Jones v Waitakere City Council HC Auckland CIV 2010-404-2338

[2010] NZHC 1925

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-002338

UNDER  Part 30 of the High Court Rules

IN THE MATTER OF     a decision to sell Westpark Marina land and a decision as to the volume of dredging required at Westpark Marina

BETWEEN  ALAN JAMES JONES CHRISTOPHER JOHN GEDYE CHARLES ANDREW HOWARTH BRENT ALEXANDER IVIL AND ALAN SEFTON (AS TRUSTEES OF THE WESTPARK MARINA ASSOCIATION TRUST)

Plaintiffs

ANDWAITAKERE CITY COUNCIL First Defendant

ANDWESTPARK MARINA LIMITED Second Defendant

Hearing:         22 September 2010

Counsel:         D B Hickson for Plaintiffs

M E Casey QC and A J Davidson for First Defendant
M J Ruffin for Second Defendant

Judgment:      29 October 2010 at 3pm

I direct the Registrar to endorse this judgment with a delivery time of 3pm on the

29th day of October 2010.

RESERVED JUDGMENT OF MACKENZIE J

JONES AND ORS V WAITAKERE CITY COUNCIL AND ANOR HC AK CIV-2010-404-002338  29 October

2010

Introduction

[1]      The plaintiffs are the trustees of the Westpark Marina Association Trust, established to represent the interests of berth holders at Westpark Marina in the upper Waitemata Harbour at Hobsonville.   In this proceeding, they seek judicial review of certain decisions of the first defendant (the Council) relating to the Marina, and also seek relief against both the Council and the second defendant, Westpark Marina Limited (WML), which is the operator of the Marina, in respect of alleged breaches of a trust which is claimed to exist in favour of the berth holders.   The defendants have applied to strike out the claim.   This judgment deals with those strike out applications.

Factual background

[2]      A brief description of the facts is necessary.  The description which follows is based upon the allegations in the statement of claim, which are, for the purpose of this application, to be taken as capable of proof.   I make no factual findings in respect of them.

[3]      The Marina comprises a boat harbour and seawalls, and associated shore facilities on land reclaimed from the Waitemata Harbour.   The reclamation and construction of the Marina was authorised by a local Act of Parliament, the Waitemata City Council (West Harbour) Empowering Act 1979 (the Empowering Act).   Under that Act the Crown vested 39 hectares of seabed at Clearwater Cove upper Waitemata Harbour, in the Auckland Harbour Board (AHB) and authorised the Council, then known as the Waitemata City Council, to reclaim not more than

12.5 hectares of that land for the purpose of constructing a boat harbour.  Following reclamation, the reclaimed land was to be transferred to the Council for the purpose of a boat harbour.

[4]      The development of the Marina was the subject of contractual arrangements between the AHB and the Council, entered into in accordance with powers conferred by the Empowering Act.  Under those arrangements, AHB was to issue a licence for

the Marina seabed to the Council, which would then issue a sub-licence to the Marina operator, WML.   Briefly stated, the contractual arrangements entered into between AHB and the Council in 1983 pursuant to the Empowering Act provided that:

(a)      The Council would not itself undertake the development of the boat harbour, but would sponsor its development by contracting with a developer;

(b)AHB would grant a licence to the Council, which would in turn grant a  sub-licence  to  the  developer,  to  enable  the  reclamation  and associated development of the boat harbour to proceed, subject to AHB approval;

(c)      On completion of the boat harbour development, the reclaimed land would  be  transferred,  without  consideration,  from  AHB  to  the Council, and AHB would grant to the Council a licence to the remainder of the foreshore and seabed occupied by the boat harbour. The Council would grant a lease of the reclaimed land, and a sub- licence of the foreshore and seabed areas, to WML.

[5]      In its subsequent approval of the development, which included a subdivision of the reclaimed land into a number of lots, AHB specified that several lots were to be “irrevocably tied to seabed sub-licences (while in force) to be held in common by marina operator”.  These lots included Lots 3 and 4, with which this proceeding is concerned.   The licences and sub-licences referred to in (c) were entered into in

1987.  Leases of Lots 3 and 4 from the Council to WML were registered in 1988.  It was a requirement of the development sub-licence between the Council and WML in

1985, as described in (b), that the leases of (inter alia) Lots 3 and 4 should contain a provision that the lessee should at all times be the same person as the sub-licensee of the seabed and foreshore areas.

[6]      In  1998,  the  Council  transferred  Lots  3  and  4  to  Waitakere  Properties

Limited, a wholly owned subsidiary of Waitakere City Holdings Limited, wholly

owned  by the  Council.    Lot  3  was  further  subdivided  by Waitakere  Properties Limited and, from late 1999 on, the subdivided lots were on sold to purchasers unconnected with the Council for residential development.  Lot 4 was, at about the same time, transferred to The Cove Limited, a company unconnected with the Council.  That company subdivided Lot 4 and has on sold the subdivided lots.

[7]      The essence of the plaintiffs’ claim is that, in terms of the Act and of the deeds entered into as part of the development arrangements, Lots 3 and 4 were to be irrevocably tied to the seabed licence, and were to be held by the Council for the purposes of a boat harbour.  The plaintiffs seek relief against both the Council and WML arising from the sale of Lots 3 and 4 in a number of respects.

(a)      They seek judicial review of the decision of the Council to transfer Lots 3 and 4 to Waitakere Properties Limited with a view to disposing of Lots 3 and 4 to a party other than the Marina operator and for use other than a boat harbour.  The plaintiff asserts that that decision was ultra vires the Council and illegal.

(b)They further allege that the Council held the freehold estate in Lots 3 and 4 on trust for, inter alia, the berth holders represented by the plaintiffs.    The  plaintiffs  assert  that  as  trustee  the  Council  was required to hold the freehold estate in Lots 3 and 4 in perpetuity for use as a boat harbour and that the sale of the lots to a party other than the Marina operator and for purposes other than use as a boat harbour and associated facilities is a breach of trust which has caused damage to the plaintiffs.

(c)      Against WML, the plaintiffs assert that, as the Marina operator, WML held the leasehold interest in Lots 3 and 4 on trusts similar to those upon which the freehold interest was held by the Council.   The plaintiffs assert that the surrender by WML of its leasehold interest as part of the arrangement by which Lots 3 and 4 were sold for private development was also a breach of its duty as trustee under the trust of which the berth holders are beneficiaries.

[8]      In addition to those challenges to the sale of Lots 3 and 4, the plaintiffs raise a separate and unrelated claim against the Council, concerning the arrangements for dredging  in  the  harbour.    The  background  to  that  claim  must  also  be  briefly described.  The nature of the Waitemata Harbour in the vicinity of the Marina is such that dredging is necessary for the effective use of the Marina.   The development arrangements provided that the Marina seabed would be excavated to a depth of two metres below chart datum.  Under the seabed sub-licence, WML undertook to keep the Marina seabed properly dredged to the required depth.  The plaintiffs allege that in the period 2000 to 2004 no sufficient dredging was undertaken.  In 2005, on the renewal of the seabed licence between the Council and WML, WML entered into a dredging agreement which provided that WML should dredge and dispose of not less than 50,000 cubic metres of sediment from the Marina seabed by 13 December 2007. The dredging agreement further provided that, unless a significantly reduced rate of accretion was clearly demonstrated to the Council in future, WML would undertake ongoing maintenance dredging from 1 April 2008 until the expiry of the new sub- licence term in October 2025 at not less than 18,000 cubic metres per annum on average.   WML commissioned a study in 2007 to determine the current rate of siltation and future siltation trends.  That study found that the rate of siltation had been consistently slowing down over the previous five years and that the current rate was now approximately 9,000 cubic metres per annum.  A further study undertaken in April 2008 found that the rate of siltation was in the region of 6,000 to 9,000 cubic metres per annum.  The plaintiff asserts that based on the findings of the 2008 study it would be necessary to remove about 10,000 cubic metres of silt per annum in order to achieve the target depth of two metres below chart datum by the end of the current term of the seabed sub-licence in 2025.

[9]      In August and November 2008 representatives of the plaintiff and WML met with the Council to seek a reduction in the dredging requirement from 18,000 cubic metres per annum to the figure said by the 2008 study to be necessary.  The request for  a  reduction  was  considered  by  a  committee  of  the  Council  in  April 2009. Council officers recommended that the Council approve a reduction from 18,000 cubic metres to 14,500 cubic metres, not to the full extent of the reduction sought. The plaintiffs seek judicial review of that decision of the Council on the grounds that the Council failed to take into account a relevant consideration, took into account

irrelevant  considerations,  and  that  the  decision  was  so  unreasonable  that  no reasonable decision maker, properly informed could have arrived at it.

The strike out applications

[10]     Both the first defendant and the second defendant apply to strike out the plaintiffs’ claim.  The applications are made under r 15.1 of the High Court Rules, which provides:

Dismissing or staying all or part of proceeding

(1)       The court may strike out all or part of a pleading if it—

(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)      is likely to cause prejudice or delay; or

(c)      is frivolous or vexatious; or

(d)      is otherwise an abuse of the process of the court.

(2)       If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.

(3)       Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.

(4)       This rule does not affect the court's inherent jurisdiction.

[11]     The principles to be applied on this application are not in dispute.  They are as described in Attorney-General v Prince and Gardner.[1]   The application proceeds on the assumption that the facts pleaded in the statement of claim are true.   The causes of action based on those facts must be so clearly untenable that they cannot possibly succeed.  The jurisdiction is to be exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material.   The fact that applications to strike out raise difficult questions of law and require extensive argument does not exclude jurisdiction.

[1] Attorney-General v Prince and Gardner [1998] 1 NZLR 262.

[12]     The Council’s submission is that the causes of action are so untenable that they cannot possibly succeed.   The Council further submits that the trust has not suffered any relevant loss, damage or prejudice, that the relief sought will serve no useful purpose and there is no reasonable prospect of discretion being exercised in favour of the trust should the matter proceed.  In respect of the judicial review cause of action concerning the sale of Lots 3 and 4, the Council submits that the events alleged occurred some 12 years before these proceedings were brought, and that this delay is such as to preclude the grant of relief in judicial review proceedings.  The Council further submits that the trust does not have a genuine interest in the matter in that it has not suffered loss, damage or prejudice as a result of the Council’s decision to sell Lots 3 and 4.  Counsel further submits that a declaration that the decision to sell Lots 3 and 4 was ultra vires would be futile because there is no ability to revisit that decision as the land in question is now in private ownership.

[13]     As to the claim for breach of trust in respect of Lots 3 and 4, Mr Casey QC for the Council submits that the statement of claim and the affidavits filed with it do not show that any trust in favour of the berth holders exists or can be implied.  He submits that any duty imposed on the Council arising from the Empowering Act is a statutory duty to be exercised for public purposes for which there is no remedy in breach of trust.   He further submits that the plaintiffs, as trustees of the Westpark Marina Association Trust, cannot establish that the Trust was a beneficiary of any trust that might be established in that it was not in existence at the time the relevant decision was made and there is no evidence that any of the current berth holders claimed to be beneficiaries of the alleged trust owned berths at the relevant time. The Council accordingly submits that the breach of trust cause of action against the Council discloses no reasonably arguable  cause of action.   The Council further submits that the breach of trust cause of action is statute barred by s 21(2) of the Limitation Act 1950.

[14]     As to the cause of action seeking judicial review of the decision to vary the dredging requirements, the Council submits that the decision of the Council was a decision in relation to the variation of the dredging contract between the Council and WML.   The Council submits that the decision to vary the contract is purely commercial or operational in nature and does not involve the exercise of a statutory

power that is susceptible to review.   The Council further submits that the relief sought would be futile in that if the decision to vary the dredging requirement was set aside the original requirement of 18,000 cubic metres would be reinstated.

[15]     The second defendant, WML, seeks to strike out the sole cause of action against it, namely the cause of action alleging a breach of trust in respect of the surrender of the sub-lease of Lots 3 and 4.   Mr Ruffin for the second defendant submits that there is no statutory trust created by the Empowering Act of which the plaintiffs can be said to be beneficiaries.  He further submits that the rights of the current  berth  holders  represented  by the  plaintiffs  in  respect  of  the  Marina  are contained in their berth licences, of which there has been no breach.   He further submits that the plaintiffs have no standing or judiciable interest to enable them to seek judicial review of the transfer of the leasehold interests.  He further submits that in relation to the second defendant there was no exercise or purported exercise of a statutory power of decision.  The second defendant further submits that the cause of action as beneficiaries under a statutory trust is barred by s 21(2) of the Limitation Act.

[16]     Mr Hickson for the plaintiffs submits that the statement of claim discloses reasonable causes of actions against both defendants.  On the issue of delay, counsel accepts that a considerable period of time has elapsed since the sale of Lots 3 and 4 but submits that in the particular circumstances of this case that cannot fairly be characterised as a delay in the issue of proceedings.  He submits that there are special factors in play that made the long period of time between the sale of Lots 3 and 4 and the issue of proceedings not only predictable but virtually inevitable.  None of the berth holders was party to the original agreements and the plaintiff Trust itself did not come into existence until 2005 and until that time berth holders did not have a representative body that could voice their concerns in regard to the operation of the Marina.   Counsel submits that the only parties who knew whether or not it was within the power of the Council to sell Lots 3 and 4 at the time of the sale in 1998 were the Council and WML.  The plaintiffs further submit that the Court ought to have regard to the gravity of what the plaintiffs say occurred in this case when considering the question of delay.  He submits that on an application to strike out for delay the overriding consideration is always whether justice can be done despite the

delay.[2]    The plaintiffs submit that the Council has suffered no prejudice as a consequence  of  the  lapse  of  time  in that  the claim  is  based  upon  documentary evidence not dependent on the recollections of witnesses.

[2] Manson v New Zealand Meat Workers Union [1990] 3 NZLR 615 at 621.

[17]     Counsel submits that a Court ought to decline relief in respect of an unlawful decision only if there are extremely strong reasons to do so.  As to the submission that a declaration that the decision was ultra vires and illegal would be futile, counsel for the plaintiffs submits that a declaration will have utility because of its potential impact, in several ways, on the way in which the current demand for car parking space at the Marina is addressed.   Counsel for the plaintiff submits that the berth holders have suffered the loss of amenities from the sale by reason of the limitations on car parking and the effect of that on the cost of car parking, a cost which the plaintiffs say is ultimately borne by the berth holders.

[18]     As to the cause of action alleging breach of trust by the Council, counsel for the plaintiff submits that the claim does not rely solely on the provisions of the Empowering Act and so does not allege a statutory trust.  The plaintiffs rely upon the arrangements and commitments entered into in implementing the boat harbour development authorised by the Empowering Act.   Counsel submits that the berth holders are beneficiaries of the alleged trust.  The fact that the plaintiff Trust had not been established at the time, or that some of its members may not have been berth holders at the relevant time is not fatal to the plaintiffs’ claim, since what is alleged is that the trust is for the benefit of all present and future users of the Marina including berth holders who are the principal users.  The plaintiffs submit that the trust contended for by the plaintiffs is a purpose trust of the type described in In Re

Denley’s Trust Deed,[3] namely a trust which, though expressed as for a non-charitable

[3] In Re Denley’s Trust Deed [1969] 1 Ch 373.

purpose, is directly or indirectly for the benefit of ascertainable individuals.   The plaintiffs assert that the proceedings are not statute barred as they comprise an action to recover from the Council trust property or the proceeds thereof in the possession of the Council or previously received by the Council and converted to its use within the meaning of s 21(1) of the Limitation Act 1950.  They submit that the damages sought  for  breach  of  trust  involve  compensation  for  the  loss  of  amenity  as  a

consequence of the sale of Lots 3 and 4 in breach of the trust and they also seek by way of the claim for damages recovery of monies acquired from the sale of the land by the Council in breach of the purpose trust.

[19]     As to the cause of action for judicial review of the dredging decision, counsel for the plaintiffs submits that the Council’s decision regarding the annual dredging requirements for the Marina is not purely commercial or operational in nature but is founded on a statutory obligation to ensure maintenance dredging is undertaken at the Marina.  The plaintiffs rely in particular on s 15(2) of the Empowering Act which provides:

Notwithstanding anything in subsection (1) of this section, from the time a boat harbour has been constructed and is in operation and while it is in use, the Council shall maintain and dredge or contract for the maintenance and dredging of any waterway forming part of the boat harbour or within any adjacent area providing access thereto.

[20]     Mr Hickson   submits   that   the  power  to   make  the  decision   regarding maintenance dredging, exercised in relation to the contract for renewal of the Marina seabed sub-licence was derived from the relevant provisions of the Empowering Act and made for the purpose of fulfilling the Council’s statutory obligations pursuant to s 15(2)  of  that  Act.    The  plaintiffs  accordingly submit  that  the  decision  is  one founded in public law rather than private law  and is accordingly susceptible to judicial review.   Counsel submits that the function being performed was not just consideration of a request to vary a contractual term, it was also the exercise of a decision  making power  under  s 15(2)  to  maintain  and  dredge  the  boat  harbour. Counsel submits that there is utility in the relief sought on this cause of action in that the plaintiffs seek orders that the Council give fresh consideration to the request that the annual dredging requirement be reduced.

Discussion

[21]     I deal first with the submission that the plaintiffs have no sufficient interest, or standing, to bring the proceedings.  I do not think that it would be right to strike out the proceedings on this ground.  The plaintiffs claim to represent the interests of the berth holders for the time being in the Marina.   While it is not appropriate to

express any concluded view, I consider that the berth holders in the Marina may well have a sufficient interest in ensuring the lawfulness of decisions made and arrangements  entered  into,  in  respect  of  the  area  of  land  which  was  originally included within the Marina development, and in respect of dredging arrangements, to have standing in judicial review proceedings concerning those matters.  So far as the causes of action for alleged breach of trust are concerned, the pleading is that the berth holders for the time being are the beneficiaries of such a trust.  On that basis, the plaintiffs have sufficiently arguable status in respect of those breach of trust causes of action to survive a strike out application.

[22]     I deal next with the question of whether the causes of action can be said to be untenable,  to  the  extent  that  there  is  no  reasonably  arguable  cause  of  action disclosed.  The plaintiffs’ contention that all of the reclaimed land transferred to it pursuant to s 8 of the Act was required to be held for the purpose of a boat harbour, and that its sale by the Council was ultra vires, cannot be dismissed as untenable.  It follows that the pleading seeking judicial review of the relevant decisions or actions of the Council in connection with the sale cannot be said to disclose no reasonably arguable cause of action.  As far as the pleading against the Council alleging breach of trust is concerned, that is so closely connected with the proposition that the sale of Lots 3 and 4 by the Council was ultra vires that that cause of action should not be struck out as not reasonably arguable.

[23]     The cause of action against WML for breach of trust does, it seems to me, face considerable hurdles.  However, I do not consider it can properly be said to be not reasonably arguable, so that it should be struck out.  In reaching that view, I have regard to the position of WML in relation to the pleadings as a whole.  As the Marina operator, WML will likely be affected by any relief which might be granted against the Council, even if no relief were granted against WML.   For that reason, WML would probably be a necessary party, even if the only causes of action were those against the Council.  I say “probably” because there is no need for me to reach a firm conclusion on the point.  It is sufficient to say that there is an arguable case for the proposition that WML is a necessary party, so that it would not be appropriate to dismiss WML from the proceedings.   That conclusion that WML is likely to be a

necessary party in any event, is relevant to the question of whether the cause of action against it should be struck out.

[24]     As to the dredging decision, the contract, although it is a commercial one, does have a statutory foundation in s 15(2), in that the dredging contract is the means by which the Council seeks to fulfil its obligations under that section.   Where an entity has both public functions and commercial functions, the boundary between its decisions which are public in nature, and accordingly subject to judicial review, and its decisions which are commercial in nature, and not generally so subject, is not a bright line one.  The Court of Appeal said, in Lab Tests Auckland Ltd v Auckland

District Health Board,[4]  that in assessing the standard of judicial review in such a

[4] Lab Tests Auckland Ltd v Auckland District Health Board [2009] 1 NZLR 776 at [85].

case, it is necessary to look at the nature of the public body, the particular function being performed, the context within which that function was performed, and what it said has gone wrong.   An analysis of that sort will be required in this case.   That analysis cannot properly be carried out on the basis of the limited material which may be put before the Court on a strike out application.

[25]     The next question is whether the claim should be struck out on the grounds of delay.  The essence of the defendants’ submission is not that the proceeding should be struck out because it is likely to cause prejudice or delay under r 15.1(1)(b), but rather that the extent of the delay in bringing proceedings is such that any relief to which the plaintiffs might otherwise be entitled would be refused because of delay. In essence therefore the contention is that by reason of the delay, the proceeding should  be  struck  out  under  r 15.1(1)(a),  namely  that  it  discloses  no  reasonably arguable cause of action, or (d), that it is otherwise an abuse of the process of the Court.  I do not consider that this proceeding should be struck out on either of those bases.  The question whether or not relief in judicial review proceedings should be refused by reason of delay involves an exercise of discretion.  That discretion should be exercised after a full consideration of the relevant facts.  I do not consider that it can be said, on the basis of the material properly before the Court on this strike out application, that relief must inevitably be refused.   The plaintiffs submit that the berth holders have only recently become aware of all of the relevant circumstances.

Further, they contend that they have only relatively recently become organised to the extent of having collective representation through the plaintiff Trust.

[26]     On the breach of trust causes of action, the effect of the delay is said to be such that the claim is statute barred under s 21 of the Limitation Act.  The defendants submit that the claim is statute barred by s 21(2), the plaintiffs assert that it is within the exception in s 21(1)(b).   I have already noted that the breach of trust cause of action against the Council is closely linked to the judicial review cause of action.  I have further noted that WML is likely to be a necessary party to the proceedings, whether or not the specific relief claimed against WML is available or not.  Those considerations lead me to the conclusion that I should not endeavour to decide, on this strike out application, whether or not s 21(2) applies.  I consider that that issue is better left for resolution at trial.  In reaching that conclusion, I take into account that similar issues to those raised by the breach of trust causes of action will require to be examined, under the judicial review cause of action, whether or not the causes of action for breach of trust were to remain.

[27]     As  to  the  submission  that  no  meaningful  relief  will  be  available  to  the plaintiffs if the proceedings were to succeed, I do not consider that it is so clear that there could be no meaningful relief that the proceedings should be struck out.  The relief sought in the proceedings includes a declaration that the sale of Lots 3 and 4 was  ultra  vires.    A  declaration  is,  without  more,  a  substantive  remedy,  as  is recognised by s 2 of the Declaratory Judgments Act 1908.  Further, a declaration in this case could potentially have practical effect.  The plaintiffs’ assertion, in respect of Lots 3 and 4, is that those lots were shown, in the development plans, as intended for car parking.  A declaration to the effect sought by the plaintiff may well have the potential to influence any negotiations which may be necessary to deal with the car parking facilities available to berth holders, and the cost of those facilities.   In respect of the dredging decision, meaningful relief, by means of a direction to the Council to reconsider the matter, would be possible.

[28]     For these reasons, I conclude that this case is not one where the discretion to strike out the proceedings should be exercised.   The applications are accordingly refused.

[29]     The plaintiffs are entitled to costs on these applications.   If the parties are unable to agree on quantum, memoranda may be submitted.

“A D MacKenzie J”

Solicitors:           D B Hickson, Barrister & Solicitor, Auckland, for plaintiffs.

Denis Sheard, Waitakere City Council, Henderson for first defendant

(Counsel Acting: M E Casey QC, Barrister, Auckland).

Kevin McDonald & Associates, Auckland for second defendant

(Counsel Instructed: J Ruffin, Barrister, Auckland).