Queenstown Central Ltd v Queenstown Lakes District Council
[2013] NZHC 815
•19 April 2013
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2012-425-000405 [2013] NZHC 815
BETWEEN QUEENSTOWN CENTRAL LIMITED Appellant
ANDQUEENSTOWN LAKES DISTRICT COUNCIL
Respondent
ANDFOODSTUFFS (SOUTH ISLAND) LIMITED
Applicant
ANDSHOTOVER PARK LIMITED Associated Respondent
Hearing: 12-14 February 2013 (Heard at Queenstown)
Appearances: J Young for Shotover Park Limited
J Gardner-Hopkins and E Matheson for Queenstown Central Limited
T Ray and J Macdonald for Queenstown Lakes District Council
N Soper and A Ritchie for Foodstuffs (South Island) Limited
G Todd for Cross Roads Properties Limited
Judgment: 19 April 2013
RESERVED JUDGMENT OF FOGARTY J
Solicitors:
Russell McVeagh, Auckland – [email protected] and james.gardner- [email protected]
Anderson Lloyd, Queenstown – [email protected]
Macalister Todd Phillips, Wanaka – [email protected]
Brookfields, Auckland – [email protected]
QUEENSTOWN CENTRAL LIMITED V QUEENSTOWN LAKES DISTRICT COUNCIL HC INV CIV-2012-425-000405 [19 April 2013]
Contents
Road map ...............................................................................................................[1] Introduction and summary of both the Foodstuffs and the Cross Roads
appeals decision .....................................................................................................[2] Section 104D issues .............................................................................................[21] The context ...........................................................................................................[21] Preliminary observations .....................................................................................[31] Foodstuffs decision...............................................................................................[42] Cross Roads decision ...........................................................................................[55]
Does Hawthorn apply to the application of s 104D(1)(a), in the context of
this case? ..............................................................................................................[61] Conclusion............................................................................................................[84]
Did the Environment Court err in its interpretation and application of “minor” when applying the alternative numeric analysis, which does take into account and recognise the presence of PC19(DV)? Did the Environment Court err in law when defining a 20% threshold for “minor”
effects?..................................................................................................................[86]
Did the Environment Court err in law in considering all undeveloped industrial land in Queenstown/Wakatipu was the appropriate base against which to measure the loss of industrial land in relation to the Foodstuffs
application?........................................................................................................ [116]
General conclusion on error of law in the Foodstuffs application on the evaluation that the Foodstuffs application could be no more than a “minor” adverse effect, and was not contrary to objective 10 of PC19(DV)...................[128]
Materiality of error of law ..................................................................................[129] Other issues ........................................................................................................[141] Should the Environment Court have adjourned the hearings? ..........................[141] Was the Court prejudiced by an error of law classifying QCL as a trade
competitor? Did this materially affect the decision? ........................................[144]
Result..................................................................................................................[164]
Road map
[1] There are two resource consent applications at issue: one application by Foodstuffs to build a Pak’nSave at Frankton Flats, and another by Cross Roads Properties to build a Mitre 10 Mega, also at Frankton Flats. Queenstown Lakes District Council (QLDC) declined the Foodstuffs application. The Cross Roads application went directly to the Environment Court. The Environment Court granted both applications. Now the Environment Court’s decisions have been appealed to the High Court. The
High Court is releasing two separate decisions, one for each application.1 This
is necessary as there are separate rights of appeal. Both decisions need to be read together.
Introduction and summary of both the Foodstuffs and the Cross Roads appeals decision
[2] This summary endeavours to collect in one place the reasoning of both decisions.
[3] The Resource Management Act 1991 requires applications for consent to be processed promptly; even on the eve of a proposed plan for the locality becoming operative; even when the applications are in conflict with what is being proposed.
[4] There is a tension, not resolved by a rule, rather guided by standards, between the consent authority’s duty to process the applications and the duty to do so having regard to the proposed plan for the locality.
[5] In 2012, the Environment Court was seized with two applications for consent to establish a Pak’nSave supermarket and a Mitre 10 Mega on the Frankton Flats, being undeveloped land adjacent to the airport at Queenstown.
These were significant applications, taking up about 4 hectares of a 42 hectare
1 This decision and Queenstown Central Ltd v Queenstown Lakes District Council [2013] NZHC 817.
area of undeveloped rural zoned flat land. The land is identified for urban development in objective 6 of the operative district plan. To implement objective 6, including to provide for industrially zoned land, there is a proposed plan, PC19. The Council had heard submissions for and against it, and reached a decision. There have been numerous appeals against that decision, and those appeals were pending before another division of the Environment Court, already part heard. Neither the Pak’nSave nor the Mitre 10 Mega proposals are permitted in the proposed plan change.
[6] The two applications for consent were for two large scale retail developments, Foodstuffs, 2.8 hectares, and Cross Roads, 1.82 hectares, to be located in the proposed E1 and E2 zones, but located significantly in the E2 zone, abutting the eastern access road and partly encroached on the pure industrial zone E1. E2 is for light industrial activities with some provision for retail. As PC19(DV) stood at the time, area E, including E1 and E2, provided for industrial activities with limited retail activities. These applications were not permitted by proposed plan PC19.
[7] The Council, via a Commissioners’ decision, had declined the Pak’nSave application. On appeal, the Environment Court, by a majority, held that a Pak’nSave would have only “minor” adverse effects on the environment, and, unanimously, would not on the whole be contrary to the objectives and policies of PC19. Having gone on to consider the merits of the application, having regard to the proposed change, the Environment Court granted the
application.2 Commissioner Fletcher dissented from the finding that the
Pak’nSave proposal would have only a “minor” adverse effect. He considered the loss of future supply of industrially zoned land to be an adverse effect that was more than “minor”. He otherwise agreed with the decision. The
Environment Court similarly split on adverse effect in the Cross Roads
2 Foodstuffs (SI) Ltd v Queenstown Lakes District Council [2012] NZEnvC 135 (Foodstuffs).
application for a Mitre 10 Mega.3 Here though, Commissioner Fletcher completely dissented. That application was heard directly by the Environment Court.
[8] Both decisions are appealed and were heard by this Court together. The issues in both appeals centre upon whether and how the Environment Court should have considered PC19 providing for the development of Frankton, when considering whether or not the two applications would have adverse effects on the environment. For the purposes of s 104D analysis, there is no material difference between the Foodstuffs and Mitre 10 Mega proposals.
[9] It is the scheme of the RMA that there is always an operative plan, and often a proposed plan. Before any consents are granted, the operative plan has to be applied, and regard must be had to the proposed plan, s 104. The jurisprudence is that the closer the proposed plan comes to its final content, the more regard is had to it. Consent has to be given under both plans.
[10] Within this basic scheme there is a sliding scale of analysis of the merits of applications, depending on the degree of conformity or departure from the operative and proposed plans. Those are ss 104 and 104A-D. This case concerns principally the application of s 104D.
[11] Section 104D provides:
104D Particular restrictions for non-complying activities
(1) Despite any decision made for the purpose of [section 95A(2)(a) in relation to adverse effects], a consent authority may grant a resource consent for a non-complying activity only if it is satisfied that either—
(a) the adverse effects of the activity on the environment (other than any effect to which [section 104(3)(a)(ii)] applies) will be minor; or
(b) the application is for an activity that will not be contrary to the objectives and policies of—
3 Cross Roads Properties Ltd v Queenstown Lakes District Council [2012] NZEnvC 177 (Cross Roads).
(i) the relevant plan, if there is a plan but no proposed plan in respect of the activity; or
(ii) the relevant proposed plan, if there is a proposed plan but no relevant plan in respect of the activity; or
(iii) both the relevant plan and the relevant proposed plan, if there is both a plan and a proposed plan in respect of the activity.
(2) To avoid doubt, section 104(2) applies to the determination of an application for a non-complying activity.
(Emphasis added)
[12] In both cases, the Environment Court, by a majority, applying s
104D(1)(a), was satisfied that the adverse effects of the separate proposals on the environment will be “minor”. The Court found the proposals will have only a “minor” effect in two different ways:
(i) By ignoring the proposed change PC19 completely, and effectively assuming as a fact that the Frankton Flats area was going to remain undeveloped;
(ii) In case (i) was wrong: By taking the proposed change into account and finding that “minor” could be any loss less than 20%, arguing that using a number scale was “no more arbitrary” than the statutory standard “minor”, and finding the loss of industrial land was less than 5%, and so “minor”.
[13] The assumption in (i) of a rural undeveloped environment is contrary to objective 6 and policies 6.1 and 6.2 of the operative district plan and to the current contest between property developers for the most valuable commercial development of Frankton Flats which is the remaining undeveloped flat land in Queenstown. There is no prospect of the land remaining undeveloped. While the Environment Court was right not to focus on the specifics of PC19(DV)’s content, it should have recognised:
that the future environment of Frankton Flats was urban, consistent
with objective 6 and its policies;
the sites of the proposals were located within the last area of Frankton
Flats to be rezoned urban;
There was competition for development of that land and a pending plan
change (PC19).
[14] As to (ii), it is not permissible to substitute a numeric test for the statutory test. The application of that test oversimplified the task set by law in subsection (1)(a).
[15] These two errors undermine both judgments of the Environment Court, for they had the consequence that the gatekeeping section, s 104D(1)(a), was not applied correctly. Inasmuch as the Environment Court may have considered its s 104 analysis led to satisfaction of s 104D(1)(b), as an alternative to (1)(a), it was also in error of law.
[16] There is a real prospect that had s 104D been applied correctly, both these applications would have been dismissed at either of the two s 104D thresholds. Therefore the errors are material. It is not the task of the High Court on appeal to apply s 104D.
[17] Accordingly, both appeals have to be allowed. The applications remain on foot, and can be pursued, but will be examined now against the latest decision on the proposed change, which was released by another division of the Environment Court on 12 February 2013.4
[18] There were other arguments presented to the Court, contending other
errors of law on the part of the Environment Court. Because of the Court’s
findings on the application of the gateway section 104D, these issues are of
4 Queenstown Airport Corporation Ltd and Anor v Queenstown Lakes District Council
[2013] NZEnvC 14 (QAC v QLDC).
lesser importance to this Court. In case, however, this matter goes on to the Court of Appeal, the two judgments identify these other issues of law, and give summary reasons as to the Court’s findings, both on error and on materiality.
[19] The first of these arguments is that the Environment Court should not have heard the appeal against the Foodstuffs decision or the original application in respect of Cross Roads Properties Ltd until the decision of the other division of the Environment Court on PC19(DV). The second argument is that the Court wrongly classified Queenstown Central Limited (QCL) as a trade competitor, with improper motives, with the result that it did not give QCL a fair hearing. The third argument is that the Court misinterpreted objective 10 of PC19(DV).
[20] This Court is releasing separate judgments on each appeal. However, there is significant cross-referencing. Effectively, both decisions have to be read, to collect the complete reasoning. The reason for separate judgments is to allow the parties to each appeal to make separate decisions to seek leave to appeal or not.
Section 104D issues
The context
[21] Queenstown is a resort town with an international appeal. The resort town proper is built right on the edge of the lake, at the head of Frankton Arm. Its centre is a bustling resort town, a mix of retail, restaurants, bars, backed by hotels, motels and apartments.
[22] The area suitable for industrial land is at the head of Frankton Arm, on flat land known as the Frankton Flats. The Frankton Flats are significantly developed. The airport is there. There is also industrially zoned land called Glenda Drive. There is also a large area of undeveloped land, not yet built upon, a good part of which is the subject of this litigation.
[23] The Council notified its district plan under the Act in 1995. It was declared partially operative in 2003 and fully operative in 2009. Frankton Flats was given a Rural General zoning; however, the district plan recognised that eventually it would become urbanised. Under the heading in the section of the operative district plan dealing with “District Wide Issues” “Urban Growth” the following appears:
Objective 6 – Frankton
Integrated and attractive development of the Frankton Flats locality providing for airport operations, in association with residential, recreation, retail and industrial activity while retaining and enhancing the natural landscape approach to Frankton along State Highway No. 6.
Policies:
6.1To provide for the efficient operation of the Queenstown airport and related activities in the Airport Mixed Use Zone.
6.2To provide for expansion of the Industrial Zone at Frankton, away from State Highway No. 6 so protecting and enhancing the open space and rural landscape approach to Frankton and Queenstown.
[24] Part of Frankton Flats is developed; another part (FFA) remains undeveloped, but for a large excavation undertaken by a failed developer. The rezoning of the balance of Frankton Flats, known as FFB, is the purpose of plan change 19 (PC19). It was first notified back in July 2007. After hearing submissions, the Council released what is known as PC19 (Decision Version) (“PC19(DV)”).
[25] PC19(DV) has as its overall purpose the completion of the rezoning of Frankton Flats for urban activities, implementing objective 6 and policies 6.1 and 6.2 of the operative district plan. The mix of activities includes education, residential, visitor accommodation, commercial, industrial, business and recreation. It covers an area of approximately 69 hectares; 38-42 hectares, variously described, which provide for industrial uses.5 It provides for a
village centre, generally towards the west end of the area, being itself a mix of
5 See Foodstuffs at [100]. See QAC v QLDC, at [28], (numbers are hectares) – D-7.95, E1-
20.39, E2-9.37, E4-1.62.
commercial, business, residential, visitor accommodation and retail. Generally to the south and near the airport, it provides for industrial and yard-based activities, with minimum lot sizes and more limited site coverage, with no residential or visitor accommodation and limits on retail. Generally, to the east it provides for industrial activities, with no residential or visitor accommodation and retail prohibited. This land to the east abuts existing industrial zoned land known as Glenda Drive. This proposed plan reflects the usual urban separation of residential activities from unsuitable commercial and industrial activities, made to avoid nuisance, or, in current RMA language, to avoid reverse sensitivities.
[26] The Council’s decision on the proposed change, PC19(DV), was the subject of a number of appeals. While these appeals were pending, Foodstuffs applied to the QLDC to construct a supermarket, to be a Pak’nSave, in the area of PC19(DV). Likewise in PC19’s area, Cross Roads Properties Limited applied for consent to erect a Mitre 10 Mega alongside the Pak’nSave, both businesses sharing a large car park.
[27] Because the operative zoning of the land for both the Foodstuffs and the Cross Roads applications is Rural General, the proposed uses were non- complying against the operative district plan.
[28] Both the Foodstuffs and the Cross Roads proposals were inconsistent with PC19(DV). Section 87B(1)(c) of the RMA requires that as the rules proposed by PC19 are not yet operative, any application must be treated as an application for a discretionary activity. The Pak’nSave proposal was located mostly within the E2 activity area, where all activities are prohibited unless an outline development plan had been approved. Inasmuch as Pak’nSave was located in area E1, it was a prohibited activity.
[29] In the case of Cross Roads, it was located principally in the E1 industrial zone, and in that regard is a prohibited activity. But for the same reason, it is treated as a discretionary activity by application of s 87.
[30] To obtain consent therefore the two proposals needed to get past the gateway of s 104D and then survive analysis under s 104. The first way that both applications could get to s 104 was if the consent authority (here the Environment Court) would be satisfied that the effects on the environment of the Pak’nSave proposal, and separately, the Mitre 10 Mega proposal, would not be more than “minor”.
Preliminary observations
[31] The Environment Court framed the application of s 104D(1)(a) in the following way, in [71] of its Foodstuffs decision:
[71] Similarly, the resources or people against which or on whom possible effects are assessed to ascertain whether they are adverse (and, if so, more than minor) are identified either in principles in Part
2 of the RMA, or in operative objectives and policies, or in proposed objectives and policies in a proposed plan (change) that are beyond
challenge. In our view they do not include the objectives and policies
of a proposed but challenged plan (or plan change). Where the provisions of a proposed plan (change) are under challenge then they
are not reasonably foreseeable as settled in that form for the purposes
of section 104D(l)(a) of the RMA. It is worth noting that while permitted activities under a proposed district plan (or plan change) are not relevant to the first gateway test, proposed objectives and policies are still relevant under the second gateway test (and under section
104(1)(b) if we reach that far). In summary:
(1) the first gateway (section 104D(l)(a)) is concerned with the adverse effects of a proposal on the existing and likely (reasonably foreseeable) future environment as explained in Hawthorn;
(2) the reasonably foreseeable environment does not include permitted activities in a proposed but challenged plan or plan change;
(3) the second gateway (section 104D(l )(b)) is concerned principally with the adverse effects of a proposal on the future desired environment (even if, in the case of a proposed plan (change) that may be unlikely).
[32] The issues on this appeal principally concern the legality of subparagraphs (1) and (2). I observe, however, that this judgment should not be taken in any way as an endorsement of (3). Because both appeals turn on the application of the first gateway threshold, and because I have not had full
argument on the framing of the second gateway test (3), this judgment does not discuss that framing. It is sufficient to say that I think (3) is inconsistent with s 104D(1)(b). The objectives and policies of plans are not confined to avoiding adverse effects.
[33] As a preliminary to more detailed analysis of the first gateway, I briefly introduce the issue by way of reference to the arguments that I heard. I do not intend, however, to attempt to summarise all the arguments from the five sets of counsel. That would unduly burden the judgment, without assisting the comprehension of it. It is, however, important to signal at the outset that this Court’s judgment as to the application of the first gateway test does not coincide with any one of the five arguments received. It also does not wholly reject the approach of the Environment Court. The Environment Court rightly observed that PC19(DV) was under appeal in many respects, and so it was difficult to forecast what its ultimate shape and content would be.
[34] Mostly, counsel before me presumed that the task of applying the standard “will be minor” in the first gateway test involved examining the effects of each proposal on the future environment as provided for in PC19. In that regard, I heard a great deal of detailed argument as to the distinctions between the industrial E1 zone, the mixed industrial commercial and retail E2 zone, and the potential alignments of the Eastern Access Road.
[35] The Environment Court correctly identified, and all counsel agreed, that one of the ultimate issues was whether or not there was an adverse effect of the loss of industrial land. The first gateway test s 104D(1)(a), of being satisfied that the proposed activity’s effects on the environment will be “minor”, does not refer in any way to the operative or proposed plans. By contrast, the second gateway test s 104D(1)(b) does refer to operative and proposed plans, but only to their objectives and policies. For reasons which I detail hereafter, I am of the view that the first gateway test is a forward looking judgment as to whether or not the proposed activities may cause an adverse effect more than “minor” on the existing and future environment. That judgment can be made, and must be made, with regard to the provisions of the operative plan, existing
resource consents, commercial activity competing for use of the subject and surrounding land, and associated regulatory initiatives by way of proposed change. But the judgment is not made in any static setting, for example, examining PC19(DV) as though it will remain unchanged.
[36] Second, I observe that the cornerstone material fact in the application of the first gateway test is that there is an operative district plan which contains objective 6, which provides for the urbanisation of this area to accommodate residential, commercial and industrial activity. I note that in [71] of the Environment Court’s framing, it has correctly included in the consideration of whether effects are adverse and, if so, more than “minor”, “operative objectives
and policies”.6 However, I go on to reason that in fact it did not do this when
applying the first gateway test. This is because, in my respectful view, it got sidetracked by the decision of the Court of Appeal in Queenstown Lakes District Council v Hawthorn Estate Ltd.7
[37] Overall, the Environment Court was looking at these two applications, in the context of a plan change promulgated by the Council to give effect to the operative district plan objective 6, policies 6.1 and 6.2 and implementation methods, in accordance with the “Explanation and Principal Reasons for Adoption”. It was a zone with multiple uses, endeavouring thereby to accommodate a residential village, shopping for the residents and to provide for additional commercial, industrial and yard-based activities.
[38] This is all in a setting where optimal growth of Queenstown makes it desirable to make provision for a low cost residential community and, second, for more industrial activity which, in the nature of things, is easier located on flat land. Flat land was scarce. This is the remaining flat land within the urban boundaries of Queenstown not yet developed. None of these facts are in dispute. All are common knowledge, and the stuff of regular debate in the
local community.
6 See third and fourth lines.
7 Queenstown Lakes District Council v Hawthorn Estate Ltd [2006] NZRMA 424 (CA).
[39] At the time that the Environment Court heard both applications for resource consent, in July and August 2012, PC19(DV) was under appeal. As already noted, there were numerous submissions for change, and the different zone boundaries and policies were very much under challenge. There was, however, no suggestion that the area of Frankton Flats B would remain undeveloped as rural general land. On the contrary, there is going to be intensive development, and the setting was one of making planning decisions to accommodate all the proposed activities, including a large area of industrial activity onto this area.
[40] There is very little land zoned industrial in the operative plan which remains undeveloped. It is all at Glenda Drive. In 2006, it amounted to 6.2 hectares.8 There were competing estimates by the experts as to how much industrial zoned land Queenstown needs. The estimates vary between a low of
60 hectares and a high of 100 hectares. It was common ground that Queenstown is short of industrial land.9 The Frankton Flats B zone, under PC19(DV), is approximately 69 hectares, of which 38-42 hectares provided for industrial (not exclusively) activities. Hence the important conclusion by the Environment Court, at [100] of the Foodstuffs decision:
[100] ...Indeed, providing a maximum of some 42 hectares within Frankton Flats B is not going to meet all the need identified [for industrial land], no matter which numbers are used.
[41] The next part of this decision summarises the reasoning in the Foodstuffs and the Cross Roads decisions, before returning to the issue as to whether or not that reasoning was in error of law. Both judgments of the Environment Court are detailed and very long. I am indebted to Mr Todd for his summary of the Environment Court’s reasonings in both decisions, when
applying s 104D(1)(a).
8 Foodstuffs at [107].
9 Foodstuffs at [63], [291], [298].
Foodstuffs decision
[42] The Court noted that a resource consent was required under both the operative plan and under the proposed plan.10 It noted the extended definition of “effect” in s 3 of the RMA.11 It set out the wide definition of “environment” in s 2 of the Act.12 It is appropriate to set out both of those definitions now.
[43] Section 2 contains a broad definition of “environment”; it provides:
Environment includes—
(a) Ecosystems and their constituent parts, including people and communities; and
(b) All natural and physical resources; and
(c) Amenity values; and
(d) The social, economic, aesthetic, and cultural conditions which affect the matters stated in paragraphs (a) to (c) of this definition or which are affected by those matters:
[44] Section 3(a) of the RMA provides:
3 Meaning of “effect”
In this Act, unless the context otherwise requires, the term effect …
includes—
(a) Any positive or adverse effect; and
...
[45] The Court then went on to find that the meaning of “environment” was explained by the Court of Appeal in Hawthorn, setting out [42] of that decision:13
[42] Although there is no express reference in the definition to the future, in a sense that is not surprising. Most of the words used would, in their ordinary usage, connote the future. It would be strange, for example, to construe “ecosystems” in a way which focused on the state of an ecosystem at any one point in time. Apart from any other
10 At [23].
11 At [66].
12 At [67].
13 Queenstown Lakes District Council v Hawthorn Estate Ltd [2006] NZRMA 424 (CA).
consideration, it would be difficult to attempt such a definition. In the natural course of events ecosystems and their constituent parts are in a constant state of change. Equally, it is unlikely that the legislature intended that the inquiry should be limited to a fixed point in time when considering the economic conditions which affect people and communities, a matter referred to in para (d) of the definition. The nature of the concepts involved would make that approach artificial.
[46] The Environment Court then went to apply what it considered the Court
of Appeal’s conclusion was:
[84] In summary... in our view, the word “environment” embraces the future state of the environment as it might be modified by the utilisation of rights to carry out permitted activity under a district plan. It also includes the environment as it might be modified by the implementation of resource consents which have been granted at the time a particular application is considered, where it appears likely that those resource consents will be implemented. We think Fogarty J erred when he suggested that the effects of resource consents that might in future be made should be brought to account in considering the likely future state of the environment. We think the legitimate considerations should be limited to those that we have just expressed. In short, we endorse the Environment Court’s approach.
[47] Then in [69] of its judgment, the Environment Court recognises that the Frankton Flats was generally undergoing major changes, and these were all about changes “to one of the few as yet un-urbanised areas remaining on the flats”. It then observed that just about everything about PC19(DV) had been challenged on appeal. It then moved on to [71], as we have seen.
[48] In the Foodstuffs decision, the Environment Court was satisfied that the adverse effects of the activity of a Pak’nSave supermarket on the environment would be “minor”. It reached this decision by firstly finding that the landscape in the area had already been modified by the adjoining urbanisation of the Frankton Flats. That part of the decision is not under challenge. Second, and more pertinently, it found:
[104] ...By analogy with Hawthorn where the Court of Appeal held that possible applications for resource consents were not part of the reasonably foreseeable environment, we hold that a possible exclusively industrial zoning for the site under the unresolved (and challenged) PC19(DV) is not part of the reasonably foreseeable environment.
[105] ...Consequently the potential effect of removing possible exclusively industrial land from use as such within the potential Frankton Flats B zone is not an effect on the “environment” within the meaning of section 104D(1) of the RMA.
[49] By these two findings, the Environment Court removed from the future environment the possibility of industrial zoning. As will become apparent, the qualifier “exclusively” was not relevant; it is not used again in the Court’s reasoning. The effect of these two findings is that it did not consider either the subject site or the receiving environment as a place where industrial activity might occur in the future. This is contrary to objective 6, which we have seen expressly provides for industrial activity on the Frankton Flats generally, and specifically in policy 6.2 for expansion of the industrial zone at Frankton. Effectively, the Environment Court used [84] of Hawthorn to remove consideration of objective 6 of the operative district plan when examining the future environment of the Frankton Flats.
[50] In case that reasoning was wrong as a matter of law, the Court went on to examine the receiving environment in the context of the planned development of Frankton Flats B for urban activities, including industrial land. In this alternative analysis it substituted the test of “minor” for a test of a 20% or less loss of potentially industrial land. It set “minor” alongside the complementary concept of “major” to arrive at the 20% figure. It then found that the potential loss of industrial land was less than 5%. It used this finding to find that quantitatively and qualitatively the effect would be “minor”.
[51] Therefore, on two alternative bases the Court was satisfied that the adverse effects on the environment would be “minor”, and so was satisfied that s 104D(1)(a) applied. That enabled the application for a non-complying activity to proceed to s 104 analysis.
[52] I note that in the Foodstuffs analysis the Court also considered the question of an adverse effect on the amenities of the future Eastern Access Road and another road, Road 2, and adverse effects on the future of urban structure on the Frankton Flats. It came to the conclusion that both effects were “minor”. These aspects of the decision were not the focus of the appeal.
[53] The appeal by QCL against the Foodstuffs decision did not contend that the Environment Court also cleared the Foodstuffs application under the second gateway test, subsection (1)(b). However, it is arguable it did. At [119], the Court found:
[119] Since we have found that any adverse effects of the proposal on the environment are not more than minor, the first gateway under section 104D(1)(a) of the RMA is passed and we do not have to consider the second, that is whether the proposal is contrary to the objectives and policies of either the outline development plan or of the PC19(DV). However, out of an abundance of caution and in the light of Mr Gardner-Hopkins’ submission that consent cannot be granted because both gateway tests are failed, we will consider each of the objectives and policies to which the proposal by Foodstuffs is said to be contrary, after we have discussed them below under section
104(1)(b) of the Act.
[54] In its s 104 analysis, the Environment Court did find that the Pak’nSave proposal was consistent with objective 10 of the proposed change, when considered as a whole. In the companion Cross Roads decision of the Environment Court, it came to a similar position. The appeal point was taken principally in the Cross Roads appeal. In that decision, I find that there were several errors by the Environment Court in the construction of the objectives and policies. For the purposes of this judgment it is sufficient to say that my conclusion in that regard in Cross Roads is of equal application to Foodstuffs. So that if the Environment Court did clear the Foodstuffs application under the second gateway that was an error of law. I also observe that it is important in regulatory statutes to ask the right question at the right time. If the second gateway test of s 104D(1)(b) was going to be examined in Foodstuffs, it should have been before considering the criteria under s 104(1)(b). As under s 104, the issue is not “will not be contrary” to the objectives and policies, for even if there is a conflict a proposal may be granted.
Cross Roads decision
[55] The Cross Roads decision was released after the Foodstuffs decision. It followed the analysis on the law in Foodstuffs, particularly as applying to the application of Hawthorn and as to the substitution of a numeric test for the
statutory test of “minor”. Like Foodstuffs it started with a landscape “minor”
effect analysis, which does not concern us on this appeal.
[56] On the Hawthorn point, the Environment Court said, at [59]:14
[59] The short answer is that, adopting the analysis in Foodstuffs, as a matter of law the supply of possible industrially zoned land under proposed PC19(DV) is not part of the (future) environment for the purposes of section 104D. We acknowledge that the Foodstuffs analysis was dealing with the E2 area, while this case is about E1. However, we were advised that in the PC19(DV) appeal hearings SPL is seeking that the site be part of a proposed “E3” area, in which a range of other activities including “trade and home improvement retail” would be enabled. Obviously, the future environment under PC19 is very unpredictable. Thus we consider the Foodstuffs analysis still applicable.
[57] Then it moved on to the alternative analysis:
[60] In case we are wrong about that, we proceed to consider whether the removal of 1.8 hectares of industrial land would be only minor or not...
[58] The Environment Court then reached its conclusion:
[65] ...Taking all those matters into account, we are satisfied that to lose 5% (cumulatively up to 5.6%) of the only land that is proposed by PC19(DV) to be protected for “true” industrial uses would be an effect on the PC19(DV) environment that is only minor.
[59] It then dealt with adverse effects on the Eastern Access Road and Road
2.
[60] It then, again similarly to Foodstuffs, appeared to have deferred the second gateway test until after consideration of s 104, as in the last sentence of [71] it said:
[71] ...We consider the extent to which the proposal implements (or fails to implement) the relevant objectives and policies of PC19(DV) in part 3 of this decision.
14 Cross Roads Properties Ltd v Queenstown Lakes District Council [2012] NZEnvC 177.
Does Hawthorn apply to the application of s 104D(1)(a), in the context of this case?
[61] The Court in Foodstuffs approached s 104D(1)(a) by identifying the range of alleged adverse effects. The alleged adverse effects identified by the evidence were:15
(i) effects on the landscape;
(ii) effects on industrial land supply;
(iii) effects on the amenity of the neighbourhood and in particular on the Eastern Access Road and Road 2;
(iv) effects on “urban structure”.
[62] The practical consequence of applying [84] in Hawthorn literally, however, is that the Court is not allowed to examine the effects of the Foodstuffs and Cross Roads proposals on the future environment. Rather, applying [84] of Hawthorn to s 104D(1)(a), requires adopting the unreal prospect that the undeveloped land will continue to be the activity on the receiving environment. Likewise, housing, retail, etc, is excluded from consideration by the application of [84]. Or to use the drier phrasing of the Environment Court, in [71], cited above at [30]:
[71] ...
(2) the reasonably foreseeable environment does not include permitted activities in a proposed but challenged plan or plan change;
...
[63] The Environment Court found effectively that Hawthorn prevented it from taking into account the reality that there was a demand for more industrial land for Queenstown, which had been recognised in the operative district plan as an objective to be provided in the future, and that the only available flat land
will be used at least in part for that industrial activity.
15 Foodstuffs at [65].
[64] Paragraph [84] is a summary of paragraphs [34]-[83]. In the core of its analysis, the Court of Appeal endorsed a future orientated assessment of the environment, in [53] and [54],:
[53] Future potential effects cannot be considered unless there is a genuine attempt, at the same time, to envisage the environment in which such future effects, or effects arising over time, will be operating. The environment inevitably changes, and in many cases future effects will not be effects on the environment as it exists on the day that the council or the Environment Court on appeal makes its decision on the resource consent application.
[54] ...It would be surprising if the Act, and in particular s
104(1)(a), were to be construed as requiring such ongoing change to be left out of account. Indeed, we think such an approach would militate against achievement of the Act’s purpose.
[65] Hawthorn also recognised that these standards have to be applied in context:
[61] Difficulties might be encountered in areas that were undergoing significant change, or where such change was planned to occur...
That was not the context of Hawthorn.
[66] I think [84] of Hawthorn was read literally as applying to any context. I do not think the Court of Appeal intended it to be read this way. To read [84] as a rule applying to this context was an error of law. The context of this case is materially different from the context in Hawthorn. The Court of Appeal in Hawthorn did embrace a future environment as the consideration in s 104D (s 105(2A) previously) and s 104. For these combinations of reasons, it does not govern the application of these facts. It does, however, support relying upon objective 6 and policies 6.1 and 6.2 as reliably informing the assessment of “minor” effect on the future environment.
[67] In Hawthorn the applicant applied for consent to subdivide 33.9 hectares into 32 separate lots, and for consent to erect a residential unit on each lot. The proposal required consent as a non-complying activity under the operative district plan and as a discretionary activity under the proposed district plan, so it did engage the predecessor to s 104D, s 105(2A).
[68] It is very material when comparing the context of Hawthorn to this case that the following relevant resource consents already existed in the Hawthorn baseline and receiving environment:
(a) An unimplemented consent to subdivide the subject site into 8 blocks of approximately 4 hectares each; (baseline)
(b)Building consents in respect of a 166 hectare triangle, which included the subject site, for 24 houses already erected and a further 28 consented to, but not yet built; (part baseline, part receiving) and
(c) Consents in respect of a further 35 building platforms outside the area of the triangle (receiving).
[69] This large number of existing consents meant that there was no issue, but that the environment would have a rural/residential quality. Furthermore, the applicant developer in Hawthorn had proffered as a condition of its application not to intensify the residential quality, by not making any further application for subdivision within the receiving environment. It is not surprising that consent was granted, and not disturbed on two appeals.
[70] None of the baseline or receiving environment cases has ever been deployed before to rule out consideration by a consent authority of the prospect that an application would impede an established objective in the operative plan. Given objective 6 and its policies 6.1 and 6.2, and recognising Queenstown’s needs, it is inevitable that the Frankton Flats will be urbanised and used in part for industrial activities. “Will be” is the language used in s 104D(1)(a).
[71] The predecessor of s 104D was s 105(2A). It has been considered by the Court of Appeal in Arrigato Investments Ltd v Auckland Regional Council16
and in Dye v Auckland Regional Council.17 They also are distinguished by
16 Arrigato Investments Ltd v Auckland Regional Council [2002] 1 NZLR 323 (CA).
17 Dye v Auckland Regional Council [2002] 1 NZLR 337 (CA).
context. Like Hawthorn, they were subdivision applications into relatively stable existing environments.
[72] There is no doubt that a Pak’nSave supermarket and/or a Mitre 10 Mega would have major effects on the future environment. They involve the erection of very large buildings, putting in place a large number of car parks, and will generate tens of thousands of vehicle movements each week. They would enhance the economic wellbeing of the community by delivering the benefits of competition in the marketplace.
[73] The question is not whether the Foodstuffs (or Cross Roads) proposal would affect the environment. But the question is whether it will be an adverse effect, and if so, can the consent authority be satisfied it will be less than minor.
[74] All counsel agreed that utilisation of scarce land for an inappropriate use can be an adverse effect. This is because Part II of the Act, particularly s 5(2), includes consideration of meeting community needs, in the future.
[75] Section 5 provides:
5 Purpose
(1) The purpose of this Act is to promote the sustainable management of natural and physical resources.
(2) In this Act, sustainable management means managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural well-being and for their health and safety while—
(a) sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and
(b) safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
(c) avoiding, remedying, or mitigating any adverse effects of activities on the environment.
[76] The consent authority cannot consider any adverse effect on the community of using land for retail activities, which is suitable for industrial activities, if the s 104D(1)(a) analysis is done without the Court being able to have regard to the future needs of Queenstown for industrial land, and the objective in the operative district plan to provide more industrial land at Frankton Flats.
[77] The sort of issues that had to be confronted in Foodstuffs simply were not in play in Hawthorn. One cannot say with confidence how the Court of Appeal in Hawthorn would have analysed the material facts of this case. For these reasons, I do not consider that the Environment Court or this Court are bound by [84] in Hawthorn.
[78] Furthermore, the finding at [84] of Hawthorn was a non-binding observation that I erred, when I suggested, obiter, that the effects of resource consents that might in future be granted should be brought into account in considering the likely future state of the environment. The Court of Appeal endorsed the Environment Court’s approach, which had taken a more restricted view. But the Court still answered the question in the negative, meaning that they did not think there was a material error in the High Court judgment, and no error in the Environment Court judgment.
[79] When the RMA had its genesis, it was intended by many of the promoters to introduce effects based decision-making. Activities which did not generate adverse effects should not be regulated, was the attractive goal. That idea has never been completely lost. The Act did finally embrace the inevitability of plans, but not the inevitability of rules. Plans were to have objectives, policies to implement them, and those policies might or might not have rules: ss 30(1)(a) and 31(1)(a). But alongside that was the understanding that if an activity was innocuous (had no significant adverse effect on the environment), it did not need to be regulated or controlled by the RMA.
[80] That, in my view, is the natural context of s 104D(1)(a). If the activity is non-complying but has only “minor” (no need to be bothered about) adverse effects, then, even though it is non-complying, consent can be considered under s 104.
[81] There are a number of Environment Court decisions which examine the
meaning of “minor” in s 104D(1)(a). They were not cited in argument.
[82] Section 104D(1)(a) is a section intended to impose a further restraint on consents being granted for non-complying activities under either an operative plan or a proposed plan, and activities which are inconsistent with the proposed plans, unless they have only a “minor” effect. It is a very small eye in the needle. It can be contrasted with ss 104A-C. I develop this point later in this judgment, when considering the numeric substituted test for “minor”.
[83] There was no dispute to the proposition of fact that each activity, the Pak’nSave and Mitre 10 Mega, considered separately would have the adverse effect of a loss of land for industrial use. There was evidence before the Environment Court of a shortage of industrial land – quite independent of PC19(DV)18. That assessment can be made without regard to the operative plan. But, in fact, it is reinforced by objective 6, and its policies of the operative plan.
Conclusion
[84] The context of this case was materially different from Hawthorn. That decision recognised the importance of context. Read as a whole, it endorses having regard to objective 6 and its policies as a guide to the future environment. [84] was a summary only, and itself should not be read out of
context. It is an observation which does not bind this Court in this case.
18 Foodstuffs at [63], [291] and [298].
[85] Section 104D, and indeed the RMA as a whole, calls for a “real world” approach to analysis, without artificial assumptions, creating an artificial future environment. Read as a whole, Hawthorn endorses having regard to objective 6 and its policies. The current development of the Frankton Flats, of which these applications are only part, was inconsistent with the plain statutory injunction imposed on the consent authority to consider the adverse effects on the future environment, contained in the phrase “will be”. To read down s 104D(1)(a) so that the judgment is will be “minor” if established in an undeveloped environment, was contrary to the operative plan and the facts, and so thwarted the intention of Parliament. It was a significant error of law in the Foodstuffs decision, and likewise in Cross Roads.
Did the Environment Court err in its interpretation and application of "minor" when applying the alternative numeric analysis, which does take into account and recognise the presence of PC19(DV)? Did the Environment Court err in law when defining a 20% threshold for "minor" effects?
[86] In the alternative to applying Hawthorn, the Environment Court, in case it was wrong, went on to consider whether the effect of granting consent to the retail use of a Pak'nSave would be more than "minor". The Court considered four possible areas against which the Foodstuffs area could be "measured”:19
(1) The activity areas proposed to be zoned industrial under
PC19(DV) (42 hectares);
(2)All undeveloped industrial land in the Queenstown/Wakatipu area;
(3) The quantity of industrial land demanded in the district;
(4)The total area of industrial zones plus proposed industrial zones within the district.
19 Foodstuffs at 106.
[87] The Court opened its discussion of the alternative application of the standard "minor" in s l04D(1)(a), as follows:
[72] Counsel did not refer to authorities on what "minor" means. The dictionary definitions suggest it means comparatively small or unimportant or lesser in number, size or [extent]. Based on normal usage "minor" seems to come between minimal on one side, and more than minor and then major on the other side of a scale of effects. Further, the concepts of size and importance seem to have both quantitative and qualitative dimensions. Accordingly, whether adverse effects are "minor" or "more than minor" depends on the circumstances and context. For example, where a significant habitat of a threatened indigenous species is at risk in a region where the species' population has already reduced to 20% of its former population, even a small (say 1%) reduction in its habitat or population may be more than minor. It depends on the species, the factors on which its population viability depend and the margins of error in the analysis.
[73] We are also acutely conscious of the "One Percent Problem" "... where small contributors account for so much of a ... problem that the social goal cannot be met without regulating many one percent sources".20 Even very minor effects which may happen have the potential to lead to adverse accumulative effects ...
[74] We return to the assessment of other adverse effects, including any strict cumulative effect - an effect that is at least reasonably likely to happen if a proposal gains consent and if it is implemented. The situation that most often arises with predicting such an effect is that the consent authority (or on appeal the Environment Court) is faced with making an unscientific qualitative prediction on evidence that gives no margin of error or confidence limits. A further complication is that in Westfield21 Blanchard J approved an Environment Court decision in which the court placed "significant" somewhere in the scale, at least where there are possible trade effects (which must be disregarded under (now) section 104(3)(a)(i)). For the purposes of this decision we ignore any complexities introduced by Westfield and apply the first gateway test in the standard way. We hold that any adverse effect which changes the quantity or quality of a resource by under
20% may, depending on context, be seen as minor.
[88] It may be noted that no authority is cited for the last sentence. The last sentence has to be read as justified by the preceding analysis. That analysis starts with reference to the "dictionary definitions" and "normal usage". It is
not referenced to the function of s l04D in the scheme of the RMA.
20 Citing an article by K M Stack and M P Vandenberg The One Percent Problem (2011) 111
Columbia Law Review 1385 at 1388.
21 Discount Brands Ltd v Westfield (New Zealand) Ltd [2005] 2 NZLR 597 (SC).
[89] When it came to applying the standard against the key issue on appeal, whether the loss of potential industrial land is an effect on the environment, as we have seen, the Court identified a loss of about 5% of the proposed supply of scarce industrial land. It recognised this as a distinct adverse effect, but concluded it was only minor:
[110] ...However, in these particular circumstances we are satisfied that it is quantitatively and qualitatively only minor (and at the lower end of minor too).
[90] No counsel defended the proposition that any adverse effects which change the quantity or quality of a resource by under 20% may, depending on context, be seen as "minor". Rather, counsel supporting the decision emphasised that the Court was relying on a much lower percentage of 5%.
[91] The context is the unchallenged common assumption by the Environment Court under appeal and all counsel before me that land suitable for industrial activities is a resource and is necessarily limited within the urban area of Queenstown. Moreover, there is competition for land suitable for industrial activities, to be used for other, here retail, activities. In this context, loss of land for industrial activity can be an "adverse effect" on the environment. The definition of environment is engaged under s 2(a), (b) and (d), set out above in [43].
[92] I do not think it is possible to ignore the Court's approach to the application of "minor" by its substitution of a 20% test. This is for two reasons. Firstly, it is a substitution of one standard, a statutory one, by another. Second, by identifying 20% as a demarcator between "minor" and "not minor", the Court is creating an anchoring effect on reasoning. Setting up the break line at 20% facilitates and indeed encourages a judgment that a loss of 5% will be "minor". This is even though there are qualifying passages in the Court's judgment saying that a significant 1 % loss could be "minor".
[93] The legal method deployed by the Environment Court in its analysis is a traditional legal method known as "literal" or "black letter". This is the method of reading a provision in isolation, as a businessman would, giving the words in the provision their usual meaning and then applying them to the facts.
[94] This legal method can apply quite satisfactorily when the provision is a rule. A rule can be applied without the need to understand why the rule is there, and without the need to understand the other body of rules surrounding it. So, for example, we are all familiar with driving to a strange city and immediately becoming familiar with the parking prohibitions around our hotel. It is not necessary to understand the policy or purpose behind why there is a no stopping sign and yellow lines painted in a particular part of a particular street. The signs and the yellow lines send a clear and unmistakeable communication.
[95] This black letter method cannot apply reliably, however, when the statutory provision is not a rule but a standard. When the statutory provision contains a term like "minor", that is a standard, application of which requires resolution of a question of degree. There is no bright line distinction between "minor" and "not minor". There is always room for two persons to honestly disagree in good faith on the application of a standard.
[96] It is not possible to apply standards in any way consistently without the persons who are applying them examining and agreeing on the policy or reason why the standard has been imposed, rather than a rule made. Standards are usually imposed when the task is of such complexity that it is simply not possible for it to be regulated by precise rules. In such situations it is necessary to apply the standard against the purpose for which it is applied. This is the classic situation where s 5 of the Interpretation Act 1999 applies. Section 5(1) provides:
5 Ascertaining meaning of legislation
(1) The meaning of an enactment must be ascertained from its text and in the light of its purpose.
[97] The operative standard in s 104D(1)(a) is:
A consent authority may grant a resource consent for a non-complying activity only if it is satisfied that ... the adverse effects of the activity on the environment ... will be minor.
[98] It is not simply an application of a standard of "minor". It requires a positive satisfaction on the part of a consent authority that the adverse effects of the activity on the environment in the future will be "minor".
(Emphasis added.)
[99] Coming to this standard for the first time, the consent authority should ask: "Why is it here?" The reason is not hard to find. It is an amendment to the RMA, introduced to elaborate upon s 104. Section 104 is the cornerstone section which sets out the criteria that a consent authority must have regard to when considering any application for a resource consent. Sections 104A, B, C and D amplify s 104 by distinguishing separate criteria for applications for controlled activities s 104A (which "must" be granted), and discretionary or non-complying activities s 104B, restricted discretionary activities s 104C, and non-complying activities s 104D, (all of which "may" be granted).
trade competition.
32 Foodstuffs at [102].
[161] Rather, trade competition presents as the use of RMA arguments to serve the ulterior purpose of retaining or obtaining market share in unrelated markets. So a supermarket as a trade competitor stops a rival building another supermarket in its customer catchment, and uses every available RMA argument to do so. This is a wholly different game from property owners competing for the best use of their land.
[162] In [263] of the Foodstuffs decision, the Court said:
[263] ...Quite apart from our duty to issue a decision as soon as practicable, the strong flavour of anti-competitive behaviour by QCL suggests a decision should be issued sooner not later.
[163] While it was unfortunate that the Environment Court labelled QCL as a trade competitor, and criticised its behaviour, I do not think it was an error of law which had material consequences. There is no evidence, beyond QCL's genuinely held perception, however, that the characterisation of QCL as a trade competitor influenced the decision, except possibly the decision to hear these applications, notwithstanding the commencement of the proceedings before the other division of the Environment Court in respect of PC19.
Result
[164] The appeal is allowed, for the reason that the decision has material errors of law, summarised at the beginning of this judgment. The case is remitted back to the Environment Court. In case there be any doubt, the application now requires re-evaluation against the current terms of PC19, as they have been amended by the February 2013 decision.
[165] Costs are reserved. If the parties cannot agree costs, I require counsel to circulate draft submissions on costs, not extending beyond five pages each. After that process, file the submissions. I will deal with these submissions on the papers unless there is a request for an oral hearing. Leave to apply in that regard is reserved.
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