WILLIAM STANLEY RANDLE AND DAPHNE STEWART RANDLE Appellants AND CONTACT ENERGY LIMITED

[2001] NZCA 448

IN THE COURT OF APPEAL OF NEW ZEALAND  CA258/00

BETWEENWILLIAM STANLEY RANDLE AND DAPHNE STEWART RANDLE

Appellants

AND                CONTACT ENERGY LIMITED

First Respondent

ANDELECTRICITY CORPORATION OF NEW ZALAND LIMITED

Second Respondent

Hearing:  19 November 2001

Coram:Gault J Heron J Gendall J

Appearances:             C S Whitnall QC and J A Kean for Appellants

M R Camp QC and N M Gaffaney for Respondents

Judgment:                 19 November 2001

JUDGMENT OF THE COURT DELIVERED BY GAULT J

[1]    In High Court proceedings the appellants alleged nuisance, liability under the Rylands v Fletcher principle and negligence by the respondents arising out of the construction and operation of the Roxburgh hydro dam. The damages sought are in respect of losses said to be consequential on flooding. On the application of the respondents Master Venning ordered the pre-trial determination of certain questions under R 418 of the High Court Rules. In a judgment delivered on 25 September 2000 John Hansen J determined those questions in favour of the defendants, effectively resolving the proceedings in favour of the present respondents. The

appellants filed an appeal in this Court but as it was out of time they sought and were granted leave to appeal by John Hansen J. In his separate leave judgment the Judge noted that the appellants abandoned causes of action in nuisance and under Rylands v Fletcher. Therefore the only question remaining is one relating to negligence, more specifically whether or not the appellants' rights of action are barred by the provisions of an agreement underlying a compensation certificate issued pursuant to s17 of the Public Works Amendment Act 1948.

[2]    The allegations of negligence are the same against each of the respondents and are in respect of the period of their respective ownership and operation of the Clutha power schemes.

[3]    The negligence is said to lie, in essence, in operating the Roxburgh power generation scheme which resulted in the build-up of silt in the river bed and omitting to take remedial steps to prevent the flooding which caused damage to the appellants land and crops. The amended statement of claim alleged against the first respondent:

32.FOLLOWING the 1995 flood the plaintiffs became aware that the real cause of the repeated flooding was due to the actions of the defendants.

33.THE defendants have acted tortiously with a view to profit in knowing the risk to the plaintiffs' land from flooding and electing to take no action to prevent or minimise it.

…

49THE first defendant by their conduct and acceptance of all liabilities of the second defendant, assumed the burden of the second defendants' liabilities for negligence in that:

49.1Created the risk of flooding but failed to help or prevent damage.

49.2Failed to properly design the hydro scheme to prevent silting of riverbed.

49.3Failed to flush the river in a timely manner to prevent flooding. As a consequence of the above

failure a sandbar built up at the mouth of the Manuherikia River.

49.4Considered several methods of controlling the river and protecting property and failed to undertake any of them.

49.5Had control of the impounded water and failed to adequately exercise that control.

49.6Failed to utilise the knowledge, skill and expertise available to the defendants to avoid damage to the plaintiffs.

49.7Negligently misrepresented to the plaintiff that the river flows were abnormal and beyond the defendants' control

AND

49.8Approaching the plaintiffs directly and unsolicited and misrepresenting to them that they are the party to whom the plaintiff should look for compensation.

49.9Failing to advise the plaintiffs that they should seek legal advice.

There were the same allegations against the second respondent.

[4]    The background facts are that the appellants are horticulturists who own land near Alexandra where there is the junction of the Clutha and Manuherikia rivers. Their property is to the south of the Clutha river on the Alexandra/Earnscleugh highway. It was flooded at various periods in 1987, 1988, 1994 and 1995 when the Clutha river and a tributary of the Manuherikia river flooded. The respondents are the successors in title to the Clutha river generating stations and hydro works from the Crown.

[5]    In 1947 the Crown, by Order in Council under the Public Works Act 1932, approved the construction of the Roxburgh power scheme on the Clutha river. The construction began in 1949. From 1947 until mid 1960 the Crown designated Crown land for water power development, or acquired land under the Public Works Act and

set it aside for water power development for the Roxburgh scheme. In January 1954 the Crown leased sections 107, 109 and 112 of the Fraser Survey District to a        Mr I J Frater. The lease was registered against CT369/88. The land in section 112 is part of the land owned by the appellants and is the land relevant to these  proceedings. On 19 February 1958 the Crown published a proclamation taking section 112 for the development of water power under the Roxburgh power scheme.

[6]    Negotiations between Mr Frater and the Crown in respect of compensation ensued. In 1959 the lease was surrendered. At the same time a new lease of sections 107 and 109 was granted to Mr Frater and registered under CT408/102. Mr Frater requested a return of the leasehold interest in section 112 in lieu of compensation for the taking of that land and acknowledged that he would assume the risk of flooding. The request document was drawn up on behalf of the District Commissioner of Works and contained the condition that Mr Frater and his successors would make no further claims for compensation arising from or incidental to the use of the Clutha river for the construction and operation of power schemes and river control work.  Mr Frater signed the request  and  forwarded  it  to  the  District  Commissioner on 23 November 1963. This was agreed to and implemented by the Crown.

[7]    In January 1964 the Minister of Works made a declaration under s35 of the Public Works Act 1928 that the land in question was no longer required for government work. This was gazetted and its effect was to allow the land to be leased to Mr Frater. On 19 November 1964 the Assistant Commissioner of Crown Lands issued a Certificate of Alteration  which  incorporated  the  land  in  question  into  Mr Frater's lease. That was entered on Certificate of Title 408/102 on 26 November 1964. The effect of this was that Mr Frater held a renewable lease over sections 107, 109, and 112. Instead of executing a formal deed of covenant a compensation certificate was registered against the leasehold title on 16 November 1965. The relevant part of the certificate provides:

In consideration for the Crown granting a lease of the area to Ian James Frater, the said Ian James Frater has contracted with the Crown

1.The lessee, successors and assigns will make no further claims for compensation in respect of the above land for

loss or damage arising from or incidental to the use of the Clutha River for construction and operation of the power Scheme and River control works.

[8]    It is common ground that the appellants are successors in title to the land, now renumbered section 214. They acquired their interest in the land in 1985 by  way of deferred payment licence and then in 1995 acquired the freehold estate at which point the respective interests merged. It is also now common ground that the title has been the subject of the compensation certificate at all times.

[9]The questions referred for determination under R 418 included the following:

1.Are the plaintiffs bound by the compensation certificate annexed as Exhibit "A" to the affidavit of David Michael Ryan sworn 17^th February 1999?

2.If the answer to (1) is "yes", does the compensation certificate bar any claim for compensation in support of, or one of:

(i)negligence; and/or

(ii)nuisance; and/or

(iii)the principles of Rylands v Fletcher?

3.If the answer to (2) is "yes", does the compensation certificate bar claims arising out of the construction and operation of both the Roxburgh and Clyde dams or either of them?

[10]John Hansen J answered all three questions in the affirmative.

[11]The notified points of appeal stated:

1.That the exclusion clause contained in the Compensation Certificate is in respect of compensation for damage arising under the Public Works Act 1928, and was intended to cover that type of damage only.

2.Alternatively, that the clause is ambiguous, that liability for negligence is not expressly excluded, it is possible for liability to arise otherwise than by common law negligence, and that in

accordance with established principle, negligence is not covered by the clause.

[12]   The written submissions filed in support of these grounds were directed to the correct construction of the exclusion clause notified in the compensation certificate in its factual and statutory setting and in light of the principles expressed in the judgment of the Privy Council in Canada Steamship Ltd v The King [1952] 1 All ER 305.

[13]   Mr Withnall QC for the appellants, who has been instructed for the appeal, when faced with the respondents' written submissions acknowledged the difficulty of the appellants' case.

[14]   He accepted that Mr Frater's position at the time he entered into the agreement was that, had he not entered into the agreement, once he regained the land any claim in respect of flooding arising from the operation of the power scheme would be for compensation for injurious affection under the Public Works Act. That statutory remedy is exclusive: Farrelly v Pahiatua County Council (1903) 22 NZLR 683, 691; O'Brien v Wellington City Corporation [1928] NZLR 215, 218; Todd, Law of Torts in New Zealand (3^rd ed, 2001) 527.

[15]   By agreeing to forego compensation, Mr Frater was relinquishing the only available remedy for flooding arising from the use of the river for the power schemes. The conclusion of the Judge, therefore, was plainly correct.

[16]   To overcome this difficulty Mr Withnall sought to rely upon the limited scope of the eligibility for compensation. As the authorities make clear, if  the activity giving rise to the claim was outside that for which there is statutory authority, liability at common law can be pursued. It is only liability for negligence in carrying out a public work within a statutory power that is excluded by the compensation regime. In President, Councillors and Ratepayers of Colac v Summerfield [1893] AC 187, 191, the Privy Council said:

As to the first of them, their Lordships think it is very plain that, by his averments of negligence, the respondent did not intend to charge, and was not understood to charge the appellants with excess of their

statutory powers; and that the jury, by their verdict, only meant to affirm that the appellants, if they had seen fit to do so, might have so planned and executed their works as to occasion less injury to the respondent's land. In the Courts below, the case, from first to  last,  was conducted upon the footing that what the appellants had done was done in the exercise of the powers conferred upon them by sect. 384. So long as they act within their statutory powers, negligence is, in any question of compensation, immaterial, and cannot affect the extent of their liability, which is for all damage resulting from the construction or maintenance of their works.

[17]   Mr Withnall submitted that the answers given by the Judge to the questions 2(1) and 3 should be reversed so far as they would preclude the appellants from proceeding with their claims in respect of negligence in conduct outside the statutory authority. That authority, at the relevant times was "to acquire, construct, maintain and work any scheme or schemes for the generation and supply of electrical energy": The State Supply of Electrical Energy Act 1917, s3; The Electricity Act 1968, s11. He contended that the appellants can argue that the statutory authority does not extend to operating the schemes so as to permit the build-up of silt and to omitting to take steps to prevent flooding resulting from that.

[18]   It was pointed out that the difficulties with this approach are that the case was conducted in the High Court without any suggestion that the alleged negligence occurred in the course of activities outside the statutory power; that the pleadings make no such allegation; and that no notice of it was given in the notice of points of appeal or in the appellants' written submissions. A quite different point was there raised going to the kind of compensation to which the compensation certificate related having regard to the terms of the Public Works Act.

[19]   Mr Withnall, after arguing unconvincingly that the pleadings in the amended statement of claim are broad enough to encompass negligence outside the scope of the statutory authority, applied to amend the pleadings. Recognising that more extensive amendment would be desirable, he sought, in the time available to him, as a stopgap, to add after para 49 (and correspondingly after para 52) a new clause reading:

The activities pleaded in paragraphs 49.1, 49.3, 49.4 and 49.6 hereof were not authorised by the statutory powers under which the

Roxburgh Power Scheme was operated and the damage caused to the Plaintiffs' land was caused by such unauthorised activities and not by the lawful use of the Clutha River for the operation of the Power Scheme.

[20]   We heard argument on whether the amendment should be allowed. Mr Camp QC for the respondents opposed the amendments as too late, but primarily on the ground that they would be futile. Mr Withnall addressed this argument relying on  the decision of the English Court of Appeal in Marriage v East Norfolk Rivers Catchment Board [1949] 2 All ER 1021 and particularly the comments of Jenkins LJ (p1034).

[21]   It is, of course, not for us to determine whether or not the flooding of the land in question was caused by negligence within or beyond the scope of the power to maintain and operate the power schemes. But in the exercise of the Court's  discretion we can take into account the apparent lack of strength of the re-formulated case which the appellants seek to pursue. That is not the determining factor  however.

[22] This is not an appeal on an application to strike out the claim. Under R 418 there has been a decision on questions in the case (in effect a trial of part of the claim) and this is an appeal from that. The matter was conducted on the basis of wide-ranging argument in the High Court but without reference to the case now sought to be advanced (although it does seem that it may have been mentioned on the application for leave to appeal). The Judge in the High Court had no occasion to consider the issue. The case proceeded before him on the basis that the alleged negligence occurred in the carrying out of the public work. We consider that it is now too late to re-formulate the case for the purpose of circumventing the judgment already given and going back to the High Court to try a quite different case than that the respondents have had to meet to date. The amendments are refused.

[23]   In the circumstances, as counsel accept, the appeal must be and is dismissed. The respondents are entitled to costs which we fix at $5,000 together with disbursements as fixed, if necessary, by the Registrar.

Solicitors

Russell McVeagh, Wellington, for Appellants Simpson Grierson, Wellington, for Respondents