Guide Hill Station Limited v Attorney-General
[2019] NZHC 3216
•6 December 2019
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV 2018-412-76
[2019] NZHC 3216
UNDER the Crown Proceedings Act 1950 and the Declaratory Judgments Act 1908 IN THE MATTER
of a decision under the Public Works Act 1981
BETWEEN
GUIDE HILL STATION LIMITED
Plaintiff
AND
HER MAJESTY’S ATTORNEY-GENERAL
First Defendant
AND
MERIDIAN ENERGY LIMITED
Second Defendant
Hearing: 31 July–1 August 2019; further written submissions 19 -26
September 2019
Counsel:
P J Page and J Pierce for Plaintiff
B Arapere and K Gaskell for First Defendant
J Maassen abd H Tapper for Second DefendantJudgment:
6 December 2019
JUDGMENT OF SIMON FRANCE J
Table of Contents
Introduction [1]
Legislation [6]
Facts – land tenure history [10]
Issues [11]
Is the target land required for a public work? [13]
GUIDE HILL STATION LIMITED v ATTORNEY-GENERAL & MERIDIAN ENERGY LIMITED [2019]
NZHC 3216 [6 December 2019]
Did the transfer to ECNZ in 1988 mean the Pukaki scheme was
no longer a public or government work? [38]
Even if the physical land is required for a public work, should the
freehold estate have been offered back? [41]
The effect of the transfer of the Crown hydro lake and riverbeds
to management under the Land Act. [57]
The expediency decision [59]
The policy directive [65]
The effect of the transfer to the Land Act [73] A declaration? [80]
Conclusion [93]
Introduction
[1] In 1976, the Crown took part of the plaintiff’s land (the acquired land) under the Public Works Act 1928 for “the generation of electricity”. The total acquisition was 139.0275 ha. Subsequently the level of Lake Pukaki was raised which resulted in the inundation of some but not all of the acquired land. This is because it was part of the Crown’s hydroelectric power blueprint to ensure that there was sufficient surplus land to provide for large flood events. A rationale for this is to protect neighbouring properties from flood and erosion.
[2] The present proceeding concerns a portion of the acquired land – approximately 47 ha (the target land). It runs between the eastern side of the lake and a road, constructed as part of the acquisition process, that runs parallel to the lake. The plaintiff, Guide Hill Station Ltd, has entered into an agreement to sell the target land, if it can be reacquired, to a third party which has plans to build a lodge on the land if consent can be obtained.
[3] The target land is subject to an all-encompassing easement registered in favour of the second defendant, Meridian Energy Ltd. It enables Meridian to do anything to the land which it needs to do for electricity generation purposes, including entry and, if necessary, controlling flooding. It may also do any necessary erosion work.
[4] Guide Hill seeks a declaration that the target land should have been offered back to it under the provisions of the Public Works Act 1981. The core proposition is that the easement gives Meridian everything it needs to have to carry out its functions. Accordingly, the freehold should be returned, subject to the easement. As is required in such cases, the plaintiff must plead the effective date on which it is said the obligation to offer back arose.1 The significance of this is that the effective date will usually become the valuation date. Not always, but normally, the further back in time the effective date is, the lesser the price the former owner will have to pay to reacquire the land, which by now may be worth considerably more.
[5] Guide Hill pleaded two effective dates – 13 March 1987, being the date of a Cabinet Steering Committee meeting, and 8 May 1990, being the date of certain Electricity Corporation of New Zealand (ECNZ) correspondence. Each is said to show the target land was no longer required as that term is used in the Public Works Act. During the hearing a third date emerged, being the date when the current easement was registered – 13 November 2007. This latter date was not pleaded, but was the subject of submission at the hearing. Subsequent to the hearing I gave the parties an opportunity to file further submissions. I am satisfied there has been a fair opportunity to address the point, and that there is no evidential prejudice arising from it not being pleaded. I will accordingly address it as a third possibility.
Legislation
[6]The key provision is s 40 of the Public Works Act, which provides:
40 Disposal to former owner of land not required for public work
(1)Where any land held under this or any other Act or in any other manner for any public work—
(a)is no longer required for that public work; and
(b)is not required for any other public work; and
(c)is not required for any exchange under section 105—
the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority, as the case may be, shall
1 High Court Rules 2016, r 5.26.
endeavour to sell the land in accordance with subsection (2), if that subsection is applicable to that land.
(2)Except as provided in subsection (4), the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority, unless—
(a)he or it considers that it would be impractical, unreasonable, or unfair to do so; or
(b)there has been a significant change in the character of the land for the purposes of, or in connection with, the public work for which it was acquired or is held—
shall offer to sell the land by private contract to the person from whom it was acquired or to the successor of that person—
(c)at the current market value of the land as determined by a valuation carried out by a registered valuer; or
(d)if the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority considers it reasonable to do so, at any lesser price.
(2A) If the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority and the offeree are unable to agree on a price following an offer made under subsection (2), the parties may agree that the price be determined by the Land Valuation Tribunal.
(3)Subsection (2) shall not apply to land acquired after 31 January 1982 and before the date of commencement of the Public Works Amendment Act (No 2) 1987 for a public work that was not an essential work.
(4)Where the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority believes on reasonable grounds that, because of the size, shape, or situation of the land he or it could not expect to sell the land to any person who did not own land adjacent to the land to be sold, the land may be sold to an owner of adjacent land at a price negotiated between the parties.
(5)For the purposes of this section, the term successor, in relation to any person, means the person who would have been entitled to the land under the will or intestacy of that person had he owned the land at the date of his death; and, in any case where part of a person’s land was acquired or taken, includes the successor in title of that person.
[7]It can be seen subs (1) first defines the land to which the section is applicable
– land held for a public work. It then identifies the context that must apply before the
section is relevant – the land is no longer required for the public work for which it is held, nor for any other public work.2
[8] If the land is no longer so required, the Chief Executive must offer it back to the original owner (or his or her successor).3 Subsection (2) provides two exceptions to this obligation to offer back land not now required for a public work:
(a)it is considered impracticable, unreasonable or unfair to offer it back; or
(b)there has been a significant change in the character of the land.
[9]The process is summarised by Professor Elizabeth Toomey in this way:4
The Court of Appeal reviewed the process under s 40 of the PWA [Public Works Act] that had been carefully explained in Attorney-General v Hull.
The criterion in s 40(1)(a) of the PWA is satisfied when the land is no longer required for the purpose for which it was taken. The next step is for the land-holding agency to take reasonable and expeditious steps to ascertain whether the land is “not required for any other public work” or “not required for any exchange under section 105 of [the PWA]”. If the land is not so required, the “offer back” provisions will be triggered unless an “offer back” would be “impracticable, unreasonable, or unfair” or it is considered that the land should be sold to an adjacent owner. If neither exception applies, the land must be offered back to the original owner, or the successor in title. There is allowed a reasonable time in the circumstances to ready the land for sale and to locate the original owner or successors.
Facts – land tenure history
[10] The land tenure history comes primarily from an agreed statement of facts. So far as they are relevant to the judgment the facts are:
(a)The acquisition of the acquired land was gazetted on 8 March 1976. It was declared to be taken pursuant to s 32 of the Public Works Act 1928. It was taken for “the Generation of Electricity”.
2 The third option, that land is not required for any exchange under s 105, is not in issue.
3 Public Works Act 1981, s 40(2).
4 E Toomey “The “Offer Back” Provisions in the Public Works Act 1981: Former Owners Chase Potential Spoils” [2007] NZ L Rev 659 at 681-682 (footnotes omitted), relying on Attorney- General v Hull [2000] 3 NZLR 63 (CA).
(b)The road that now forms the inland border of the target land was built on the acquired land in 1977.
(c)On 31 March 1988, as part of the privatisation reforms, the Crown entered into a Deed of Sale to sell assets it owned and used for the generation of electricity to ECNZ.
(d)On 8 May 1990 an employee of Electrocorp Production, a division of ECNZ, advised Guide Hill that “the land in question” had been declared surplus by Electrocorp Production. The disposal of surplus land was said to be a matter for head office.
(e)Subsequent to the agreement to sell made in 1988, the Government decided that hydroelectric lakes and riverbeds should be retained in Crown ownership. Accordingly, on 16 April 1993 the Crown and ECNZ entered into a Deed of Operating Easement which acknowledged ownership would not pass, but ECNZ would be granted all rights and powers necessary and desirable to enable it to carry out its business.
(f)The operating easement, which was a generic easement applying to all hydro lakes and rivers, granted ECNZ perpetual rights for water storage, operating rights including access and storage, rights to control erosion, and rights in the event of flooding. The Crown further agreed to grant ECNZ specific easements over land acquired or retained by the Crown prior to 1 April 1988 for the primary purpose of electricity generation.
(g)The Crown proceeded to take steps to prepare the individual easements for approximately 35-40 lakes and riverbeds nationwide. The task was carried out under the supervision of the Commissioner of Crown Lands. The easements were to be done under the Land Act 1948, thereby necessitating a change in status of the land from the Public Works Act to the Land Act.
(h)On 21 December 1995, the Commissioner issued a general decision that such transfers would not engage the s 40 Public Works Act offer back requirements. He was satisfied, first, it would be unreasonable to have to offer back because the land is still required for hydroelectricity operations (s 40(2)(a)), and, second, there had clearly been a significant change in the character of the land (s 40(2)(b)). The acquired land (speaking here not just of Guide Hill but nationwide) had become either lake bed or margin. The Commissioner added:
While it could be argued that a lake margin had not changed in character, it may be required by ECNZ for access or because it is within the design flood level of the lake. Both situations are required to be covered by the operating easement.
(i)Meridian was incorporated on 16 December 1998, and received the rights of ECNZ to operate Lake Pukaki for electricity generation purposes.
(j)On 19 January 2001, the acquired land, amongst others, was declared to be Crown land subject to the Land Act. This was done pursuant to s 42(3)(b) of the Public Works Act.
(k)On 22 January 2003, the Commissioner issued Guide Hill a licence to graze on part of the acquired land. This includes the target land.
(l)On 21 August 2007, the Crown and Meridian entered into a Deed of Easement for Lake Pukaki. The easement was registered as an instrument on 13 November. It authorises Meridian to store water, erode land, and install and operate hydroelectricity water works, and confers ancillary rights to facilitate that.
(m)On 13 July 2011, Guide Hill applied to the Commissioner under the Land Act to alienate the target land. The Commissioner set out the process to be followed, which included obtaining clearances from other agencies.
(n)From 11 July 2015 to 1 June 2016, Guide Hill negotiated and completed the sale of the station to Blue Lake Investment (NZ) Ltd, a foreign- owned company. There is an agreement to also sell the target land to Blue Lake should Guide Hill acquire it.
(o)On 15 June 2016, the Crown applied to the local authority for consent to subdivide the acquired land in order to create a title for the target land. Consent was obtained on 22 November 2016. A condition of the consent is that the target land then be immediately amalgamated with the station land now owned by Blue Lake.
(p)In October 2017, Blue Lake, although not yet the owner, sought consent to construct a building on the target land. The application stated the Crown had agreed to sell the land to Guide Hill. The Commissioner advised the local authority there was no contract to sell the land to Guide Hill.
(q)On 4 May 2018, the Commissioner declined Guide Hill’s application to alienate the target land under the Land Act on the grounds that the Department of Conservation had requested the land to use it as a scenic reserve.
(r)Guide Hill was unsuccessful in the rehearing provided for by s 17 of the Land Act. As part of that hearing Ngāi Tahu indicated it considered it may have a right of first refusal under the Ngāi Tahu Claims Settlement Act 1988.
Issues
[11] The overarching question is whether the target land was required for a public work at any point after 1987, and if not, whether the Crown was obliged under s 40 of the Public Works Act to offer back the land to Guide Hill at a certain point in time. To answer that question, the following issues emerge:
(a)Was the target land required for a public work at any point after 1987?
(b)Did the intended transfer to ECNZ in 1988, and the subsequent grant of the easement, mean the Lake Pukaki scheme and the target land was no longer a public or government work?
(c)Even if the physical land is required for a public work, should the freehold estate of the target land nonetheless have been offered back under s 40?
(d)What is the effect of the transfer of the target land from the jurisdiction of the Public Works Act to the Land Act?
[12] If I find the Crown was obliged to offer back the land, a final issue emerges - whether the Court should use its discretion to grant a declaration in these circumstances.
Is the target land required for a public work?
[13] In this section I deal with the physical land itself and its use. Later it will be necessary to consider separately whether the freehold estate is required for a public work.
[14] Concerning the land, Guide Hill relies on two matters: what has happened to the land, or not; and statements made at various times by persons connected with the issue, be they from ECNZ or the Commissioner of Crown Lands.
[15] Factually, what has happened is not in dispute. The target land sits on the shores of Lake Pukaki. It is above the level of the lake and has not been flooded. It is not used, in any actual sense, by Meridian. Since 2003, Guide Hill has had a licence to graze stock on it. On this basis, Guide Hill says the target land was never required for a public work, and in any event is no longer required for a public work.
[16] Meridian filed considerable evidence from various experts in support of its proposition that the target land has always been and still is needed for electricity generation. Because the evidence has not been challenged it can be briefly summarised. Before doing so, I make my own observation – the target land is subject
to Meridian’s easement. Unless that is not needed, and no-one suggests that, it is plainly a component of the hydroelectric scheme. It performs a role unchanged from the date of acquisition.
[17] Dr Murray Webby is a specialist in hydraulic engineering. He often gives evidence on the management and operation of natural lakes, lakes controlled for hydroelectricity generation purposes, and on the hydrological and climatological processes affecting such lakes. He is familiar with Lake Pukaki, having had involvement dating back to the early 1990s. He was recently one of a team that updated the Probable Maximum Flood Study for the Waitaki River Catchment, which includes Lake Pukaki.
[18] Dr Webby describes the impact of an extreme maximum flood that could be expected to occur under Probable Maximum Flood conditions. Inundation to a variable marginal strip of up to 120 m wide is predicted. It is also predicted that the impact of flooding will be affected by significant high winds, the adverse impact of which is uncertain. In Dr Webby’s opinion it is important to maintain a lake management margin to accommodate future inundation and potential erosion.
[19] Dr Martin Single is a coastal geomorphologist with specific expertise in lakeshore processes. He has had involvement with many of the lakes in New Zealand used as part of hydroelectric schemes. He notes that raising Lake Pukaki created a new shoreline. In geomorphological terms, it is a “young” shore that is still changing. Further erosion of steeper areas and deposits in areas of more gentle slope can be expected. The Guide Hill frontage is an area that may be subject, directly or indirectly, to erosional processes. Dr Single considers:
Uncertainties in determining a stable shore position do not allow for redrawing the landward limit of the operating easement closer to the current lakeshore with a high degree of confidence that hazards would be avoided.
[20] Dr Jennifer Purdie is an employee of Meridian. She is a scientist in climate forecasting. She is particularly responsible for managing wind and water forecasting and planning generation for Meridian, on time scales covering one week to 30 years.
[21] Dr Purdie first describes the predicted climate changes for New Zealand by the end of the century. As a consequence of these changes, it is expected over the next 50-100 years the inflows for Lake Pukaki will increase in winter and decrease in summer. Volatility is expected to increase, with it currently being projected it will be seven per cent wetter for each degree of temperature increase. Up to three degrees of temperature increase on 1990 levels may occur by the turn of the century. The significance for the present issue is that predicting what lake margin is needed, and what lake controls will be required, is uncertain.
[22] Mr Guy Waipara is the General Manager of Generation and Natural Resources for Meridian. He attests to the importance of the Waitaki hydro scheme to New Zealand. It is noted that if the push towards renewable generation continues, the Waitaki hydro scheme will be more central. Presently it accounts for 18 per cent of New Zealand’s renewable electricity generation. Evidence is also given about forecasted increases in energy demands. It is noted that no new hydro generation has been built or is expected to be, with the current focus on wind, geothermal and solar options.
[23] Mr Waipara emphasises that Lake Pukaki is New Zealand’s largest hydro storage lake. Its management and the imperatives driving the management are likely to change. Flexibility is needed, with the existing easements, including over the target land, seen as essential.
[24] As noted, Guide Hill did not seek to contest the evidence. The evidence establishes beyond doubt that the target land is properly included in the easement. It provides, as does all the margin land, a degree of protection against existing risks, being flooding and erosion. These risks are likely to increase throughout the century.
[25] In terms of the concept of “required”, as the term is used in s 40(1) of the Public Works Act, the fact that nothing physically happens on the land does not, in my view, mean it is not used, let alone required. It is a buffer zone, and that is a required use.
It is both presently used and required, and is required in the future. It is far from a case of land banking to see if some need emerges.5
[26] I do not accept Guide Hill’s submission that future needs are irrelevant. It is too broad a statement. It is well established land cannot be held to guard against the possibility that some time in the future a presently unknown need may emerge.6 But here there is an existing need and an identifiable future need. That the risk it is in part designed to prevent may not arise immediately does not mean the land is not required.
[27] In any event, I consider it correct to say it is presently used. Similarly, the fact that a compatible use such as grazing stock is possible does not mean the land is not being used or required. It is that its use as a buffer does not prevent other uses.
[28] The scale of the acquired land was at the time a calculated exercise based on known flood lines, and having regard to a one-in-a-thousand-year event. Nothing has changed in that regard other than the science would say the risks of flooding, erosion and variable inflows have increased and will continue to do so. There has been no reconfiguration of the model, nor has evidence been presented to say it is invalid. In terms of the use of the land then, I consider it is presently required, and indeed used, for a public work.
[29] The second aspect of Guide Hill’s case on this part are statements made by officials that the land is surplus. I put to one side for later consideration statements after 2007 made in the context of the possible alienation of the freehold estate, and focus here on observations that the physical land is surplus.
[30] The first statement occurs in 1990 in a letter written by a Land and Property Advisory Officer. It is written in response to an inquiry from Mr Gould of Guide Hill. His evidence confirms he made an inquiry but does not detail it. The response is that:
Unfortunately I do not have control over the land in question as it had been declared surplus by Electrocorp Production.
5 Relevant authorities include Edmonds v Attorney-General HC Wellington CIV-2000-485-695, 3 May 2005; Attorney-General v Edmonds [2006] NZCA 146; The Sisters of Mercy (Roman Catholic Diocese of Auckland Trust Board) v Attorney-General HC Auckland CP 219/99, 6 June 2001; and McElroy v Auckland International Airport Ltd [2008] 3 NZLR 262 (HC).
6 McElroy v Auckland International Airport Ltd, above n 5, at [51] and [98].
[31] The evidence as it stands is too vague to be of value. What land is being talked about is not known, nor who declared it surplus, for what purposes it was surplus and why it was considered to be surplus. If it is based on the fact that the land will not be deliberately inundated, that would be too narrow a view of “required”.
[32] Guide Hill next relies on an extract from a consultation paper authored on 24 December 1999 by the Chief Crown Property Officer of Land Information New Zealand (LINZ), which states:7
When the Crown decided to build a hydro-power development scheme, it purchased sufficient land to hold water up to the “1000 year flood level”, in order to reduce the risk of flooding adjoining private property. Three water levels are important in hydro lakes. These are:
… [other levels omitted]
The “design flood level” is based on the theoretical depth of a “once in a 1000 year” flood occurrence. When building dams, the Crown acquires sufficient land to accommodate a flood of this magnitude once the dam is built. The “design flood level” is significantly higher than the maximum operating level. As the dry land margin is required only very occasionally for flood containment, it could technically be used for other purposes if these do not interfere with power generation activities.
[33] The paper from which this extract is taken was a Departmental report detailing feedback to a proposal to transfer the management of Crown hydro lakes, Crown hydro rivers and their dry land margins to territorial local authorities. The genesis of the proposal seems to be concern over the ongoing costs of, and the endeavour required for, such management. The outcome of the discussion was a conclusion that more consultation was needed, albeit with a Departmental preference for transfer to territorial authorities.
[34] The cited extract proffers support, as Guide Hill says, for the idea that some use of the margin land is compatible with the land’s function as a lake margin. The paper notes these margins are well sited for recreation and leisure activities, an observation consistent with the Department of Conservation’s current interest in the target land as a scenic reserve. It does not support Guide Hill’s claim that recognition of compatible uses means it cannot also be required for a public work. The transitory
7 Sam Brown Chief Crown Property Officer Report Against Internal Milestone 98/99 3(i) (Land Information New Zealand, 24 December 1999) at 2-3.
nature of the compatible uses can be noted, as indeed can the underlying proposition that transfer should be to a local authority, not private ownership.
[35] The other proposition about the physical land use advanced by Guide Hill is that because the margin was taken as part of a policy to guard against an event anticipated to occur every thousand years, it cannot be being held for a public work. However, that is to place an incorrect emphasis on the figure 1000. The reality is that the margin protects in the case of a flood of a level likely to be experienced at that frequency. It does not of course mean that flooding may not occur tomorrow nor only once. That it will happen is, however, a predictable event.
[36] Meridian’s unchallenged evidence goes further than that, in my view. It both establishes the current need for the margin as part of the model applicable when it was acquired, but also that the current need may change in the short term as a result of climate change, the way the lake reacts to that and the way government and society react to the changing climate. The evidence demonstrates that the next 100 years are likely to be a time of flux, and that the acquired land, including the target land, may be more directly needed either by choice or because of the direct impact of nature.
[37] In conclusion on the issue of whether the physical land is needed, the target land is part of an established hydro scheme. It was taken for a purpose, and its taking was pursuant to a model for these schemes that assessed, amongst other things, the potential impact of raising the lake for hydroelectricity generation on adjacent properties, and how best to manage this. The target land has served that function since the outset and continues to do so. That function means it is held and required for a public work. In terms of necessity,8 nothing has changed. Further, the evidence establishes that in terms of future needs over the next 100 years, it is likely the need for the lake margin will increase rather than diminish.
8 The test Guide Hill identifies from Attorney-General v Horton [1999] 2 NZLR 257 (PC) and
Kerry-Taylor v Attorney-General [2004] 3 NZLR 104 (HC).
Did the transfer to ECNZ in 1988 mean the Pukaki scheme was no longer a public or government work?
[38] Guide Hill focuses on the definition of public work, government work and local work in the Public Works Act:
Public work and work mean—
(a)Every Government work or local work that the Crown or any local authority is authorised to construct, undertake, establish, manage, operate, or maintain, and every use of land for any Government work or local work which the Crown or any local authority is authorised to construct, undertake, establish, manage, operate, or maintain by or under this or any other Act; and include anything required directly or indirectly for any such Government work or local work or use:
…
Government work means a work or an intended work that is to be constructed, undertaken, established, managed, operated, or maintained by or under the control of the Crown or any Minister of the Crown for any public purpose; and includes land held or to be acquired for the purposes of the Conservation Act 1987 or any of the Acts specified in Schedule 1 of that Act (except the common marine and coastal area), even where the purpose of holding or acquiring the land is to ensure that it remains in an undeveloped state
[39] It is submitted ECNZ, and subsequently Meridian, as state-owned enterprises, are neither the Crown nor local authorities. Therefore from 1988, hydroelectric generation carried out by ECNZ or Meridian was no longer a public work, and the target land was no longer being held for one.
[40] I do not agree and consider the situation falls within the concept of a government work. The Crown continues to own the lake bed. The electricity generation is carried out by a state-owned enterprise which was, at that time, wholly owned by the Crown, and since 2013 is majority owned by the Crown. These are enough to maintain the status of public work.
Even if the physical land is required for a public work, should the freehold estate have been offered back?
[41] Land is defined in the Public Works Act as including any estate or interest in land.9 Guide Hill contends that the freehold estate has not been required since the time the easement was granted as that gives the generator all the powers it needs. This was either at the time of the generic easement granted in 1993, or at the latest when the lake specific easement was registered in 2007. It is said that Meridian is, or should be, disinterested in the ownership of the freehold because any transfer will be subject to Meridian’s rights under the easement.
[42] I analyse this submission against the background that the physical land itself is currently used for electricity generation, as a public work, and is needed in the future.
[43] Guide Hill first notes the terms of the generic easement entered into on 16 April 1993, which provide:
6. The parties recorded their agreement that ownership of the lands referred to in Paragraph 3 is not essential to enable the Corporation [ECNZ] to meet its commercial objectives and further that the Grantor shall have the right to sell those lands or to utilise them for its own purposes as it sees fit but subject always to the provisions of this Deed of Easement and all relevant Acts of Parliament or subordinate legislation from time to time in force.
[44]Recital [5] deals with the intended individual easements and states:
5. The Corporation acknowledges that the entering into this Deed of Easement by the Grantor and the granting of such easements on an individual basis will meet its requirements and will enable it to carry out its business as contemplated by the Deed of Sale and Purchase.
[45] Guide Hill next refers to the evidence filed by Meridian for this hearing. Acknowledging that its import is that an easement over the target land is essential for electricity generation, it is submitted the other inference is that the easement is all that is needed. The evidence is not directed at, and does not suggest, a need for the Crown to retain the freehold estate.
9 Section 2.
[46] The next source of statements concerning the freehold is found in a subdivision application made by the Commissioner of Crown Lands. Guide Hill had applied under s 54 of the Land Act for return of the freehold of the target land. For a time it appeared the application was favourably viewed, at least by the Commissioner, but subject to a consultation process still to be completed.
[47] The subdivision application sought to obtain a separate title for the target land, and the application was made with return of the freehold in mind. It will assist to set out a lengthy extract from the application which then becomes self-explanatory:
The proposed new allotment is part of a former 139.0275ha portion of fee simple land RS 33300 & RS 33297 taken from Guide Hill Station Limited for the purpose of Generation of Electricity by Gazette 1976 p704 (GN 7699.1). Subsequently a 10.6831ha part of the parcel taken was set apart for road (Hayman Rd) by GN 126736.1. Approximately 81ha of the original parcel taken was drowned by the raising of the level of Lake Pukaki as part of the Upper Waitaki Hydro Power Development project and is now a permanent part of the bed of Lake Pukaki. The remaining 47.8ha of the original parcel taken is dry grazing land, located between Hayman Road and the landward margin of the bed of Lake Pukaki.
In 2001 it was necessary for the Crown to provide an operating easement in favour of Meridian Energy Ltd over the physical bed of the lake and also the immediately adjoining dryland areas, in order to provide the power generator with the right to manage lake water levels (within the limits of land use consents it holds under the RMA), to manage activities on the bed and dry land fringes of the lake and to control the erection of structures thereon and manage the risk of erosion and other matters. To execute this easement it was necessary, for practical purposes in documenting the easement, for the Crown to bring the [sic] all of the large number of affected land parcels, held in a large number of appellations for a wide range of purposes under various statutes, to the same status and appellation. This required bringing all the affected land areas into the status of Crown Land under the Land Act 1948 and then merging them into a single new allotment.
The original bed of Lake Pukaki always had the status of Crown Land under the Land Act 1948. All remaining drowned and dry land parcels affected were declared Crown Land under the Land Act 1948 by Gazette 2001 p180 (GN 5021657.2). These parcels and the original lake bed were then merged into a single new parcel of Crown land under the land Act 1948: - being Section 1 SO 380603.
The 47.8ha of dry grazing land remaining from the original 139.2075ha taken is therefore now Crown land under the Land Act 1948 and no longer required for a public work. It is leased on a short term grazing lease basis to the original owner, Guide Hill Station Limited, which has approached the Crown expressing their desire to repurchase.
Under s.40 Public Works Act 1981 land held for a public work that is no longer required and is to be disposed of, must first be offered back to the original owner or descendants who have a mandatory first right to negotiate a re- purchase of that land, with no requirement for subdivision consent under the RMA if subdivision is needed to effect the return of ownership.
However in this case, because the subject land has been declared Crown land under the Land Act 1948 and is no longer held under or subject to the PWA 1981, the mandatory ‘offer back’ provided for in the Public Works Act does not apply, denying Guide Hill Station Limited the automatic first right to repurchase the subject land that would have applied if it had remained held for the purpose of Generation of Electricity and not returned to Crown land status to support execution of the operating easement. Because of this fact, the Crown has acknowledged a moral obligation to offer this land back to Guide Hill Station Limited on the same basis that would have applied if the land had remained held under the Public Works Act 1981 and not been declared Crown land. This means that without the mandatory requirement to offer back the land, the transaction is not exempt from obtaining subdivision consent under the RMA 1991, hence this requirement for consent application. As the land is Crown land subject to the Land Act 1948, the proposed disposition thereof will be undertaken in terms of s.54 of the Land Act 1948.
[Emphasis added]
I make the observation that any references to the land being surplus, or being not required for a public work, must be understood to be against the background that the easement is secured against it.
[48] That said, there is no doubt the Commissioner at the time the subdivision application was filed, being the person who is responsible for the land, was of the view, that the freehold was no longer required for a public work.10 The decision to decline Guide Hill’s application under the Land Act does not reflect a change in view. Rather, subsequent to this application the Department of Conservation advised it wanted the land as a scenic reserve, and that was given priority. The Commissioner’s approach is consistent with the general directive at the time the land was transferred to the Land Act. This was before the easement was in place, yet it was thought necessary to resort to the exceptions in s 40. Recourse to them is only needed if the land is not required for any public work.
10 It is appropriate to make the point here that the case is about whether the Public Works Act obligated the Crown to return the land. Whether the Crown as owner chooses to return the land is a different issue which arises between the Crown and interested third parties – the previous owners, Meridian, Ngai Tahu and other government departments.
[49] The history of the Department of Conservation’s response under the Land Act should be noted. Initially, the Department did not express interest in the land, but noted reservations about allowing access to grazing stock because of water quality issues. It wanted fencing to be explored. The Department wrote again some months later to say it had subsequently met with the owners of Guide Hill and agreed a practical fence boundary would be set, and eventually agreement on its location was reached prior to the subdivision application being made.
[50] In April 2018 the Department wrote again, advising matters had changed.11 The Department said it had gathered considerably more information about the conservation values of the target land and the Mackenzie Basin more widely. The updated values were then listed. It was also noted that since its previous advice, a plan change had become operative. The plan change designated the whole of the Mackenzie Basin as “an outstanding natural landscape” and classified the target land as a lakeside protection area because of its highly sensitive and visible landscape values.
[51] The Department followed this correspondence by making a joint submission with LINZ to the Commissioner to instead transfer the land to the Department for a scenic reserve. This application was eventually why Guide Hill’s application was declined.
[52] Returning to the freehold issue, it is clear that subsequent to the registering of the easement, and despite opposition from Meridian, the Commissioner considered electricity generation purposes did not require the Crown to maintain ownership of the freehold. That is also consistent with the statements in the easements which confirm the separate nature of the Crown’s ownership.
[53] Meridian submits, amongst other matters, that the role of transferring the freehold is inconsistent with its rights under the easement. It rejects Guide Hill’s proposition that Guide Hill, and then Blue Lake as intended subsequent owner, respect the easement. It notes what it sees as endeavours by Guide Hill and Blue Lake to undermine the easement.
11 Guide Hill contends the key event was a change of Government.
[54] There is much in the point about the easement being inconsistent with Crown alienation of the freehold with which I agree, but for present purposes it can be noted the Commissioner seemingly was not of that view. The easement affords various rights to Meridian which it can no doubt seek to enforce as and when it needs to. These matters are relevant to whether it is practicable to transfer the freehold, but they do not constitute any sort of formal bar to transfer of the freehold.
[55] Where I differ from Guide Hill is that I see no basis on which it can be said the freehold should have been offered back prior to the registering of the easement in 2007. The agreement with ECNZ required the Crown to provide individual easements under the Land Act. These lake-specific easements are seen to give Meridian all the powers it needed for generation of electricity on Lake Pukaki. Any transfer of the freehold will be subject to that easement. The registering of the easement was both a contractual obligation on the Crown, and a necessity.
[56]Accordingly, until the easement was registered:
(a)the Crown had not fulfilled its contract obligations as land owner; and
(b)Meridian’s position was not secured as it needed and as it was contractually entitled to.
This means until that time, even if the freehold was not needed, the exceptions within s 40(2) of the Public Works Act, preventing the land being offered back, inevitably applied. At the least, it would have been impracticable and unreasonable to offer back the land to the owners of Guide Hill at this point as the Crown still had obligations to fulfil in relation to the land. The position after 2007 is dealt with in the following section.
The effect of the transfer of the Crown hydro lake and riverbeds to management under the Land Act.
[57] On 19 January 2001, Lake Pukaki was declared to be Crown land subject to the Land Act.12 This involved two decisions – a decision by a delegate of the Minister of Lands, pursuant to s 42(3)(b) of the Public Works Act, that it was expedient to do so, and a prior decision by the Commissioner of Crown Lands that such a transfer would not require an offer back under s 40. Each decision needs consideration.
[58]Section 42(3) of the Public Works Act provides:
(3)Subject to section 40(2), where any land held for a Government work—
(a)is not required for that work; or
(b)for any other reason the Minister considers it expedient to do so—
the Minister, without complying with any other requirements of this section, may by notice in the Gazette declare the land to be Crown land subject to the Land Act 1948, and thereupon, or from such later date as may be specified in that behalf in the notice, the land shall vest in the Crown as Crown land subject to that Act, and may be administered and disposed of under that Act.
The expediency decision
[59] There is no formal document detailing why it was considered expedient to declare the land Crown land subject to the Land Act. One recognised reason was that it was done to enable the creation under the Land Act of the individual easements. More generally, however, a document relied on by the Crown perhaps points to why, having decided to maintain ownership, the Crown desired to transfer the management of the beds to the Land Act.
[60] Ms Arapere for the Crown points to an officials Cabinet Committee report of 1991, written in the context of considering Crown management of river and lake beds, which identified the following matters:
12 “Land Declared Crown Land – Lake Pukaki, Mackenzie District” (25 January 2001) 8 New Zealand Gazette at 180.
(a)the Crown’s ownership interest;
(b)the strategic value of the assets;
(c)the existence of agreements with Māori interests;
(d)the need to recognise unresolved Māori claims and the advantages of maintaining ownership for Treaty settlement purposes, and perhaps the obligation to maintain such ownership;13
(e)management of the underlying resources such as shingle;
(f)conservation requirements; and
(g)the ability to allocate space on the lakes and rivers.
[61] The identified options at the time were management under the Conservation Act 1987 and the Land Act with officials considering the Land Act to be the best vehicle. The submission therefore made for the Crown is that although the need to create the easements was a primary driver, there were many other recognised factors that feed into the expediency decision.
[62] Guide Hill submits that the decision to transfer the land to the Land Act, in so far as it was driven by the easement issue, was unnecessary because the easements were capable of being registered under the Public Works Act. Further, it is submitted transfer under s 42(3) to the Land Act was an unsuccessful device to avoid the Public Works Act’s offer back obligations at s 40(2), because s 42(3) is subject to s 40(2). It is so submitted the Crown made an error in not applying the offer back provision.
[63] As regards the latter proposition, it is difficult to reconcile with the Commissioner’s assessment that s 40 of the Public Works Act did apply, such as to require him to make a decision on whether to offer back the land. As noted,14 the
13 An issue still current with Lake Pukaki given Ngāi Tahu’s intimation it considers rights of first refusal may arise.
14 See this judgment at [10(h)].
Commissioner then concluded the statutory exceptions in s 40(2) applied so as to mean no obligation to offer back arose. This is to apply the Public Works Act, not avoid it.
[64] Broadly, I do not consider this aspect of the case merits more attention. Transferring the land to be managed by the Land Act was the mechanism chosen by the Crown to enable the easements to be granted, and for other reasons above- identified. Perhaps there were other ways of doing it but there is no basis to conclude it was an invalid method. There can at this stage be no formal challenge to the effectiveness of the transfer and so it is preferable to focus on its consequences.
The policy directive
[65] Recalling that s 43(2) of the Public Works Act provides that the power to transfer management of land to the Land Act is subject to s 40(2), in December 1995, the Commissioner of Crown Lands issued a policy directive stating that he was of the view the exceptions set out in s 40(2) applied such that the transfer from the Public Works Act to the Land Act would not trigger the obligation to offer back.
[66] There is no obstacle to a general directive which relates to a package of different Crown lands held in the same circumstances and to which the same remaining reasoning validly applies. There is nothing in the wording of the Public Works Act to prevent a general decision. It may be that it can be shown the reasoning is invalid as regards some particular land covered by the directive, but there is no issue with the technique.
[67] The Commissioner identified two reasons for why the s 40(2) exceptions apply:
(a)First, pursuant to s 40(2)(a), that it would be unreasonable (for the Crown) to have to offer back the target land as ownership of the land was still required by the Crown for water power development and to enable the registration of the individual easements as previously contracted for.
(b)Second, pursuant to s 40(2)(b), there had clearly been a significant change in the character of the land in connection with the public work for which it was acquired. What previously may have been farm land is now lake bed or margin. While it could be argued that a lake margin has not changed in character, it may be required by ECNZ for access or because it is within the design flood level of the lake. Both situations are required to be covered by the operating easement.
[68] As previously noted, I consider the first reason is beyond dispute. At least until the easements were in place, the Crown needed to maintain ownership in order to guarantee the ability of the generators to carry out their task and to allow the Crown to meet its obligations.
[69] I also agree with the second consideration concerning the character of the land. All the acquired land, for whichever lake or river is in issue, was taken for the generation of electricity. This acquisition would often be followed by flooding of significant portions of the acquired land. It certainly was for Lake Pukaki. Creating a (larger) lake and using it for hydro generation has inevitable impacts. One means of controlling those impacts is to maintain margins that protect neighbouring properties from climatic events which would not otherwise have affected them in that way had the lake not been increased. As a general proposition it is, in my view, unrealistic to identify a small patch of that land, now part of the margin, and say it has not changed in character. The land may look the same but its border is now a hydro lake, which previously it was not. Risks of flooding and erosion now exist that previously did not.
[70] If one moves from the physical character to ownership concepts, the character of the freehold has also changed. As a consequence of its acquisition as part of a hydro scheme, and then its transfer to ECNZ, the freehold is subject to an easement that allows a generator, in certain circumstances, to flood the land, to do works on it, to plant vegetation on it, to remove material off it, to enter and leave as necessary and to do such things as build jetties. These powers are subject to conditions, and always must be for the purposes of the scheme, but as a package it means the character of the ownership interest has also significantly diminished.
[71] For these reasons, the assessment in 1995 of the Commissioner of Crown Lands that the exceptions in s 40 of the Public Works Act would apply to the transfer of these lands to the Land Act was a reasonable and correct decision. The reasoning continued to apply up to the date of the transfer.
[72] Guide Hill submitted a s 42(3) transfer can only arise if the land is surplus. That approach reads the alternatives identified in s 42(3) – surplus and expediency – as cumulative. I am unclear why that would be so. In any event, the issues would still come back to the applicability of the exceptions. More comment on that is not required.
The effect of the transfer to the Land Act
[73] The Crown and Meridian submit that once the land is validly transferred under s 42(3), the Public Works Act no longer has application. Guide Hill submits that by virtue of the opening words of s 42(3) “Subject to section 40(2)” the Public Works Act continues to apply, and the obligation to offer back must be considered whenever there is a change in circumstances.
[74] Mr Page for Guide Hill relies on McElroy v Auckland International Airport Ltd where, in the High Court, Hugh Williams J held that transfer of the land to the Reserves Act 1977 did not defeat the ongoing applicability of s 40(2).15 This was due to the opening words of s 40(1) of the Act which provide that it applies whenever land is held as a public work “under this or any other Act”.16
[75] There are, in the present case, statutory indicia pointing the other way. Two prominent reasons are, first, the Land Act contains its own alienation scheme, and, second, s 42(3) says that the transferred land becomes Crown land “subject to that Act” and “may be administered and disposed of under that Act”. On normal interpretation principles, the specific provision in s 42(3) would override the general terms of s 40(1).
15 McElroy v Auckland International Airport Ltd, above n 5.
16 At [104].
[76] If one analyses it through the “surplus land” transfer option identified in s 42(3)(a), a s 40 decision will always be required at the time of the proposed transfer. Section 42(3) is expressed to be subject to s 40(2), and the transfer power in s 42(3)(a) only arises because the land is not required for the public work. The scheme therefore is that before making it Crown land, and thereby subject to different regime, it must be offered back unless the exceptions to s 40 apply. If they do apply, however, the logic is then that the land is not offered back, moves out of the Public Works Act scheme, and is managed under the Land Act, including its own but different alienation options.
[77] The second s 42(3) option, the expediency option at s 42(3)(b), is that the land is not surplus, but it is, nevertheless, expedient to manage it in the future as Crown land. Under this option the land is likely to still be needed as a public work. In this situation, it is unlikely that Parliament intended for two parallel alienation processes to apply to the land once it had been transferred. The better interpretation is that a Public Works Act offer back assessment is required before the land is transferred and thereafter the Land Act scheme applies. In this case, an offer back assessment occurred before the transfer, as explained above.17
[78] This conclusion is reinforced by the legislative history. The 1981 Act made two significant changes to s 42(3)18 – it made the transfer subject to s 40, and it added that the land, once transferred to the Land Act, would be administered and disposed of under the Act. Both changes suggest following transfer, the Land Act regime was to apply.
[79] I accordingly conclude that the Public Works Act no longer applied in 2007 when the easement was registered. The correct alienation route was the Land Act processes, and that is the route both parties followed. The correctness of those processes is not in issue in this proceeding. If wrong in this interpretation, for reasons already articulated I consider the land would not have to be offered back under the Public Works Act. It was still being used as a public work, and the exceptions would anyway apply.
17 See [68] of this judgment.
18 Under the 1928 Act, s 42(3) was found as a proviso to s 35(1).
A declaration?
[80] It is not strictly necessary to consider this discretionary aspect of the making of declarations given the decisions already reached mean Guide Hill has not succeeded. However, as this is a first instance judgment, it is appropriate to draw some conclusions on the issues.
[81] Both the Crown and Meridian submit that the Court should not make declarations in favour of Guide Hill. The grounds advanced are:
(a)the fact the land has already been on-sold to Blue Lake and the corresponding lack of ongoing familial connection;
(b)delay, as the challenged decisions date back to 1995 and 2001; and
(c)third party interests, being a potential claim by Ngāi Tahu to a right of first refusal, Meridian as the beneficiary of the easement, and the public given the Department of Conservation’s intention to create a public scenic reserve.
[82] The first basis advanced draws on the decisions of the Court of Appeal and Supreme Court in a leave decision in Williams v Auckland Council.19 The Court of Appeal noted the discretion to refuse relief must be exercised against the background of the statutory framework.20 That framework is to recognise that the power to compulsorily acquire land is a necessary but significant interference with private rights. If the acquired land is no longer required, it is mandatory to offer it back to the former owners, subject of course to the prescribed exceptions. As the Court says in Williams, the Public Works Act is remedial, and fairness requires that the land be offered back if the statutory conditions apply.21
19 Williams v Auckland Council [2015] NZCA 479 [Court of Appeal judgment]; and Williams v Auckland Council [2016] NZSC 20 [Supreme Court judgment]. The Court of Appeal judgment at [96]-[98] provides an example of why it is preferable to address the discretion issue, even if not strictly necessary on the approach adopted by the High Court.
20 At [99].
21 At [100].
[83]That said, passages from both judgments are relevant:22
[101] However, the offer-back provision was plainly introduced to compensate for the loss of a personal rather than an economic interest. It was essentially restorative in nature, underpinned by the assumption that the land was originally acquired for fair value. Correspondingly, the owner or successor’s right to buy the land back was also fixed at the current market value. This purpose of compensation by restoration, not by a financial adjustment to the original price or by conferring an economic benefit on the owner or his or her immediate successor, is significant.
and
[9]We do not read the Court of Appeal’s judgment as being critical of the use of a litigation funder, but rather as emphasising that the purpose of the Public Works Act is to restore to someone whose land has been compulsorily taken land with which that person has a personal or familial connection. That is in keeping with the fact that the offer back right applies only to the original owner and the original owner’s successor, as that term is restrictively defined in s 40(5). In the present case the land was taken in the 1950s and the present named applicants did not have any real personal interest in the land.
[84] To give some background, Guide Hill is the corporate operating entity of the family that owned the land at the time it was acquired for electricity generation. The land was purchased in 1962 by the parents of the current directors of Guide Hill, Mr David and Mrs Marion Gould.
[85] An agreement for the then Ministry of Works and Development to take the land was first entered into in 1972, with the formal taking occurring in 1976.
[86] Concerning the family connection to the land, the context is that the farm has been sold to a foreign-controlled company, Blue Lake. It is a condition of the subdivision consent creating a title to the target land that upon return it will be immediately amalgamated with the farm title to again be part of the one entity.
[87] Mr Gould says the family has farmed the land since 1962. He and his wife still live on the land and their daughter manages the farm for the new owners. The ashes of their parents (the original purchasers in 1962) are scattered overlooking the target land. However, a new farm property nearby has been purchased. It will be farmed by
22 Court of Appeal judgment, above n 19, at [101]; and Supreme Court judgment, above n 19, at [9].
the daughter and provide Mr and Mrs Gould with a retirement place near to the land. They will be able to visit the target land regularly.
[88] I address first the question of delay. Mr Gould says that they first contacted ECNZ and LINZ in 1990 about the target land and have been pursuing the matter, with some frustration, since then. They believed the Land Act process took place against an understanding the land would be sold to them, and they were surprised at the outcome. Any delay in filing the claim was due to their endeavours to work with the parties involved to achieve an outcome.
[89] I do not consider delay on the part of Guide Hill to be relevant in this case to the exercise of the discretion. It is more important, in my view, that the Goulds have been inquiring about return of the target land since 1990, rather than focusing on when Court proceedings were filed. Other forms of redress and relief have fairly been explored, and they should not be penalised for doing so.
[90] As for the degree of connection to the land, I do not consider the Goulds to be in a strong position. I do not diminish the connection they feel, but there are objective facts that need emphasising. The land was owned by the family for only 10 years before agreement was reached to sell it. I do not by this suggest it was a voluntary sale; it was an agreement entered into in knowledge of likely compulsory acquisition. But it was nevertheless a period of ownership of only 10 years. I also recognise the adjoining land continued to be owned and farmed by the family, but the connection with the acquired land and target land is far less established than one often sees.
[91] Second, if the land is returned, it will represent only a small part of the acquired land and it will not be returned to the Goulds. The Goulds will not live on the property but on a new property nearby. The ownership of the land will not affect their proximity to it. Further, again objectively, the reality is that the Goulds have sold the farm. The target land may be re-united to the farm, but it will not be in the ownership of the Goulds. Further it is known the new owners have a development interest in the land, so there is an undoubted commercial overlay to it all.
[92] Assuming an obligation had arisen at some point under the Public Works Act, I would not have made a declaration that the land should now be offered back. At the most some financial compensation might have been required. Offering the land back would primarily be for financial reasons. The land would not be going to the former owners, is not required for the farm, and there are strong public interests in its retention in Crown ownership.
Conclusion
[93]The plaintiff’s case fails and is dismissed.
[94] Costs memoranda can be filed. On the basis of the case known to me, I see no reason for orders other than costs follow the event, with each defendant entitled to a full award.
Simon France J
Solicitors:
Gallaway Cook Allan, Dunedin for Plaintiff Crown Law, Wellington for First Defendant
Meridian Energy Limited, Christchurch for Second Defendant
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