ZYXCBA Developments Limited v Auckland Council
[2015] NZHC 1412
•23 June 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2306 [2015] NZHC 1412
UNDER the Declaratory Judgments Act 1908 BETWEEN
ZYXCBA DEVELOPMENTS LIMITED Plaintiff
AND
AUCKLAND COUNCIL Defendant
Hearing: 18-20 May 2015 Appearances:
M E Casey QC and A Davidson for the Plaintiff
D J Neutze and M C Allan for the DefendantJudgment:
23 June 2015
JUDGMENT (No 3) OF MUIR J
This judgment was delivered by me on Tuesday 23 June 2015 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Counsel/Solicitors:
M E Casey QC, Barrister, Auckland
P Castle, Castle Brown, AucklandD J Neutze, Brookfields, Auckland
M C Allan, Brookfields, Auckland
ZYXCBA DEVELOPMENTS LIMITED v AUCKLAND COUNCIL [2015] NZHC 1412 [23 June 2015]
Introduction
[1] In this proceeding the plaintiff (ZYXCBA) seeks declarations relating to the approach which should be followed by valuers in assessing the value of reserve land which vested in the defendant following lodgement of a plan of subdivision by the plaintiff. The defendant says that the proposed declarations do not accord with the valuation approach mandated in the relevant District Plan provision. It also says that they should be declined in the Court’s discretion as premature, an inefficient use of judicial resource and as involving mixed questions of fact and law.
[2] I decline the declarations sought. My reasons are as follows.
Background
[3] The ZYXCBA land had been part of a larger block which was subdivided in
1998 by its former owner. That larger block comprised 12.1413 hectares all of which was zoned rural under the Manukau Operative District Plan and the Manukau Proposal District Plan.
[4] Condition 4 of the 1998 subdivision consent provided that the native bush on Lots 1 and 2 of the subdivided land was to be protected and preserved by way of a consent notice and native bush management plan. Lot 1 on that plan subsequently came to be known as Lot 205 DP 362358 and was acquired by Mr Des Cowie (sole director of the plaintiff), his former wife Susan Cowie and Thorsen Gempton Consulting Limited in 1999. The consent notice was registered on the title prior to transfer to the Cowie interests. Mr Cowie acknowledged that if he was not aware of
the consent notice then he “probably ought to have been”.1 It is a fair assumption
that the consent notice and features of the land’s topography and bush cover were
reflected in the price paid which was $525,000.
[5] Subsequently, and pursuant to relationship property arrangements, Lot 205 was transferred to the plaintiff.
1 At NOE, p 5.
[6] The land is in an area of the former Manukau City Council known as Flat Bush. Subsequent to purchase by the Cowie interests the planning framework for the Flat Bush area underwent a number of significant changes. These started with a change to the Regional Policy Statements (“RPS”) and Metropolitan Urban Limit (“MUL”) which bought the Flat Bush area, including the ZYXCBA land, within the MUL. Subsequently, a Comprehensive Discharge Consent was obtained by Manukau City Council from the Auckland Regional Council requiring compliance by the Council with the Flat Bush Catchment Management Implementation Plan (“CMIP”). The consent was confirmed in August 2004.
[7] Variation 13 of the proposed Manukau District Plan (“the District Plan”) was notified in 2001 and made operative in 2006. Under this variation, the ZYXCBA land was rezoned to Flat Bush Residential 1 and 2 with stormwater management and public open space overlays.
[8] A key part of Variation 13 was the introduction of the Flat Bush Structure Plan (“FBSP”) which identified parts of Flat Bush which the Council wished to acquire for its stormwater management and open space reserve areas as required by the Comprehensive Discharge Consent (and CMIP).
[9] The mechanism which Council adopted in relation to such acquisitions was to insert District Plan Provisions whereby the land would vest in it upon subdivision, and the compensation payable would be assessed according to provisions inserted in the Plan specifically for that purpose.
[10] In February 2012 ZYXCBA was granted consent to subdivide its land into 22 lots. These comprised 15 residential lots, one road and three access lots, two recreation reserves and one local purpose (stormwater management) reserve. Together the recreation and stormwater reserves (comprising Lots 200, 201 and 202 on the subdivision plan) totalled 10,852 square metres. This was a little over half the total area of the ZYXCBA land. Condition 52 of the 2012 Subdivisional Consent provided:
Lots 200 and 201 shall be vested as Recreation Reserve (POS6) in Auckland
Council.
Advice Note:
At the time of vesting, Auckland Council is to pay the Consent Holder compensation for Lots 200 and 201 at an amount to be agreed by both parties.
[11] Condition 53 in turn provided:
Lot 202 shall be vested as Stormwater Management Area in Auckland
Council. Advice note:
At the time of vesting, Auckland Council is to pay the Consent Holder compensation for Lot 202 at an amount to be agreed by both parties.
[12] It is common ground that, on its own, the requirement (or expectation) that the parties would reach agreement on compensation does not invalidate the condition and that the relevant mechanisms for setting the compensation are those in the District Plan.
[13] Of the relevant District Plan provisions those primarily engaged are
Rules 17.10.11.9 and 15.15.2.2.3 which are respectively in the following terms:
17.10.11.9 Additional Standards Applying to Subdivision of Land within the Public Open Space 6 Overlying Area
(a) Upon development or subdivision of sites containing Public Open Space 6 Overlying Area, such areas shall be vested in the Council for public open space purposes. Property owners of all land so vested shall be compensated (where applicable) in accordance with Rule 15.15.2 and Rule 17.10.11.9 (b) & (c).
(b) The underlying zone of Land in the Public Open Space 6 Overlying
Area shall assume the zoning of its adjoining zone.
(c) Where land within the Public Open Space 6 Overlying Area has more than one adjoining zone, then the mid point of the stream or gully shall be taken as the boundary between the adjoining zones.
(d) All land contained within the Public Open Space 6 Overlying Area that is vested in Council upon subdivision, development or by direct purchase, shall be administered in accordance with the Rules for Public Open Space 6 – Environment Corridor zone.
(e) In the situation where all or part of the land identified within the Public Open Space 6 Overlying Area is not required to be vested in Council as public open space, the overlying area status shall no longer apply and the land shall be administered in accordance with
the provisions of its underlying zone as determined in
Rules 17.10.11.9(b) and (c).
(f) Where land is no longer required as a Stormwater Management Area within the Flat Bush area as determined by Rule 9.8.3.2 the land shall be administered in accordance with the provisions for the Public Open Space 6 Overlying Area.
15.15.2.2.3
Where proposed public space is designated on the planning maps, these areas will be obtained wherever possible either by way of reserve contribution when the land is subdivided, or by the use of monetary reserve contributions. Within the Flat Bush Area proposed public open space as shown by the Public Open Space 6 Overlying Area will be obtained wherever possible either by way of reserve contribution when the land is subdivided, or by the use of monetary reserve contributions.
The valuation of land which is to be acquired for reserve purposes (Public Open Space 6) and/or stormwater management purposes (refer paragraph 1 of clause 17.10.9.6.3) as shown indicatively on the Flat Bush Structure Plan (Figure 16.11A) shall be based on undeveloped i.e. raw land value. The value shall be the block or raw land value that would apply to the overall parcel of land of which the Public Open Space land to be acquired forms a part. The value should take into account all the features of the land including topography and bush cover.
For the avoidance of doubt it shall be assumed when making such assessment that the form of roading and section development that could have taken place on such land (had it not been required for Public Open Space 6 and/or stormwater management purposes) would be similar in concept to that shown on the Flat Bush Structure Plan (Figure 16.11A) but with the park edge roads located as close as practically possible to the 100 year flood limit. In other words it should be assumed that the basic principles of the park edge roading (with allotments being created on one side only) would still have been required by the Council in those areas, where such roading is shown on Figure 16.11A.
The valuations of areas proposed to be acquired for Public Open Space 6 purposes and/or stormwater management purposes that are not shown indicatively on the Flat Bush Structure Plan (Figure 16.11A) e.g. the widening or extending of the Public Open Space 6 area to incorporate a local or neighbourhood type reserve, may be determined by other methods.
Where the initial valuations outlined above include land acquired for both reserve purposes and stormwater management purposes, the individual values of the reserve land (Public Open Space 6) and stormwater management areas shall be subsequently obtained by apportioning the overall value between the two land acquisition categories.
Declaration (a)
[14] The declaration sought is in terms that the valuers are to:
Value the overall ZYXCBA land (Lot 205 DP 362358) on a block or raw land value basis and apply that value pro-rata to the land.
[15] The plaintiff contends that, on its proper construction, the second paragraph of Rule 15.15.2.2.3 provides that, in assessing the value of the land taken, a three step process is to be adopted whereby:
(a) The value of the overall undeveloped (or raw) block (including the land to vest as Public Open Space 6/Stormwater Management Area (POS6/SMA)) is assessed taking into account all the features of the land;
(b)That total value is then analysed to a per square metre rate over the total original block (including the land to vest as POS6/SMA) i.e. on a pro rata area basis;
(c) That derived pro rata rate is then to be applied to the land to be vested.
[16] By comparison, the Council says that the object and effect of Rule
15.15.2.2.3 is to establish a market value of the land to be taken based on all of its features including topography and bush cover and that, to the extent such features may depreciate the value below that of the adjoining land for which subdivisional consent was granted, that is, in turn, reflected in the compensation payable.2
[17] To place these competing contentions in a practical perspective; on the most recent valuation obtained by the Council (that of Mr Delbridge) the plaintiff would be entitled to compensation of $628,000 on the Council’s approach and approximately $1.75 million based on the alleged pro rata approach.3
[18] The plaintiff’s contentions are based on what it says is the plain reading of the penultimate sentence of the second paragraph in terms “the value shall be the block or raw land value that would apply to the overall parcel of land which the
2 Assuming for the purposes of this part of the discussion, market value is to be assessed on the basis that the highest and best use was as residential land with allowance for typography, bush cover etc.
3 Mr Delbridge’s valuation does not proceed on a pro rata basis but the methodology he employs
allows this to be “reverse engineered”.
Public Open Space land to be acquired forms a part”. It rejects any suggestion of windfall and says that a pro rata approach may, in part, reflect the advantages accruing to Council from acquisition of the land (although not to the exclusion of the additional increment Mr Bennett identifies as having a fair value or special value to the Council) and the circumstances of acquisition (effectively compulsory at the point the decision is made to subdivide).
[19] For the Council, Mr Neutze acknowledges that the sentence is awkward. But he says that a pro rata approach to valuation would produce a surprising and artificial outcome which would result in compensation at a level well above market value and that this was clearly never the intention of the parties to the consent orders of the Environment Court which introduced the relevant part of Rule 15.15.2.2.3.
[20] The Council draws heavily on the context and scheme of the plan and the history of its development citing the Environment Court’s decision in Queenstown River Surfing Limited v Central Otago District Council where these elements were recognised as legitimate aids to construction.4
[21] In that respect it refers, in particular, to the unchallenged evidence of Mr Harland who is a senior planner and urban designer in the employ of the defendant and who was the Council officer who led planning for the Flat Bush area under the previous Manukau City Council. He deposes at length about the history and development of variation 13 of which Rule 15.15.2.2.3 was a part. This variation was first notified in 2001 and proposed the rezoning of the Flat Bush area to a number of zones including residential, business and public open space. In developing variation 13, he says that the Council came to the conclusion that the technique of POS 6 and SMA Overlying Areas was the most appropriate means for Council to exercise its functions under the Resource Management Act 1991. That technique and the specific SMAs proposed in variation 13 were the subject of an appeal to the Environment Court. So too was Council’s intention to increase reserve contributions from 6 per cent to 7.5 per cent of the assessed market value of
residential sites created on subdivision.
4 Queenstown River Surfing Limited v Central Otago District Council [2006] NZRMA 1 (EnvC)
at [7].
[22] Mr Harland deposes:
Concerns were raised by the appellants as to the appropriateness for the overlying area technique (both POS and SWMA) and the justification for the increased reserve contribution proposed. Council had concerns about the financial sustainability of achieving the greenfinger networks and the need to have a practical mechanism to agree on the detailed extent of the POS and SWMA areas. In addition, Council had concerns that theoretical and fanciful subdivisions for the purpose of valuation would ignore key matters, such as limitations on removal of bush and filling and piping of significant streams.
[23] The proposal to increase reserve contributions had its origin in concerns (reflected in the relevant Committee Decision Report 8.1 – 8.15) that, on the current valuation methods and practise, there would be a shortfall of between 1.5 and 2 per cent in terms of Council’s policy “for full cost recovery from development to achieve the desired public open space in Flat Bush”. Council’s initial proposal was for a
2 per cent increase, which was reduced to 1.5 per cent following submissions. The
Committee report noted that it considered:
That the 1.5 per cent increase is necessary in order to acquire the desired public open space and it ensures that Council will be able to pay the market value to land owners for land vested as public open space.
[24] Mr Harland deposes that these reserve contribution and compensation issues were ultimately resolved by way of a consent order before the Environment Court. In particular, substantial additions were made to Rule 15.15.2.2.3 which he says initially consisted of the first paragraph only.5
[25] The Environment Court’s consent order was based on a memorandum of
Council which in part provided:
The amendment proposed in cl 7.1 [additions to Rule 15.15.2.2.3] amends a rule in the Operative District Plan that simply states at present, that the Public Open Space areas will be obtained, where ever possible, either by way of reserve contribution when the land is subdivided, or by the use of monetary reserve contributions. What is proposed is a consequential amendment clarifying the basis of land valuation for acquisition purposes. It provides a balance to mitigate Council’s concern that the reduction in reserve contribution to meet the relief sought should not result in under funding in relation to the acquisition of Public Open Space.
(emphasis added)
5 This affidavit dated 27 March 2015 suggests the second sentence of the first paragraph was also added by the consent order but this was corrected by affidavit dated 2 June 2015.
[26] In Mr Neutze’s submission therefore, the evidence establishes a move away from a framework with no particular guidance as to how acquired land would be compensated for (albeit on a market value basis), to one which provided greater certainty as to the approach that would be taken in calculating compensation. He says that all this occurred against the backdrop of a concern about the adequacy of reserve contributions to fund acquisition of the required Public Open Space. In his submission, the suggested pro rata approach to valuation runs directly counter to Council’s expressed concerns at the time and its desire to mitigate its exposure through the redrafted provisions. He says that the clear intent was that its reduced reserve contributions would meet or at least broadly approximate compensation liabilities. He says that if the parties to the consent memorandum and/or the Environment Court had been asked whether the effect of the amendments was to provide for a pro rata payment, the clear answer would have been, “No, that would produce artificial and likely inflated payments to the landowner which bear no relationship to the market value of that land to be acquired taking into account all its features”. In short he says such an interpretation would exacerbate the very problems which the amendment was designed to fix.
[27] I agree that application of a pro rata formula to the land taken would be a surprising outcome. The Committee Decision Report indicates that what was always contemplated by the Council was payment of the market value of the land vested. There was concern about the Council’s ability to do so at existing reserve contribution levels. It seems unlikely that, in reverting to those levels as part of the settlement with objectors, the intention was to increase Council’s compensation liability significantly beyond market value. The terms of the settlement and, in particular, the reference to “mitigating” the Council’s concerns about underfunding the acquisition of Public Open Space reinforce that conclusion.
[28] The reserve contributions charged to developers are to be levied on a market value basis. Such is clear from Rule 15.15.2.3.1 which provides in part:
The reserve contribution shall be assessed by the Council and its registered valuer according to the assessed market value (which is inclusive of any Goods and Services Tax) of the allotments in the subdivision at the date of subdivision consent and according to the rules pertaining to the principal
purpose of the subdivision as if the allotments are available for sale at that date.
[29] The conditions imposed on subdivision of the ZYXCBA land into residential lots confirm that position with condition 60 providing in part:
The reserve contribution of $284,970 including GST, being 6 per cent (plus
15 per cent GST) of 14 x the assessed market value of Lots 1 – 15 …
[30] It makes little sense that reserve contributions would be calculated on a market value basis but the compensation they were designed to fund would reflect a significant premium over market by virtue of the value influence of the adjoining and non-acquired land.
[31] I agree with the Council’s submission that the words “value” and “valuation” where they appear in Rule 15.15.2.2.3 carry with them the natural implication that what is referenced is market value. Although obviously not determinative as a matter of law in terms of the Rule’s meaning, it is significant that none of the six valuations or peer reviews obtained by the respective parties approach the valuation issue on any other basis. Only in the reply affidavit of Mr Bennett (his first to be filed) are other bases of valuation postulated. Nor until that evidence is a pro rata approach suggested by any valuer. Nor in valuing other land pursuant to the Rule for the Council (248 Ormiston Road) did Mr Bennett approach the valuation on this basis. All that speaks to the fact that the interpretation advanced by the plaintiff is, at least among professional valuers, an unexpected one. It is difficult to identify any rationale for why the Council would have contemplated such an outcome.
[32] Nevertheless, the Rule does state that:
The value shall be the block or raw land value that would apply to the overall parcel of land of which the Public Open Space land to be acquired forms a part.
And if, as Council’s valuer Mr Delbridge assumes in his valuation, the purpose of this clause is simply that the valuers adopt a before and after approach – valuing the entire land in its constituent parts and then deducting the value of the land which is not to vest – it is difficult to see how that result could not more efficiently be
obtained by simply valuing the parts that were to vest, on a market value basis, assuming their underlying zoning.
[33] A more detailed analysis of the words used in their immediate context is therefore required.
[34] At the outset I note that the relevant sentence refers to the parcel, “of which the Public Open Space land to be acquired forms a part.” That should of course be the Public Open Space land and/or the land required for stormwater management purposes referred to earlier in the paragraph. Nothing in my view turns on that omission in the present case, but it is symptomatic of the sloppiness of the drafting.
[35] The plaintiff does not argue that the value of the vested land is to be taken as the block value. Although unsatisfactorily worded, the sentence includes the phrase “that would apply to the overall parcel”. It does not say that the value shall be the raw land value of the overall parcel. The plaintiff’s concession is therefore appropriate. However, its declaration seeks to interpolate the words pro rata (by which I infer it means pro rata on a square metre basis) which are simply not there.
[36] Then there is a difficulty created by the final sentence of the paragraph in terms “the value shall take into account all the features of the land including topography and bush cover”. I agree with the Council that the references to the “value” and to the “land” in this sentence are references respectively to the “value of the land vested” and the “land vested”. They do not refer to the value of the overall block and the total area of land identified in the preceding sentence. Not only is that interpretation better aligned with the opening words of the paragraph – “the valuation of land which is to be acquired for reserve purposes” – but paragraph 2, following immediately after the relevant sentence, states:
For the avoidance of doubt it shall be assumed when making such assessment that the form of roading and section development that could have taken place on such land had it not been required for Public Open Space 6 and/or storm water management purposes would be similar in concept to that shown on the Flat Bush Structure Plan…
(emphasis added)
[37] So “such land” is the land taken and naturally references “the land” as
appearing in the final sentence of the preceding paragraph.
[38] With that premise established, I agree with the Council that determining an average rate per square metre across the whole block and then applying it to the portion being acquired does not meet the requirement that the value of the vested land take into account “all the features of land including topography and bush cover”. That is because, as the Council observes, even if the valuers attribute a lower per square metre rate to the vested land on account of perceived difficulties with it (flood plain, stream and protected native bush), if they then average a single rate across the whole parcel, the rate applied to the acquired land will necessarily reflect a significant uplift based on the “good” residential land which the Council is not acquiring. In so doing a valuer would not be fully taking into account all the features of the land acquired. The effect would be to “average” those features across the whole block.
[39] Moreover, to apply a pro rata approach assumes a developer entitlement to double dip because the evidence before the Court was that the presence of the bush and stream increased the value of the residential sections which ZYXCBA subdivided. Indeed, Mr Bennett said in relation to that proposition, “oh yes definitely”.6 If the section price is enhanced by the amenity value of the bush that must inevitably be reflected in the raw land value of that part of the site to be developed for residential purposes. If that in turn drives a higher average price for the land to be vested and therefore, the quantum of compensation, the developer
receives a secondary advantage.
[40] In defence of this and other criticisms directed to the overall merits of its construction of the Rule, the plaintiff points to the considerations referred to in [17] above and particularly, the circumstances of acquisition. But, at least in relation to the land subject to the SMA overlay (the majority of that acquired), that submission fails in my view to recognise the reality of the situation, namely that without the Comprehensive Discharge Consent obtained by Manukau Council from the
Auckland Regional Council (requiring compliance with the CMIP which in turn
6 NOE p 50.
recognises “fully protected streams” of which the stream through the subject property is one), the ZYXCBA land is unlikely ever to have been developed in the way it was. Objective 9.3.6 of the District Plan states that SMAs are vested “so as to minimise risk of flooding to life and property” and to “avoid or remedy effects on the water quality of receiving environments”. That objective is supported by
Policy 9.4.3.7 I accept therefore the Council’s submission that the Comprehensive
Discharge Consent (and associated SMA function of the land acquired for that purpose) does not solely benefit the Council. It benefits developers such as the plaintiff by facilitating subdivision and development in the wider Flat Bush area.
[41] Indeed, in its Assessment of Environmental Effects for the proposed subdivision, the plaintiff’s consultant recognised the advantage to the plaintiff in not having to seek a Regional Consent for stormwater discharge. He stated:
Consent for storm water discharge under the Auckland Regional Plan: Air, Land and Water is not necessary as all storm water discharge in Flat Bush is covered by the Flat Bush Network Discharge Consent. This proposal was considered to be consistent with this network consent.
[42] In short, the SMAs were not “one way traffic”. I cannot accept therefore that their creation carries with it any particular implication in terms of the way Rule
15.15.2.2.3 is to be read. Indeed, the natural starting point in relation to any public acquisition would, in my view, preclude an assumption of a windfall over market value for the owner of vested land.
[43] In summary therefore, I see the plaintiff ’s proposed construction as:
(a) Creating internal tensions with the final sentence of the paragraph. (b) Giving rise to a double-dipping criticism.
(c) Being unsupported by any logical rationale, and accordingly both
surprising and unlikely.
7 I note that Policy 9.4.3(c) states that stormwater management should be provided in an integrated and cost effective manner.
[44] When, in turn I look at the provision’s context and history and, in particular, the desired alignment between market value based reserve contributions and compensation commitments, those conclusions are reinforced.
[45] I accept that this conclusion means that the penultimate sentence of the second paragraph8 sets up a valuation methodology which seems inefficient for the reasons explained in [32] above. Assuming the clause to be a product of Committee drafting, that inefficiency is unlikely in itself to preclude the conclusion I have come to. Alternatively, I consider it better for the Court to endorse the inefficiency than condone an outcome which I do not believe could have reasonably been in the minds of the drafters. In my view, awkward although the language is, it was simply designed to reinforce the proposition that the valuation exercise was to be conducted
having regard to the underlying zoning of the land which was to vest and that the POS 6 and SMA overlays were to be ignored. Although that result flows from the later Rule 17.10.11.9, its re-emphasis within this specific compensation provision is not, in my view, unexpected.
[46] For these reasons, I decline the declaration sought.
Declaration (b)
[47] The declaration sought is in terms that the valuers are to:
Value the land on the basis of its value for reserve purposes including the added value of the features of the land (including topography, trees and bush cover) for such purposes.
(emphasis added)
[48] Underpinning all of the plaintiff’s argument on this point is the proposition that the land had special suitability to the Council because its acquisition was necessary for it to comply with the conditions of the Comprehensive Discharge Consent, which, in turn, required development to be undertaken in accordance with the CMIP. It says that such special suitability means that the land should be valued
for reserve purposes representing a higher and better use than the underlying
8 “The value shall be the block or raw land value that would apply to the overall parcel of land of
which the Public Open Space land to be acquired forms a part”.
residential zoning. It says that the topography of the site and bush cover represent value additions in that context and that the valuers should be so directed by the Court.
[49] In support of that submission the plaintiff starts by emphasising that this is not a Public Works Act 1981 (“PWA”) acquisition. Rather the Council chose to adopt a mechanism whereby the land would vest on subdivision with compensation assessed according to provisions inserted in the District Plan specifically for that purpose. Whereas therefore s 62(1)(b) of the PWA precludes special suitability of land for any purpose being taken into account if that purpose is one which could only be applied pursuant to statutory powers or if it is a purpose for which there is no market apart from the special needs of the local authority, the plaintiff says no such restriction applies here. Indeed, it sets up the corollary of the PWA position as the inferred starting point where acquisition is not governed by it.
[50] It then says that there is nothing in Rule 15.15.2.2.3 which compels the valuer to adopt what it calls a “strict market value” approach. In so far as the Council’s valuer Mr Delbridge considers that the terms “value” and “valuation” in the Rule “can only be taken as a reference to market value”,9 the plaintiff says that he ignores the fact that in terms of the International Valuation Standards published by the International Valuation Standards Council, alternative methods of valuation including “fair value” and “special value” are available (the former including, in para
42 of the Standards, elements of the latter arising out of “the combination of the
[parties’] interests”).
[51] It relies on Mr Bennett’s affidavit, in which he essentially recants the methodology of his two previous valuations and says that what Rule 15.15.2.2.3 requires (reinforced by the advice note attaching to the subdivisional consent which identifies compensation as being in an amount “agreed” by both parties) is an assessment of fair value and that where the Council has a clear and particular purpose for acquiring the land there should be a good reason offered, such as a
statutory or rule based exemption, before such purpose should be disregarded.
9 Affidavit of I D Delbridge dated 27 March 2015 at [12].
[52] In his written submissions Mr Casey QC endorses the fair value approach. However, he does not pin his colours exclusively to that mast. He says that the special suitability that the land has for the Council’s needs can equally be reflected in a market value approach because the Council is not to be excluded from the available market. He relies on Valuer General v Wellington City Corporation,10 the cases discussed in it, including London County Council v Erith Churchwardens and Overseers,11 and on the subsequent Privy Council decision in Raja Vyricherla
Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam.12
[53] He cites the very recent Court of Appeal decision in Palmerston North City
Council v Hardiway Enterprises Ltd and in particular the observation:13
In terms of the [market value] test, a willing buyer will include the acquiring authority for whom the land may have special value by reason of its unusual or unique features.14 But here as s 62(1)(d) [PWA] makes clear, this approach to the application of the test has been expressly excluded in certain specifically prescribed situations.
[54] He suggests that this proposition is even stronger in a case such as the present where the land was particularly suited to a requirement imposed on the Council pursuant to a statutory obligation (i.e. the Discharge Consent) and that, taking into account the purpose for which the land was being acquired, the features (including topography and bush cover) should be treated in the same way as improvements on the land.
[55] In valuing those improvements the plaintiff relies on the Supreme Court decision in Mandic v Cornwall Park Trust Board15 which, although affirming a “residual value” approach for valuing improvements as that required by the Valuation of Land Act, held that the current depreciated replacement cost of such
improvements was likely to be a material consideration, particularly where there was
10 Valuer General v Wellington City Corporation [1933] NZLR 855 (Full Court).
11 London County Council v Erith Churchwardens and Overseers [1893] AC 562 (HL).
12 Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC
302 (PC).
13 Palmerston North City Council v Hardiway Enterprises Ltd [2015] NZCA 114 at [20].
14 Citing Raja Vyricherla above n 12 at 312-313 and Jacobsen Holdings Ltd v Drexel [1986] 1
NZLR 324 (CA) at 328-329 per Cooke P. The application of these cases to the present facts is discussed at [85]–[93].
15 Mandic v Cornwall Park Trust Board [2011] NZSC 135, [2012] 2 NZLR 194.
no direct market.16 The plaintiff therefore says that the assessment of special value should take into account the cost the Council would have been put to had it needed to replicate the asset it was purchasing.
[56] In a valuation prepared for the plaintiff by Cadwallader Tree Consultancy, the replacement cost of the trees and under-storey plants which are able to be purchased at similar grade is put at $2.2 million. The remaining canopy of trees are, in turn, valued on a so called STEM basis at $5.2 million.
[57] In the plaintiff ’s written submissions it summarised the position in these
terms:
8.19The proper approach is then to value the land according to its highest and best use with the particular features treated in the same way as it would “improvements”. As with Valuer General v Wellington City Corporation, and as adverted to in Mandic, the construction or replacement cost, less depreciation, is an appropriate consideration.
8.20That is how the plaintiff’s valuers have sought to approach the exercise. Mr Bennett has valued the land without the trees, Mr Cadwallader has valued the trees and the two together make up the value of the land with the special features.
[58] However, this “combination” approach was not supported by the evidence. When it was put to Mr Bennett in cross-examination that his valuation of the land for residential purposes combined with Mr Cadwallader’s tree valuation equated to a value of approximately $900 per square metre for the POS 6 and SMA land, that this was approximately three times the market value of good residential subdivisional land and that the Council’s peer reviewer, Mr Cork, had described this as
“nonsensical”, Mr Bennett agreed.17
[59] This demonstrates what is, to me, an unsatisfactory feature of the plaintiff’s case. There is neither before the Council nor the Court any valuation of the land which includes the alleged special features. I will return to this issue in the context
of the Court’s discretion in relation to the relief sought.
16 At [57] and [60].
17 NOE p 54.
[60] In analysing the plaintiff’s approach I start, however, with Mr Bennett’s proposition that a “fair value” approach should be adopted for the valuation.
[61] Again, it is significant that none of the valuers engaged by either the Council or the plaintiff (including Mr Bennett who stated that his previous valuations were undertaken in accordance with the District Plan Rule), had previously considered such an approach applicable. It emerged for the first time in Mr Bennett’s reply affidavit. Mr Bennett candidly acknowledged18 that the interpretation he naturally gave to Rule 15.15.2.2.3 at the time he completed his valuations was that he had to assess the market value of the land. He confirmed that he was not aware of any valuer undertaking a fair or special value assessment of land in the Flat Bush area
and further, that not only had he not undertaken such an assessment in this case, but that he had never done so in respect of land “which is to be transferred to another party”.19 Nor, he conceded, was there any market evidence that suggested a purchaser might pay more than the assessed market value for POS 6 or SMA land.20
Nor was his assessment for the Council in relation to the property at 248 Ormiston
Road undertaken on the basis now suggested.
[62] I do not consider that the advice note direction in the consent conditions is a necessary pointer to a “fair value” approach as suggested by Mr Bennett and by the plaintiff in its submissions. The essence of market value is that it assumes a willing seller and a willing buyer who meet in agreement at the market price. That the parties are encouraged to agree carries no implication that some other valuation basis is envisaged. Moreover, it cannot be appropriate to use advice notes in a 2012 resource consent to interpret a compensation provision incorporated in a District Plan some six years earlier.
[63] Nor do I consider the fact that the phrase “market value” is used elsewhere in the plan (for example in relation to the reserve contribution in Rule 15.15.2.3.1) but not in Rule 15.15.2.2.3 indicates some other basis of valuation was intended. The
reminder that District Plans do not reflect the precision of Chancery drafting is
18 NOE pp 43–44.
19 NOE p 47.
20 NOE p 45.
appropriate in that context.21 If anything, I consider that the reference to market value in Rule 15.15.2.3.1 underscores the fact that the Plan’s philosophy is built around the market value approach.
[64] In any event, market value is in my view implicit in the concept of “block or raw land value” which is specifically identified in Rule 15.15.2.2.3. As Mr Bennett acknowledged in response to a question from the bench, the readily developed part of the block would always be valued on a market value basis.22 There is no rationale, in my view, for suggesting that the valuers are to approach the block value assessment using two totally different valuation methodologies, fair value for the POS 6 and SMA lands and market value for the balance. Such an unlikely result would, I believe, require the clearest possible direction.
[65] Moreover, the District Plan’s definition of market value dovetails with the
concept of block or raw land value by excluding improvements. It is in terms:
Market Value
Means and has the same meaning as “Land Value” as defined by the
Valuation of Land Act 1951 which is:
In relation to any land, means the sum which the owner’s estate or interest therein, if unencumbered by any mortgage or other charge thereon, might be expected to realise at the time of valuation if offered for sale on such reasonable terms and conditions as a bona fide seller might be expected to impose, and if no improvements (as herein before defined) had been made on the said land.
This reinforces what I regard as implicit.
[66] Finally, I note that the International Valuation Standards state that the market
approach is “commonly applied to the valuation of real property interests”.23 It is effectively the default position.
21 Central Otago District Council v Greenfield Rural Opportunities Ltd EnvC 128/09,
11 December 2009 at [76].
22 NOE p 70.
23 At p 65.
[67] I come then to the question of whether proper assessment of market value necessitates that the land be valued for reserve purposes with an uplift to reflect topography and bush cover.
[68] Many of the factors which I have identified in relation to the pro rata argument are equally applicable in this context. Given the significant emphasis on a synergy between reserve contributions and compensation liabilities it would, for example, be surprising if the former were to be calculated on the basis of residential land values but the latter on a basis reflecting some significant premium over such values on account of the special suitability for reserve and/or stormwater purposes. That is particularly so when the Council was the only buyer on that basis.
[69] Clearly if Rule 15.15.2.2.3 was designed to “mitigate” the Council’s exposure, as recognised in the Consent Memorandum, the plaintiff’s proposed construction is inconsistent with that purpose. Likewise, I consider artificial the proposition that the Council should pay for the “special suitability” of the land when acquisition of the stormwater component is an essential part of the context in which the plaintiff was able to realise value from the subdivisable land. And in relation to the POS land, it is clear from the plaintiff ’s Assessment of Environmental Effects that it placed direct reliance on the retention of bush on the land to support an argument that the effect of the proposed subdivision on the environment was “less than minor” and that the application should therefore be consented on a non-notified basis. For example at pages 18–19 it is stated:
Due to the level of mitigation proposed and the retention of the bush in the western portion of the site, it is considered that there will be less than minor effects in terms of visual amenity and species habitat and diversity…
The above assessment considers the relevant effects from the proposal. The proposed subdivision, associated earthworks and vegetation removal can be considered to have less than minor effects on the environment for the following reasons:
A substantial area of native bush will be retained…
[70] The plaintiff’s position therefore assumes benefit to it at every turn, or as the
defendant characterises it, a “cake and eat it” approach.
[71] In my view, there are several problems with the plaintiff’s argument.
[72] Firstly, it seeks to interpolate into Rule 15.15.2.2.3 words that are simply not there. There is, for example, no reference in the Rule to:
(i) the land’s value for reserve purposes;
(ii) the value to the Council for those purposes; or
(iii)the added value of the topography, trees or bush cover for reserve purposes.
[73] Secondly, the plaintiff ’s approach is inconsistent with Rules 9.8.3.2 and
17.10.11.9. These Rules respectively provide in the case of the SMA and POS 6 land that it shall, “assume the zoning of its adjoining zone” (in the present case Residential 1 or 2 depending on which side of the stream the land falls). In the case of Rule 17.10.11.9 the relevant provisions, repeated for convenience, provide:
(a) Upon development of subdivision of sites containing Public Open Space 6 Overlying Area, such areas shall be vested in the Council for public open space purposes. The property owners of all land so vested shall be compensated (where applicable) in accordance with Rule 15.15.2 and Rule 17.10.11.9(b) and (c).
(b) The underlying zone of Land in the Public Open Space 6 Overlying
Area shall assume the zoning of its adjoining zone.
Issues of compensation and underlying zoning are therefore interrelated in terms of the Rule – a further example of synergies within the District Plan.
[74] I reject Mr Casey’s submission to the contrary which is inconsistent not only with the approach adopted by Mr Bennett in his two earlier valuations but with the plaintiff’s own submission that it is:
9.1 … appropriate to assess the raw land value as land suitable for
residential development as per the zones (but not already developed
– ie raw) without any other planning impediment. Other land in the vicinity has been developed by piping the stream and filling gullies
so without the impediment of the Zoning and Structure Plan (and assuming it was zoned as Flat Bush residential) the vested land could
be developed likewise.
[75] Again, the plaintiff seeks all the benefits of residential zoning on the one hand while, on the other, claiming it is not the highest and best use.
[76] Moreover, as Mr Neutze points out, the list of permitted, controlled, discretionary and restricted discretionary activities in Chapter 17.10 of the District Plan, which deals with the Flat Bush area, does not contemplate informal recreation and leisure on Public Open Space land within the Residential 1 and 2 zones. The relevant section in the table simply records such activities as “N/A” and there was no
planning evidence before the Court to the contrary.24
[77] In my assessment, the directive to value the land according to its underlying (in this case residential) zoning clearly requires that the POS 6/SMA overlays and the associated reserve purposes be disregarded for valuation purposes.
[78] I agree with Mr Delbridge that the approach contended for by the plaintiff would lead to:25
… an unresolved and confusing contradiction between valuing the land (i) in accordance with its underlying residential zonings and (ii) for its intended reserve purposes. Only one of the approaches can properly apply, not both at the same time …
[79] I consider that interpretation is supported by the first sentence of paragraph 3 of Rule 15.15.2.2.3. This makes it clear that the valuers are to approach their task as if the vested land is residential and has the potential to be developed in accordance with the relevant residential rules. The presumed intention of this direction was to benefit landowners by, as Mr Delbridge suggests “avoid[ing] any downgrading of value which might otherwise result from the existence of the more restrictive nature
of the Public Open Space 6 zone”.26 However, I see no reason in principle why this
clear direction arising out of the underlying zoning might not be enlisted by the
Council in defence of a special suitability claim.
24 Mr Bennett states that there is nothing about the residential zoning of the land which would prevent it being used as public open space or stormwater management (affidavit of P H Bennett dated 13 April 2015 at [27]) but I accept the Council’s challenge to his expertise to give this evidence.
25 Affidavit of I D Delbridge dated 27 March 2015 at [53].
26 Affidavit of I D Delbridge dated 27 March 2015 at [11].
[80] The context in which the valuation is to occur is also, in my view, relevant. This is not a valuation for rating purposes27 but for compensation purposes. Such is the direction in Rule 17.10.11.9. The usual meaning of compensation is to award someone with something in recognition of loss, suffering or injury.28 Likewise within the laws of contract29 and in tort, compensatory damages are designed to restore the innocent party to the position he or she would have occupied had the contract not been made or the tort not been committed.30 Within the compulsory acquisition of land context, such principles may, of course, result in compensation for any special value that the land may have in the hands of the party dispossessed. However, “full compensation” within the terms of s 60(1) of the PWA is focused on the value of the land to the landowner, not the value to the acquiring authority.31 As observed in Salmon: The Compulsory Acquisition of Land in New Zealand:32
The purpose of compensation under the Public Works Act is to restore the person whose land or whose interest in land is taken as far as is possible to the position in monetary terms, or sometimes in a combination of land and money, that he would have been in had his land or interest in it not been taken.
[81] I accept that the land was not being acquired under the Public Works Act in this case but the circumstances of acquisition were effectively compulsory at the point ZYXCBA decided to seek a subdivisional consent.
[82] In Hardiway Enterprises Ltd, the Court of Appeal observed that there was no market for the purpose of using the land in the way intended by the Council and that the rationale behind s 62(1)(d) of the PWA was to:33
overcome factors which might inflate compensation beyond a level which is considered reasonable in the public interest. Landowners should not receive a windfall at the expense of the community.
27 As in Valuer General v Wellington City Corporation, above n 10.
28 Online Oxford Dictionary definition of ‘compensation’.
29 Where the plaintiff argues a reliance interest. See Laws of New Zealand Contract (online ed) at
[426]; Newmans Tours Ltd v Rania Investments Ltd [1992] 2 NZLR 68 (HC).
30 Stephen Todd (ed) The Law of Torts in New Zealand (6th ed, Brookers, Wellington, 2013) at
[20.2.01].
31 Russell v Minister of Lands (1898) 17 NZLR 241 (HC) at 255.
32 Peter Salmon The Compulsory Acquisition of Land in New Zealand (Butterworths, Wellington,
1982) at [11.1]; see also Te Marva Ltd v Wellington Regional Water Board [1983] NZLR 694 (CA) at 697 per Richardson J: “The governing principle of compensation is the award of a monetary equivalent for what has been lost”.
33 Palmerston North City Council v Hardiway Enterprises Ltd, above n 13, at [30].
[83] Although s 62(1)(d) does not apply in this case, the same public policy considerations seem to me to be in play here. The vested land provides tangible and intangible benefits to the community as a whole. It continues to benefit (or has benefited) the plaintiff directly in the several aspects already identified.34 What is contemplated is a windfall at the expense of the community. The Court should, in my view, be reluctant to recognise such an outcome, particularly against the history
of the District Plan provisions to which I have previously referred.
[84] I emphasise, however, that these considerations are secondary to what I regard as the principal problems with the plaintiff’s arguments identified in [71]–[79] above.
[85] The three authorities on which the plaintiff mainly relies are, in my view, distinguishable.
[86] In Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam, the Privy Council was concerned with a compulsory acquisition of land which contained a spring that yielded good quality drinking water that the authority wanted to use as part of a water-supply scheme. In regards to how the land should be valued, the Court said:35
…the value of the land is not to be estimated at its value to the purchaser. But this does not mean that the fact that some particular purchaser might desire the land more than others is to be disregarded. The wish of a particular purchaser, though not his compulsion, may always be taken into consideration for what it is worth.
[87] The Court then referred to land which may possess some unusual or unique features as regards its “potentialities” where an arbitrator has no market value to use as a guide. In such cases, the land is valued not merely by the use to which the land is being put at the time, but also by reference to the uses of which the land is reasonably capable, the example given being agricultural land that has the potential of being built upon. However, the land must not be valued as though it had already
been developed.36
34 See [39], [40], and [69] of this judgment.
35 Vizagapatam, above n 12, at 312.
36 At 312–313.
[88] In order to assess the value of the land’s “potentiality”, the Court referred to an imaginary auction where purchasers interested in the potentiality would be willing to pay more than purchasers who were not. The amount that the latter would be prepared to pay was referred to as the “poramboke” value.
[89] In relation to what sum the sole purchaser of the potentiality might pay over poramboke value the Court said:37
It was contended on behalf of the respondent that, at an auction where there is only one possible purchaser of the potentiality, the bidding will only rise above the "poramboke" value sufficiently to enable the land to be knocked down to that purchaser. But if the potentiality is of value to the vendor if there happen to be two or more possible purchasers of it, it is difficult to see why he should be willing to part with it for nothing merely because there is only one purchaser. To compel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible purchaser of a potentiality is usually quite willing to pay for it.
(emphasis added)
[90] This highlights an important distinction in terms of the present case. In Vizagapatam, the potentiality (potential use of water supply) was of value to both the landowner and the acquiring authority.38 Later in the judgment, the Court said that if the authority could obtain water from other sources, the landowner “would almost certainly be refused permission to carry [out] his competing supply”.39
[91] In the present case the “potentiality” argued by the plaintiff is the use of the vested land for reserve purposes, which provides stormwater and amenity benefits. The plaintiff has an interest in that potentiality as the subdivisible land is more valuable on account of it. However, the reasoning in Vizagapatam does not apply as this value to the plaintiff is not a value which is lost when the land is vested in the Council. In Vizagapatam, the landowner was being compensated for a potentiality
which he could no longer make use of when the land was acquired.
37 At 316.
38 See at 324.
39 At 330.
[92] Jacobsen Holdings Ltd v Drexel was a decision involving compensation for landlocked land under the former s 129B of the Property Law Act 1952. Cooke P cited Vizagapatam at pp 312-313 and said that:40
In principle that appears to me to apply to a right-of-way such as that ordered in the present case, since it has a unique value to the owner of the land to which it is appurtenant.
[93] Somers J saw the same general principles applying under s 129B as apply in the compulsory taking context and said:41
What has to be discovered is the value of the interest to the defendant owner with all its existing advantages, possibilities and potentialities. This must mean the market value; the price at which a willing seller would sell and a willing buyer would buy. … There is however no reason at all to exclude from that market a purchaser who has special needs and who would therefore be willing to pay more than others.
[94] Significantly however, Somers J noted that the object of s 129B was to strike a compromise between two property owners who did not agree and that the section did not contain any statement of principle or of restriction or indeed “any statement at all about the manner or assessment of compensation”.42 That can be contrasted with the present case where Rules 15.15.2.2.3 and 17.10.11.9 provide a framework within which compensation is to be assessed and in a way I consider influenced by the history and purpose of these rules. Likewise, Jacobsen Holdings does not engage the public interest criteria to which I have previously referred.
[95] The plaintiff also relies on Valuer-General v Wellington City Corporation.43
That case concerned a valuation of land for rating purposes. The first issue was the determination of the “capital value” of land developed and used by the Corporation for an abattoir and septic tank. The Full Court held that, for the purposes of valuation, the Corporation should not be excluded from the number of potential
buyers as:44
40 Jacobsen Holdings Ltd v Drexel, above n 14, at 328.
41 At 333–334.
42 At 333.
43 Valuer-General v Wellington City Corporation, above n 10. It also cites the subsequent rating valuation case of Re Dunedin City Corporation’s Objection [1956] NZLR 466 (Land Valuation Court).
44 At 866.
If the owner were generally so excluded, the result would be to eliminate from the list of possible buyers the one most likely to buy and the one to whom the undertaking valued might be of the most value.
[96] It observed that if works were constructed to fulfil a statutory duty, the alternative cost of purchasing a property equally suitable “would be a factor of great importance in determining the sum which might be expected to be realised by the hypothetical sale.45 The plaintiff submits that an analogy is available with the particular features of the land acquired in this case.
[97] I consider the rating valuation authorities of little assistance. The analogy between the ‘improvements’ with which the cases are concerned and the topography and bush cover relevant in this case is, in my view, weak. Rule 15.15.2.2.3 treats topography and bush cover as inherent features of the land, not an improvement. They are part of what is assessed in establishing a “block or raw land value” (itself is a strong pointer to unimproved value). In addition:
(i)section 2 of the Rating Valuations Act 1998 (“RVA”) expressly defines “land” as including “all trees growing or standing on the land”;46
(ii)the native bush on the land vested does not fall within the RVA’s definition of “improvements”; and
(iii)as previously noted,47 the District Plan definition of market value indicates that the Plan does not regard “improvements” as forming part of the market value of the land.
[98] All of that is consistent with the common law position that land is not only the soil, subsoil and airspace above land, but includes trees growing on the land.48
45 At 871-872.
46 Although they are excluded from the value of land for valuation purposes under that Act: See s
20. See also s 2 of the Land Transfer Act 1952 which defines land as including “all trees and timber thereon” and s 5 of the Local Government (Rating) Act 2002.
47 Above at [65].
48 For further discussion see [104] to [107].
[99] There is also the problem that if an “improvement” analogy is applied to the trees then logically, within the framework of Rule 15.15.2.2.3, it should also be applied to the topography, which is integral to the land’s stormwater management purposes. On that basis, compensation should reflect the cost of turning flat developable land into contoured land sufficient to carry a watercourse. That, in my view, indicates the artificiality of the plaintiff ’s approach.
[100] For these reasons, I decline the declaration sought.
Declaration 1(c)
[101] The declaration sought is in terms that the valuers should proceed on the basis that:
(c) The value of the trees and bush cover should be added to the value of the land as if it was without trees and bush cover.
[102] While related to the plaintiff’s proposed declaration (b), declaration (c) poses a discrete proposition – namely that the land should be valued ignoring the trees, that the trees should be valued separately and that the compensation is the addition of the two sums.
[103] In my view the declaration in the form sought faces three insuperable problems:
(a) It is inconsistent with the evidence of Mr Bennett who agreed that a combination of his land valuation and the Cadwallader tree appraisal produced a “nonsensical” result.49
(b)It does not accord with the plain words of Rule 15.15.2.2.3 which requires that the value of the “land” should take into account all its features “including topography and bush cover”. There is no suggestion that there should be two stand alone valuations. Moreover, if the plaintiff’s proposition was correct, then topography of the land
(i.e. its gradient, contour, etc), and other inherent features (for
49 NOE p 54.
example soil type) should likewise be independently valued and added to the land value. I do not consider that an attractive proposition.
(c) In any event, the case law is firmly against the declaration sought.
[104] One of the most directly relevant decisions is McCullum v Mount Maunganui Borough.50 That case concerned the value of land taken by the Mount Maunganui Borough Council for catchment purposes in the context of a water supply scheme. The land contained some millable timber. The claimant’s case was that compensation was to be assessed by adding valuations of the land and valuations of the timber separately obtained.
[105] In rejecting that approach Archer J stated:51
We consider the valuation of land to be primarily a matter for land valuers, and it is to be regretted that none of the claimants’ land valuers appeared to appreciate this obvious weakness in the evidence of their timber appraisers. Nor, save for the simple process of addition, did they attempt to relate the separate assessments made for land and timber, so as to arrive at a figure which might reasonably be regarded as the value of the land in the open market. We think that a skilled and experienced land valuer should be able to assess the added value given to land by standing bush, in the same way as he would normally add in his valuation the benefit of plantations or of shelter or make deductions for gorse or scrub when valuing land. It may be reasonable for him to seek the assistance of a timber appraiser to ascertain the amount of millable timber on a particular area and the rate of royalty which the timber would command, but in the final analysis the experienced land valuer should be able to assess the value of the land with the standing timber thereon. An assessment of this character must of necessity be made whenever anyone decides to buy bush country in order to secure the timber thereon for milling.
[106] The Court held that the real question in issue was “what additional sum a purchaser might have been expected to pay in cash on the relevant date, over and above the value of the land, because of the millable timber upon it”.52 Assuming for present purposes that the bush cover added value as contended for by the plaintiff,
the same approach would be applicable here.
50 McCullum v Mount Maunganui Borough [1960] NZLR 1101 (Land Valuation Court).
51 At pp 1104–05.
52 At 1104.
[107] There are similar observations in several subsequent cases including Vile v Manawatu County;53 Minister of Works v Green and McCahill (Contractors) Ltd;54 and the Land Valuation Tribunal’s decision in Gray v Minister of Lands.55 In my view a declaration in the form proposed by the plaintiff is untenable in light of these authorities.
Declaration (d)
[108] As amended, this is in terms that when valuing the land:
(c) The consent notice (DB75044.2) is to be either: (i) disregarded; or
(ii) treated as adding value to the land when acquired or vested for reserve purposes.
[109] In its submissions the plaintiff acknowledges that “to a large extent, the significance of the consent notice follows the Court’s findings on the relevance of the ‘special value’ of the bush cover to the Council in the valuation exercise”.56
[110] It says that because the appropriate basis for valuation is that of fair value, which itself reflects knowledgeable parties, and because the Council had what the plaintiff describes as “the power to extinguish the covenant” on vesting, the covenant cannot adversely impact the price the Council would be willing to pay for the vested land.
[111] It says further that the fact that the Council required the Consent Notice on an earlier subdivision is additional evidence of the special value the Council attributes to the bush cover and that it “seems likely” the importance of the bush in connection with future development of Flat Bush was already appreciated, including its
importance to the discharge consent.
53 Vile v Manawatu County [1959] NZLR 337 (Land Valuation Court) at 339–340, in relation to metal deposits underlying the land.
54 Minister of Works v Green and McCahill (Contractors) Ltd [1965] NZLR 580 (Land Valuation
Court) at 585, in relation to soil and clay.
55 Gray v Minister of Lands [2004] NZLVT3 at [18].
56 Plaintiff ’s submissions [10.3].
[112] The Council rejects any suggestion that the Consent Notice was imposed for reasons relating to the discharge consent. It says that the plaintiff again tries to interpolate words which are not there and that there is no mention at all of such purpose in the Consent Notice or the associated approved bush management plan. It emphasises that the discharge consent was not issued until 2004.
[113] It says that the Consent Notice remained on the title until the time of vesting, that under s 239(1)(a) of the Resource Management Act such vesting typically takes place on a basis free from all interests in the land, including any encumbrances, but for the purposes of assessing market value it is necessarily taken into account.
[114] Finally it says that even in the absence of the Consent Notice there are factually contested issues around the “consentability” of a residential subdivision of the vested land on a “clear, pipe and fill” basis. It relies on Mr Harland’s extensive evidence in this respect57 and the fact that under Chapter 17.10 of the District Plan58 any works or activity that may have an adverse effect on native bush, is a discretionary activity. It says that a declaration in the form proposed is “pointless” in that context.
[115] As the plaintiff’s submissions recognise, the outcome in relation to this aspect of its case is largely predicated on the outcome of declaration (b) and in particular the proposition that “fair value” is the appropriate basis on which to value the land. Having rejected that proposition and decided that a market value approach is required, the Consent Notice is not something which, in my view, can be ignored. Significantly, both Mr Delbridge and Mr Bennett endorsed the IVSC International
Valuation Standards 2011 which in the context of market valuation state that:59
The determination of the highest and best use involves consideration of the
following: …
(b) to reflect the requirement to be legally permissible, any legal restrictions on the use of an asset, eg zoning designations, need to be taken into account.
57 Affidavit of R B Harland dated 27 March 2015 at [38] to [48].
58 At p 51.
59 At [35].
[116] Moreover, as Associate Judge Sargisson observed in Norman Avenue
Properties Ltd v UHD Wairarapa Ltd:60
In short, a consent notice is ordinarily a memorial on the title evidencing an interest which derogates from the unrestricted enjoyment of ownership. It restricts or encumbers.
[117] I accept that as the typical position and that market participants would approach the matter accordingly. The same can be said of the interests related to the plaintiff which acquired the land in 1999 and of ZYXCBA itself. The price paid would have reflected the restrictive nature of the consent notice. To suggest the Consent Notice now adds value belies that reality.
[118] Nor, in a market value context, do I consider it relevant that the land passed free of encumbrances at the point it was vested (whatever relevance that fact may have to a “fair value” assessment).
[119] For these reasons, I decline the declaration sought.
[120] In relation to the alleged “pointlessness” of the declaration, I return to this issue in the context of the Court’s discretion.
Discretion
[121] Apart from the findings already made, I have real reservations about whether many of the issues raised in this proceeding are suitable for declaratory judgment proceedings, or at least at this stage.
[122] At the First Case Management Conference held before Associate Judge Bell on 3 February 2015, His Honour recorded his concern about what he identified as a “piecemeal approach to the claim for compensation” with the plaintiff “seeking only declarations in this Court while leaving other outstanding questions to be resolved later, possibly in some other proceeding”.61 He recorded the defendant’s submission
that by consent of the parties and the Land Valuation Tribunal, all matters at issue,
60 Norman Avenue Properties Ltd v UHD Wairarapa Ltd (2011) 11 NZCPR 944 (HC) at [26].
61 First Case Management Telephone Conference Minute of Associate Judge Bell dated 3 February
2015.
legal, factual and expert could be determined in that forum or alternatively that it was open to the parties to submit the entire dispute to arbitration.
[123] I share these concerns but note that the Court of Appeal’s observation in Mandic v Cornwall Park Trust Board62 to the effect that jurisdiction under the Declaratory Judgments Act 1908 requires an “actual controversy between the parties which cannot be more appropriately determined in another forum, such as by arbitration” was disapproved of by the Supreme Court on appeal63 (albeit that the Supreme Court’s comments were specifically directed to the question of whether an existing dispute or lis was necessary, and not the arbitration point). The Supreme Court’s decision does, however, emphasise that the Act:64
… enables anyone whose conduct or rights depend on the effect or meaning
of an instrument, including an agreement, to obtain an authoritative ruling.
[124] Although therefore I do not consider the availability of more efficient options for the determination of all matters in dispute a “threshold” issue going to jurisdiction (as the Court of Appeal in Mandic appears to have approached it), I nevertheless regard it as a consideration in the exercise of the Court’s discretion.
[125] More important in my view is the fact emphasised by Mr Neutze (specifically in relation to declarations (a) and (b) but also capturing declaration (c)) that the plaintiff has, at no stage, produced a valuation based on either the pro rata formula or any of the approaches by which it says the value of the land for reserve purposes is captured.
[126] In my view that objection gains weight from the fact that neither of the two valuations produced by Mr Bennett in 2012 adopt either pro rata or fair value methodology. Nor did he follow either approach in his Ormiston Road valuation for the Council. Where a proposed approach is at odds with what appears to have been the received position of the multiple valuers who have previously considered it, the
Court could, in my view, expect evidence as to the impact of the proposed
62 Mandic v Cornwall Park Trust Board [2010] NZCA 576, (2011) 12 NZCPR 34 at [13].
63 Mandic v Cornwall Park Trust Board, above n 15, at [5]–[9].
64 At [9].
methodologies on the plaintiff’s claim. The Court should not be required to address these issues in a vacuum.
[127] This objection is all the stronger for the fact that the advice notes to the 2012 subdivision consent require compensation for the POS 6 and SMA lands to be “at an amount agreed by both parties”. As Mr Neutze points out, the Council cannot agree to an amount without receipt of a valuation on the bases proposed. I agree with his proposition that in the circumstances of the advice notes, the plaintiff should have, before invoking the declaratory judgment procedure, been put to the discipline of producing a valuation which sets out the sum the plaintiff says it should be paid, the basis for that valuation and the evidence supporting it. As Mr Neutze points out, whatever differences separate the parties, the Council may wish to settle this particular claim and, given the expectation that the parties would agree an amount, the Court should, in my view, encourage that objective.
[128] Not only therefore does the Court have to address the issue in a vacuum, but it seems to me that its jurisdiction is being invoked prematurely. I agree with the Council that what the Court is being required to do is conduct a hypothetical analysis of the rules in the District Plan, with tailored declarations sought by the plaintiff to support future valuations not yet undertaken. There is, in my view, a similar flavour about the case to that objected to by McCarthy P in New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd when he said that the proceedings sought “an answer based on the presumed existence of certain facts chiefly to assist counsel in possible
negotiations or in future court action”.65
[129] That case also emphasises that the Court will not, in a Declaratory Judgments Act context, deal with mixed questions of fact and law.66 Nor will the Court entertain an application where the facts are in dispute. Hardie Boys J explained the reason for that in R v Sloan when he said:67
If evidence is required then it is proper that it be determined in the ordinary
way…. The reason is that an answer given on a hypothesis is of no value as
65 New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84 (CA) at 85.
66 At 85.
67 R v Sloan [1990] 1 NZLR 474 (HC) at 482.
declaratory of the rights of the parties inter se; and so does not achieve the purpose for which the Courts exist.
[130] In relation to declarations (b) and (c) I agree with the Council that I would need to be satisfied that there is/was a value for reserve purposes and an added value for such purposes by virtue of the property’s features, including topography and bush cover. Those are contentious propositions in this case with a mixed expert opinion and legal component. There is also an underlying assumption in the declaration sought that reserve or stormwater purposes are not precluded by the residential zoning which is again disputed.
[131] In relation to declaration (c) there is simply no evidential basis for the order
sought, even a disputed one. Mr Bennett disowns the “combination approach”.
[132] In respect of declarations (b) and (c) there is force also in the Council’s submission that Rule 15.15.2.2.3 is neutral as to whether the features of the land (including bush cover and topography) should be treated as adding, reducing or not affecting value and that it is for professional and experienced valuers, not lawyers or judges, to ascertain whether or not the presence of trees on land does in fact increase, decrease or have no effect on value.
[133] In respect of declaration (d) I agree with the Council that the Court should not entertain it where, putting the Consent Notice to one side, there is a substantial dispute as to the “consentability” of residential development on the vested land. As the extract from the plaintiff’s submissions recorded at [73] of this judgment demonstrates, it remains a part of its case that raw land value (inclusive of the vested land) should be assessed by reference to land suitable for residential development (presumably as a “base line” to which additional increments are added).
Result
[134] I decline the declarations sought.
[135] The defendant is entitled to costs which, absent any special considerations of which I am unaware, I would award on a 2B basis (one counsel). In the event costs
cannot be settled by agreement, brief memoranda may be filed. These are to be
exchanged in draft before filing so as to limit areas of disagreement.
Muir J
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