowners for a partial take of their land under the Public Works Act 1981 (PWA).1 This Court sat with an additional member, a registered valuer, appointed for the appeal.2
1 Flath v Minister for Land Information [2024] NZHC 36 [the High Court decision].
2 Land Valuation Proceedings Act 1948, s 3. The appointed member was WJM Reid. The hearing took place over three days and in addition, a site visit was undertaken by the Court.
FLATH v MINISTER FOR LAND INFORMATION (LEAVE TO APPEAL APPLICATION) [2024] NZHC 1739 [27 June 2024]
[2] The appeal was allowed, however the overall result remained similar to that reached by the Tribunal in terms of the assessment of compensation. The successful ground of appeal was that the Tribunal had provided inadequate reasons for its decision.3
[3] The landowners (applicants) now seek leave to appeal under s 18A of the Land Valuation Proceedings Act 1948 (LVPA) on the basis that there is a question of law or general principle which warrants clarification by the Court of Appeal. In particular, the applicants contend that the valuation approach taken was novel and that a core issue relating to the consideration given to the deduction of subdivision costs in the valuation has not previously been considered by the Court of Appeal.
The decision sought to be appealed
[4] The case concerns the assessment of compensation for the compulsory acquisition of a 1,917 m2 piece of land taken from the rear of the applicants’ residential property at South Raumati (totalling 1.084 ha). The land was taken for the construction of the northern corridor motorway, known as the Mackay’s to Peka Peka Expressway.
[5] The present leave application focusses on the “willing buyer/willing seller” valuation methodology and its application to the piece of land taken.4
[6] The value of the land taken was assessed by the Tribunal and confirmed by this Court at $38,000, and the injurious affection compensation was assessed at $33,000. The methodology applied under the injurious affection head of compensation is not under appeal. The overall compensation was increased on appeal by $1,000 from the Tribunal’s determination in order to correct a mathematical error in relation to the injurious affection compensation.
3 The High Court decision, above n 1, at [135].
4 The other matters that were the subject of the first appeal for which leave to appeal is not sought include the injurious affection methodology (discussed at [146] – [176]) and the fencing costs and relocation interest claims (at [177] – [180]).
[7] This Court reviewed the evidence before the Tribunal and concluded that the Tribunal’s approach to valuation to determine compensation was correct. The Tribunal had applied a hypothetical market valuation approach to establish the amount of compensation payable for the land taken, as required under the PWA. That involved determining the amount what the land might be expected to realise if it were sold in the open market by a willing seller to a willing buyer.5
[8] The two registered valuers who had prepared reports for the Crown before the Tribunal concluded that the appropriate valuation approach was to determine the market value of the whole of the owner’s land and then deduct the market value of the balance of the owner’s land after the taking or acquisition. This is referred to as the “before and after” approach, and may only be applied where the part of the land to be taken is, as set out in s 62(1)(b)(ii) of the PWA, “of a size, shape, or nature for which there is no general demand or market”.
[9] The Crown valuers concluded that the piece of land to be taken met those criteria. They valued the land to be taken at $28,000 (Mr Whittaker) and $19,000 (Mr Robertson).6 On the other hand, the market valuation — or willing buyer/willing seller — methodology was applied the by applicants’ valuer, Mr Doherty. His report to the Tribunal assessed compensation for the piece of land to be taken at $210,000, however he adjusted that amount to $195,000 in the course of the hearing, following cross examination.7
[10] The Tribunal applied the willing buyer/willing seller methodology to establish the value of the piece of land to be taken. The Crown did not appeal the rejection of the “before and after” valuation methodology. On appeal, it supported the Tribunal’s determination and approach. This Court concluded that the market valuation methodology adopted by the Tribunal was appropriate.8 It also concluded that the Tribunal had given inadequate reasons.9 This Court reviewed the evidence before the
5 At [141].
6 At [19].
7 At [17]–[18].
8 At [141].
9 At [135].
Tribunal and, for the reasons given in the judgment, determined that the Tribunal had reached the correct amount of compensation.10
Approach to second appeals under the LVPA
[11] Section 26(5) of the LVPA provides that an appeal against a decision of the High Court on appeal from the Land Valuation Tribunal “shall be final”, subject to ss 13(3) and 18A. The present application seeks leave to appeal under s 18A.
[12]Section 18A provides:
18A Appeal to Court of Appeal in certain cases
(1)Notwithstanding anything in any enactment, any party to any proceedings before the court who is dissatisfied with any award or order of the court may, with the leave of the court or of the Court of Appeal, appeal to the Court of Appeal; and section 56 of the Senior Courts Act 2016 shall apply to any such appeal.
(2)In determining whether to grant leave to appeal under this section, the court to which the application for leave is made shall have regard to the following matters:
(a) whether any question of law or general principle is involved:
(b) the importance of the issues to the parties:
(c) the amount of money in issue:
(d) such other matters as in the particular circumstances the court thinks fit.
(3)The court granting leave under this section may in its discretion impose such conditions as it thinks fit, whether as to costs or otherwise.
(4)The decision of the Court of Appeal on any such appeal shall be final.
[13] The Court of Appeal in Chief Executive of Land Information New Zealand v Luke noted in regard to s 18A that:11
[17] The four criteria specified under s 18A(2) should be evaluated as a whole. Not every question of law which is important to one of the parties and which involves a lot of money should be given leave. The application for leave must be considered in light of this court’s function on second appeals.
10 At [141].
11 Chief Executive of Land Information New Zealand v Luke [2008] NZCA 43 at [17].
As this court said in Waller v Hider, upon a second appeal, “this Court is not engaged in the general correction of error”: at 413. And further:
“It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and rules upon by a Court.”
[14]In Waller v Hider, the Court of Appeal described the test as follows:12
The appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal…
[15] The Court of Appeal has also emphasised that it is important the scarce time and resources of the Court are not wasted on appeals “without realistic hope of benefit”.13
Positions of the parties
The applicants
[16] The applicants raise the following as questions of law or general principle to justify the leave to appeal. Their application for leave to appeal dated 1 March 2024 set out the following proposed grounds of appeal:
1. That the Land Valuation Tribunal (LVT) held that a subdivision of the severed land was not economically viable and the judgment held that subdivision costs were prohibitive.
2 It wasthe only known partial take on the Transmission Gully/Mackays Crossing to Peka Peka Expressway where subdivision costs were deducted from the value of the compulsorily acquired land.
3.The LVT deducted without reasons $92,000 from the compensation for subdivision costs, which the judgment held that the reasons given by the LVT were inadequate and did not provide an understanding of why the matter had been decided in the way it was, that the LVT’s approach was “unusual” and the logic of it was difficult to follow and that “its reasoning was not clear” but despite this the judgment used the same figures adopted by the LVT and deducted the same sum from the compensation.
4.The LVT ignored the primary compensation provision under the Act, namely s 60’s Basic entitlement to compensation; erroneously included
12 Waller v Hider [1998] 1 NZLR 412 (CA) at 413.
13 Luke, above n 11, at [18], citing Waller, above n 12, at 413. See also Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2007] NZCA 335, [2008] 2 NZLR 591 at [36].
s 63 of the Act which had no relevance to a compulsory take; yet the judgment, without reasons, held “we have no doubts that the Tribunal was well aware of and would have born in mind the provisions of s 60. Similarly, there was no error in including reference to s 63”.
5.The court upheld the LVT’s reliance upon subdivision compensation cases where the highest and best use of the land was for it to be subdivided, and its reliance upon a s 40 “offer-back” case, notwithstanding the finding in both the LVT and the judgment that subdivision of the appellants’ compulsorily taken land under any circumstance was not economic.
6.The judgment failed to consider the Court of Appeal’s requirement in Drower v Ministry of Works [1984] 1 NZLR 29 that compensation must not be whittled down.
7.The judgment considered the important issue of whether the costs of obtaining a separate title for compulsorily acquired land should be deducted, and found that the long held precedent in Bishell v Minister of Works did not assume that title could be obtained without the costs of that being deducted from the compensation.
8.The decision referred to the principal of liberality but neither applied it nor gave guidance as to its application; and
9.While finding that s 62(1)(b)(ii) of the Act did not apply, then applied the Crown valuations which were erroneously based upon a before and after valuation methodology rather than a market valuation.
The respondent
[17] The respondent opposes leave on the basis that the applicants’ claim that the law needs to be clarified fails to recognise the legislated market value test under the PWA. The respondent submits that the outcome in this case was required by s 62 of the PWA, which governs the assessment of compensation, and thus there is no legal controversy to warrant a second appeal.
[18] The respondent contends that of the nine circumstances raised in the applicants’ notice of application, seven of them are inherently incapable of giving rise to argument qualifying for a second appeal, as they turn on the specifics of the particular case and therefore do not involve an issue of “wider importance”.
[19] The respondent provided detailed submissions on points 7 and 8, concerning the “principle of liberality” and the Bishell decision, saying these were the only matters which might be wider than the specific case. However, the Crown says that in any
event these two points are issues relating to valuation rather than law, and not matters which should be the subject of a second appeal. In particular, the Crown notes that on a second appeal, the Court of Appeal, unlike both the Tribunal and this Court, does not have the benefit of an expert valuer’s assistance. The Court of Appeal in Rotorua District Council v Ngāti Whakaue Education Endowment Trust Board commented on the benefit of a system in which a valuer sits with a High Court judge on appeals to provide assistance and factual expertise.14
Law relating to approach to valuation
[20] Before considering the questions of law or general principles advanced by the applicants as the basis for the leave application, I outline the relevant compensation provisions under the PWA and some generally accepted valuation principles.
[21] The assessment of compensation for land taken is governed by the PWA. The sections relevant to the proposed appeal are:
Entitlement
60 Basic entitlement to compensation
(1)Where under this Act any land—
(a) is acquired or taken for any public work; or
(b) suffers any injurious affection resulting from the acquisition or taking of any other land of the owner for any public work; or
(c) suffers any damage from the exercise (whether proper or improper and whether normal or excessive) of—
(i)any power under this Act; or
(ii)any power which relates to a public work and is contained in any other Act—
and no other provision is made under this or any other Act for compensation for that acquisition, taking, injurious affection, or damage, the owner of that land shall be entitled to full compensation from the Crown (acting through the Minister) or local authority, as the case may be, for such acquisition, taking, injurious affection, or damage.
…
14 See Rotorua District Council v Ngāti Whakaue Education Endowment Trust Board [2018] NZCA 143, [2018] NZAR 951 at [69].
(emphasis added)
62 Assessment of compensation
(1)The amount of compensation payable under this Act, whether for land taken, land injuriously affected, or otherwise, shall be assessed in accordance with the following provisions:
(a) subject to the provisions of sections 72 to 76, no allowance shall be made on account of the taking of any land being compulsory:
(b) the value of land shall, except as otherwise provided, be taken to be that amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise, unless—
(i)…
(ii)only part of the land of an owner is taken or acquired under this Act and that part is of a size, shape, or nature for which there is no general demand or market, in which case the compensation for such land and the injurious affection caused by such taking or acquisition may be assessed by determining the market value of the whole of the owner’s land and deducting from it the market value of the balance of the owner’s land after the taking or acquisition:
…
[22] The approach to the assessment of market value as required by s 62(1)(b) is based on a hypothetical open market transaction. The valuation methodology is well established in law and widely used by valuers applying accepted valuation principles. The methodology is summarised in the decision of this Court, citing Green & McCahill Holdings Ltd v Auckland Council,15 as follows:16
[58] The “willing seller/willing buyer” formulation in s 62(1)(b) has been considered on a number of occasions by the High Court and the Court of Appeal. The approach was summarised in Green & McCahill Holdings Ltd v Auckland Council as follows:
[61] As was noted in Boat Park Limited v Hutchinson, the objective is to assess the market value of the subject land at the effective date.
…The market value, or fair market value, is arrived at by determining what price the property would sell for on the open market under the normal conditions applicable in the market for the type and location of the property being valued… Fundamental to this task is the willing seller/willing
15 Green & McCahill Holdings Ltd v Auckland Council [2013] NZHC 507 at [61]–[62].
16 The High Court decision, above n 1 (footnotes omitted).
buyer principle. Thus, “market value” is defined in the New Zealand Institute of Valuers, Valuation Standard 1, in these terms:
Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
[62] We agree with comments made in the course of an arbitral award in relation to the Green Group land, which the parties referred us to, that this requires identification of the knowledge or information the hypothetical parties would have been likely to have and to have taken into account at the specified date in coming to their conclusions about value. The nature and extent of the knowledge or information which the hypothetical party will be assumed to have had will be influenced by the nature and sensitivity of the particular issue to the value of the land in question.
[23] To assess the market value, a valuer must ascertain the highest and best use (HABU) of the property. This Court described this by reference to valuation principles in the following way:17
[60] A basic concept in relation to valuing on a “willing seller/willing buyer” basis is that of “highest and best use” (HABU). This is described by Rodney L Jeffries in Urban Valuation in New Zealand as follows:18
The highest and best use of a property can generally be described as that use which at the time of valuation would be the most profitable, likely, legal, and probable use of the property. Highest and best use analysis is an extension of economic analysis, particularly as related to the subject of urban land economics. In economic terms it is generally regarded as that use which is the most profitable use from among proposed uses that have been found to be legally permissible, physically possible, appropriately supported, financially feasible, and which would be expected to generate the highest rate of net return over a given income forecast period in relationship to the total capital required to be invested.
It can alternatively be described as that use, or future utilisation of the property, that produces the greatest present land value…
In general terms, however, a category of uses or a range of sizes or types of uses most likely to be the highest and best use is usually ascertainable, based upon calculation, experience and common sense.
…
17 The High Court decision, above n 1.
18 Rodney L Jeffries (ed) Urban Valuation in New Zealand (2nd ed, New Zealand Institute of Valuers, Wellington, 1990) vol 1 at 5-17 and 5-18.
[24] General principles relevant to the hypothetical market valuation methodology were set out in the judgment as follows:19
(a)Imaginary Market: The statutory criteria implies the concept of a willing seller in an open market on a specified date selling to a willing buyer of the property as it then existed including its zoning without the prospect of the public work. The price must be tested by the imaginary market which would have ruled had the land been exposed for sale before the public work was contemplated, but as at the specified date.
(b)Principle of Equivalence: Speedy in Land Compensation notes that “compensation” is a metaphorical expression, “the idea being derived from a pair of balances”. He says:
It is to be proportionate to the loss sustained, an equivalence to what is taken from the owner. It was never contemplated that the community should profit at the expense of the owner.
The principle of equivalence is that statutory compensation cannot, and must not, exceed the owner’s total loss. The owner is to be paid neither less nor more than his loss. The principle is at the root of compensation, because to do otherwise would be unfair on both parties. Unfair on the owner to pay him less than his entitlement, unfair on the acquiring authority that has been given the power of compulsory acquisition in the public interest.
The fundamental principle can be expressed by saying that an owner’s compensation should be equivalent to what he has lost by reason of the compulsory acquisition. What is to be considered is the loss caused by the compulsory acquisition. It is important that regardless of what losses are caused by the taking, there should be no duplication. The final global sum must be the equivalent of what the owner has lost by reason of the compulsory acquisition, neither more nor less.
…
The principle of equivalence is not only a judicial and valuation problem but also an economic and social one, because nothing really compensates an unwilling owner for his non-monetary losses which arise from his attachment to a property or from any sentimental, personal, or aesthetic reason. A genuine unwilling seller probably has an inflated idea of its worth. The economic concept is to convert land values and losses to their equivalent monetary value in the impersonal marketplace. Compulsory acquisition is an economic metamorphosis of that owner’s equivalent loss.
(c)Potentialities: It must be assumed that both the seller and the hypothetical buyer are adequately informed of all relevant
19 The High Court decision, above n 1, at [63(a)–(e)] (footnotes omitted).
circumstances in negotiating a price. It implies a reasonable and bona fide seller. As Speedy notes:
Both the willing seller and the hypothetical willing buyer are deemed to be reasonable men who are prepared to give proper but not excessive weight to all relevant circumstances. Yet he would not overlook any ordinary business consideration and would make full and careful inquiries on all relevant matters from public and other authorities.
Therefore any potential use of the land must be considered in determining compensation for the compulsory acquisition of land. This flows from the well-established principle that the land must be valued taking into account any potentialities. Potentialities are to be valued as such, and not as “actualities”.
(d)Allowance For Realising Potentiality: In considering the value of “potentiality” one must make appropriate allowance for any risk that the claim potential is not realised. The application of the risk is not a mathematical process but rather recognises that the parties to a hypothetical sale are assumed to be fully informed and have made proper enquiries. They would make an allowance for this risk and attendant costs at the date of the acquisition. Therefore, such allowance must be factored into the market value. The extent and nature of the costs to realise the potential of the property by way of subdivision are in contention in this case and we deal with that in more detail below.
(e)Principle of Liberality: Speedy notes that:
…when land is taken compulsorily from an owner, compensation should be assessed liberally. This does not alter the principle of equivalence, nor the test of value. What it means is that in such cases doubts are to be resolved by the courts in favour of the dispossessed owner. …It does not enable the courts to take into consideration the age and health of the owner, nor to be influenced by sympathy, nor the desire to be generous to the owner. The emphasis is on the matter of doubt, which if it exists means that the court should lean towards the owner as may be justified by the evidence, but on fairly generous rather than niggardly terms.
The author goes on to say that this does not alter the normal valuation criterion. He comments that “[i]t is a cardinal principle of compensation law that the owner is entitled to be put back into the same position in respect of his capital as he was in before the taking”.
Analysis
Question of law or general principle
[25] While the applicants have put the issue in a number of different ways in their application for leave and submissions, the primary issue raised in the grounds
advanced for appeal is whether subdivision costs should be taken into account as a factor applied by the hypothetical market’s willing buyer/willing seller.
[26] In this case, the additional potentiality that the piece of land to be taken lent to the property as a whole in a market valuation was taken into account.20 To assess that, the ability to subdivide the land into two lots was considered. Mr Stevens for the applicants submitted that any subdivision costs or related costs should not be taken into account when valuing the piece of land to be taken (Lot 2), as those costs were only relevant to a market valuation where the land is valued on the basis that a subdivision development of more than two lots is the HABU of the land. The applicants therefore draw a distinction between a market valuation for a property where the HABU is subdivision into more than two lots, and a property where the HABU is subdivision into two lots (as in this case). In the case of the former, which the applicants refer to as a “subdivision development”, the applicants accept that valuation requires consideration of the costs of obtaining title for the lots in the subdivision (subdivision costs), as well as other potential costs likely to be payable by the hypothetical purchaser, such as additional foundation or engineering costs likely to be incurred due to the nature of the land to be built on. However, in a two-lot subdivision, no title costs (including subdivision costs) should be considered.
[27] In this case, the valuers had considered various subdivision development options for the property. Those notional developments were assessed as at July 2013 (the specified date for the valuation). The development scenarios included eight options for before the land take, and nine for after the land take.21 One of those subdivision scenarios was of a two-lot subdivision, in which Lot 2 roughly equated to the piece of land to be taken.22
[28] The Tribunal determined that the two-lot subdivision was the HABU in this case, and that subdivision was a potentiality which would be taken into account by a willing buyer/willing seller in the hypothetical market.23
20 At [137].
21 At [122].
22 At [124].
23 Flath v Minister for Land Information [2022] NZLVT 30 [the Tribunal decision] at [39].
[29] The Crown valuers had deducted subdivision and other costs from the various subdivision development scenarios. They had reached the conclusion that no subdivision development, including the two-lot subdivision, achieved an economic value when subdivision and other costs were factored in as a consideration by the willing buyer/willing seller. They therefore concluded that s 62(1)(b)(ii) required that they value the land using before and after valuation methodology. This Court noted that:24
…They had taken this approach on the basis that the exception applied because there was “no general demand or market” for the part of land in question. This was due to the nature of the land taken and that it could not be subdivided off economically. This was largely due to the nature and value of any subdivided lots, high costs of subdivision and providing services to the subdivided lots. They also undertook valuations based on a “willing seller/willing buyer” methodology as well as a hypothetical subdivision as cross checks.
[30] The Tribunal was satisfied that the land taken was of a size, shape, and nature for which demand existed, and under normal market conditions it could be subdivided and sold to a prospective buyer, or sold for a lower transfer price with the buyer incurring the costs and risks required to obtain title.25 The Tribunal had evidence before it on the likely costs of obtaining title and of the likely costs which would be incurred in building on Lot 2.26 It factored in costs of $92,000 for subdivision (into two lots), which it deducted from its calculation of the adjusted site value ($130,000) to reach a figure of $38,000 for the value of the land taken.27
[31] On appeal, this Court considered that the Tribunal had been generous towards the owners in factoring in the figure of $92,000, but was satisfied it was within the appropriate range of costs that might be factored in by the willing buyer/willing seller.28 However, this Court found that the Tribunal gave inadequate reasons in relation to its approach to valuation and the determination of compensation.
[32] Therefore, this Court undertook a review of the substantial valuation evidence put before the Tribunal, including on comparative sales and development options.
24 The High Court decision, above n 1, at [68].
25 The Tribunal decision, above n 23, at [22]. See also the High Court decision, above n 1, at [74].
26 The High Court decision, above n 1, at [121]–[122].
27 At [128].
28 At [127].
These were set out in the Crown valuer’s reports and evidence, as well as that of Mr Doherty.29 It concluded that the Tribunal’s approach was supported by the evidence and was correct.30
[33] This Court noted that Mr Doherty had not deducted subdivision costs from the two-lot subdivision development, on the basis that it was merely a severance of the land to be taken.31 To justify this failure to factor in costs he relied on the 1965 Land Valuation Court decision of Bishell v Minister of Works.32 The Tribunal rejected the contention that Bishell was authority for the proposition that costs of subdivision did not need to be factored into a market valuation for a notional two-lot subdivision where Lot 2 was the land to be severed. In relation to Bishell, this Court noted:33
[101] In Bishell, Archer J in the Land Valuation Court, in a very brief decision of half a page, dealt with a compulsory acquisition notional valuation of a small part of land cut off from a larger area where there were restrictions on subdivision. The Court held that the assessment of a small part of land taken compulsorily is made on the basis the land “could have been sold on the open market.” The Judge said:
It is difficult to know how to value a piece of land which has been cut off from a larger area and where there are restrictions on subdivision in the district where the land is situated. It seems to us that when we have to assess the value of a small piece of land taken compulsorily we must assume that that particular piece of land could be sold. We have to find out what the land should have realised if sold by a willing seller to a willing purchaser and that implies that the land can be sold on the open market. We have virtually to assume therefore that a clear title can be given. On that assumption we think the subject land would be sold for more than was offered by the Crown.…
[102] The Court in Bishell went on to allow £300 for the land on the basis that there had been a concession by the Crown “that if available for sale the land might fetch up to £300”. In addition, the Court noted “there was some degree of injurious affection owing to the fact that the land taken included a large proportion of the frontage of the property as a whole”. It noted that the land taken was practically a square part of land, and not the sort of section that a landowner would readily sell from the front of his property. For this reason, it allowed £100 for injurious affection.
29 At [81]–[100] and [114]–[128]
30 At [141] and [145].
31 At [98(ii)] and [99].
32 Bishell v Minister of Works LVC Blenheim, 24 November 1965 in Moira Thompson (ed)
Land Valuation Cases 1965-1992 (The New Zealand Institute of Valuers, Wellington, 1993).
33 The High Court decision, above n 1 (footnotes omitted).
[103] From the brief report of Bishell, it appears that the Court did not turn its mind to what a willing buyer would pay for that part of land given that buyer had been required to pay the cost of subdividing that land. It merely took the indication by the Crown that the land might reach £300, although we do not know how that £300 was assessed.
[104] The Crown submitted that in any event Bishell is not now reliable authority as the statutory regime has changed. The case was decided in 1965 before the coming into force of the Public Works Act 1981 and in particular the provisions in s 62(1)(b)(ii). That exception, Mr Allan submitted, solved the problem that was faced by the court in Bishell, where due to the “size, shape, or nature” of the land taken there was no demand or no market for it, by permitting a “before/after” valuation. We have not had detailed argument on that point. Regardless of that, the Bishell decision is short, and gives no details as to the calculation of the compensation for the part taken. The Court has relied on what appears to be a concession by the Crown as to the value of the land to be taken. The lack of detail and reasoning reinforces the fact that, at best, it can only be authority for the proposition that even if a part of land could not be subdivided by reason of its characteristics including inability to subdivide due to restrictions, that fact will not inhibit it being valued as if it were able to be subdivided and title could issue.
[34] Mr Stevens in his argument in support of the leave application suggested that there was nothing in Bishell which indicated that the costs of subdivision should be factored into a market valuation of the lot taken.34 In the Tribunal, Bishell was advanced as authority for the argument that those costs should not be factored in. Mr Stevens also submitted that there was nothing in the legislation which indicated that the statutory market valuation approach would include factoring an allowance for costs of subdivision into the considerations of the hypothetical willing buyer/willing seller in assessing a value of Lot 2.
[35] Mr Stevens noted that Bishell had stood for over 30 years and has not been overturned. However, Bishell is not authority for the fact that subdivision costs should not be a consideration of a willing buyer/willing seller in the hypothetical market for the reasons set out in the judgment.35
[36] The principles of valuation are well established, and both the Tribunal and this Court applied them to the facts in the present case. The market value of the piece of land to be taken was determined using the statutory test, which must be based on the
34 Ground 7 in the application for leave to appeal.
35 The High Court decision, above n 1, at [101]–[104].
HABU of the land. In this case, the potentiality of the property included a two-lot subdivision. As noted at [24] above:
In considering the value of “potentiality” one must make appropriate allowance for any risk that the claim potential is not realised. The application of the risk is not a mathematical process but rather recognises that the parties to a hypothetical sale are assumed to be fully informed and have made proper enquiries. They would make an allowance for this risk and attendant costs at the date of the acquisition. Therefore, such allowance must be factored into the market value.
[37] Both the Tribunal and this Court referred to other compensation cases in which the costs of subdividing were a factor to be taken into account in assessing market valuation. Mr Stevens sought to distinguish those cases on the basis that although they involved land being taken and the application of the willing buyer/willing seller market valuation methodology, the nature of the land taking was different.36 However, for reasons set out in the judgment, this Court was satisfied that the Tribunal made no error in referring to those cases.37
[38] The market valuation to determine compensation that was applied by the Tribunal, and reviewed and confirmed with reasons by this Court, was the market value test required under the PWA. That was the methodology supported by the applicants valuer, Mr Doherty. However, Mr Doherty’s valuation did not take into account all the factors which would be considered by the willing buyer/willing seller in the hypothetical market. He omitted consideration of the costs to obtain Lot 2. The assessment of the market valuation was based on the evidence before the Tribunal and reconsidered by this Court. It involved the application of the facts and evidence particular to this case.
[39] Mr Stevens also submits the approach of the Tribunal and this Court does not apply the principle of liberality and it fails to take into account “full compensation” as required under the Act.38 The respondent acknowledges that as a principle of general application, misapplication of the principle of liberality might raise a matter of general importance. However, the respondent submits that there has been no misapplication
36 Ground 5 in the application for leave to appeal.
37 The High Court decision, above n 1, at [107]–[111].
38 Ground 8 in the application for leave to appeal.
because, as noted by this Court, the “market value” test of value required by s 62 is unaffected by the principle of liberality, as it does not alter the principle of equivalence nor the test of value, and in particular the principle:39
…does not enable the courts to take into consideration the age and health of the owner, nor to be influenced by sympathy, nor the desire to be generous to the owner. The emphasis is on the matter of doubt, which if it exists means that the court should lean towards the owner as may be justified by the evidence, but on fairly generous rather than niggardly terms.
[40] In the judgment sought to be appealed, the principle of liberality was applied in that this Court took the view that the Tribunal had been liberal in its assessment of costs a willing buyer/willing seller might factor into the value of Lot 2. However, it adopted the Tribunal’s figure, as it considered this to be within the range of amounts which would be factored into the hypothetical market valuation.40
[41] Mr Stevens also submitted that the judgment failed to consider the Court of Appeal’s requirement in Drower v Ministry of Works that compensation must not be “whittled down”.41 That case has no relevance in the present case, as the market value of the land and compensation was properly assessed.42
[42] I now deal with the other matters raised in the leave application and submissions which relate to matters of fact and evidence rather than law or general principle.
[43] The first is that this case was the only partial take of land for the relevant portion of expressway in which subdivision costs were deducted pointing to negotiated agreements with other land owners.43 The details of the other land taking agreements were not before the Tribunal in detail and the general information available was of little use in a valuation.44
39 The High Court decision, above n 1, at [63(e)] citing Squire L Speedy Land Compensation (The New Zealand Institute of Valuers, Wellington, 1985) at 7.
40 At [142].
41 Drower v Minister of Works and Development [1984] 1 NZLR 26 at 29. See ground 6 in the application for leave to appeal.
42 The High Court decision, above n 1, at Attachment A at [3].
43 Ground 2 in the application for leave to appeal.
44 The High Court decision, above n 1, at [115].
[44] The applicants submitted that while finding that s 62(1)(b)(ii) of the PWA did not apply, the Tribunal and this Court applied the Crown valuations, which were erroneously based upon a before and after valuation methodology rather than a market valuation.45 The Crown valuations undertook full valuations including consideration of subdivision scenarios and comparative market analysis. The material in those valuations provided a large amount of valuation evidence upon which the Tribunal and this Court relied in reaching a determination of compensation.
[45] The applicants also say that the Tribunal held that a subdivision of the severed land was not economically viable and the judgment held that subdivision costs were prohibitive.46 This mischaracterises the judgment, which reviewed the evidence and in so doing agreed that a notional two-lot subdivision added potentiality. This ground is specific to this case and not a matter of law or general principle. Nor is the applicants’ other criticism of the first instance Tribunal determination.47
[46] The applicants also raised in submissions that this Court erred by not taking into account the contribution from the neighbouring mirror property at 24 Leinster Avenue for development of the right of way in relation to the subdivision into two lots. Splitting the costs of subdivision between the four relevant land owners was considered unreasonable by the Tribunal.48 This is a matter of fact and evidence which relates to the applicants’ individual circumstances and does not carry any wider importance. It is not a matter of general principle.
[47]The respondent pointed out the comments of the Court of Appeal in Waller:49
When the disputed matter is entirely or largely a question of fact the task of the applicant … is harder. An issue of fact in a matter falling within the jurisdiction of an inferior Court will seldom be of public importance.
[48] In conclusion, on the primary issue raised as to whether subdivision costs should be taken into account as a factor applied by the hypothetical market’s willing buyer/willing seller, the judgment raises no question of law or general principle. The
45 Ground 9 in the application for leave to appeal.
46 Ground 1 in the application for leave to appeal.
47 Ground 4 in the application for leave to appeal.
48 The Tribunal decision, above n 23, at [41]; upheld in the High Court decision, above n 1, at [98(i)].
49 Waller, above n 12, at 413.
valuation methodology used to assess compensation was applied to the valuation and related evidence as required by the relevant legislation and valuation principles.
[49] The other matters raised by the applicants in support of the application for leave to appeal largely fall into the category of questions of fact which are peculiar to this case.
[50] No question of law or general principle is raised by the proposed grounds of appeal.
Importance of the issues to the parties
[51] The applicants submit that the issues involved in this case are important in protecting their private property rights and ensuring they receive just compensation for the land taken. They contend that the determination of the correct methodology for valuing partial takes of land and when subdivision costs should be deduced is in the broader public interest, as it affects the compensation payable for all partial takes under the PWA.
[52] The methodology for valuations in the situation of land taken is well settled and, as I have found, there is no issue of law or general importance. I note the issue of compensation for the land taken is of importance to the applicants, but that is not enough to warrant a second appeal in this case.
The amount of money in issue
[53] In terms of the amount of money at issue, the applicants note that the land taken represents approximately 18 per cent of their overall property.
[54] I accept the respondent’s submissions that that while the amount paid by way of compensation is a relevant consideration to the applicants, it cannot override a lack of bona fide and serious grounds to argue issues of wider importance. In light of the broader considerations regarding leave to appeal to the Court of Appeal, I do not consider that the financial impact on the applicants in this case is sufficient to justify leave being granted in the circumstances.
Conclusion
[55]Overall, for the reasons given, leave to appeal is not granted
Costs
[56] Costs on a 2B basis in favour of the successful respondent appear appropriate. However, if the parties are unable to agree, any application for costs should be made on or before five days from the date of this judgment and any response within a further five days.
Grice J
Solicitors:
Hazelton Law, Wellington Crown Law, Wellington
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