Gulf Harbour Investments Limited v Rodney District Council

[2010] NZCA 428

IN THE COURT OF APPEAL OF NEW ZEALAND

CA93/2009
[2010] NZCA 428

BETWEENGULF HARBOUR INVESTMENTS LIMITED

First Appellant

ANDGULF HARBOUR MARINA HOLDINGS LIMITED

Second Appellant

ANDRODNEY DISTRICT COUNCIL

Respondent

Hearing:4 and 5 May 2010

Court:Hammond, O'Regan and Arnold JJ

Counsel:G P Curry and R J Thompson for Appellants

J G Miles QC, R M Gapes and J R C Lees for Respondent

Judgment:20 September 2010 at 3 pm 

JUDGMENT OF THE COURT

AThe appeal is dismissed.

BThe appellants must pay the respondent costs for a standard appeal on a band B basis and usual disbursements.  We certify for two counsel.

REASONS OF THE COURT

(Given by Arnold J)

Introduction

[1]        This appeal, against a decision of Keane J,[1] concerns the Gulf Harbour Marina in Hobbs Bay near the eastern end of the Whangaparaoa Peninsula in the Hauraki Gulf.  In particular, it concerns the scope of permitted development on some reclaimed land there known as Hammerhead Point.  The case turns on the interpretation of the underlying documents, most notably a form of lease.

Background

[1]Gulf Harbour Investments Ltd v Rodney District Council HC Auckland CIV 2006-404-5005, 5 February 2009.

[2]        In 1985 the respondent, the Rodney District Council (then the Rodney County Council, referred to here simply as the Council), issued a development licence which entitled the original holder to reclaim and develop a large part of Hobbs Bay as a boat harbour, now known as Gulf Harbour Marina.  Once the development was completed, the developer would be entitled to a seabed licence and nine standard form ground leases.  The development was undertaken, but one piece of reclaimed land which lies between the sea and the marina, Hammerhead Point, was not subdivided into three lots and leased as had been contemplated.  Rather, this area was left as essentially open land.

[3]        The first appellant, Gulf Harbour Investments Ltd (GH Investments), a subsidiary of the second appellant, Gulf Harbour Marina Holdings Ltd, is a property development company and the assignee of the development licence.  It wishes to develop Hammerhead Point.  Initially, the Council argued that it did not have to subdivide Hammerhead Point and grant leases to GH Investments in the standard form.  It now accepts, however, that it is obliged to do that. 

[4]        What remains at issue is the extent of any rights that GH Investments will have to develop the land under the standard form leases when it has them.  GH Investments claimed originally that it had the right to develop, for example, a 300 unit, four storied residential complex offering time share accommodation, although it now appears that it no longer pursues that option.  By contrast, the Council contends that GH Investments’ leasehold interest only permits at most a modest level of accommodation for the purposes of the marina.  In essence, the Council says, GH Investments is limited to the type of development contemplated in the original planning documents.

[5]        Keane J found for the Council.  He accepted that the development of Hammerhead Point is governed by the development scheme for the marina, reflected in a series of plans known as GHM 1 – 17, and, in particular, in GHM 1, unless the Council consents to a variation.[2]  GHM 1 is an overhead drawing or plan of the proposed development, described as the “Marina Concept Plan”.  It shows the location of the marina fingers, together with facilities such as parking, hardstand, haul-out, toilets and some proposed or possible buildings. 

[2]At [93].

[6]        In addition, Keane J held that the subdivision of Hammerhead Point into lots must be consistent with the subdivision plan in GHM 2, except to the extent that the lot boundaries are altered by agreement.[3]

The nub of the dispute

[3]Ibid.

[7]        Mr Curry, who did not appear in the High Court, put GH Investments’ case on a rather different basis than it was put to Keane J.  Before Keane J GH Investments had argued that the Council was estopped by conduct from recourse to the development scheme and GHM 1.  In this Court, however, Mr Curry focussed his arguments on the interpretation of the relevant documentary material, in particular the standard form lease.

[8]        The essential point of difference between the parties concerns the degree of flexibility available under the documents, especially the standard form lease, in terms of further development:

(a)GH Investments argued that GHM 1 was not prescriptive and that the lease and legislation provided the substantive limitation on what could be developed.  There is sufficient flexibility in the contractual arrangements to enable it to undertake further development of Hammerhead Point of the type foreshadowed, namely a development that bears little or no relationship to that shown on GHM 1 for Hammerhead Point.  This flexibility, it was argued, is to be expected in a large scale development that was to be undertaken over time and would lead to the granting of leases which will run for up to 100 years. 

(b)By contrast, the Council argued that the scope of any possible further development is constrained by the approved development scheme, in particular by the concept plan GHM 1.  The Council argued that all the relevant documents were integrated, and that the developer, although not required to build every structure shown in the plans, was limited to building structures of that type in the locations indicated.

The context of the dispute

[9]        To understand the respective positions of the parties and the way in which events unfolded, it is necessary to understand the documents covering the harbour development.  Accordingly, we will deal with those in the course of our brief summary of the factual background.

[10]       The Gulf Harbour project was initiated by a company called Parkdale Development Ltd (Parkdale).  In 1977 the Waitemata County Council (later the Rodney County Council) promoted an empowering Bill, with the support of Parkdale.  This became the Rodney County Council (Gulf Harbour) Vesting and Empowering Act 1977 (the Act).

(a)The Rodney County Council (Gulf Harbour) Vesting and Empowering Act 1977

[11]       The long title of the Act is:

An Act to vest in the County of Rodney a certain part of the Hauraki Gulf, to authorise it to reclaim a certain area thereof and to develop or authorise to be developed such reclaimed land for the purpose of a boat harbour.

The effect of the Act, then, was to grant the Council title to approximately 39 hectares of the foreshore and seabed of Hobbs Bay, together with the right to reclaim approximately 16 hectares of it, for the purpose of a boat harbour.

[12]       Under the Act the Council was authorised:

(a)to “develop and redevelop from time to time” the vested area “for boat harbour purposes”;[4] and

(b)“for the purpose of ... developing or redeveloping” the land, to licence or contract with others “to undertake and carry out all or any of the activities relating to such [authorised] reclamation or development”.[5] 

[4]      Section 6.

[5]      Section 7.

The Council was also empowered to license any part of the vested land “to be used or occupied for boat harbour purposes for such period and upon such terms and conditions” as it thought fit.[6]  Further, it had the power to lease any reclaimed land “to any person or persons for boat harbour purposes for any term with such right or rights of renewal and on such terms and conditions as the Council may think fit”.[7]

[6]      Section 9(1).

[7]      Section 10(1)(a).

[13]       Finally, the Council was required to change its District Scheme so as to make provision for the use of the reclaimed land.  This change was to be operative before any reclamation work began.[8]

[8]      Section 14.

[14]       Mr Curry drew our attention to the definition of “boat harbour”.  That term relevantly means:[9]

[A] harbour or part of a harbour or an anchorage used for the purpose of mooring, sheltering, or serving pleasure boats; and includes any land or building used in conjunction therewith and, without limiting the general import of that term, may include–

...

(b)Any shop, restaurant, car park, club premises, or facility or any other commercial or recreational amenity for the use and convenience of the general public as well as that of the boating public,–

...

(Emphasis added.)

[9]      Section 2.

He emphasised in particular the italicised words as showing that it was within the purposes of the development to provide services (such as accommodation) to the public.

[15]       Mr Curry submitted that the Act conferred a broad discretion on the Council.  It contemplated that the Council would review and modify or change what had already been approved and perhaps even developed, provided always that what was done was for boat harbour purposes.  In this context, the italicised words in the definition were important in showing that the Act’s focus was not simply on providing services to the boating public but to the general public as well.  Mr Curry said that to import a requirement to comply with GHM 1 would impinge on the broad scheme and purpose of the Act.

[16]       Mr Miles QC for the Council argued that the primary focus of the Act was to allow the development of the reclaimed land on terms satisfactory to the Council.  The subsequent documentation, in particular the development licence, set out what those terms were.

(b)         The District Scheme

[17]       In June 1980 the Council introduced a new District Scheme which provided for a boat harbour zone.  The Scheme provided:

(e)         Boat Harbour (Gulf Harbour) Zone

This zone applies to the area of land authorised to be reclaimed by the County Council (Gulf Harbour) Empowering Act 1977, and to two adjoining areas.  These areas are to be developed to provide a harbour, marina and associated land-based facilities at Hobbs Bay on the Whangaparaoa Peninsula in conjunction with the Gulf Harbour land development.

The Boat Harbour zone is designed to provide for all the structures, buildings and activities associated with the use of this area for the mooring, storage, servicing, maintenance and repair of pleasure craft together with ancillary activities such as club rooms, shops and fueling of craft.  The zoning also provides for facilities associated with the possible establishment of a marine public transport service. 

Before any use may be established or structure erected, Council must approve an outline development plan of the whole area and all subsequent development shall comply with that plan unless Council approves a modified development plan at any time.

As the development plan will specify the distances between buildings and other buildings or boundaries of the land and the heights of buildings, provision for car parking, loading, landscaping and any subdivisions that may be necessary, there are no bulk and location or subdivisional standards specified in the ordinances for this zone.

In approving a development plan, Council will have particular regard to the following:-

(i)          The provision of public access to the water.

(ii)The provision of appropriate facilities to provide for the best use of the area for water-orientated recreational purposes.

(iii)The appearance of buildings and structures as viewed from the water or from adjacent land.

(iv)The provision of parking for cars and boat trailers.

(v)The landscaping of the area and the effective screening of parking areas, boat storage areas and outside storage or service areas.

[18]       There were two further developments in relation to the District Scheme that Mr Curry said were relevant:

(a)In March 1985 the zone became subject to Scheme Change 76, which was operative from January 1986.  Its effect was to broaden the prescribed uses to which the zone could be put by allowing for travellers’ accommodation (excluding licensed hotels or camping grounds).

(b)Proposed District Plan 2000 introduced the term “visitor accommodation” which essentially meant any premises used for transient accommodation for not more than 50 days in any 12 month period by any given individual and charged on a basis commensurate with short stay accommodation.

Mr Curry submitted that that the inclusion of visitor accommodation (as defined) was an explicit recognition on the part of the Council that this type of accommodation was within the objective for the development of the boat harbour.

[19]       In October 1984 Parkdale was purchased by Wilkins and Davies Construction Company Ltd (W&D).  On 28 November 1984 W&D and the Council entered into a deed, known as the investigation licence.

(c)         The investigation licence 

[20]       Under the investigation licence, the Council licensed W&D to “investigate development of the land as a boat harbour and to prepare the development scheme” and undertook to grant it a licence to develop the land as a boat harbour in accordance with the development scheme if it was approved.[10]  The deed required that the development scheme be sufficiently detailed to enable proper assessment by the Council, but full working or construction plans and specifications were not required.[11]  The Council had to approve or disapprove the scheme within 75 days of its submission.[12]  If the Council approved the development scheme, the Council was required “in terms of the Act” to offer W&D as licensee:[13]

[A] formal licence to develop the land for Boat Harbour purposes in accordance with, and upon the terms and conditions set out in the Development Scheme and such other terms and conditions as the Council may think fit and if the Licensee shall accept such licence it shall perform and observe all the Licensee’s obligations thereunder according to the terms thereof.

[10]      Clause 2.

[11]      Clause 4(b) and (c)(i).

[12]      Clause 5.

[13]      Clause 7.

[21]       W&D then incorporated Gulf Harbour Ltd (GHL) and assigned the investigation licence to it.  GHL prepared a development scheme which is set out in four volumes of material, including, most importantly for present purposes, the series of drawings and a timeline known as GHM 1 – 17.  The Council approved this development scheme in October 1985 and in November 1985 granted GHL a development licence. 

[22]       In relation to Hammerhead Point, GHM 1 showed an area of public reserve, a public beach, a trailer boat launching ramp, toilets and changing facilities, parking for cars and boat trailers, a “proposed” commercial building site and  “possible” club house and  heli-pad sites.  On the marina side of the Point some berths for sales and chartering operations were shown, along with a fuelling jetty and a “possible” ferry terminal.

[23]       Mr Curry argued that the language of the extract quoted above[14] was consistent with “an ongoing elasticity as to what would be developed”.  The critical thing was that any development comply with the Act (that is, be for boat harbour purposes, as defined).  He argued that the development scheme did not comply with the requirements of the District Scheme[15] because it did not provide details of matters such as the distances between, and heights of, buildings.  This indicated that the plans, GHM 1 in particular, were not intended to be prescriptive.

[14] At [20].

[15] See [17] above.

[24]       Mr Miles argued that this interpretation involved a distortion of the language used.  He submitted that the language was prescriptive and required that any licence granted for the development be in accordance with the approved development scheme, including GHM 1.

(d)         The development licence

[25]       Under the development licence the Council granted GHL the right:[16]  

[T]o undertake the reclamation of the areas of land to produce the development illustrated on the plan annexed hereto and identified as sheet GHM 1 and to construct and develop the Boat Harbour as shown in the Scheme upon the terms and conditions set out in this Deed.

[16]      Clause 2(a).

[26]       The development licence prescribed the form of the seabed licence[17] and the form of the ground leases that would be granted as the development was completed.[18]  The form of ground lease annexed to the development licence was referred to as the “pro forma lease”.  It was anticipated that the land in the core marina area would be subdivided into six lots, which would be subject to six separate leases albeit in common form, and Hammerhead Point would be subdivided into three lots, which would also be subject to common form leases.

[17]      Clause 6(c).

[18]      Clause 6(d).

[27]       The parties drew attention to the definitions of various terms in the development licence:

(f)“the plans and specifications” are the plans and specifications forming part of the Scheme, as approved by the licensor and the Minister of Transport.

...

(i)“the Scheme” is the Development Scheme dated the 25^th day of June 1985 as submitted by the licensee to the licensor and approved by the licensor on the 9^th day of October 1985;

(j)“the stages of the works”, “stage of the work” or “stage” means and refers to the various stages of the works described and depicted in the plans and specifications or as defined or modified and agreed between the Licensee and the Licensor from time to time;

...

(l)“the works” are the works referred to or set out in the plans and specifications;

[28]       Mr Curry argued that the definitions, read together and in context, injected elasticity into the licence allowing the parties to depart from the concept plans.  In this context, the definition of “stage” was important because it explicitly recognised that the plans might be modified over time.  Mr Curry argued that this flexibility reflected the realities of such a large development and was consistent with the Act.  He drew further support for his argument from cl 6 of the licence, which deals with the Council’s obligation to subdivide the land in accordance with GHM 2, but specifically allows for the parties to alter the boundaries of the lots by agreement. 

[29]       For his part, Mr Miles submitted that the development licence was the “keystone contractual document”.  He placed particular emphasis on cl 2(a) of the development licence with its specific reference to GHM 1.[19]  GHM 1 – 17 were, he argued, specifically part of the development scheme.  Accordingly, the development licence restricted the development to that shown on GHM 1, which was “prescriptive”.  He argued that the references in the definition of “stage” to modification by agreement did not detract from the certainty of the arrangement entered into by the parties.  Nor did cl 6(f), which described plan GHM 2 as “generally indicative of the present intent of the parties but may need to be altered as the works proceed”.  That language did not indicate that the development plans were not settled as it was concerned only with the boundaries of the proposed lots, not with the scope of the development scheme as a whole. 

[19] See [25] above.

[30]       In July 1988, the whole of the development, including Hammerhead Point, was certified to be practically complete.  GHL nominated Gulf Harbour Marina Ltd (GH Marina), which is now also a subsidiary of the second appellant, Gulf Harbour Marina Holdings Ltd, to take the seabed licence and the land leases.  The Council thereupon granted GH Marina a seabed licence.  Later, in 1989, the Council granted six land leases in respect of the core marina area, two to GH Marina and four to GH Investments.  It did not, however, subdivide Hammerhead Point into three lots and provide leases in respect of those, as contemplated by the development scheme. It appears that this was deferred, by agreement with the marina’s developers.

(e)        The pro forma lease

[31]       As we have said, when the Hammerhead Point leases are granted they will be in the form of the pro forma lease.  Mr Curry placed particular emphasis on cl 2 of the pro forma lease, which provides that any structure which the lessee wishes to construct:

will conform with the permitted purposes as contained in the definition of “boat harbour” in [the Act] and in conformity with the [District Scheme]... and in particular the Ordinance concerning Gulf Harbour Boat Harbour Zone 2 ...

Clause 2 does not mention GHM 1.  Had GHM 1 been prescriptive, Mr Curry argued, it would have been mentioned in cl 2. 

[32]       Mr Curry noted that GHM 1 was referred to in cl 14(b), but only in the context of amenities to be maintained by the Council.  This indicated, he submitted, that although the parties had turned their minds to GHM 1, they did not make it binding as a conceptual framework or blueprint.  The critical elements as far as the parties were concerned were the terms of the Act and the District Scheme. 

[33]       Mr Curry drew further support for this argument from GHM 1 itself.  He emphasised that GHM 1 was described as a concept plan and argued that it would be “commercially absurd” to treat it as prescriptive.  He drew attention to the following extract from the engineering section of the development scheme:

CONCEPTUAL LAYOUT

[GHM 1] presents the Concept Layout Plan for the Gulf Harbour Marina development.  The extent and general shape of the development and the area to be reclaimed is determined by [the Act].  The Concept Layout Plan illustrates the scope of the proposed development with respect to general layout and amenities provided to be provided.

We note that the clause goes on to describe the amenities to be provided.  These include commercial activities such as rigging services, sail loft, engineering workshop, charter boat operations and electrical services, all of which seem to be necessary or at least complementary to a marina operation.

[34]       Mr Curry submitted that, while the development scheme provided considerable detail concerning the aspects necessary for the marina, in relation to commercial uses it did little more than identify that some land would be put aside for such uses.  Beyond that, there was little detail.  Mr Curry argued that the district planning documents specifically envisaged that the Council could approve modified development plans subsequent to its initial approval of the development scheme. Provided that it was for boat harbour purposes in terms of the Act, was within the provisions of the licence and was consistent with any relevant planning documents, any development was possible. 

[35]       Mr Miles argued, however, that it was artificial to construe the lease as a standalone document, divorced from the development licence.  The documents were consistent and “interlocking”.  Mr Miles argued that:

(a)The lease was annexed to and incorporated into the development licence;

(b)The concept of practical completion used in the development licence meant that leases would issue when the reclamation work, but not all the building work, was completed.  As a consequence, “the developer was subject to an ongoing obligation to construct ancillary buildings and services in accordance with the plans and specifications”.

(c)It would be contrary to the Act and the contractual documents if the lessee could circumvent the specific contractual restrictions in the development licence under which the leases were granted.

(d)Interpreting the lease to exclude the development restrictions in the development licence “flouts business common sense”.[20]  Accordingly, the lease must be interpreted as being subject to the restrictions in the development licence.

[20]Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 per Tipping J at [22].

[36]       To complete the picture, we should mention that prior to the proceedings being issued, there had been discussions between various parties over a number of years as to the future of Hammerhead Point.  Their detail need not concern us.

Discussion

[37]       As we have said, Mr Curry submitted that this case should be resolved simply by recourse to plain language of the documents, of which, he said, the Act and the standard form lease were the most important.  He did not seek to rely on material extraneous to the various documents.  The Council sought to support the judgment on other grounds by relying on pre- and post-contractual material.  As we have concluded that, on their proper interpretation, the documents do not give the type of flexibility that Mr Curry contended they did, we do not need to address this broader material.  Nor is it necessary that we address any uncertainties as to the proper approach to contractual interpretation that may arise from the judgments of the Supreme Court in Vector Gas.

[38]       We begin by making two general points.  First, we accept that from time to time changes have been made to the original plans.  For example:

(a)The fuelling jetty which was to be located on the marina side of Hammerhead Point was ultimately built in another location for safety reasons. 

(b)A large boat shed has been built on the area described as lot 3 in GHM 2.  GHM 1 made no provision for such a building on this site.

(c)GHM 1 makes provision on lot 4 for the construction of a workshop.  That was constructed, albeit at a different location within lot 4 and with a different footprint.  More importantly, three new sheds are to be (or have been) constructed, none of them provided for on GHM 1.

[39]       Significantly, however, these changes were made by agreement between the parties.  The fact that such agreed changes have been made does not provide support for GH Investments’ position.  Changes of this type are to be expected in a development of this scale, and may be seen as incidental.  The development scheme contemplated some flexibility in relation to commercial uses.  This is illustrated in the Engineering section of the development scheme where it says in relation to Hammerhead Point:

Administration and Clubhouse Facilities

An area has been set aside for the development of commercial and administration buildings at the southern end of the reclamation.  It is envisaged that services such as boat brokerage, dive shop, chandlery, fuel sales, charter office and dairy would operate from this zone.  In addition the marina administration operation would be located in this facility.

A site for a future clubhouse overlooking the entrance channel to the marina is also proposed in this location.

Clearly this contemplates some flexibility as to what commercial enterprises are ultimately accommodated in the proposed facilities.  But developments involving, for example, the construction of large-scale facilities for public accommodation are quite another proposition, being fundamentally different in nature and purpose from what was originally contemplated. 

[40]       More importantly, as we have noted, the parties agreed the changes identified above. In the present case, GH Investments argues that it is entitled under the terms of the lease to undertake the type of development it has foreshadowed, provided it is for boat harbour purposes in terms of the Act and is in conformity with the relevant planning documents.

[41]       The second point is that this development had its origins in the late 1970s and early 1980s.  Given that councils generally adopted a prescriptive approach to planning at that time, it seems improbable that the Council would have agreed to a development of this type and accorded the developer the degree of flexibility that Mr Curry says is contemplated by the contractual arrangements.  One of the witnesses, Mr Winefield, a senior Council officer who was significantly involved in the marina development from 1984 to 2001, made the following observation about the investigation licence:

The Investigation Licence is a product of its time.  In the mid 1980s the Council was a conservative local authority and the Councillors and management were very involved in planning.  The Council was concerned about the specific details of development in the area.  The requirement to submit a detailed development scheme imposed by the Investigation Licence reflects this concern and an innate distrust of ‘developers’.  The Council wanted to know exactly how the marina would look, how it would be laid out and what amenities would be included. 

We see considerable force in this.

[42]       Turning to the language, we agree with Mr Miles that it is artificial to attempt to divorce the pro forma lease from the development licence and its antecedent, the investigation licence (including GHM 1).  The foregoing description of the factual background shows that:

(a)The investigation licence contemplated that GHL (or for present purposes, GH Investments) would prepare detailed but not complete plans of the development.  

(b)The Council would consider the plans of the proposed development and, if it approved them, would grant GH Investments a development licence to produce the approved development. 

(c)If GH Investments completed the development to the necessary extent in accordance with the approved plans, it would be granted a seabed licence and leases of the surrounding land. 

The plans as proposed and subsequently approved were therefore central to the sequence of events and to the contractual documents.  Initially, the plans related to a development that the developer proposed would be undertaken, and language such as “concept plan” reflects that.  But after approval, the plans represented the particular development that the Council agreed could be undertaken and the developer agreed it would undertake.  There was undoubtedly some flexibility in the project, but not of the order that GH Investments contends for, at least absent agreement.

[43]       Once it has the Hammerhead Point leases to which it is entitled, GH Investments will not have a free hand (subject only to compliance with the Act and planning requirements) as to what it does on the leased land.  Rather, if it goes ahead with the construction of buildings, it must do so within the overall scheme of the plan, that is, within the general framework of the proposed and possible building sites identified on GHM 1. 

[44]       Obviously GH Investments will have some degree of flexibility in this process.  For example, GHM 1 refers to a proposed commercial building site on the marina side of Hammerhead Point.  There will be some flexibility as to the precise location, size and type of commercial facility or facilities GH Investments builds on that site.  But GH Investments cannot undertake a development that is different in scale and kind from those contemplated without the Council’s agreement.  The Council’s ability to agree will, of course, be constrained by the terms of the Act and the relevant planning document(s); but otherwise it will be free to accept or reject any proposal that goes beyond what is contemplated in GHM 1 (taking into account the inherent flexibility mentioned above).  Put another way, GH Investments will not have a contractual entitlement to depart from what is proposed in GHM 1 in any fundamental way.

Decision

[45]       Accordingly, we dismiss the appeal.  The appellants must pay the respondent costs for a standard appeal on a band B basis and usual disbursements.  We certify for two counsel.

Solicitors:

Anderson Creagh Lai, Auckland for Appellants

Simpson Grierson, Auckland for Respondent