Minister for Land Information v Mundy
[2023] NZHC 3757
•18 December 2023
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2022-409-226
[2023] NZHC 3757
BETWEEN MINISTER FOR LAND INFORMATION
Appellant
AND
TEXAS ANDREW MUNDY and HELEN CAMPBELL MUNDY
as Trustees of the Mundy Trust First Respondents
AND
MUNDY BROTHERS LIMITED
Second Respondents
Hearing: 27 March 2023 Appearances:
K I S Naik-Leong for the Appellant
R J B Fowler KC and R J Cooper for the Respondents
Judgment:
18 December 2023
JUDGMENT OF HARLAND J
Introduction
[1] It is a fundamental principle of our law that, when privately owned land is taken for public works, the owner of the land should be compensated for their loss. Although few would disagree with this statement of general principle, what amounts to “loss” and how much should be paid to compensate for it is often the subject of disagreement. This case is about what compensation should be paid under the Public Works Act 1981 (the Act) to the respondents for losses they say they have suffered when part of the land owned by the first respondents was taken by the Crown to build a road. In this appeal, the Minister for Land Information (the Crown) challenges the
MINISTER FOR LAND INFORMATION v MUNDY [2023] NZHC 3757 [18 December 2023]
legal basis for the award and the amount the Land Valuation Tribunal (the Tribunal) determined should be awarded.1
[2] This appeal proceeds by way of rehearing under s 26 of the Land Valuation Proceedings Act 1948. In accordance with the principles set out in Austin, Nichols & Co Inc v Stichting Lodestar, the Court must reach its own conclusions as to the merits of the appellant’s claim, but the onus is on the appellant to satisfy the Court that it should differ from the Tribunal’s decision.2 It is only if the Court considers that the Tribunal’s decision was wrong that it is justified interfering with it.3 The extent of the consideration an appeal court exercising a general power of appeal gives to the decision appealed from is a matter for its judgment.4
[3] I have decided to dismiss the appeal in all respects apart from in relation to costs under s 90 of the Act. This judgment sets out my reasons for that conclusion.
Background
[4] The Mundy family interests have owned and farmed the land in and around Blakes and Radcliffe Roads at Belfast, Christchurch for well over 100 years. By the time World War 2 started, Mundy Brothers Ltd was a major producer of vegetables and produce and, after the war, it was one of the first producers in the country to harvest potatoes and onions in bulk. The family’s business interests have also included a winery and, over the years, various additional small lifestyle blocks adjacent to their land interests were purchased as they came onto the market. During Mr Texas Mundy’s lifetime, the family has not sold any of its land, rejecting offers over the years to sell to developers for subdividing.
[5] Since the 1960s, the Mundy family interests have been aware that one day a motorway would be built in the area, but they understood it would only impact a smaller strip of land near the eastern boundary of the land. In 2008, their family interests were advised that the road corridor had changed and it would pass through the commercial buildings and infrastructure that were a key part of their farming business.
1 Mundy v Minister for Land Information [2022] NZLVT 8.
2 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
3 At [4].
4 At [5].
[6] The road concerned is State Highway 74, which is also referred to as the Christchurch Northern Motorway.
[7] A number of fee simple and leasehold estates were required by the Crown to complete this roading project. The Crown acquired the land under the Act with proclamations published in the New Zealand Gazette on 7 July 2016. The ownership of the land covered by the six proclamations vested in the Crown on 21 July 2016.
[8] The land which is the subject of this appeal was part of one proclamation. It is the land situated at 169 and 183 Radcliffe Road owned by the Mundy Trust, the first respondents in these proceedings. The land acquired comprised 4.5591 hectares contained in four separate titles. The second respondent, Mundy Brothers Ltd, is the vehicle through which the Mundy family’s market gardening business operated on the land. It leased the land from the Trust.
[9] In order to build State Highway 74, five buildings were removed from the land. These comprised a dwelling and four commercial buildings which had been used by Mundy Brothers as part of its farming operation for storing, grading and packing vegetable crops grown on the Mundy land. As well, the land taken included infrastructure, being a yard, a perimeter road and wells.
[10] The part of the Mundy Brothers business operated on the land and in respect of which the buildings and improvements were required, was relocated to facilities at West Melton owned by Devon Downs (West Melton) Ltd, an associated Mundy family business. In his evidence before the Tribunal, Mr Mundy explained that, before this, the West Melton property was primarily used for growing arable crops and some vegetable crops. Some of the vegetable produce grown at West Melton was brought to the Radcliffe Road facility for cleaning, grading and packaging. Mr Mundy explained it was easier to recruit and retain staff to work at the Radcliffe Road property rather than at West Melton which is in the Selwyn District, outside of the Christchurch city boundary and more cost effective.
[11] As a result of the land being taken, the Mundy land and farm was split down the middle. The respondents’ case was that this effectively doubled the infrastructure
required (such as power and irrigation), reduced some of the paddock sizes and made moving machinery, including harvesting equipment and harvested produce between parts of the farm, over the motorway corridor, more difficult and dangerous.
[12] The respondents filed a claim for compensation in the Tribunal which was later amended, and various advance compensation payments were agreed to by the parties.
[13] Prior to the Tribunal hearing, following expert witness conferencing, the parties’ valuers and their quantity surveyors reached significant agreement about the compensation that ought to be paid apart from what, if any, compensation was payable for improvements that had been lost as a result of the land being taken.
The Tribunal’s decision
[14] At the appeal hearing, counsel for the Crown helpfully set out in her submissions the four positions that were argued before the Tribunal as follows:
(a) The appellant’s position 1 (or primary position) was the lifestyle value of the taken land, including the value of the lost improvements agreed between the parties as $1,057,500, included the value of the lost improvements at $242,500. No separate compensation was payable for the cost of replacement improvements.
(b) The appellant’s position 2 (or secondary position) was the rural value of the taken land, excluding the value of the lost improvements as agreed between the parties at $423,715.24, plus the cost of replacement improvements at $2,753,483.47.
(c) The first respondents’ position 1 was the lifestyle value of the taken land, including the value of the lost improvements (agreed at $1,057,500) plus the cost of replacement improvements.
(d) The first respondents’ position 1A was the lifestyle value of the taken land excluding the value of the lost improvements ($815,000) plus the cost of replacement improvements.
[15]The Tribunal awarded compensation of:
(a) $4,074,784.21 to the first respondents. The amount awarded accepted the first respondents’ position 1A referred to in [14](d) above. The award comprises:
(i)$815,000 for the taken land (i.e. the lifestyle value excluding the value of the lost improvements); and
(ii)$3,241,756.52 for replacement improvements; and
(iii)$229,070.92 for professional fees;
(b) compensation of $159,128.17 (excluding GST) to the second respondents to recompense them in relation to the financial impacts on their farming business.
[16] The details of the compensation awarded and the breakdown of the various replacement improvements allowed were included in sch A attached to the Tribunal’s determination.5 Schedule B concerns the compensation payable to the second respondent which is not challenged on appeal.
The appeal
The notice of appeal
[17] The Crown submits that the Tribunal’s decision was wrong in fact and in law because, in general terms:
(a) it was based on the erroneous identification and application of the relevant legal framework; and
(b) it was not supported by the preponderance of the relevant evidence.
[18]Specifically, the Crown claims the Tribunal erred:
5 Schedule A was subsequently amended by an Erratum decision dated 22 August 2022.
(a) In failing to provide reasons in the decision for its dismissal of the appellant’s primary position and supporting authorities on how to fully compensate the respondents for their loss. The respondents are entitled to the value of the acquired land at highest and best use, agreed between the parties to be lifestyle use valued at $1,057,500, which includes the value of the improvements previously on the land, with no separate disturbance compensation payable for the cost of replacement improvements. This is referred to as the Crown’s primary argument.
(b) At [17]-[22], [25], [36]-[45] and [87]-[93] in:
(i)distinguishing Horn v Sunderland Corporation from applying to the respondents’ circumstances;6
(ii)mistakenly relying on inapplicable or irrelevant authorities in coming to its decision; and
(iii)awarding the respondents compensation for the acquired land on a lifestyle basis in addition to compensation for the cost of replacing the farm improvements previously on the acquired land that were utilised for an inconsistent (rural) use.
This is referred to as the Crown’s secondary argument. (c) At [76]-[108] in:
(i)misunderstanding and failing to engage with the Crown’s submissions and evidence as to the respondents’ duty as claimants for compensation under the Act to mitigate their financial loss; and
(ii)awarding financial impact claims to the second respondents;
(d) At [111] in:
(i)disregarding written and oral submissions presented and memoranda filed on behalf of the appellant confirming the appellant reserved their
6 Horn v Sunderland Corporation [1941] 2 KB 26 (EWCA), [1941] 1 ALL ER 480 (CA).
position as to costs claimed by the respondents pursuant to s 90 of the PWA until a costs hearing could be convened following the decision being issued;
(ii)concluding the parties have agreed to costs for professional fees; and
(iii)awarding the second respondent costs pursuant to s 90 of the PWA without turning its mind to whether the claimed costs are properly categorised under this provision.
This is referred to as the costs argument.
[19] By way of relief, the Minister seeks an order discharging the Tribunal’s decision and an order that compensation is paid to the respondents in accordance with the appellant’s primary argument or, alternatively, if the Court considers the improvements are separately compensable, that the respondents be awarded compensation based on Horn v Sunderland Corporation.7 Costs are also sought.
The opposition to the appeal
[20] The respondents submit that the Tribunal correctly applied the law, by awarding the respondents full compensation, which included disturbance compensation under s 66 of the Act. Further, they submit that the approach taken by the Crown on this appeal is inconsistent with its past approach to compensating the respondents for the loss of their business premises and the dwelling, as evidenced by the compensation paid by the Crown to them once the land was taken and the building of the road commenced.
[21] The respondents also submit that the Horn approach relied on by the Minister is not good law in New Zealand and is wrong in principle but, in any event, the principles articulated in it are not engaged in this case.
7 Horn v Sunderland Corporation, above n 6.
[22] In relation to costs, the respondents submit there is no reason to revisit the Tribunal’s decision because it had the benefit of agreed costs being put before it and awarded costs to the respondents on that basis.
[23] In addition, given the passage of time, the respondents reserve their rights in relation to further escalation and interest costs.
Agreed value
[24]The parties are agreed that:
(a) the appropriate approach to the valuation of the land requires a “before versus after” analysis and the applicable dollar figures are:
(i)Value 1 – the lifestyle value of the land is $1,057,500;
(ii)Value 1A – the lifestyle value of the land, minus improvements ($240,000), is $815,000; and
(iii)Value 2 – the rural value of the land is $423,715.24.
(b) In relation to the farm improvements, the replacement cost is
$3,750,712.29.
The Public Works Act provisions engaged in this case8
[25] Section 60 of the Act outlines what is described in its title as the “Basic entitlement to compensation”. Relevant to this appeal, it provides:
60 Basic entitlement to compensation
(1) Where under this Act any land—
(a)is acquired or taken for any public work; or
(b)suffers any injurious affection resulting from the acquisition or taking of any other land of the owner for any public work; or
8 Section 61 (Exceptions to right to compensation), s 63 (Compensation for injurious affection where no land taken), s 64 (Compensation for injurious affection to be assessed by reference to whole work) and s 65 (Compensation for land for which no general demand exists) are not relevant to this appeal.
…
and no other provision is made under this or any other Act for compensation for that acquisition, taking, injurious affection, or damage, the owner of that land shall be entitled to full compensation from the Crown (acting through the Minister) or local authority, as the case may be, for such acquisition, taking, injurious affection, or damage.
…
(emphasis added)
[26] Section 62 of the Act is entitled “Assessment of compensation”. It sets out that the amount of compensation payable for land taken, injuriously affected or otherwise, is to be assessed in accordance with the provisions of that section.
[27] Section 66 of the Act is entitled “Disturbance payments”. Relevant to this appeal, it provides:
66 Disturbance payments
(1) Subject to subsection (2), the owner of any land taken or acquired under this Act for a public work shall be entitled to recover compensation for any disturbance to his land and in particular to recover, where appropriate,—
(a)all reasonable costs incurred by him in moving from the land taken or acquired to other land acquired by him in substitution for the land taken or acquired, including—
(i)[Repealed]
(ii)the reasonable valuation and legal fees or costs incurred in respect of the land taken or acquired:
(iii)the reasonable valuation and legal fees or costs incurred in respect of the land acquired in substitution, but not exceeding the reasonable valuation and legal fees or costs which would be incurred in respect of land with a market value equal to the land taken or acquired:
(iv)the actual and reasonable costs incurred by him in transporting his goods and chattels and those of his family from the land taken or acquired to the land acquired in substitution, but not exceeding the reasonable costs of such transport by road over a distance of 80 kilometres, or such greater distance as is necessary to reach the nearest land that reasonably could have been acquired in substitution:
…
[28] Section 68 of the Act is entitled “Compensation for business loss”. Relevant to this appeal, it provides:
68 Compensation for business loss
(1) The owner of any land taken or acquired under this Act for a public work who has a business located on that land shall be entitled to compensation for—
(a)business loss resulting from the relocation of the business made necessary by the taking or acquisition which loss, unless the owner and the Minister or local authority otherwise agree, shall not be determined until the business has moved and (if the circumstances so require) until sufficient time has elapsed since the relocation of the business to enable the extent of the loss to be quantified; or
(b)loss of the goodwill of any such business, if—
(i)the land is valued on the basis of its existing use; and
(ii)the owner gives such assurances and undertakings not to dispose of the goodwill and not to engage in any similar trade or business as may be required by the Minister or local authority.
…
What comprises full compensation in this case (the primary argument)?
[29] The Crown’s primary position is that “full compensation” for the taken land under ss 60 and 62 of the Act equates to the value agreed by the valuers of $1,057,500 at its highest and best use as lifestyle land. This amount includes the value of lost improvements amounting to $242,500 with the land value amounting to $815,000. The Crown case is that no separate compensation is payable for replacement improvements. This was the appellant’s position 1 at the hearing before the Tribunal, set out in para [14](a) above.
[30] The valuers agreed to assess the market value of the taken land as lifestyle land given that they both considered this was its highest and best use. Although the Tribunal accepted that the market price for the land in the locality may well be driven by demand from lifestyle purchasers, it considered that the zoning of the land was also relevant.
[31] The evidence established that the zoning of the land was Rural 3 (Styx- Marshland). Reference was also made to the zoning proposed for the land in the proposed Christchurch Replacement District Plan which is Rural Urban Fringe. In relation to this zone, the Tribunal referred to the registered valuation evidence at para
[12] of its decision as follows:
… the zone adjoins the Christchurch main urban area and provides for continued rural production activities and the use of existing sites for rural dwellings while avoiding the creation of new sites of less than 4 hectares for rural dwellings, new plantation forestry and intensive farming activities.
(emphasis added)
[32] The Tribunal described this zoning as “particularly nuanced” because, although the valuers had considered the highest and best use of the land was for lifestyle purposes, there was, on the other hand, evidence from Mr Mundy that the land could be efficiently and economically farmed for horticultural purposes such as market gardens.9
[33] The Tribunal therefore formed the view that there were “competing interests for the land, both for lifestyle purposes and for continued rural activities such as for market gardening”.10 Accordingly, it found that the existing use of the land as rural for market gardening was a viable and economic use of the land which could not be disregarded.11
[34] This factual finding was fundamental to the Tribunal’s following analysis in relation to compensation for disturbance and what comprises “full compensation” for the land that was taken under the Act.
[35] A key point of difference between the Crown and the respondents’ approach in this appeal is whether the replacement cost for improvements of $3,750,712.29 can be claimed as a disturbance cost under s 66 of the Act.
9 Mundy v Minister for Land Information, above in 1, at [11].
10 At [15].
11 At [16].
[36] The Crown does not accept that s 66 applies in this case. It contends that the Tribunal was required to accept the valuers’ evidence that the highest and best use of the land was for lifestyle purposes and this was the appropriate basis for valuing it. It was also submitted that both expert valuers had valued the lost improvements as part of the land on a lifestyle basis and, I infer, that the Tribunal was bound by this, effectively as an agreed fact.
[37] Essentially, the Crown’s argument is that the lost improvements were part and parcel of the taken land12 and that, as was the case with the fruit trees in Pomona Orchard Ltd v Minister of Works,13 the improvements on the taken land were, in law, a part of that land and therefore it is from the loss of that land that the right to compensation has arisen. In further support of this argument, counsel for the Crown referred to Gugusheff v South Australian Urban Land Trust where the South Australian Supreme Court held that the plaintiff’s valuer in that case had correctly treated water supply and improvements as part of the value of the land which had been developed for market gardening purposes, comparing this with the approach taken by one of the valuers for the defendant who had not.14
[38] Further, the Crown submitted that there was no legal basis for the Tribunal to have considered that additional compensation should be paid to the first respondents in the form of “cost of replacement improvements” to enable the first respondents to continue to provide the second respondent with sufficient resources “as improvements” for its business to remain properly functioning.15 The point made by counsel was that the Tribunal did not separately consider what each distinct legal entity had lost because it wrongly combined the first and second respondent as one enterprise. The Crown does not dispute that the first respondents were claiming compensation for the taken land under s 60 of the Act and costs to replace the improvements on the taken land which were demolished as part of the takings under s 66 of the Act. However, it contended that it was the second respondents who had the right to claim in relation to the financial impacts of the taking under s 66 of the Act.
12 Auckland City Council v Ports of Auckland Ltd [2000] 3 NZLR 614 (CA).
13 Pomona Orchard Ltd v Minister of Works [1958] NZLR 88 (Land Valuation Court).
14 Gugusheff v South Australian Urban Land Trust (1990) 55 SASR 268.
15 Mundy v Minister for Land Information, above in 1, at [35].
[39] The Crown finally submitted that the Tribunal was required to provide “some cogent explanation” for its finding that it was not bound to the decisions cited by the appellant from authority at the High Court level or above.16 The Crown submitted that not only was no legal basis provided for the Tribunal’s departure from the position that improvements are taken into account when calculating the market value of the land taken, but that it failed to address this position at all.
[40] The respondents submit that jurisdiction to compensate for disturbance is precisely why s 66 exists. Mr Fowler KC submitted that the Crown argument would render s 66 useless if s 62 was applied to address disturbance compensation.17 He submitted that the s 62 assessment would be more likely to result in the provision of full compensation in a residential setting where the value of a taken house, for example, could then be used to purchase a replacement house. But he submitted the same analogy could not be used in a commercial or business setting such as this where replacement buildings may need to be developed to allow the disturbed business to be put back in an equivalent position in order for it to continue its business. To do otherwise, he submitted, fails the statutory entitlement and requirement of full compensation as set out in s 60 of the Act.
[41] Mr Fowler referred to Ace Developments Ltd v Attorney-General to support his argument.18 In that case, the Court of Appeal held that incidental relocation costs, such as demolishing and replacing buildings on substitute land, may be categorised under disturbance and therefore compensation could be awarded under s 66 as well as under s 62 of the Act. In Ace Developments, the question was whether the costs sought were reasonable, which is not an issue in this case because the quantum of the award ($3,750,712) has not been appealed. Mr Fowler submitted that, based on Ace, this amount is recoverable in addition to the s 62 award which is for the land taken or injuriously affected.
16 Westpac Banking Corporation v Commissioner of Inland Revenue [2011] NZSC 36, [2011] 2 NZLR 726 at [49].
17 Mr Fowler submitted this would also apply to s 65 but, in this case, s 65 is not engaged.
18 Ace Developments Ltd v Attorney-General [2017] 3 NZLR 278.
[42] The Tribunal allowed compensation of $815,000 to reflect the value of the land given it was also agreed that the lifestyle value of the land, minus improvements ($242,000), amounted to $815,000. It is clear therefore that, in reaching its decision, it excluded the value of the improvements that would apply if the land was considered based solely on lifestyle value. But, as I have outlined, that was not the factual finding reached by the Tribunal after it took into account the zoning of the land under both the existing district plan and the proposed district plan. There was therefore, contrary to the Crown’s submissions, a factual basis upon which the Tribunal reached its view that the agreed valuation evidence about lifestyle value was not definitive in respect of the highest and best use of the land.
[43] Having reached the view on the facts that the existing use of the land as rural for market gardening was a viable and economic use of the land which could not be disregarded, it was logical for an assessment of the replacement costs as a disturbance cost under s 66 to be considered. Unfortunately, as identified by the Crown, the Tribunal did not specifically consider this with reference to the sections of the Act, rather, its decision focussed on the factual analysis of the disputed claims for such costs. But this, as I return to shortly, is not in my view fatal.
The significance of the separate legal entities
[44] The Crown submits that it is necessary to draw a distinction between the losses suffered by the first and second respondents because they are separate legal entities.
[45] The respondents meet this argument by referring to s 60 of the Act and the requirements for full compensation. In order for there to be full compensation, Mr Fowler submitted that the Mundy Trust would not be restored to the same position unless it received compensation under s 66 to rebuild the farm buildings lost which it had previously been able to lease to Mundy Brothers. He submitted that the approach of the Tribunal did not contain any element of overcompensation or double compensation and it was correct not to require the level of demarcation the Crown now seeks to employ.
[46] The Tribunal dealt with compensation for improvements at paras [33]-[40] of its decision. After referring to s 60 and the principle of full compensation, the Tribunal identified that its obligation was to determine what full compensation might be. It noted that the meaning of “full” appeared to have been obscured by the concessions and agreements previously made by the parties. While acknowledging that such concessions and agreements were to be encouraged and commercially sensible, the Tribunal considered that, for those matters not agreed, it should consider what level of compensation would be fair for the Mundy Trust for it to be able to continue to provide the Mundy Brothers with sufficient resources (as improvements) for its business to remain properly functioning.19
[47] In respect of this, the Tribunal referred to Director of Building and Lands v Shun Fung Ironworks Ltd, citing the following passage from that judgment:20
Fairness requires that in such a case the claimant should be entitled, in respect of the disturbance of his business, to his reasonable costs incurred in the removal of his business and in setting it up again at the new property. Otherwise he would not be properly compensated for his loss; he would not be placed in a financially equivalent position. [emphasis added]
[48] Although acknowledging that the passage cited above referred to a new property, the Tribunal noted that, on the facts of it and other similar cases, there was insufficient remaining land after the acquisition had been completed for the reinstatement of the improvements to satisfactorily occur on the balance of the claimant’s land (if there was any). However, the Tribunal found that situation did not apply in this case because, as a matter of fact, it found there is sufficient remaining land for replacement improvements to be erected on the Radcliffe Road land. Accordingly, compensation could be provided for replacement buildings on the remaining land that had not been taken in this case.21
[49] The Tribunal also referred to the legal distinction between the Mundy Trust and the Mundy Brothers. In relation to this, it said:
19 Mundy v Minister for Land Information, above in 1, at [35].
20 Mundy v Minister for Land Information, above n 1, at [36], citing Director of Building and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111.
21 The Tribunal did not consider the fact that a new property was involved in Director of Building and Lands v Shun Fung Ironworks Ltd was critical to the ratio decidendi of that case.
[38] As we have noted above, Mundy Brothers is the business 'vehicle' for which the Mundy family undertakes their farming operations. We appreciate that there is a legal distinction between the trust (and various other land holding entities) and the company, but for the purposes of this proceeding there is insufficient detail in the evidence presented to the Tribunal for it to attempt to delineate or demarcate each element of the Mundy family's business operations.
(footnotes omitted)
[50] The Tribunal noted the Minister’s valuer had opined that, should the buildings be reinstated, then compensation value “would likely equate to the replacement cost in this instance as the default position”.22 The Tribunal referred to A & B Taxis Ltd v Secretary of State for Air, where the rationale for reinstatement, a principle that “affords the only proper basis of compensation”,23 was summarised:24
This principle is that the owner cannot be placed in as favourable a position as he was in before the exercise of compulsory powers, unless such a sum is assessed as will enable him to replace the premises or lands taken by premises or lands which would be to him of the same value.
[51] I accept the respondents’ argument that the Crown did not provide evidence and arguments focused on delineating the interests between the two entities before the Tribunal. I agree with Mr Fowler that this approach benefitted the Crown, at least in one instance, where the Tribunal accepted that the omnibus nature of the claim meant that the benefit of an upgraded well on other land owned by a different Mundy entity sufficiently compensated the Mundy Trust for the loss of the acquired well on the taken land.25
[52] But, in addition, I accept Mr Fowler’s submission that the Crown argument on appeal is inconsistent with past instances where it recognised its legal obligation to fully compensate the respondents for the loss of their business premises and old house by:
(a) paying compensation to replace residential infrastructure previously located on the taken land;
22 Mundy v Minister for Land Information, above in 1, at [39].
23 A & B Taxis Ltd v Secretary of State for Air [1922] 2 KB 328 (CA) at 336.
24 At 337.
25 Mundy v Minister for Land Information, above in 1, at [69].
(b) setting up a temporary yard area and staff toilet at 188 Radcliffe Road to enable trucks to be loaded with produce for transport; and
(c) other examples where the Crown had communicated with the respondents on the basis that full replacement compensation was to be provided.
[53] I am therefore satisfied that the Tribunal addressed these issues based on the case that had been advanced before it by the Crown and the respondents. I accept that, although the Tribunal did not articulate it as such, there is no basis to challenge the compensation awarded as it was properly claimed under s 66 as compensation required to put the respondents in a position where the Mundy Trust can replace the buildings on its residue land and Mundy Brothers can utilise them. It is only if this occurs that the respondents are put back in the same position as they were before the acquisition, which is what s 60 requires.
[54] Counsel for the respondents accepted that the difference between the two respondents is however relevant to GST as follows:
(a) the Mundy Trust is the claimant in relation to the land and the buildings, including s 66 disturbance costs. Mr Fowler advised that the Trust is not GST registered so the compensation amounts awarded to the Trust will require GST to be added and be expressed as a higher amount, namely inclusive of GST.
(b) Mundy Brothers is the claimant in relation to the “financial impacts” claims which are for business losses. Mundy Brothers is registered for GST and the amounts awarded should be plus GST.
[55] If these matters require further attention in terms of the appeal to this Court, leave is reserved for them to be addressed subsequently.
[56] Having decided that the Crown’s primary argument on appeal does not succeed, I turn to consider its secondary argument.
The Crown’s secondary argument – did the Tribunal incorrectly apply Horn?
[57]The Crown submits that the Tribunal erred in law by incorrectly distinguishing
Horn v Sunderland Corporation,26 which it contends applies in New Zealand.
[58] In Horn, the claimant, a farmer, occupied land upon which he had farmed pedigree horses. The farm was compulsorily purchased for housing and the compensation that had been assessed at first instance in a highest and best use for housing, not farming. The claimant sought extra compensation for the loss of sand, gravel and limestone underneath the surface of the farm and for business disturbance. It was accepted that, if these minerals were to be extracted, it would be impossible to obtain housing value for the surface of the farm and, valued for housing, it was far in excess of the value of the land if used as agricultural land.
[59] The majority found that the claimant was to be awarded compensation for disturbance to the farming use of the land only if the value of the land used for farming purposes and disturbance to that use exceeded the value of the land for housing as its highest and best use. This was because the extra price which the claimant could realise could only be realised by ceasing to farm the land and this would more than compensate him for the cost of relocating to another farm if he wished to continue farming.
[60] A key aspect of the majority judgment was what was described as a finding that the claimant was “economically speaking, indulging an idiosyncrasy without any economical justification” by farming on land which had a higher value if used for housing.27 By claiming for disturbance, the majority held the claimant was asking to be compensated not for any real pecuniary damage but for the loss of the opportunity to indulge his idiosyncrasy.28
26 Horn v Sunderland Corporation, above n 6.
27 At [38]-[39] and [41].
28 Mr Fowler KC submitted that the majority position was the subject of some criticism at the time. He referred to an article in the Law Quarterly Review in January 1942 at pg 29, the commentator later becoming McGarry LJ.
[61] In the dissenting judgment, Goddard LJ considered that, if a claim for disturbance could be made at all, it was difficult to see why its success or failure should depend on the basis upon which the value of the land had been calculated.
[62] Horn has been referred to in two early public works compensation cases in New Zealand.29 One is a decision of the former Supreme Court, the equivalent of the High Court, but the other is a Land Valuation Tribunal case and not binding on this Court.
[63] Counsel for the Crown submitted that the principle established in Horn is that, where the value of the highest use of the acquired land exceeds the value of its existing use plus disturbance, then the higher use value provides the basis for compensation. Counsel submitted that this means that a claimant cannot recover the value of the land at its highest and best use and then claim for loss caused by disturbance for a lower use.
[64] Comparing the current case with Horn, counsel submitted that the lifestyle value of the taken land could only be realised in the market if the property’s use as a crop farming business was abandoned to obtain the higher price. In other words, the claims for lifestyle value of the taken land and the costs of replacement farm improvements are inconsistent.
[65] Counsel for the respondents submitted that the Horn approach is not good law in New Zealand and is wrong in principle. Again, he referred to the starting point in s 60(1) of the Act which requires full compensation as the guiding and overriding principle.
[66] The Tribunal considered the secondary argument at paras [17]-[22] of its decision. As outlined above, the Tribunal found that the land appeared to have competing uses as the zone description indicated and it noted that the zone description enabled both uses to coexist as permitted uses. Accordingly, the Tribunal distinguished Horn on the facts as it did not consider the land owned by the Mundy
29 Pomona Orchard Ltd v Minister of Works, above n 13; and Verger Paints NZ Ltd v Wellington City Corporation [1973] 2 NZLR 739 (SC).
Family was of the same kind, namely, “prime for redevelopment”, residential, lifestyle or otherwise.
[67] The Tribunal made a specific factual finding that the Mundy interests were not indulging an “idiosyncrasy” (the term used in Horn) as their evidence was that a viable market gardening activity could be maintained on the land in this locality. Accordingly, the Tribunal found that it could adopt a more traditional approach to the assessment of compensation for the land acquired by the Minister for the works under s 62 of the Act. The Tribunal adopted the parties’ agreed approach that, if the Tribunal chose not to follow Horn, the land should have an agreed assessed compensation value of $815,000 plus GST if any, which is the value it included in Schedule A.30
[68] The Crown response to the Tribunal’s findings on appeal was that the Tribunal had mistakenly considered that Horn was saying that a market gardening operation was an uneconomic use of the land, whereas the dispute was not concerned with whether the respondents were operating an economic business on the taken land, but whether the land was valued for its highest and best use as lifestyle land. Further, counsel for the Crown submitted that the claimants’ own expert valuer had provided evidence supporting the use of the taken land by the Mundy claimants for crop farming as idiosyncratic, notwithstanding the zoning of the land providing for continued rural production activities.
[69] Counsel also challenged the Tribunal’s statement that the parties had agreed that, if it did not follow Horn, the assessed compensation for value would be $815,000 plus GST if any. Ms Naik-Leong submitted that the entitlement is $1,057,000 which will compensate the respondents for what they have lost, namely, the lifestyle value of the land including the improvements.
[70] I am not persuaded that the Tribunal was wrong to distinguish Horn. As I have said several times before in this judgment, the planning overlay was considered by the Tribunal to be nuanced. Given that the chairperson of the Tribunal is an Environment Judge, her knowledge of the potential use of the land, as expressed by the zoning applied to it, was informed by a degree of expertise that was more wide-reaching than simply the reference to the zoning in the valuation evidence. In addition, I do not read
30 Mundy v Minister for Land Information, above n 1, at [20]-[22].
the respondents’ valuer’s evidence as supporting that the respondents’ claim for crop farming was idiosyncratic. Rather, the valuer simply noted that valuing the land on such a hypothetical basis was problematic as all the nearby land sales were impacted by a demand for lifestyle use, not as productive rural land for food production or grazing. As well, in my view, the Tribunal was entitled to give considerable weight to Mr Mundy’s evidence on this point given his extensive experience of crop farming in this location.
[71] I agree with Mr Fowler that s 60(1) and the requirement of full compensation is the guiding and overriding principle. That entitlement is not to be whittled down in any respect.31 Not only is there no authority in New Zealand directly adopting Horn, it must also be factored in that the Act was not in force at the time Horn was decided. The appropriateness of applying English law directly and in a limiting fashion should be done so cautiously when the legislative context points in another direction. I also accept that the value of the land is derived not just from its current use but also its potential use and, as well, the value of the land may also reflect a potential use even if currently used for another completely inconsistent purpose.
[72] But, even if I am wrong about this, I accept the respondents’ submission that the New Zealand position is different from the position in the United Kingdom and Australia. In those jurisdictions, compensation for improvements is subsumed into the value of land by regulation and/or statute.32 The cases from the United Kingdom and Australia are therefore of little, if any, assistance.
[73] In New Zealand, however, s 66 disturbance entitlements are separate and distinct. They are not part of the land valuation analysis itself.33 It is also important to note that the Act was promulgated in 1981 and Horn is a much older case. If Horn had been designed to be applied in New Zealand, it is hard to understand why the approach taken in the United Kingdom and Australia was not, likewise, followed in New Zealand when the Act was enacted in 1981.
31 Drower v Minister of Works and Development [1984] 1 NZLR 26 (CA).
32 Horn v Sunderland Corporation, above n 6, at pg 484; Hughes v Doncaster Metropolitan Borough Council [1991] 1 ALL ER 295 at 299; and The Commonwealth v Milledge (1953) 90 CLR 157 at 164.
33 Ace Developments Ltd v Attorney-General, above n 18, at [83].
[74] But, in any event, I agree with counsel for the respondents that Horn is not engaged on these facts. The reinstated buildings are on the retained land and the respondent claimants do not have to move off the land as they can and wish to continue the same activities on the part of the land that has been reinstated. In my view, s 66(1)(a) can apply to this scenario.
[75] Accordingly, I can see no error in the Tribunal’s approach to Horn, which it distinguished. The appellant’s secondary argument also fails.
Did the Tribunal err in not addressing the Crown’s primary argument?
[76] The Tribunal did not directly address why it departed from the position that improvements are taken into account when calculating the market value of the land. The Crown submitted it was required to do so, citing the Supreme Court’s decision in Westpac Banking Corporation v Commissioner of Inland Revenue where it was held that:34
… it would have been necessary to consider whether our preference for that different view was sufficient to justify departure from the meaning which had been adopted by the Privy Council. That would have raised questions concerning, on the one hand, desirability of stability in the law and respect for the principle of stare decisis and, on the other, whether there are cogent reasons for reconsideration or, and departure from, that judgment.
[77] In my view, the Tribunal’s justification for its departure from the Horn approach, despite the Crown’s argument that it did not justify it at all, was provided by its finding that the existing rural use of the land for market gardening was a viable and economic use of the land. As a result, it logically followed that an assessment pursuant to s 66 was required in these circumstances. The Tribunal was therefore not bound to the higher authorities cited by the Crown. I note that in light of the Supreme Court’s statement cited above, it would have been preferable for the Tribunal to have expressly considered the Act’s provisions alongside its factual findings in regard to the disputed claims. The fact that the Tribunal did not do so specifically, however, is not fatal to the respondent’s case. The decision of the Tribunal covered the main points raised and, from its factual analysis, the reason for its conclusion is clear.
34 Westpac Banking Corporation v Commissioner of Inland Revenue, above n 16, at [49].
Were costs correctly awarded by the Tribunal?
[78] The Tribunal awarded a combined figure of $229,070.92 plus GST for s 66 costs and s 90 costs to the respondents.35 It was common ground that s 66 costs are for reasonable valuation and legal fees, or costs incurred in respect of the land taken or acquired, and s 90 costs are those incurred in the hearing of a compensation claim and are at the discretion of the Tribunal.36
[79]At paras [110] and [111] of the Tribunal’s decision, it said:
[110]The Minister's position is that only 70% of this part of the claim (being
$160,394.64 (plus GST)) should be treated as s66 costs with the remainder to be sought as s90 costs. Again, as before occasioned, the Tribunal has not been provided with specific argument on this part of the claim from either counsel for the claimant or counsel for the Minister. We do accept Ms Cheng's observation that "it is not easy to distinguish between fees incurred for the purposes of negotiation (s66 costs) and litigation (s90 costs)".
[111] The Tribunal accepts that where costs are sought under s90 of the Act such costs are discretionary. In this instance however, because the parties have agreed to the costs for professional fees (as stated above) we do not consider that the discretion afforded to the Tribunal to apportion the costs between s66 and s90 is required to be exercised. Accordingly, this agreed sum is included in Schedule A.
[80] Counsel for the Crown submits that the appellant only agreed to the reasonableness of the quantum of the s 90 costs but not that they should be awarded. Ms Naik-Leong submitted that the appellant’s position is that the Crown’s liability to pay the s 90 costs should have been determined following the decision on the substantive matters. She noted this was the appellant’s position in oral and written submissions before the Tribunal and in a memorandum filed post-hearing. The Crown does however agree with the respondents’ rough estimate that 70 per cent ($160,394.64 plus GST) of the $229,070.19 of the professional fees claimed are s 66 costs and should be paid.
[81] The respondents’ position is that there is no reason to revisit the Tribunal’s decision as it had the benefit of the agreed costs being put before it and awarded those costs to the claimant respondents.
35 Mundy v Minister for Land Information, above n 1, at [111].
36 Stringer v Minister of Land [2014] NZHC 776 at [18].
[82] That said, the fact the Crown stated its position to have s 90 costs determined after the substantive decision both prior and post hearing should not be ignored. There is a possibility that the Crown’s position regarding the reasonableness of the quantum was misinterpreted as agreement they should be awarded. While the Tribunal agreed with counsel’s point that distinguishing between fees for negotiation and litigation costs is difficult, the Crown have included in their submissions that the general rule is to pay the reasonable costs incurred up until the point the compensation claim is filed with the Tribunal and, following that, legal costs are likely to have been incurred so as to fall under s 90.
[83] I have therefore decided that this is a matter to be further considered and determined by the Tribunal. The appeal is allowed in relation to s 90 costs and remitted back to the Tribunal for further consideration and determination.
Result
[84] The appeal is allowed in relation to s 90 costs; but dismissed in all other respects.
[85] The costs payable on this appeal should follow the event. If costs are not able to be agreed, the respondents are to file a memorandum outlining the costs they seek no later than Friday 9 February 2024 with a response from the Crown by Friday 23 February 2024.
[86] I note that further escalation and interest in relation to the amounts originally awarded by the Tribunal are claimed by the respondent. Counsel are to address how these issues should be further progressed in the costs memoranda referred to above if they are filed and, if not, the same timetable I have imposed applies. If any issues remain as to the articulation of GST in the award counsel are to address these in the same memoranda.
Harland J
Solicitors:
Crown Law, Wellington
R J B Fowler KC, Wellington Meares Williams, Christchurch.
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