Palmerston North City Council v Hardiway Enterprises Limite
[2015] NZCA 114
•16 April 2015 at 10.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA78/2014 [2015] NZCA 114 |
| BETWEEN | PALMERSTON NORTH CITY COUNCIL |
| AND | HARDIWAY ENTERPRISES LIMITED |
| Hearing: | 26 February 2015 |
Court: | Ellen France P, White and French JJ |
Counsel: | J W Maassen and N Jessen for Appellant |
Judgment: | 16 April 2015 at 10.00 am |
JUDGMENT OF THE COURT
AThe questions are answered as follows:
Question 1
Did the High Court err when it reasoned that the Public Works Act 1981, s 62(1)(d) “limb one”, did not apply?
Answer: Yes.
Question 2
Did the High Court err when it held that the Public Works Act 1981, s 62(1)(d) “limb two”, did not apply because Lot 18 would retain its value as “access way or road extension to any prospective purchaser who appreciated the strategic value of Lot 18”?
Answer: Yes.
Question 3
Did the High Court err in suggesting that relief would incur difficulties under the Property Law Act 1952 rather than under the Property Law Act 2007?
Answer: It is unnecessary to answer this question.
BThe appeal is allowed and the decision of the Land Valuation Tribunal is reinstated.
C The respondent must pay to the appellant costs for a standard appeal on a band A basis with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by White J)
Table of Contents
Para No
Introduction [1]
Background [5]
The Public Works Act 1981 [14]
The Valuation Tribunal decision [24]
The High Court decision [28]
Submissions for the Council [33]
Submissions for Hardiway [39]
Reply submissions for the Council [45]
The interpretation and application of s 62(1)(d) [46]
Second limb [48]
First limb [77]
Result [83]
Introduction
This case concerns the assessment of the compensation to be paid by the appellant, the Palmerston North City Council (the Council), to the respondent, Hardiway Enterprises Ltd (Hardiway) for a small piece of land (70m²) owned by Hardiway which the Council seeks to acquire under the Public Works Act 1981 (the PWA) to enable a public road to be extended and a subdivision to proceed.
Faced with valuation evidence ranging from $350,000 for Hardiway to $2,000 for the Council, the Land Valuation Tribunal (the Tribunal) determined that the valuation of the land for compensation award purposes should be $36,000.[1]
[1]Hardiway Enterprises Ltd v Palmerston North City Council LVT, 11 May 2011 [Tribunal decision], at [58].
On appeal by both parties the High Court decided that as the Tribunal had erred in its interpretation of the relevant provisions of the PWA the appeal by Hardiway should be allowed and the case remitted to the Tribunal to receive further evidence and to apply the principles set out in the High Court judgment.[2]
[2]Hardiway Enterprises Ltd v Palmerston North City Council [2013] NZHC 2310, [2013] 3 NZLR 848 (Collins J and J P Larmer, Valuer) [High Court decision] at [79]–[80].
The Council then obtained leave from the High Court to appeal to this Court on two questions relating to the interpretation of s 62(1)(d) of the PWA which governs the approach to the assessment of the compensation payable in this case.[3] Leave was also obtained to appeal in respect of a third question relating to the interpretation of the Property Law Acts 1952 and 2007, but the parties have now agreed that it is unnecessary for the Court to consider this question.
Background
[3]Hardiway Enterprises Ltd v Palmerston North City Council [2014] NZHC 46.
The 70m² piece of land the subject of the appeal came into existence in 1992 following a 1991 subdivision of a rural site into ten rural residential lots at Valley Views Road, Palmerston North. The 70m² piece of land, described as Lot 18 on Deposited Plan DP73932 (Lot 18), is located at the end of Valley Views Road which is a public road adjacent to one of the ten residential lots (Lot 7) and another rural site (Lot 51) which is the property the subject of the proposed new subdivision.
The relationship between the various Lots and Valley Views Road is shown in the following diagram:
By acquiring Lot 18, the Council will be able to extend Valley Views Road to Lot 51 thereby enabling the proposed new subdivision of that Lot to proceed more expeditiously and economically than any alternative access option.
One alternative access option would involve a subdivision of Lot 7 which is also adjacent to Lot 51 and is owned by the same person. That alternative is shown as proposed Lot 3 in the diagram. One difficulty with this alternative is that Lot 7, like the other Lots created by the 1991 subdivision, is subject to a number of restrictive covenants. These covenants gave rise to the third question relating to the two Property Law Acts which no longer requires to be answered.
The reason for the creation of Lot 18 by the developer of the 1991 subdivision has not been able to be ascertained.[4] Whatever the original reason may have been, however, there is no doubt that Lot 18, which is now owned by Hardiway, is strategically located as far as the proposed new subdivision is concerned.
[4]Tribunal decision, above n 1, at [11] and High Court decision, above n 2, at [13].
As the Tribunal put it:[5]
Lot 18 is what was referred to at the hearing before the Tribunal as a “link” strip, or “spite” strip. There is a reference in some of the cases to the same being known as a “ransom” strip. This is because Lot 18, being at the end of the claimant’s subdivision, blocks the logical continuation of the existing road (Valley Views Road) onto Lot 51. The sensible use of Lot 18, because of its small size and inability to be used as land for any other purpose, is as a road, enabling rational progress of Valley Views Road in a southerly direction upon the proposed development of Lot 51 for rural residential purposes.
[5]Tribunal decision, above n 1, at [4].
To enable the subdivision of Lot 51 to proceed, the Council in December 2004 issued a notice of desire to take Lot 18 under s 18 of the PWA. In September 2005 a notice of intention to take the land was issued by the Council. As the parties were not able to agree on the amount to be paid for Lot 18, Hardiway applied on 16 March 2007 for compensation under s 80 of the PWA. The application required the Tribunal to assess the amount of compensation in accordance with the requirements of s 62 of the PWA.
The parties accepted that the date at which the assessment of compensation was to be made was 16 March 2007 being the date of Hardiway’s application. In terms of s 62(2) of the PWA this was the “specified date”.
It is convenient to refer to the relevant provisions of the PWA before summarising the decisions of the Tribunal and the High Court and the submissions for the parties on appeal in respect of the two remaining questions.
The Public Works Act 1981
Under s 60 where land is acquired for “any public work” the owner of the land is entitled to “full compensation” from the Crown or local authority for the acquisition.
There is no dispute that, in acquiring Lot 18 for the purpose of extending Valley Views Road, the Council is acquiring the land for a “public work”, namely a public road.[6]
[6]Public Works Act 1981, s 2, definition of “public work”, and Local Government Act 1974, s 319(1)(a)–(c).
Nor is there any dispute that Hardiway is entitled to “full compensation” for the compulsory acquisition of its land.[7]
[7]Drower v Minister of Works and Development [1984] 1 NZLR 26 (CA) at 29.
Under s 62(1) the amount of compensation in this case is to be assessed in accordance with the following provisions:
(a)subject to the provisions of sections 72 to 76, no allowance shall be made on account of the taking of any land being compulsory:
(b)the value of land shall, except as otherwise provided, be taken to be that amount which the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise, unless—
(i)the assessment of compensation relates to any matter which is not directly based on the value of land and in respect of which a right to compensation is conferred under this or any other Act; or
(ii)only part of the land of an owner is taken or acquired under this Act and that part is of a size, shape, or nature for which there is no general demand or market, in which case the compensation for such land and the injurious affection caused by such taking or acquisition may be assessed by determining the market value of the whole of the owner's land and deducting from it the market value of the balance of the owner's land after the taking or acquisition:
(c)where the value of the land taken for any public work has, on or before the specified date, been increased or reduced by the work or the prospect of the work, the amount of that increase or reduction shall not be taken into account:
(d)the special suitability or adaptability of the land, or of any natural material acquired or taken under section 27, for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only pursuant to statutory powers, or a purpose for which there is no market apart from the special needs of a particular purchaser or the requirements of any government department or of any local authority:
(e)the Tribunal shall take into account by way of deduction from that part of the total amount of compensation that would otherwise be awarded on any claim in respect of a public work that comprises the market value of the land taken and any injurious affection to land arising out of the taking, any increase in the value of any land of the claimant that is injuriously affected, or in the value of any other land in which the claimant has an interest, caused before the specified date or likely to be caused after that date by the work or the prospect of the work:
Again there is no dispute that the starting point is the amount which:[8]
… the land if sold in the open market by a willing seller to a willing buyer on the specified date might be expected to realise … .
[8]Public Works Act, s 62(1)(b).
The “willing seller willing buyer” market value test is well-established in the context of valuations not only of land, as here, but also of shares.[9] It is essentially a practical question, not to be overlaid by philosophical or legal niceties. It requires a valuer to decide, often on the basis of comparable transactions, what a willing but not anxious seller and a willing but not anxious buyer, acting freely and adequately informed, would agree should be the price.[10] Compulsion on either side is to be disregarded.
[9]GUS Properties Ltd v Tower Corporation [1992] 2 NZLR 679 (CA) at 687 per Cooke P; Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 (CA) at 83–85; Morgenstern v Jeffreys [2014] NZCA 449 at [61] (leave to appeal declined: Morgenstern v Jeffreys [2014] NZSC 176); Alan Hyam The Law Affecting Valuation of Land in Australia (5th ed, Federation Press, Sydney, 2014) at 44–47.
[10]Jacobsen Holdings Ltd v Drexel [1986] 1 NZLR 324 (CA) at 329 per Cooke P; Modick RC Ltd v Mahoney [1992] 1 NZLR 150 (CA) at 155 per Cooke P.
In terms of the test, a willing buyer will include the acquiring authority for whom the land may have special value by reason of its unusual or unique features.[11] But here, as s 62(1)(d) makes clear, this approach to the application of the test has been expressly excluded in certain specifically prescribed situations.[12] For the purposes of the two questions for our consideration, the relevant exclusions appear in the two separate limbs of s 62(1)(d).
[11]Raja Vyricherla NarayanaGajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 (PC) at 312–313 per Lord Romer; Jacobsen Holdings Ltd v Drexel, above n 10, at 328–329 per Cooke P.
[12]Jacobsen Holdings Ltd v Drexel, above n 10, at 333 per Somers J, and GUS Properties Ltd v Tower Corporation above n 9, at 687 per Cooke P.
The first limb relevantly provides that:
… the special suitability or adaptability of the land … for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only pursuant to statutory powers … .
The second limb relevantly provides that:
… the special suitability or adaptability of the land … for any purpose shall not be taken into account if that purpose is … a purpose for which there is no market apart from the special needs of a particular purchaser or the requirements of … any local authority … .
It is the interpretation and application of these two limbs that have given rise to the questions on this appeal.
The Land Valuation Tribunal decision
The Tribunal decided, on the basis of two English decisions,[13] that prior to the specified date Lot 18 had lost “its special suitability” in providing road access to Lot 51 because there were other access options available.[14] Neither of the limbs of s 62(1)(d) therefore applied.
[13]Waters v Welsh Development Agency [2002] EWCA Civ 924, [2003] 4 All ER 384; [2004] UKHL 19, [2004] 2 All ER 915 and Batchelor v Kent County Council (1989) 59 P & CR 357 (CA).
[14]Tribunal decision, above n 1, at [39]–[42].
The Tribunal also decided, however, that the availability of the other options, in particular the use of Lot 3, weighed in the valuation assessment and meant that Lot 18 had lost its unique qualities and that the value basis “had swung in favour of the purchaser” (the Council).[15] In reaching this decision the Tribunal referred to the principle established by the decision of the Privy Council in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition.[16]
[15]Tribunal decision, above n 1, at [43].
[16]Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 (PC) at 572.
The Tribunal recognised the valuation exercise was challenging because there were no comparable sales of link strips in the area and the two valuers had arrived at such a wide range of values for Lot 18.[17] The Tribunal preferred the evidence of the Council’s valuer because it was “more comprehensive” and because he had placed more weight on the negotiations that could occur between a willing buyer and willing seller in arriving at the final price.[18]
[17]Tribunal decision, above n 1, at [51].
[18]Tribunal decision, above n 1, at [54].
Adopting the “cost of alternative access” approach of the Council’s valuer rather than the “percentage of net yield for benefitted property approach”, the Tribunal assessed the valuation at $72,000, but then, taking into account the increased bargaining power of the purchaser by reason of the alternative access to the use of Lot 18, reduced the figure to $36,000.[19]
The High Court decision
[19]Tribunal decision, above n 1, at [55]–[58].
In addressing the questions raised by the Council’s cross-appeal relating to the interpretation and application of s 62(1)(d), the High Court explained the legislative history of the provision, judicial decisions about its meaning, its interpretation of the provision and why s 62(1)(d) did not govern the circumstances of this case.[20]
[20]High Court decision, above n 2, at [31]–[50].
The Court referred to the decision of the House of Lords in Waters v Welsh Development Agency for the history of compensation for compulsory acquisition of land.[21] On the interpretation of s 62(1)(d), the High Court referred to two authoritative United Kingdom judgments on the equivalent provision which it found to be of great assistance.[22]
[21]Waters v Welsh Development Agency, above n 13.
[22]High Court decision, above n 2, at [41]–[45]: Hertfordshire County Council v Ozanne [1991] 1 WLR 105 (HL) and Waters v Welsh Development Agency, above n 13.
The High Court noted, with reference to Jacobsen Holdings Ltd v Drexel,[23] that the rationale for s 62(1)(d) was to overcome factors which might inflate compensation beyond a level which is considered reasonable in the public interest. Landowners should not receive a windfall at the expense of the community.[24]
[23]Jacobsen Holdings Ltd v Drexel, above n 10, at 333 per Somers J.
[24]High Court decision, above n 2, at [47].
The High Court then gave its reasons for its decision that s 62(1)(d) did not apply in the circumstances of this case:
[48] We have concluded that the English authorities to which we have referred are persuasive even though s 62(1)(d) would disregard special suitability from the special needs of a particular purchaser for which there is no market apart from the special needs of that purchaser.
[49] We find the reasoning in Hertfordshire County Council and Waters is compelling. In our assessment the special suitability of Lot 18 as a means of road access to Lot 51 could be realised other than through the exercise of statutory powers by the Council in extending Valley Views Road. Its use for road extension is not a purpose that can only be achieved through the exercise of statutory powers by the Council. The owner of Lot 51 for example, could equally see value in Lot 18 as a means of access to developing Lot 51. Furthermore, its use as a road extension is not a purpose for which there was no market except for the special needs of a particular purchaser, for instance the current owner of Lot 51. It would retain its value as an access way or road extension to any prospective purchaser who appreciated the strategic value of Lot 18.
Finally, the High Court explained why it disagreed with the approach of the Tribunal and why it was necessary to remit the case to the Tribunal for reconsideration. In essence the High Court was concerned that the Tribunal had: rejected the core value assessment of the Council’s valuer without explanation; reasoned that Lot 18 no longer had a “monopoly or ransom value when there is a viable alternative access”; found it necessary to give effect to the Pointe Gourde principle; and, having apparently settled on the “alternative access” approach, then reverted back to the “bargaining position of the parties” and halved the figure it had reached based on the alternative access methodology.[25]
Submissions for the Council
[25]High Court decision, above n 2, at [51]–[81].
For the Council, Mr Maassen submitted that both limbs of s 62(1)(d) applied and the High Court had erred in deciding otherwise.
As to the meaning of the expression “special suitability”, which is common to both limbs, Mr Maassen relied on the statement by Richardson P delivering the judgment of this Court in Peninsula Watchdog Group (Inc) v Minister of Energy that:[26]
A special consideration is one outside the common run of things, one which … is exceptional, abnormal, or unusual, but something less than extraordinary or unique.
[26]Peninsula Watchdog Group (Inc) v Minister of Energy [1996] 2 NZLR 529 (CA) at 536.
Mr Maassen submitted that in terms of the first limb the special suitability of Lot 18 for use as a public road had to be disregarded because its use as a public road could only be achieved through the exercise of a statutory power, namely the vesting of the land as a road by the Council under Pt 21 of the Local Government Act 1974. The fact that the land might also be used as a private road without the exercise of a statutory power did not prevent the application of the limb because it applied to “any purpose”.
In respect of the second limb, Mr Maassen submitted that the special suitability of Lot 18 as a link to Lot 51 had to be disregarded because there was no market for Lot 18 as a link to Lot 51 “apart from the special needs to the owner of Lot 51” or the Council’s requirements. He pointed out that this limb of s 62(1)(d) was based on a provision enacted in the United Kingdom to reverse the English Court of Appeal decision in Inland Revenue Commissioners v Clay Buchanan (Clay) which involved the valuation of a house next to a rest home and which recognised the special value of that house to the owner who wished to extend the rest home.[27]
[27]Inland Revenue Commissioners v Clay Buchanan [1914] 3 KB 466 (CA).
In Mr Maassen’s submission a “ransom” strip should be ineffective against local authorities and the Crown if it has a public good value.
Finally, Mr Maassen indicated that if the Court decided that s 62(1)(d) did apply the Council would accept the Land Valuation Tribunal figure of $36,000 in order to avoid any further delay in resolving the dispute.
Submissions for Hardiway
For Hardiway, Mr Fowler QC submitted in respect of the first limb that as the reference to “any purpose” included the use of Lot 18 as a private road which did not require the exercise of a statutory power the special suitability of the Lot as a private road should not be disregarded. In the course of argument, Mr Fowler accepted that if the purpose was limited to a public road the exclusion would apply because a statutory power would be involved, but there was no reason why it should be limited in that way when the purpose was access to Lot 51. Mr Fowler also accepted that if there could not be access to the proposed subdivision without a public road, his approach would be difficult to support.
In respect of the second limb, Mr Fowler originally submitted that, on a purposive approach, the wording, especially the two references to “special”, powerfully suggested something closer to exceptional or very unusual, if not quite unique. In the course of argument, however, Mr Fowler accepted Richardson P’s approach in Peninsula Watchdog Group (Inc) to the meaning of “special”.
Mr Fowler submitted that it was necessary to recognise the significance of the word “market” which imported an opportunity for commercial comparison or selection of choices that went beyond one particular purchaser. Here there were several parties with a potential interest, starting with the Council and the owner of Lot 51. The fact that they were “co-operating” was irrelevant. They were separate entities that, by definition, did not have identical interests.
Mr Fowler also suggested in the course of argument that, apart from the owner of Lot 7, the owners of the other nine lots created by the 1991 subdivision, who held the dominant tenements over proposed Lot 3, might have an interest in acquiring Lot 18 in order to prevent any extension of Valley Views Road to the proposed new subdivision in Lot 51. They might wish to acquire Lot 18 to prevent more traffic on the road to which their properties front. Furthermore, the owner of Lot 8 might not want the alternative access road through Lot 7.
Mr Fowler submitted that if the Council was right the use of a “blocking” strip would never prevail. This was contrary to the English authorities which recognise that the owner of such strips is entitled to expect a substantial premium (or “ransom value”) above its existing value to unlock the potential of the development area.[28] Mr Fowler accepted, however, that the decision of the House of Lords in Blandrent Investment Developments Ltd v British Gas Corporation where it was held that the “market” may include a mere speculator with no direct interest in the land did not apply.[29] Mr Fowler pointed out that s 62(1)(d) did not say that the owner of a “blocking” strip could not recover a premium from an adjacent owner.
[28]Stokes v Cambridge Corp (1961) 13 P & CR 77 (CA); Ozanne v Hertfordshire County Council [1988] RVR 133 (First Lands Tribunal decision), [1989] RVR 179 (CA), [1991] 1 WLR 105 (HL), [1991] RVR 229, [1992] 38 EG 158 (Second Lands Tribunal decision), [1995] RVR 40 (CA); Batchelor v Kent County Council, above 13; and English Law Commission Towards a Compulsory Purchase Code: (1) Compensation (December 2003) at .
[29]Blandrent Investment Developments Ltd v British Gas Corporation [1979] 2 EGLR 18 (HL) at 22 per Lord Scarman; and English Law Commission Report, above n 28, at [D.94].
Mr Fowler drew a distinction which depended on the needs of the particular purchaser. His example assumed that Lot 51 was a golf course. The owner might want to acquire Lot 18 to gain access to Valley Views Road. Alternatively, the owner might wish to acquire Lot 18 because of its soil or contour to use as a green which would improve the rating of the golf course. The former case would not trigger s 62(1)(d) because it involved straightforward access while the latter, being sufficiently special and unusual, would.
Reply submissions for the Council
In reply for the Council, Mr Maassen submitted that:
(a)The English authorities relied on by Hardiway did not apply to the second limb of s 62(1)(d) because there was no equivalent provision in the relevant English enactment.
(b)The application of the first limb depended on how “purpose” was defined. It was important to distinguish between public and private purposes. He invited the Court to consider a piece of land which could be used as a public water reservoir, a private water reservoir, or as a lake. He submitted that the special suitability of the land as a public water reservoir should be disregarded. But the suitability of the land as a private water reservoir could well be considered, assuming there was a market for that purpose. The value of the land as a private reservoir would presumably be less than as a public reservoir.
(c)The second limb applies when, except for the special needs of a particular purchaser, there is no market because there is no other demand for the land. He submitted that the s 62(1)(d) “disregard” would apply to the facts of Clay, and if there was someone who wanted to control or prevent the extension of the rest home, their purpose would be distinct from that of the owner who wants to extend the rest home.
(d)There was no evidence to support the submission for Hardiway that other rural residential property owners might have been interested in acquiring Lot 18 to prevent Valley Views Road from being extended to Lot 51 and no valuer had attempted to value the land on the basis of that purpose.
The interpretation and application of s 62(1)(d)
As both questions involve the interpretation and application of s 62(1)(d) of the PWA, the starting point is to note the well-established requirement to focus on the text and purpose of the statutory provisions being interpreted.[30] In determining purpose the Court must have regard to both the immediate and the general legislative context. The wider objectives of the enactment may also be relevant.
[30]Interpretation Act 1999, s 5; Commerce Commission v Fonterra Co-operative Group Ltd [2007] NZSC 36, [2007] 3 NZLR 767 at [22]; Fonterra Co-Operative Group Ltd v The Grate Kiwi Cheese Company Ltd [2012] NZSC 15, [2012] 2 NZLR 184; and JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at 201.
We have already set out the relevant parts of the text of s 62(1) and the two limbs of s 62(1)(d).[31] It is convenient to address the second limb first.
Second limb
[31]Above at [17] and [21]–[22].
An examination of the text of the second limb of s 62(1)(d) shows that it applies only if:
(a)the land has a “special suitability or adaptability” for “any purpose”; and
(b)“that” purpose is a purpose for which there is “no market” apart from
(i)the special needs of a particular purchaser; and/or
(ii)the requirements of any government department or local authority.
If these requirements are met, the “special suitability” of the land for the particular purpose is not to be taken into account in determining the value of the land if sold in the open market by a willing seller to a willing buyer. The value of the land will then need to be determined on the basis that the land did not have that “special suitability” for the particular purpose. The question becomes: what would a willing seller and a willing buyer agree the price should be for the land disregarding its “special suitability”?
In deciding in a particular case whether the requirements of the second limb are met, it will first be necessary to identify the “purpose” for which the land has a “special suitability”. The identification of the “purpose” is critical because it is “that” purpose which must be a purpose for which there is no market apart from the special needs of a particular purchaser or the requirements of any local authority.
The use of the expression “any purpose” recognises that the land may have special suitability for more than one purpose. In a case involving more than one purpose, it will be the particular purpose or purposes which meet the requirements of the second limb that are to be disregarded in the valuation exercise. All other purposes which do not meet the requirements may still be taken into account in the valuation exercise.
The relevant purpose must be one for which the land has “special suitability”. While counsel for the parties considered the approach adopted by this Court in Peninsula Watchdog Group (Inc) was apposite, in the context of s 62(1)(d) we prefer the approach of Lord Scott in Waters v Walsh Development Agency, one of the English authorities relied on by the High Court, when he said:[32]
While I would accept that “most suitable” may not be an apt synonym for “specially suitable” it is not necessary, in my opinion, for the land in question to have a unique suitability ... Either the special suitability must be for a purpose that can only be achieved with statutory powers or the purpose must be a purpose which only an authority with compulsory purchase powers would want to acquire the land. … If an over strict and narrow meaning is attributed to “special suitability”, [s 62(1)(d)] will be excluded in many cases in which one or other of the second criterion alternatives is satisfied and in which the “special suitability” of the acquired land is a suitability not available for exploitation by anyone other than the acquiring authority. ... [Section 62(1)(d)] is not, in my opinion, looking for a unique suitability that is not shared with other land; looking for a particular suitability that only the acquiring authority, or an authority with statutory powers, is able to exploit.
[32]Waters v Welsh Development Agency, above n 13, at 112, and High Court decision, above n 2, at [45].
Adopting that approach here, we have little difficulty in concluding that Lot 18 did have special suitability for the purpose of providing public road access to Lot 51 through the extension of Valley Views Road, an existing public road. As the Tribunal recognised,[33] in practical terms Lot 18 could not be used as land for any purpose other than extending Valley Views Road to Lot 51. The special suitability of Lot 18 for this purpose was also accepted by the High Court.[34] It was not seriously disputed by Hardiway.
[33]Tribunal decision, above n 1, at [4]: see above at [10].
[34]High Court decision, above n 2, at [49]: see above at [31].
We have described the purpose as “providing public road access” and not access more generally, including private access, because by definition public access could only be provided to Lot 51 by extending Valley Views Road, the existing public road. To use Lot 18 to provide private access to Lot 51 would be a different purpose for which there was also no market apart from the special needs of the owner of Lot 51.
We do not agree with the Tribunal that Lot 18 had lost its “special suitability” in providing road access to Lot 51 because there were other access options available prior to the specified date for the assessment of compensation. None of the alternative access options could compare to Lot 18 in terms of suitability. They all faced significant practical difficulties in terms of subdivision (Lot 7), cost and time. Only Lot 18 enabled linear continuation of Valley Views Road. In the words of Lord Scott, Lot 18 had “a particular suitability” that was not shared by the other options.
Once it is accepted that Lot 18 did have special suitability for the purpose of providing public road access to Lot 51 through the extension of Valley Views Road, the next question is whether “that” purpose is a purpose for which there is “no market” apart from one or other of the prescribed categories.
In this context the meaning of the expression “no market” is crucial. It is not defined in the PWA probably because its meaning is generally well-known and because it appears in s 62 some six times with some slight variations in meaning.
In the context of the PWA, which is concerned with the assessment of compensation for the compulsory acquisition of land, “market” may be defined in general terms as:[35]
A collection of homogenous transactions … created whenever potential sellers of [land] are brought into contact with potential buyers and a means of exchange is available. The medium of exchange may be money … Exchange agreements are reached through the operation of the laws of supply and demand.
[35]Graham Bannock and R E Baxter The Penguin Dictionary of Economics (8th ed, Penguin Books, London, 2011) at 242.
The six times “market” appears in s 62 are:
(a)“sold in the open market by a willing seller to a willing buyer”: s 62(1)(b);
(b)“no general demand or market”: s 62(1)(b)(ii);
(c)“the market value of the whole of the owner’s land”: s62(1)(b)(ii);
(d)“the market value of the balance of the owner’s land”: s 62(1)(b)(ii);
(e)“no market”: s 62(1)(d); and
(f)“the market value of the land”: s 62(1)(e).
As already noted,[36] the first reference in s 62(1)(b) is to the notional market for the sale of the land between the hypothetical willing seller and willing buyer.
[36]Above at [18]–[19].
The three references to “market” in s 62(1)(b)(ii) relate to the situation that arises when only part of the land is taken or acquired and there is “no general demand or market” for it. In that case the compensation is to be assessed by determining the “market value” of the whole of the owner’s land and deducting from it the “market value” of the balance of the owner’s land after the taking or acquisition. Unless there has been an actual sale of the whole or the balance of the owner’s land, determination of the two “market values” is likely to involve the application of the willing seller willing buyer test. Similarly, the reference to “the market value of the land” in s 62(1)(e) is likely to involve the application of that test. Importantly, these are references to a notional market.
By way of contrast, the references to “no market” in s 62(1)(b)(ii) and s 62(1)(d) involve a negative proposition, the absence of any market. The question is whether this means that it is necessary to determine whether there is no actual market for the land (“no general demand”) or whether the “willing seller willing buyer” test applies and the existence of a hypothetical purchaser will be sufficient to establish that there is a notional market.
In our view the references to “no market” in both s 62(1)(b)(ii) and s 62(1)(d) are to the absence of any actual market for the land for the identified purpose. Evidence establishing as a matter of fact that there is no demand for the land for the identified purpose in the circumstances prescribed by the two provisions is required.
In s 62(1)(b)(ii) this is clear because the absence of any “general demand or market” for the particular piece of land is a prerequisite to the application of the special process for the assessment of compensation in the situation covered by that provision. The determination of the “market value” (by the willing seller willing buyer test) applies only if the prerequisite is met. It does not apply to the prerequisite. Evidence establishing as a matter of fact that there is no actual market will therefore be required.
Similarly, in the context of s 62(1)(d), evidence establishing as a matter of fact that there is no actual market for the land for the identified purpose will be required. This is clear because:
(a)section 62(1)(d) creates an express exclusion from the application of the willing seller willing buyer test;
(b)the focus is on the special suitability of the particular land for a particular purpose for which there is no market apart from the two prescribed categories – there must be no market for “that” purpose;
(c)the two prescribed categories – the special needs of a particular purchaser or the requirements of any government department or of any local authority – are concerned with their position in the actual market; and
(d)as Mr Fowler accepted, the provision does not apply to a speculator.[37]
[37]See above at [43].
Adopting this approach here, we are satisfied the evidence before the Tribunal did establish as a matter of fact that there was no market for Lot 18 for the purpose of providing public road access to Lot 51 by extending Valley Views Road, apart from the special needs of the owner of Lot 51 and the requirements of the Council. This was implicit in the Tribunal’s decision that Lot 18 had no purpose other than being used to extend Valley Views Road to Lot 51.[38]
[38]Tribunal decision, above n 1, at [4]: see above at [10].
There was no evidence to support Mr Fowler’s submission that the owners of the other properties fronting Valley Views Road were interested in purchasing Lot 18 to prevent the public road from being extended. Even if such evidence had been adduced, we doubt whether it would have made any difference because it would not have established that there was a market for the purpose of using Lot 18 to extend Valley Views Road to Lot 51. The purpose of those other property owners would have been to restrict access to Lot 51, rather than to provide it. In terms of Mr Fowler’s golf course analogy, establishing that the neighbouring residents would want to acquire the land to control access to the golf course or prevent the golf course acquiring a better green and a higher rating does not establish a market. Those purposes are clearly distinct from the purpose of access to the golf course or establishment of a green.
We therefore do not agree with the High Court’s view that there was a market for the use of Lot 18 as a road extension. The High Court’s reason was that Lot 18:[39]
… would retain its value as an access way or road extension to any prospective purchaser who appreciated the strategic value of Lot 18.
With respect to the High Court, this is circular reasoning. It assumes that s 62(1)(d) does not apply and the value of the land will be determined on the basis of the normal willing seller willing buyer test and then reasons that it has value as a speculative investment such that there is a market for the land. There is simply no evidence that there was in fact a market for the purpose of using Lot 18 to extend Valley Views Road to Lot 51 apart from the special needs of the owner of Lot 51 and the Council.
[39]High Court decision, above n 2, at [49]: see above at [31].
Our conclusion that the second limb of s 62(1)(d) was applicable gives practical effect to the provision in this case. It would be surprising if Lot 18 were to be valued on the basis of the price some hypothetical purchaser might be prepared to pay to obtain control over the land and to block access to Lot 51. That would not be consistent with the purpose of the provision which, as we have already noted,[40] is to overcome factors which might inflate compensation beyond a level which is considered reasonable in the public interest.
[40]Above at [30].
That outcome would also be inconsistent with the purpose of the provision as discerned from its legislative history. Section 62(1)(d), which was first enacted in 1944,[41] was modelled on s 2(3) of the Acquisition of Land (Assessment of Compensation) Act 1919 (UK) which was enacted to reverse the effect of the decision of the English Court of Appeal in Clay.[42] The United Kingdom Parliament wished to ensure that the valuation of the property next to the rest home should not involve a market with a purchaser for whom the property might have a special value in extending the rest home.[43]
[41]Finance Act (No 3) 1944, s 29(1)(c).
[42]Inland Revenue Commissioners v Clay Buchanan, above n 27.
[43]Leslie Scott and others Second Report of the Committee Dealing with the Law and Practice Relating to the Acquisition and Valuation of Land for Public Purposes (Ministry of Reconstruction, 1918) at 9.
None of the other English authorities referred to in the decisions below and by counsel alter our conclusion.
Batchelor v Kent County Council (Batchelor) involved s 5(3) of the Land Compensation Act 1961 (UK) at a time when it was effectively the same as s 62(1)(d).[44] The relevant issue was whether land compulsorily acquired by a local authority for highway purposes (a roundabout) had “special suitability” for providing access to other land. The Lands Tribunal found that while the land may have been the “most” suitable for providing access it was not “specially” suitable for that purpose because there were other options available. The Court of Appeal dismissed an appeal against this aspect of the Tribunal’s decision on the grounds that the factual findings of the Tribunal as to the availability of other access options were decisive.[45] In doing so, the Court recognised that a special suitability could be found “where land has a positional advantage for the purpose in hand”[46] but that “most suitable does not correspond with specially suitable”.[47]
[44]Batchelor v Kent County Council, above n 13.
[45]At 362.
[46]At 362, relying on Raja Vyricherla NarayanaGajapatiraju v Revenue Divisional Officer, Vizagapatam, above n 11, at 312–313.
[47]At 362.
In our view the decision in Batchelor may be distinguished on the facts. Here, as the High Court accepted,[48] Lot 18 has a “positional advantage” in providing access to Lot 51 as a linear extension of Valley Views Road. None of the other options has this positional advantage or “special suitability”. Although being “most suitable” does not necessarily correspond with being specially suitable, it does in the circumstances here.
[48]High Court decision, above n 2, at [49]: see above at [31].
Like Batchelor, Hertforshire County Council v Ozanne (Ozanne) involved s 5(3) of the Land Compensation Act 1961 (UK) at a time when it was effectively the same as s 62(1)(d).[49] But Ozanne was concerned with limb 1 and not limb 2 of the provision and so is not relevant to this aspect of our decision.
[49]Hertfordshire County Council v Ozanne (HL), above n 22.
Waters v Welsh Development Agency involved s 5(3) of the Land Compensation Act 1961 (UK) in its current form, namely without the reference to the “special needs of a particular purchaser” in the second limb of the provision.[50] The issue was whether when assessing compensation payable by a local authority for land the authority’s need to acquire the land as a palliative measure as a result of environment consequences from an earlier development was to be disregarded. The House of Lords, upholding the decisions of the President of the Lands Tribunal and the Court of Appeal, held that it should on the particular facts of the case be disregarded under the first limb. An argument based on the Pointe Gourde decision was rejected.[51]
[50]Waters v Welsh Development Agency, above n 13. Note Lord Scott’s reasoning relied on by the High Court was not adopted by the other Law Lords: Michael Barnes The Law of Compulsory Purchase and Compensation (Hart Publishing, Oxford and Portland, Oregon, 2014) at 214, footnote 45.
[51]Waters, above n 13, at [163] per Lord Brown of Eaton-under-Heywood with whom Lord Woolf and Lord Steyn agreed.
While we have adopted the approach of Lord Scott to the interpretation of the phrase “special suitability”,[52] Waters does not otherwise affect our interpretation of the second limb of s 62(1)(d) or its application to the facts of the present case.
First limb
[52]Above at [52]–[53].
On the basis of our analysis of the second limb of s 62(1)(d), we have little difficulty in concluding that the requirements of the first limb were also met.
Our reasons may be stated shortly:
(a)Lot 18 had “special suitability” for the provision of access to Lot 51 by extending Valley Views Road as a public road to Lot 51.
(b)That purpose is a purpose which could be applied only pursuant to the statutory powers of the Council, namely its power under the Local Government Act 1972 to lay out a public road on Lot 18. It is also possible that it could have been made a road vested in the Crown pursuant to the statutory powers of the Minister of Transport under Pt 4 of the Government Roading Powers Act 1989.
(c)Acquisition of Lot 18 by the owner of Lot 51 for the purpose of using Lot 18 to provide access from Lot 51 to Valley Views Road would be a different purpose because it would not involve the extension of Valley Views Road as a public road.
We do not agree with the High Court that the possibility of the owner of Lot 51 using Lot 18 to provide access from Lot 51 to Valley Views Road is relevant. The focus of s 62(1)(d) is on the “special suitability” of Lot 18 for the identified “purpose”, namely its use to extend Valley Views Road, as a public road, to Lot 51. That purpose is only able to be implemented by the Council exercising its statutory powers.
We have considered the English authorities that the High Court thought were compelling. They do not cause us to alter our conclusion:
(a)In Ozanne the House of Lords decided that the first limb did not apply when the statutory power being exercised (stopping an existing highway) related to land other than that compulsorily acquired. The exercise of the statutory power was tangential to the acquisition of the land.[53]
(b)As we have already noted,[54] Waters was not concerned with the first limb of the equivalent UK provision.
[53]Hertfordshire County Council v Ozanne (HL), above n 22, at 111.
[54]Above at [75].
Our conclusion is consistent with the New Zealand legislative history of s 62(1)(d). The United Kingdom provision enacted in response to Clay was copied into the Finance Act (No 3) 1944 and then into the Public Works Act 1981 almost word for word without specific discussion in Hansard[55] or the Review Committee Report.[56] This suggests Parliament intended to mirror the effect of the original United Kingdom provision.
[55]Save for a passing reference at (December 13 1944) 267 NZPD 736 by an opposition Member.
[56]Report of the Public Works Act Review Committee (Inquiry Reports, 1977).
Having concluded that s 62(1)(d) does apply with the consequence that the special suitability of Lot 18 for the purpose of extending Valley Views Road should not be taken into account in valuing the Lot, it is unnecessary to answer the third question. That question was premised on the cost of alternative access approach to valuation, an approach only open if s 62(1)(d) does not apply.
Result
Accordingly, we answer the questions as follows:
Question 1
Did the High Court err when it reasoned that the Public Works Act 1981, s 62(1)(d) “limb one”, did not apply?
Answer:Yes.
Question 2
Did the High Court err when it held that the Public Works Act 1981, s 62(1)(d) “limb two”, did not apply because Lot 18 would retain its value as “access way or road extension to any prospective purchaser who appreciated the strategic value of Lot 18”?
Answer:Yes.
Question 3
Did the High Court err in suggesting that relief would incur difficulties under the Property Law Act 1952 rather than under the Property Law Act 2007?
Answer:It is unnecessary to answer this question.
The appeal is allowed and the decision of the Land Valuation Tribunal is reinstated. As already noted,[57] the Council accepted the Tribunal figure of $36,000.
[57]Above at [38].
As the parties agreed, costs should follow the event. The respondent must pay to the appellant costs for a standard appeal on a Band A basis with usual disbursements.
Solicitors:
Cooper Rapley, Palmerston North for Appellant
Treadwell Gordon & Co, Wanganui for Respondent
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