Silverwood Corporation Limited v Minister for Land Information
[2022] NZHC 3483
•16 December 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-000102
[2022] NZHC 3483
BETWEEN SILVERWOOD CORPORATION LIMITED
Appellant
AND
MINISTER FOR LAND INFORMATION
First Respondent
AND
PORIRUA CITY COUNCIL
Second Respondent
Hearing: Court: 10 – 11 October 2022
Gendall J
Mr W Reid (lay member)Appearances:
M Casey KC and J Dawson for the Appellant
D J S Laing and H P Harwood for the Respondents
Judgment:
16 December 2022
JUDGMENT OF GENDALL J AND MR W REID
SILVERWOOD CORPORATION LIMITED v MINISTER FOR LAND INFORMATION [2022] NZHC 3483
[16 December 2022]
Table of contents
Introduction [1]
The Appeals [6]
Background [10]
Silverwood’s compensation application [15]
The Tribunal’s January 2022 Decision [18]
Nature of appeal [22]
Analysis [27]
Lot 3 – Silverwood’s appeal against Tribunal Decision declining to take into account loss of value
(for reserve credit purposes) of surplus reserve land [28] Lot 3 – the adoption of a deferral discount rate of 8.5 per cent instead of 7.5 per cent [49] Lot 3 – further grounds of cross-appeal advanced by the Crown [54] Adopting a 30 per cent profit and risk allowance in the before, rather than 35 per cent [59] Acceptance of reserve land in lieu of a monetary reserve contribution [62] Adoption of the discount rate before deferral of 8.5 per cent instead of higher discount rates [66] The Tribunal arrived at incorrect values [68]
Conclusion on Lot 3 [71]
Lot 4 – appeal and cross-appeal relating to Lot 4 – that the injurious affection was offset by betterment? [74]
Conclusion on Silverwood’s appeal [94]
Cross-appeal by the Crown [96]
(a)The Tribunal erred in finding a hypothetical subdivision analysis was appropriate to address
the value of Lot 4 [100]
(b) The Tribunal erred in finding that Silverwood’s valuer made no reference to the Duck Creek North sale in his assessment of the value applied for Lot 4 [104]
(c)The Tribunal erred in concluding the Duck Creek South sale was an inferior sale to Lot 4 [108]
(d)The Tribunal erred in finding the valuers did not adjust the block sales for all material
differences between the sales and Lot 4 Before and After [112]
(e) The Tribunal erred in finding the analysis of the Lot 4 After sale was an unreliable method to be given little weighting [115]
(f)The Tribunal erred in finding Lot 4 was ripe for development [120]
(g)The Tribunal erred in accepting profit and risk at 25 per cent as being appropriate for
hypothetical subdivision analysis [126]
(h)The Tribunal erred in accepting the development costs provided by Mr Blyde for Silverwood,
including the claimant’s contingency of 10 per cent, on the basis that the detail work would have been undertaken to then complete a conditional sale [130]
(i) The Tribunal erred in adopting a value for Lot 4 of $5,800,000 in the before and $1,600,000 in
the after [132]
Conclusion on Crown’s cross-appeal [134]
Result and remedy [135]
Costs [137]
Introduction
[1] This is an appeal by the appellant Silverwood Corporation Limited (Silverwood) and a cross-appeal by the respondents, the Minister for Land Information (the Minister) and the Porirua City Council (the Council) (which we will collectively refer to as the Crown) from a decision of the Land Valuation Tribunal dated 31 January 2022 (the Decision).
[2] The Decision related to a claim by Silverwood for compensation under the Public Works Act 1981 (the Act) with respect to two parcels of land in Porirua City acquired by the Crown in late 2014 and early 2015 for the construction of the Transmission Gully Motorway (TGM), the major State Highway 1 bypass constructed just north of Wellington. The two parcels of land in question are known as lots 3 and
4. Parts of each of these lots together with other land owned by Silverwood were compulsorily acquired for the TGM by the Crown. Lot 3 in the before amounts to an area of 12.2602 hectares and Lot 4 an area of 31.0843 hectares. In the after Lot 3 becomes 9.575 hectares and Lot 4 20.9745 hectares. The taken area therefore amounts to 2.6845 hectares for Lot 3 and 10.1098 hectares for Lot 4.
[3] As we understand it, Silverwood and the Crown were able to agree compensation for the other land, lots 1 and 2, but they were unable to agree compensation for lots 3 and 4.
[4] The total compensation claimed before the Tribunal by Silverwood for lots 3 and 4 was $8,045,000. This represented both the value of the land taken and injurious affection. The Crown’s assessment of compensation which it contended before the Tribunal however was $2,057,000.
[5]The Tribunal in its decision assessed final compensation for lots 3 and 4 at
$4,759,000.
The Appeals
[6] In its appeal, Silverwood suggests the Tribunal’s assessment of compensation here was understated and wrong. Instead of the $4,759,000 it awarded by way of
compensation for lots 3 and 4, Silverwood says this figure should have been,
$6,555,000. We will address below how this figure is made up but note that the essential grounds of appeal advanced by Silverwood before us maintained the Tribunal was wrong in its decision in:
(a)Declining to take into account the loss of the value (for reserve credit purposes) of surplus reserve land when assessing compensation for Lot 3;
(b)The adoption of a deferral discount rate for Lot 3 of 8.5 per cent instead of 7.5 per cent; and
(c)Deciding that there was betterment to Lot 4, which entirely offset the injurious affection for that lot.
[7] In its cross-appeal so far as Lot 4 is concerned, the Crown is arguing for a reduction in the compensation of $4,200,000 awarded by the Tribunal for this Lot, to a maximum figure of $1,831,000. And, as to Lot 3, the Crown’s position on its cross-appeal appears to be that the Tribunal compensation award of $559,000 should be reduced to not more than $226,000. This was the compensation figure also argued by the Crown for Lot 3 as appropriate before the Tribunal.
[8] As to the grounds argued by the Crown for its cross-appeal, (largely addressing Lot 4), the Crown says the Tribunal erred by:
(a)Finding that a hypothetical subdivision analysis was appropriate to assess the value of Lot 4;
(b)Finding that the appellant’s valuer, Mr Bevin, made no reference to the Duck Creek North sale in his assessment of the per hectare rate that he applied to Lot 4;
(c)Concluding that the Duck Creek South sale was an inferior sale to Lot 4;
(d)Finding that the valuers did not adjust the block sales for all material differences between the sales and Lot 4, Before and After;
(e)Finding that the analysis of the Lot 4 after sale was an unreliable method that should be given little weighting;
(f)Finding that Lot 4 was ripe for development at the specified date;
(g)Accepting profit and risk at 25 per cent as being appropriate for hypothetical subdivision analysis;
(h)Accepting the development costs provided by Mr Blyde for the appellant, including the claimant’s contingency of 10 per cent on the basis that the detailed work would have been undertaken to then complete a conditional sale; and
(i)Adopting a before value for Lot 4 of $5,800,000 in the before and
$1,600,000 in the after.
[9] As to Lot 3, although this aspect of the Crown’s cross-appeal before us was of much little moment, the grounds argued for this were that the Tribunal erred by:
(a)Adopting a 30 per cent profit and risk allowance in the before, rather than 35 per cent;
(b)Concluding that land would have been accepted as an offset for a (monetary) reserve contribution;
(c)Adopting a discount rate of 8.5 per cent in the before and the after; and ultimately
(d)Arriving at a before value of $757,000 and an after value of $198,000 (both exclusive of GST, if any).
Background
[10] As we have noted, Silverwood’s compensation claim here originally arose out of the acquisition of land by the New Zealand Transport Agency (the NZTA) and the Council to enable construction of parts of the TGM project. In particular, the acquisitions at issue before us related to the interchange and link roads to the motorway in and near to the suburb of Whitby. These acquisitions in late 2014 and early 2015 follow an original starting point with the Crown acquisition of some land for the TGM itself from Silverwood in 2010. That earlier land was subject to an acquisition agreement in June 2010. Compensation was paid, and no issues relating to that 2010 acquisition arose before us.
[11] Subsequently, the 2014-2015 acquisitions occurred. Compensation discussions between the parties for these acquisitions did not reach any successful conclusion, however. This resulted in Silverwood’s current compensation claim being filed in December 2018.
[12] One important aspect of the post 2014/2015 compensation negotiations was that the Crown maintained there was never initially an agreement for land taken that compensation should be based on a hypothetical subdivision approach. Subsequently, it seems the Crown did accept that the land in question might attract a potential residential subdivision consent application and a consent was actually sought by Silverwood and granted by the Council. As a result of this, the Crown says its assessment of compensation before the Tribunal consequently increased and this was reflected in evidence it filed there. It remained the Crown’s position however that the hypothetical subdivision approach for calculations was unreliable and the direct sales comparison was the most appropriate valuation methodology and should be adopted for valuation purposes.
[13] After the filing of Silverwood’s compensation claim in late 2018, and the initial exchange of evidence, as we understand it expert witness conferencing took place. This narrowed outstanding issues relating to lots 3 and 4.
[14] The total areas of land taken by the Crown under consideration for compensation here were 2.6845 hectares for Lot 3 and 10.1098 hectares for Lot 4. The
land in question is variable in its contour with some parts undulating and some steeper areas. It is also variable insofar as its development potential is concerned. It does appear that the land acquired by the Crown generally comprises the more easily developable land and the development costs for Silverwood’s retained land accordingly to an extent have increased disproportionately in the after. Some of the land in particular relating to Lot 4 remains planted in what appears to be a commercial pine forest. Although a suggestion was made that part of the land was landlocked, this is disputed by Silverwood. We proceed on the basis that some access arrangements to adjacent roading were possible even though no formed roads may have been in existence at the operative time.
Silverwood’s compensation application
[15] Given, as we have noted, the parties were unable to reach agreement in relation to compensation, then in December 2018 Silverwood brought this application to the Tribunal under s 77 of the Public Works Act 1981 (the Act). Silverwood sought a combined compensation assessments for lots 3 and 4 of $8,045,000 (being $1,810,000 for Lot 3 and $6,235,000 for Lot 4). This figure of $8,045,000 it was said represented both the value of the land taken and injurious affection.
[16] At the time, the zoning of the land by the Council was such that it permitted residential subdivision and development generally.
[17] In response to Silverwood’s application before the Tribunal, as we have noted the Crown assessed total compensation there at the much lower figure of $2,057,000, being $226,000 for Lot 3 and $1,831,000 for Lot 4.
The Tribunal’s January 2022 Decision
[18] In this decision the Tribunal noted that it had received a considerable amount of evidence from valuers and other professionals involved in the overall works which it described by way of example as “engineering”, “earthworks”, “landscape”, “planning” and “surveying” evidence. In considering this, the Tribunal noted, however, it would deal with what it had understood were the essential positions and contentions of the parties.
[19]Its decision, nevertheless, was a detailed and carefully-reasoned one.
[20] The Tribunal in that decision made a number of findings which, importantly, included:
(a)For Lot 3:
(i)The hypothetical subdivision (residual method) is the appropriate methodology to value the land;
(ii)Lots 3 and 4 are to be valued as separate blocks;
(iii)On the balance of probability, land would have been accepted as an offset for development contribution;
(iv)A deferral adjustment is appropriate to reflect the likely time delay to development as development of Lot 3 would not have commenced at the specific date. A five year time frame to develop is appropriate at a discount rate of 8.5%;
(v)The Tribunal did not accept that there should be a payment for a reserve credit;
(vi)The Tribunal fixed on a before market value of $1,137,980 exclusive of GST (if any) and an after market value of $298,117 exclusive of GST (if any) and after discounting the values at
8.5 per cent for a five year time frame a before value of
$757,000 exclusive of GST (if any) and an after value of
$198,000 exclusive of GST (if any).
(vii)Total compensation was assessed at $559,000.
(b)For Lot 4:
(i)Analysis of block sales and the hypothetical subdivision (residual method) are both appropriate to assess the before and after and their results reconciled, in accordance with the methodology that conforms with the International Valuation Standards IVS 102-2013.
(ii)There is difficulty in applying the sales approach to block land. Moreover, this approach cannot be used as the single approach with confidence;
(iii)Injurious affection should reflect the decreased sale price of the residual lots and the increased construction costs per lot. Thirty-eight sections will be affected by the link road, however the whole subdivision (100 lots) will gain by an easier and quicker journey to the TGM and Wellington;
(iv)Any injurious affection is offset by betterment;
(v)Using the hypothetical subdivision method adopted by Mr Stafford-Bush for the before value of $5,800,000 exclusive of GTS (if any) and in the after a value $1,600,000 exclusive of GST (if any) was appropriate;
(vi)Total compensation was assessed at $4,200,000 exclusive of GST (if any).
[21] Overall, as we have noted, the Tribunal assessed total compensation for lots 3 and 4 at $4,759,000. Significantly, it determined too, that although there was injurious affection for Lot 4, this was entirely offset by betterment.
Nature of appeal
[22] Section 95(1) of the Public Works Act 1981 (the Act) provides that any award made by the Tribunal under the Act is final as to the amount awarded, subject however to s 26 of the Land Valuation Proceedings Act 1948. That s 26 provides that any person affected by an order of the Tribunal may appeal to the High Court and that every such appeal is by way of rehearing.
[23] In considering any appeal, this Court can confirm, discharge, or vary the order of the Tribunal or direct that the matter be referred back to the Tribunal for further consideration as it thinks fit. The Court can generally make such order as it considers just and equitable in all the circumstances of the case.1
[24] Appeals from the Tribunal are by way of re-hearing.2 This Court has the same powers as the Tribunal.3
[25] The approach to be taken on an appeal like the present is that discussed by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar4. There, the Supreme Court noted:
(a)The appellant bears the onus of satisfying the appeal court that it should differ from the decision under appeal;
(b)It is only if the appellate court considers that the appeal decision is wrong that it is justified in interfering with it;
(c)The appeal court has the responsibility of arriving at its own assessment on the merits of the case;
(d)No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because, for example, credibility is important; and
1 Section 26(4) Land Valuation Proceedings Act 1948.
2 Section 26(1) Land Valuation Proceedings Act 1948
3 Section 16 Land Valuation Proceedings Act 1948
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141 (SC).
(e)The appellate court is entitled to use the reasons of the first instance decision-maker to assist it in reaching its own conclusions, but the weight that the court places on them is a matter for it.5
[26]This is the approach we have adopted in considering this appeal.
Analysis
[27]In our analysis of both Silverwood’s appeal and the Crown’s cross-appeal we will consider the relevant submissions from both Silverwood and the Crown in turn in addressing the arguments relating to compensation for both lots 3 and 4 here. At the outset however, we note that in part Silverwood’s appeal of the Tribunal Decision has merit and should be allowed, whereas the Crown cross- appeal does not to such an extent that it does not justify any further interference with the Decision. We will explain our reasons for reaching these conclusions now.
Lot 3 – Silverwood’s appeal against Tribunal Decision declining to take into account loss of value (for reserve credit purposes) of surplus reserve land
[28] In its decision, the Tribunal declined to award compensation to Silverwood in relation to the loss of surplus reserve land in Lot 3 as a reserve credit. The reasons given for this was because:
(a)Lot 3 was valued as a separate lot involving a hypothetical purchaser who did not necessarily own other land that was ripe for development in Porirua City; and
(b)The Tribunal found there was no evidence to suggest that the Council would pay a developer for the surplus land set aside in the before situation.
[29] In addressing this issue of a reserves credit, first it is important to emphasise the difference between the claim for a reserve contribution (which the Tribunal
5 On this see also Green v McCahill Holdings Ltd v Auckland Council [2013] NZHC 507 at [37].
allowed here) and for a reserve credit (which the Tribunal did not). A reserve contribution is the vesting of land within a subdivision as reserve in lieu of a financial contribution (i.e. cash) that would otherwise be required by a council as a condition of consent for that subdivision. A reserve credit, however, arises where land, vested as reserve in one subdivision, exceeds the amount of land required to offset the cash contribution that would otherwise have been required for that subdivision. A developer in that situation can agree with the local authority concerned to have that land credited towards reserve contributions in respect of other developments in the area. Often this has been referred to as going into a “reserves ledger”.
[30] In the present context relating to the Silverwood land, at the outset Lot 3 did include land that was unsuitable for development purposes but it was in fact suitable and desirable as a reserve because of its conservation qualities. In its decision, the Tribunal agreed that some of that land would have been accepted as an offset for development contributions (that is within the development of Lot 3 itself) and allowed for that in the compensation which was payable.6
[31] That area of reserve land, however, exceeded what would have been required to offset Lot 3’s development contributions in the before situation. Accordingly, Silverwood’s claim here is that this should be the subject of compensation payable to it in two respects, both of which were supported by evidence before the Tribunal:
(a)Any hypothetical buyer of Lot 3 would have placed a value on acquiring land able to be used as a reserve credit towards other developments in the surrounding area. That value therefore should have been reflected in the market value of the land taken.
(b)But for the Crown’s compulsory acquisition here, the land would have been available to Silverwood to apply to other developments it might undertake on its other land – for example, Lot 4 here. As a result of the acquisition of that part of Lot 3 by the Crown, Silverwood has lost the value of that land as a possible development contribution offset.
6 Tribunal Decision at [38].
[32] The fundamental and basic entitlement to compensation under the Public Works Act 1981 conferred by s 60 is to “full compensation” from the Crown.7 We accept this must mean that a dispossessed owner is entitled to receive the equivalent of what has been lost and thus to be put into the same position as if the land in question had not been acquired by the Crown.8 The potential of the land in question is always to be taken into account, and its market value in our view needs to be assessed on the basis of the property’s highest and best use that is reasonably available.
[33] Here we accept the excess reserve land taken for significant ecological purposes, was an advantage that was possessed by Lot 3 and as such was an added value that needed to be determined.
[34] In Minister of Works and Development v National Mutual Life Association of Australia Ltd, this Court considered the potentiality of the land in question and found this included the potential for a reserves credit when it said:
We have no doubt that a reserves credit, if proved to exist, and its availability to a purchaser if established, are proper factors to be taken into account in deciding what price a willing buyer is likely to pay for a property…
In considering this matter, we bear in mind it is the chance of the council approving the reserve credit, which must be evaluated…9
[35] In the case before us, there was undisputed evidence before the Tribunal that the local authority, the Council, certainly from 1985, had a policy providing for reserve credits for developments in the general Whitby area. Evidence was also before the Tribunal that the Council had entered into development agreements by which reserve credits were added to a developer’s “reserves ledger” for future developments in a case such as the present. Indeed, Mr Bevin, the expert valuer witness for the Crown, gave evidence that relatively recently there was a “reserves agreement” in place with the Council for adjacent Whitby Duck Creek developments. There was also undisputed evidence before the Tribunal that the Lot 3 land acquired by the Council and deemed suitable as reserved land was in excess of what would be required to offset reserve contributions for the development of that lot.
7 Section 60(1) Public Works Act 1981.
8 Drower v Minister of Works and Development [1984] 1 NZLR 226 at [29].
9 Minister of Works and Development v National Mutual Life Association of Australasia Ltd, High Court Wellington, M613/82, 28 August 1985 at pages 6 – 7.
[36] The major part of the evidence before the Tribunal indicated that it would have been highly likely that Silverwood or any hypothetical purchaser would have secured a development agreement as to reserve credits with the Council relating to this Lot 3 land and the Council would have accepted that as an offset for reserve contributions relating to Lot 4. We are satisfied the acquisition of this excess reserve land for ecological purposes by the Council here did result in an actual and quantifiable loss to Silverwood.
[37] In its decision, the Tribunal overlooked the National Mutual case we have noted above. As we see it, this case has some relevance and importance to the situation before us. It assists in confirming that here, a well-informed developer (likely an owner of nearby development land) wishing to purchase Lot 3 from Silverwood would have factored into its purchase price for the block that value of the reserve credit it would have been receiving.
[38] Here we find the Tribunal in its decision relating to this aspect erred in the following respects:
(a)The Tribunal misdirected itself by finding that it needed to be satisfied that the Council would pay a developer for the excess reserve land where in reality it needed only to have been satisfied that the Council would accept the excess land as a development contribution offset in another development. The Tribunal did accept the land would likely have been accepted as a development contribution offset in the context of Lot 3 and agreed with Silverwood’s expert valuer, Mr Stafford-Bush, that such a land contribution was a reasonable expectation at the required date even in the absence of a Developer’s Agreement. Clearly that same land would have been acceptable for an offset in another nearby development. The Tribunal was also wrong to find the fact that a hypothetical purchaser might not necessarily own other land ripe for development meant that the potential for the reserve credit should not be taken into account. Silverwood itself was a developer with other development land including Lot 4. The loss of Lot 3’s excess reserve land was a loss to Silverwood for which it needed to be compensated
pursuant to the requirement in the Act for full compensation to be provided.
(b)In any event, a willing and well-informed developer purchasing in the area at that time would have known of the existence of the reserve credit practice and its value and also that a willing seller like Silverwood here would not have been prepared to sell the land without that value being recognised. That purchaser would know that the surplus provided would have gone into a “reserves ledger” and been available to offset against reserve contributions for other developments (like that on Lot 4 here).
[39] In addition, the only valuer who gave evidence as to the value to assign to the reserves credit here was Mr Stafford Bush. He used a figure of $33 per square metre for his calculations, based upon his knowledge and evidence of comparable nearby Whitby Coastal Estates Limited land and a similar rate in that case agreed with the Council. That Coastal Estates Limited land was acquired by the Council in July 2013 like here also “for use in connection with a road and associated bush and ecological protection purposes”. Mr Stafford Bush in his evidence also gave other examples of reserve or similar land transactions in the general area ranging from $25/m2 in 2004 to $416m/2 in 2018. There was no challenge or contradiction to Mr Stafford Bush on any of this valuation evidence.
[40] This rate at $33 per square metre (or $330,000 per hectare) we accept is appropriate here and gives an overall value for the reserve land of $886,479. Deducting the reserve contribution the Tribunal agreed the Council would have applied for the Lot 3 development, left a rounded reserve credit of $570,000 here, which would have been available to apply to the reserves ledger.
[41] We accept the arguments relating to this advanced for Silverwood and conclude that, if the reserves credit assessed by Mr Stafford Bush was not recognised, then the surplus reserve land would have been given no value and Silverwood would not have received full compensation for the land taken from Lot 3.
[42] In response, Mr Laing for the Crown endeavours to argue that this claim by Silverwood depends entirely on supposition and the present case is one which is distinguishable from the decision in National Mutual. The Crown contention also is that the claimed value of this reserve credit at $570,000, which would be on top of the total assessed compensation for the acquisition of the 2.68 hectares of land at issue here, (valued at $530,000), in any event is excessive. Mr Laing claims that Silverwood’s per hectare value for the entire Lot 3 block was $133,766 per hectare (which is based upon the before land area of 12.2602 hectares). Alternatively, this amounts to $26,032 per lot for the raw land. This he says is less than half of what Silverwood says this section of its Lot 3 (which Mr Laing says is largely unusable) is worth on a per hectare basis. As a result, the Crown says the appellant’s ultimate position on this aspect is entirely unrealistic here.
[43] As to the first point argued by the Crown, we do not accept that the policy of the Council here at the relevant time was such that it would not have approved a reserve credit and further that the National Mutual case does not assist. There was evidence before the Tribunal that the Council had entered into many development agreements of this type which were common with developers in the area. The Tribunal appeared entirely to ignore this.
[44] We find, too, that the effort by the Crown to suggest that a willing and informed purchaser of Lot 3 would not necessarily have known of the existence of a reserve credit practice and its value here and that a willing seller like Silverwood would have been prepared to sell the land without that value being recognised, is wrong and unsupportable in all the circumstances here. In our view, this does not represent the reality of assessing the true market value of a residential development block
[45] The area of “taken” land of Lot 3 amounts to an area of 2.6845 hectares which Mr Stafford-Bush has assessed at $570,000. This is the amount that would be applied to a reserves ledger in other parcels of land owned by Silverwood.
[46] From the evidence of Mr Stafford Bush also we accept his conclusion that higher values may have been placed on the ecological value of this particular Lot 3 land, as indeed it had a higher and better value to the Council than it might have had
as land available to be developed and sold. This is supported by sales of other reserve land transactions within the general area.
[47] In all respects, we accept the Crown arguments relating to this surplus reserve credit which should have been allowed to Silverwood here.
[48] For all the reasons we have outlined above, we find this reserves credit claim of $570,000 is justified and we conclude the Tribunal erred in refusing it.
Lot 3 – the adoption of a deferral discount rate of 8.5 per cent instead of
7.5 per cent
[49] The Tribunal in its decision held that a deferral adjustment should apply to Lot 3 to reflect the likely time delay to development and to reflect the risk of holding development land with future subdivision potential. It noted the parties had discussed the use of 7.5 per cent to account for this in assessing the current value of builders’ sales, but then the Tribunal went on to apply a rate of 8.5 per cent, which it said was appropriate to reflect those risks.10
[50] The appellant contends first that the Tribunal had already applied a higher profit and risk allowance to Lot 3, which was 30 per cent, compared with the 25 per cent figure which had been applied to Lot 4. That higher risk of holding Lot 3 until development, the appellant says, had therefore already been recognised in the higher profit and risk allowance.
[51] We do not accept this argument advanced by the appellant as a valid one. The additional percentage, be it 7.5 per cent or 8.5 per cent as a deferral adjustment, relates largely to the time cost of money, which as we see it is a different concept altogether.
[52] And, as to the use by the Tribunal of 8.5 per cent rather than the 7.5 per cent rate, we note from Mr Casey’s submissions that, had the Tribunal applied this
7.5 per cent rate, the compensation paid for Lot 3 would have been increased only by the sum of $26,000.
10 Decision at [42].
[53] This is not a large amount given the overall scale of the total compensation paid to the appellant here. At one level therefore, arguably this is not a matter such that requires major findings on our part. Nevertheless, we are of the view that the Tribunal’s conclusion, whereby the agreed position from all parties and their valuers that 7.5% here was the appropriate rate to account for the time-cost of money and certain other general risks should simply be ignored, was quite wrong. The Tribunal gave no explanation or justification when, in its decision, it simply applied a discount rate of 8.5% instead of the agreed rate of 7.5%. The Tribunal’s findings on this point must be regarded as wrong. The respective valuers agreed on the proper position as 7.5% and without more, this should have prevailed. This aspect of Silverwood’s appeal, therefore, succeeds also. The compensation for Lot 3 is to increase by a further
$26,000.
Lot 3 – further grounds of cross-appeal advanced by the Crown
[54] Finally, and for completeness, we turn to address briefly issues advanced before us in the Crown’s cross-appeal in relation to Lot 3, whereby it asserts that the Tribunal has erred by:
(a)Adopting a 30 per cent profit and risk allowance in the before, rather than 35 per cent;
(b)Concluding that land would have been accepted as an offset for a (monetary) reserve contribution;
(c)Arriving at a before value (rounded) of $757,000 and an after value (rounded) of $198,000 (both exclusive of GST, if any).
[55] Before beginning our consideration of these aspects advanced by the Crown, we note they form part of the Crown’s notice of cross-appeal, comprising over 16 pages, filed in this Court on 8 March 2022, a little over two weeks after Silverwood’s notice of appeal against the Tribunal decision.
[56] Mr Casey, for Silverwood, before us contended that the Crown with its cross- appeal, simply wished to reinvent its case before this Court. He argued the Crown’s
grounds on its cross-appeal largely echo its submissions made generally unsuccessfully before the Tribunal but with one or two novel grounds not previously raised or in dispute. He adds that on this appeal the Crown is arguing for a compensation amount that is even lower than what it advocated for at the outset of the Tribunal hearing. Mr Casey contends, too, that the Crown seeks, in response to Silverwood’s own appeal, to itself whittle down Silverwood’s compensation in every respect and even to put in issue matters which earlier were the subject of agreement between the parties’ experts. This, it is suggested, is entirely unreasonable,
[57] We say nothing on these aspects at this point, other than to note that in response to Silverwood’s appeal to this Court against the Tribunal decision, (which appeal was essentially limited to three principal issues) the Crown in its cross-appeal filed some two weeks later, raises 13 separate points by way of cross appeal. Mr Casey maintains that the Crown here simply challenges every aspect of the Tribunal’s decision which might be seen as unfavourable to it, as well as raising issues that were not in contest before the Tribunal.
[58] With these comments in mind, we turn to consider briefly each of the cross-appeal points relating to Lot 3 noted at paragraph [54] above.
Adopting a 30 per cent profit and risk allowance in the before, rather than 35 per cent
[59] Before us, the Crown argued that the Tribunal’s conclusion as to the risk of access in the “before” was incorrect and that a higher profit and risk allowance of 35 per cent (rather than the 30 per cent allowed) should be applied in the “before” to reflect what it says were greater risks in relation to that access.
[60]In our view there is little in this cross-appeal ground advanced by the Crown.
[61] In its decision, the Tribunal adopted a profit and risk allowance of 30 per cent in both the before and the after. The Crown’s position is that a higher profit and risk allowance is appropriate in the before because at the applicable dates this Lot 3, it argues, did not have legal or physical access to a road and any notional potential for access under a 2001 option agreement, which was in place, meant there were greater
risks involved. This aspect involved adjoining land which had been acquired later by the Crown for a link road which, as we understand the position, meant that any anticipated access road under the option agreement could have been constructed in a neighbouring development. But overall, given time, potential access to this land could only be seen as improving given the development of link and other roads in the area.
Acceptance of reserve land in lieu of a monetary reserve contribution
[62] The overall availability of a “reserves credit” has been discussed above. This particular aspect however relates to the Tribunal’s decision to deduct from the development costs in the before situation $5,000 per lot for reserve contributions. There is also nothing as we see it in this argument advanced for the Crown.
[63] On this, the Crown challenges too the Tribunal’s finding that the Council would have accepted Lot 3 land in lieu of a monetary reserve contribution upon development of Lot 3 in the “before” situation. The Crown argument is premised on the fact that the Council’s 1999 district plan (which applied at the specified date of relevance here) provided for cash contributions only.
[64] The Crown contention here is that the approach adopted by the Tribunal has led to what it says is a “windfall” for Silverwood. In our view this contention is wrong. The evidence before the Tribunal included the Council’s 2019 Development Contribution Policy which confirmed that for some considerable time it had been accepting land in lieu of cash contributions. The policy referred to the Council having a “long track record” of entering into Development Agreements relating to the provision of land by way of these contributions. Also in evidence before the Tribunal was the 2011 Duck Creek Comprehensive Development Plan, which endorsed a Reserves Agreement. Under this, the Council agreed to accept reserve land in lieu of council contributions payable in respect of the subdivision of Duck Creek land in the Whitby area.
[65] Again, we are satisfied there is no substance in this ground of cross-appeal advanced by the Crown. It is dismissed.
Adoption of the discount rate before deferral of 8.5 per cent instead of higher discount rates
[66] As we have noted at paragraph [48] above, the Tribunal found that a discount rate of 8.5 per cent should be used to calculate the deferral adjustment for Lot 3, on the grounds that it was appropriate to reflect the higher risk associated with holding Lot 3 until development. The Tribunal disagreed with discount rates of 10 per cent in the before and 15 per cent in the after, which had been put before it in evidence provided for the Crown by Mr Bevin.
[67] The primary position adopted by the Crown here remains that the profit and risk amount of 10 per cent and 15 per cent should have been used for Lot 3 in the before and after respectively. The Tribunal had rejected this contention advanced in the evidence of Mr Bevin.
We have no doubt the Tribunal was correct to do this, but as we have noted at [53] above, it was wrong to ignore the agreed position between the parties’ valuers that
7.5 per cent was appropriate. The Crown cross-appeal in this area is dismissed.
The Tribunal arrived at incorrect values
[68] So far as Lot 3 is concerned, the Tribunal arrived at a current before value (rounded) of $757,000 (exclusive of GST, if any) and a current after value (rounded) of $198,000 (exclusive of GST, if any).
[69] On the basis of what he suggests are errors on the part of the Tribunal that I have referred to above, Mr Laing for the Crown concludes that the Tribunal erred in adopting these particular before and after values, the adjusted calculations for which he has set out in submissions before us.
[70] Given that we do not accept any of the arguments advanced by the Crown on its cross-appeal in relation to Lot 3, we need say nothing more on this aspect. This argument for the Crown is also dismissed.
Conclusion on Lot 3
[71] For all the reasons we have outlined above, our conclusions relating to Lot 3 are:
(a)Silverwood’s appeal in relation to compensation for the loss of the reserves credit succeeds here. That compensation for Lot 3, which the Tribunal had assessed at $559,000 is now increased by a further sum of
$570,000 to a new compensation payment for Lot 3 of $1,129,000.
(b)Silverwood’s appeal in relation to a deferral adjustment rate of 7.5 per cent, instead of 8.5 per cent, (amounting to a further compensation payment of $26,000), also succeeds. Total Lot 3 compensation to be payable to Silverwood is now at $1,155,000.
Orders to this effect are to follow.
[72] So far as the Crown’s cross-appeal with respect to Lot 3 is concerned, none of the grounds advanced in support of the cross-appeal are made out. The cross-appeal relating to Lot 3 is accordingly dismissed.
[73]We now turn to consider the issues relating to Lot 4.
Lot 4 – appeal and cross-appeal relating to Lot 4 – that the injurious affection was offset by betterment?
[74] As we have noted at paragraph [6] above, Silverwood’s appeal relating to Lot 4 challenged the finding of the Tribunal that any injurious affection to Lot 4 was offset here by betterment.
[75] On this aspect, in its decision the Tribunal did accept that a discount for injurious affection should be applied to Lot 4. However, it went on to hold that any injurious affection was offset by betterment.11
11 Decision at [93] – [94].
[76] Silverwood contends in this aspect of its appeal that the Tribunal’s decision erred in two respects:
(a)There was insufficient evidence before the Tribunal to support a finding of betterment as a matter of fact because:
(i)The 2013 valuation assessment before the Tribunal, completed by Mr Truebridge, does not support its conclusion; and
(ii)The evidence from the valuation witnesses for both parties was that there was no betterment; and
(b)The Tribunal did not attempt to quantify either the betterment or the injurious affection it considered it was offsetting.
[77] The Tribunal found here that the reason injurious affection to Lot 4 was offset by betterment was because:
(a)The whole subdivision would benefit from an easier and quicker journey to the TGM and beyond;
(b)Both Silverwood’s and the Crown’s valuers were wrong when they had ignored the betterment gained by the subdivision adjoining the Link Road and its access to the TGM; and
(c)The valuers involved in the 2013 acquisition for the Whitby Link Road concluded that injurious affection there was offset by betterment.
[78] Issues of betterment were discussed at some length by this Court and the Court of Appeal in Green & McCahill Holdings Ltd v Auckland Council.12 In both Courts, findings were made that a high evidential threshold had to be met before betterment could be deducted from a compensation award:
12 Green & McCahill Holdings Ltd v Auckland Council [2013] NZHC 5017; and Auckland Council v Green & McCahill Holdings Ltd [2015] NZCA 20; [2015] NZAR 849.
There has to be a proven causative connection arising out of the public work or prospect of the work that results in betterment. The increase in value must be causally linked in a way that is more than minor. Convincing evidence is required.13
The words “caused” and “likely” indicate the need for a proven causative connection arising out of the public work. In other words, betterment must be established as a matter of fact.
Secondly, the reference to the “prospect” of the work also indicates proposed
work may cause an increase in value. In some situations, a hypothetical purchaser may in fact recognise the prospect of the work causes an increase in value…but this is a factual question to be answered in the particular case.14
[78] In order for the Tribunal here to have offset injurious affection completely on account of betterment, it was required, therefore, to:
(a)Be satisfied there was convincing evidence of a causative connection between the work (or prospect of it) that resulted in betterment that was more than minor; and
(b)Quantify both the betterment (as established by the evidence) and the injurious affection it was said to offset.
[79]That raises the obvious question: what evidence did the Tribunal rely on here?
[80] On this aspect of its appeal, Silverwood suggests that despite the Tribunal’s finding otherwise, there was in fact no betterment to offset the accepted injurious affection, and accordingly a $1.2 million increase in compensation is sought relative to Lot 4. In our view, this is a somewhat difficult matter. Two issues arise:
(a)Whether the Tribunal was correct to be satisfied there was convincing evidence before it of a causative connection between the work (or a prospect of it) that resulted in betterment here that was more than minor; and
13 High Court decision at [80].
14 Court of Appeal decision at [29] and [30].
(b)That the Tribunal was right on the evidence to quantify both the betterment and the injurious affection it was said to offset as being of equal value?
[81] Turning first to the evidence the Tribunal relied on here, this appears largely to be a report prepared by Truebridge Partners, dated January 2013, filed by the Crown less than a week prior to the hearing before the Tribunal. It seems with little prior warning, the Crown referred to this Truebridge report to support its submission that injurious affection for Lot 4 was completely offset by betterment.
[82] The Truebridge report found there was betterment established in relation to a different parcel of land (being land acquired for the Whitby link road from Whitby Coastal Estates Ltd) from the land at issue in the present case. The valuer concerned found that there was betterment from the increased access which to an extent offset the injurious affection to that land, although the report concluded it was reasonable here to still account for a net discount of 10 per cent for injurious affection in any event. But, even if the Truebridge report did provide any justification for the Tribunal’s inquiry of betterment in the present case, the author of that report did not give evidence before the Tribunal, nor was his analysis of injurious affection and betterment in that report addressed in any of the Crown’s other evidence.
[83] It is noteworthy that the Truebridge report, a report relied on significantly by the Tribunal, was prepared prior to the judgments of this Court and the Court of Appeal in Green & McCahill Holdings Ltd v Auckland Council15. In both the High Court and Court of Appeal judgments in the Green & McCahill case, it was found that a high evidential threshold had to be met before betterment could be deducted from a compensation award. Convincing evidence of an increase in value relating to betterment was required. It was made clear, too, that betterment had to be established as a matter of fact in each particular case.
[84] Turning now to the question as to what evidence of betterment was before the Tribunal here, in its decision at paras 93 and 94, the Tribunal found:
15 Above at n 12
[93] We agree with Mr Bevin that 38 sections adjoining the link road will suffer some injurious affection. However, we also consider that the whole subdivision (100 lots) will gain from betterment by an easier and quicker journey to TGM and to Wellington CBD.
[94] Both valuers ignored the betterment of the link road to TMG and we are of the opinion that any injurious affection is offset by betterment. This was also the opinion reached by the valuers for the 2013 acquisition of the Whitby link road. This results in a gross realisation of $22,500,000 (inclusive of GST, if any) in the After.
[85] Despite this, the valuation evidence provided by the Crown before the Tribunal was that in fact there was no betterment:
We have considered whether betterment would apply to the properties in the current instance, particularly as there is potential access to be provided to both areas.
…
In our view, these arguments could only be valid if the road formation was imminent and would have an impact on the development potential of the land. If development potential pointed to lower residual values than considered appropriate by direct comparison, then it would seem illogical that excess in development cost issues were a cause for betterment to be attributed.
[86] Further, after concluding that the work or the prospect of the work would result in some injurious affection to the land, the Crown valuers went on to state:
We do not consider the same can be said for betterment. The simple provision of access will, in itself, create higher block values.
…
Finally, market participants are quick to identify potentially negative aspects of a property and less so with potentially positive aspects, particularly where the timing of precise benefits may not be clear.
In conclusion, we have made no allowance for betterment.
[87] In response to this, Silverwood’s valuation evidence provided by Mr Stafford-Bush, which followed that of the Crown’s witness, referred to the influence of the Green & McCahill decisions in making any assessment of betterment, meaning now that it must be instant and measurable and an immediate consequence, and not just a potential from future works. Mr Stafford Bush in his evidence did reference an earlier historical valuation by Truebridge Partners which was in evidence before the Tribunal, which had made some allowance for betterment. This clearly had
been superseded here by reports from both the Crown and Silverwood, based on the final design of the roads and frontages and the parcels of land to be taken, all of which concluded there was no betterment in this case.
[88] As we see it, the Tribunal was wrong in the face of this evidence from the valuation witnesses for both parties, to determine that betterment had been “ignored”, because it was not. As we see that evidence, betterment had been considered by valuation experts and they agreed there was none in this case. Given that valuation assessment, it seems to us not surprising that neither Silverwood nor the Crown had any reason to address the possibility of betterment in the claim or in their evidence before the Tribunal, particularly, too, as it was not raised by the Tribunal itself during the hearing. Nor, it seems to us, were the valuation experts Mr Bevin and Mr Stafford-Bush experts in traffic engineering or traffic planning. As a result they were unable to offer any expert opinion as to the supposed travel time reduction arising from the link roads which seemed to have influence with the Tribunal.
[89] We conclude on this aspect that there was little, if any, conclusive evidence before the Tribunal relating to betterment in respect of the land being acquired from Silverwood. Both valuer witnesses, if anything, considered there was no betterment. It seems the Tribunal has substituted its own opinion, supported only by the late-produced Truebridge report. That report, as we record, provided a compensation assessment in respect of an unrelated piece of land at a different time, and it decided there was an unquantified amount of betterment in that case, set off against a degree of injurious affection. In our view, the Tribunal was wrong to place a determining reliance on this Truebridge report. Its decision that injurious affection (at whatever amount) was precisely offset by betterment cannot stand.
[90] Even if we may be wrong on this aspect, we turn for a moment to consider what might be a possible quantum of injurious affection or betterment here. In this case the Tribunal broadly equated its finding of betterment to equal injurious affection. As we see the position however, there was no analysis of any kind undertaken relating to this. No definitive value, in dollar or other terms, for injurious affection or betterment was assessed. That is precisely the approach that both the High Court and the Court of Appeal in the Green & McCahill decisions found to be wrong.
[91] On this aspect, the Court is able to make its own assessment on the merits of this case and to quantify the level of injurious affection compensation that needs to be awarded to Silverwood.
[92] The approach adopted by the Crown valuer Mr Bevin provides for an injurious affection award to be made in the vicinity of $500,000. Mr Stafford-Bush’s assessment based on a forensic lot by lot approach results in an injurious affection rate of 8.7 per cent. Applied on a gross realisation figure of $22,500,000, this provides for an injurious affection sum of $1,200,000.
[93] Mr Bevin disagrees on this $1,200,000 injurious affect amount which is based on gross realisations of 38 sections rather than the residual amount that takes into account sales costs, developers’ profit and risk, construction costs and interest on outlay. It is this latter figure which is the key, not the amount of the adjustment to the gross realisation. We agree with Mr Bevin on this aspect, as it is the residual after value that is the key and not the gross realisation. Mr Bevin’s approach to injurious affection which relies on the residual amount calculation as $498,000 (rounded upwards to $500,000) is therefore preferred. This calculation considers not only the change in gross realisation attributed to injurious affection of 38 lots, but also the subsequent costs of development, profit and risk, contingencies and interest on outlay. It is our view that the sum of $500,00 is appropriate here for injurious affection, and as the valuer witnesses agreed, no allowance for betterment should be made in this case.
Conclusion on Silverwood’s appeal
[94] For all the reasons outlined above, it will be apparent that Silverwood has satisfied us the Tribunal’s decision was wrong and that, rather than referring this matter back to the Tribunal for determination, the appropriate course here is for this Court to substitute its own compensation assessment.
[95] Doing so, that assessment is now for total compensation to be paid to Silverwood of $5,855,000 comprising:
(a)compensation for Lot 3 of $1,155,000; and
(b)compensation for Lot 4 of $4,700,000.
Cross-appeal by the Crown
[96] As we have noted at paragraph 7 above, the Crown’s cross-appeal here in relation to Lot 4, argues for a reduction in the $4,200,000 compensation figure awarded by the Tribunal to a maximum figure of $1,831,000. The cross-appeal in relation to Lot 3 also argues that the Tribunal compensation award of $559,000 should be reduced to not more than $226,000.
[97] Paragraph [54] above outlines the three different cross-appeal grounds raised by the Crown relating to Lot 3. We have addressed those to dismiss them all at [59] to [70] above.
[98] Paragraph [8] above also outlines the nine different grounds argued before us by the Crown in support of its cross-appeal relating to Lot 4.
[99] As we have noted at paragraph [55] above, the Crown’s cross-appeal followed the appeal lodged in this case by Silverwood. According to Silverwood it is entirely reactive and without merit. To a large extent, we agree and dismiss the cross-appeal in its entirety. Notwithstanding this, we will turn briefly to consider now each of the nine cross-appeal grounds relating to Lot 4 we have outlined above at [8].
(a) The Tribunal erred in finding a hypothetical subdivision analysis was appropriate to address the value of Lot 4
[100] For the reasons we have outlined above, we find there is no substance in this contention. The hypothetical subdivision analysis, cross-checked with other methods including the block sales analysis adopted by the Tribunal here, in our view was entirely appropriate. As we have said before, International Valuation Standards support this position.
[101] As the Tribunal acknowledged at paragraph [55] of its decision, it was appropriate for more than one valuation method to be used and the results reconciled. The Tribunal, it seems, did consider the block sales evidence before it, even if it had first undertaken the hypothetical subdivision analysis. In considering that block sales
evidence before it, the Tribunal derived a range of values of between $148,000 and
$374,000 per hectare. In undertaking the hypothetical subdivision analysis and determining (as it was entitled to do) various inputs that were in dispute between the parties, the Tribunal derived a before value equating to a rate of $186,000 per hectare. This fell within the range it had reached using the block sales method. Properly too as we see it, the Tribunal acknowledged that the after value fell beneath that range, justifiably attributing this to increased engineering costs per lot in the after.
[102] The legal approach adopted by the Tribunal was in line with that which was endorsed by the Court of Appeal in Boat Park Ltd v Hutchinson.16
[103] The opposition by the Crown before us to the Tribunal’s application of the hypothetical subdivision approach, in our view, is narrow and wrong. In this area its arguments have little if any weight and in this case the two valuation methods employed by the Tribunal were sufficient. We say nothing more on this aspect.
(b) The Tribunal erred in finding that Silverwood’s valuer made no reference to the Duck Creek North sale in his assessment of the value applied for Lot 4
[104] Here, the Crown suggests the Tribunal incorrectly stated that Mr Bevin, in his assessment of the per hectare rate for Lot 4, made no reference at all to the Duck Creek North sale. In our view this matter is quickly disposed of.
[105] At paragraph 58 of its decision, the Tribunal noted that Mr Bevin had listed seven sales and had noted that the two Whitby sales (Duck Creek North and Duck Creek South) were the most comparable by location to the present case.
[106] Then, at paragraph 60 of its decision, the Tribunal noted that Mr Bevin had explained that Duck Creek South provided the proper point of comparison and it was the closest comparable sale. The Tribunal in its decision at [62] went on to note the comment that Mr Bevin’s analysis here related to the Duck Creek South sale, hence his comments regarding this. But this was not a statement by the Tribunal that Mr Bevin had omitted any mention of Duck Creek North altogether.
16 Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 at [84].
[107] And, in any event, the Tribunal as we see it was entitled to assess the valuation evidence here upon which it relied. For these reasons this cross-appeal ground is dismissed.
(c) The Tribunal erred in concluding the Duck Creek South sale was an inferior sale to Lot 4
[108] In its decision, the Tribunal concluded in assessing the block sales data that the two sales at Duck Creek and the sale at Navigation Heights might give a relevant starting point for the Lot 4 before value here, with Duck Creek South regarded as inferior and Duck Creek North and Navigation Heights regarded as superior. It is the Crown’s contention that this was an incorrect conclusion. We disagree.
[109] Mr Bevin, in his own evidence, explained that Duck Creek South was inferior in some respects to Lot 4 and superior in others. This is why, as we understand it, he settled on the view that Duck Creek South sale was broadly comparable with Lot 4.
[110] Notwithstanding this, there were a range of comparisons between the Duck Creek South land and Lot 4 in evidence before the Tribunal which as we see it would point here to Duck Creek South in relative terms being inferior. These include:
(a)Duck Creek South was low-lying and prone to flooding, even according to Mr Bevin’s evidence.
(b)Lot 4 was elevated with better views and outlooks, which it seems witnesses for the Crown did not take into account.
(c)Duck Creek South (and also in fact Duck Creek North) required significant amounts of fill to build up the ground level and this would have needed to have been imported. Material on-site, it seems, was unsuitable too and this would have needed to be exported, this needed to be compared with lots 3 and 4 where the earthworks undertaken were able to be utilised or disposed of on-site, either as cut-to-fill or cut-to-waste.
[111] We reject this cross-appeal ground advanced for the Crown. Clearly it was open to the Tribunal on all the evidence before it to conclude that Duck Creek South was inferior to Lot 4 and certainly, at least, in the before.
(d) The Tribunal erred in finding the valuers did not adjust the block sales for all material differences between the sales and Lot 4 before and after
[112] The Crown complaint here is that at [70] and [71] of its decision, the Tribunal found that neither of the valuers, Mr Bevin nor Mr Stafford-Bush, adjusted block sales for all material differences between the sales, and Lot 4 before and after. Those material differences would be to include sale conditions, the time of the sale, differences between the location and physical configuration of the lots, development costs, and section yield.
[113] The Crown contends that contrary to what the Tribunal itself said, Mr Bevin did make adjustments for size, contour, proximity to the TGM, and any other perceived advantages or detriments. We make no firm finding on this. Suffice to say that, in our view, the Tribunal did consider block sales material even if only as a final check on its valuation decisions. It was entitled to reach the conclusion it did.
[114]We dismiss this ground of cross-appeal accordingly.
(e) The Tribunal erred in finding the analysis of the Lot 4 after sale was an unreliable method to be given little weighting
[115] In 2018, the balance of Lot 4 was sold on an open market sale. Although this was very much after the critical time date event here, the authorities have suggested that post-valuation sales in appropriate cases can be taken into account. Here, it seems both valuers to an extent used this subsequent sale as a “check”.
[116] Here, the Crown objection is that the Tribunal was wrong to conclude that the analysis of the later sale of this Lot 4 residual in 2018 was unreliable, and should be given little weighting in its considerations.
[117] In our view, the Tribunal’s reason for deciding to discount to some extent the later sale of Lot 4 is a logical and valid one. The Tribunal’s concern as we see the
position does not appear to be directed at the use by the valuers of a post-dated sale per se. Rather, it considered the analysis of that sale and particularly the reliance on rates of increase.
[118] Here, an increase in sale prices for residential sections in this general Whitby area over the three year period concerned we are satisfied did not mean necessarily a comparable increase in the value of a block of developable land. Other factors such as development costs, the number of sections available on the market, and builders and housing demand, were critical considerations. Certainly evidence of how these may have also changed at the time would be important. This was absent here, however.
[119] We are satisfied the Tribunal did not err to such an extent that its decision on block sales issues should be overturned here on this ground. This cross-appeal head advanced by the Crown also is dismissed.
(f) The Tribunal erred in finding Lot 4 was ripe for development
[120] Here the Crown contends that Lot 4 was not ripe for development because it did not have legal or physical access at the specified dates. Linked to this, as we understand it, was the suggestion from the Crown that any development of Silverwood’s land here would have also resulted in an over-supply of residential sections in the Whitby market.
[121] As we understand it, however, neither of these propositions were put to relevant witnesses before the Tribunal.
[122] Notwithstanding this, we are satisfied that in any event there is little in these arguments advanced for the Crown. With the subdivision consent from the council obtained by Silverwood, this development, it might be said, was “good to go”.
[123] On the access question, as we understand it, all valuation witnesses agreed at caucusing that access was indeed available at the specified date. This was also confirmed by Mr Bevin in cross-examination. This point is of little substance here.
[124] So far as the market saturation claim is concerned, there seemed to be little, if any, expert evidence before the Tribunal relating to this aspect. Timing issues here relating to the adjacent Navigation Heights development were relevant. It does seem too the only evidence before the Tribunal as to sell-down risk was from Mr Stafford-Bush, where he adopted a 25 per cent profit and risk allowance when asked if he saw much risk in his general realisation period.
[125]There is little in this argument advanced for the Crown. We dismiss it.
(g) The Tribunal erred in accepting profit and risk at 25 per cent as being appropriate for hypothetical subdivision analysis
[126]Again, this cross-appeal ground is quickly disposed of.
[127] The Tribunal in its decision noted that Mr Bevin maintained that 30 per cent was appropriate for profit and risk in the before and after, although he had made no allowance for removing an earlier lot, (lot 6), taken by the Crown, from his analysis. Conversely, Mr Stafford-Bush reduced his profit and risk allowance from 30 per cent to 25 per cent because of what he said was the reduced risk from removing lot 6 from the assessment.
[128] In its decision, the Tribunal accepted that this 25 per cent allowance for profit and risk was appropriate.
[129] The Crown’s contention that the percentage adopted was wrong, in our view has not been justified in any way. The Tribunal was entitled to accept this profit and risk at 25 per cent. No error occurred here. This aspect of the cross-appeal is also dismissed.
(h) The Tribunal erred in accepting the development costs provided by Mr Blyde for Silverwood, including the claimant’s contingency of 10 per cent, on the basis that the detail work would have been undertaken to then complete a conditional sale
[130] Mr Blyde was the only expert giving evidence before the Tribunal in this area. The Crown chose not to give directly relevant evidence from a comparable expert. Clearly before the Tribunal, it was impressed with the experience and familiarity
Mr Blyde had with the immediate Whitby locality and the nearby developments in which he had been involved. His evidence for Silverwood was clearly preferred to that of the person advanced by the Crown as its expert, Mr Beachan, whose expertise it seems was entirely different and related to major roading projects for the national roads body.
[131] We are satisfied here that the Tribunal acted properly in accepting Mr Blyde’s evidence including his highly experienced 10 per cent contingency figure, and the conclusions it formed were appropriate in all the circumstances. Again, there is nothing in this cross-appeal ground advanced by the Crown. It is dismissed.
(i) The Tribunal erred in adopting a value for Lot 4 of $5,800,000 in the before and
$1,600,000 in the after
[132] This ground has been addressed in some detail above. The figure adopted by the Tribunal for Lot 4 of $31,700 per lot or $186,000 per hectare in the before and
$16,000 per lot in the after was appropriate.
[133]We dismiss this cross-appeal ground as well.
Conclusion on Crown’s cross-appeal
[134] It will be apparent from the above that the Crown’s cross-appeal fails and is to be dismissed. As we see the position, a possible argument does exist here, as Mr Casey has contended, that the Crown in this cross-appeal has sought to an extent to “whittle down” the compensation provided to Silverwood in a situation where it is entitled to receive the “complete equivalent of that which has been taken away from it”. Arguably, this is not in accordance with fundamental compensation principles in terms of s 60 of the Act. These provide for “full compensation” meaning that a claimant is to receive the full equivalent of what has been lost and not have that entitlement unreasonably reduced from a proper figure in significant respects.17
17 Drower v Minister of Works and Development [1984] 1 NZLR 226 at [29].
Result and remedy
[135] Silverwood’s appeal succeeds. As we see the position, there is sufficient material before us on which we can properly conclude what compensation should be paid to Silverwood here. As a result, the decision of the Tribunal is set aside and quashed. Substituted, therefore, is the following:
(1)Silverwood is to be paid total compensation of $5,855,000 comprised as follows:
(a) Compensation for Lot 3 of $1,155,000; and
(b) Compensation for Lot 4 of $4,700,000.
[136]The Crown’s cross-appeal is dismissed in its entirety.
Costs
[137] Issues of costs both in this Court and in the Tribunal (costs in the Tribunal having been reserved) are reserved. No substantial submissions were advanced to us for the parties on costs.
[138] The parties are urged to liaise with a view to endeavouring to settle those issues of costs.
[139] If agreement cannot be reached on costs, then the parties may file in this court memoranda of submissions on costs (sequentially with those memoranda not to exceed five pages). These are to be referred to us for costs decisions then to be made on the papers.
Solicitors:
Claymore Partners Ltd., Auckland Simpson Grierson, Wellington
Gendall J (For the Court)
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