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Resource Management Update – June 2014

Home Insights Resource Management Update – June 2014

In this edition:

Trans-Tasman Resources Marine Consent Refused

The first marine consent application to the Environmental Protection Authority (EPA) under the new Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (EEZ Act) has been refused by the EPA's Decision-Making Committee (DMC). The decision, dated 17 June 2014, was released on 18 June 2014.

Trans-Tasman Resources (TTR) sought marine consent under the EEZ Act for iron ore extraction and processing operations in the South Taranaki Bight. TTR proposed to excavate up to 50 million tonnes per year of seabed material containing iron sand for processing and exporting.

Ultimately, the DMC found that the application did not meet the purpose of "sustainable management" under the EEZ Act (which, although a familiar concept in resource management law, is defined slightly differently under the EEZ Act). The application was considered by the DMC to be "premature" and it was suggested that more time should have been spent better understanding the proposed operation in the relevant environment, while engaging more constructively with existing interests and iwi.

The DMC relied on its powers under section 61 of the EEZ Act which demands the exercise of caution and environmental protection if the information available is uncertain or inadequate. In this case, the DMC found that the information relating to the nature of the environment and the way the mining operation might affect it was considerably uncertain. Two further significant findings were, firstly, that the information on existing Māori interests was inadequate and incomplete, and, secondly, that the impacts on commercial fishing interests in the area were uncertain.

An adaptive management regime was proposed by TTR. The DMC adopted and applied the four step test for determining the appropriateness of an adaptive management regime that was used by the Supreme Court in its decision of Sustain our Sounds v New Zealand King Salmon [2014] NZSC 40. The DMC expressed the view that there was a lack of baseline monitoring and real data as opposed to modelled information. The resulting uncertainty about the potential effects arising from the proposal made it "impossible" to determine the environmental risk. Furthermore, the DMC found that the proposed adaptive management approach would not sufficiently diminish the risk or the uncertainty. Therefore, the application was considered to be inappropriate as it failed to ensure that the potential adverse effects were avoided, remedied, or mitigated.

Holistically, TTR's proposed set of conditions, including the adaptive management regime, were found to be not sufficiently certain or robust for the application to be approved given the uncertainty and inadequacy of the information presented about the potential adverse effects. The robustness of the condition set was queried throughout the hearing. There were substantial updates made by TTR to the conditions it proposed towards the end of the hearing, but, clearly, the DMC was not satisfied that they would be sufficient.

Our experience at the TTR marine consent hearing (we were acting for Origin, as operator of the Kupe Joint Venture that manages production from the Kupe oil and gas field) was that the DMC adopted a more inquisitorial process than that which might be adopted by the Environment Court. The DMC often, for example, took over a line of questioning during cross examination, asking their own questions in an effort to assist in their understanding of the issues. The statutory timing requirements also proved to be particularly tight, which gave rise to a number of concerns about the ability for submitters to participate meaningfully and call detailed evidence on the issues. 

TTR has a right to appeal the decision to the High Court, on points of law only, within 15 working days of receiving the decision. Accordingly, any appeal should be filed by 9 July 2014. To pursue an appeal on a point of law, TTR would need to argue that the DMC applied a wrong legal test, that it came to a conclusion without evidence or one to which, on the evidence, it could not reasonably have come, that it took into account matters which it should not have taken into account, or that it failed to take into account matters which it should have taken into account.   

Cameron Gubb

Summary of submissions on Proposed Auckland Unitary Plan released

The much-anticipated Summary of Decisions Requested report (SDR report) on the Proposed Auckland Unitary Plan (PAUP) was released by Auckland Council on 11 June 2014. 

More than 9,400 submissions were received on the PAUP. The SDR report contains over 93,600 individual decisions requested, all collated into a searchable Excel spreadsheet. As well as browsing the SDR report, interested parties can access and download full submissions, and search either by submitter, or by theme such as business, residential, transport and air quality.

Following the release of the submissions and SDR report, there is now a 30 working day period for further submissions. The purpose of further submissions is primarily to allow submitters to comment on submission points that have been made by other parties that are outside the scope of their own primary submission, and to support or oppose those submissions in whole or in part. This will ensure submitters have scope to participate in the PAUP discussions, mediations and (if necessary) hearings on the matters on which they have made a further submission (in addition to the scope a submitter will already have to be involved in the matters covered by its primary submission).

Persons who did not make an original submission on the PAUP may also lodge further submissions supporting or opposing the submissions that have been made. Non-submitters must have standing to make a further submission. Standing can be established where non-submitters have an interest in the PAUP that is greater than that of the general public (which can be established in respect of a particular aspect of the PAUP that is relevant to the non-submitter), or where they represent a relevant aspect of the public interest. It will be particularly important for persons who did not make an original submission on the PAUP to consider making a further submission where their property or interests may be directly affected by a decision requested by an original submitter.  

Further submissions must be lodged with Auckland Council by no later than Tuesday 22 July 2014. 

Sam Beattie

Unitary Plan Hearing Panel procedures released

As the period for lodging further submissions on the Proposed Auckland Unitary Plan (PAUP) gets under way, the Auckland Unitary Plan Independent Hearings Panel (Panel) has publicly released its Hearing Procedures.  The Panel's Hearing Procedures set out detailed procedural directions for the pre-hearing meetings, expert witness conferencing, mediations, and hearing sessions which will follow further submissions on the PAUP.

The Hearing Procedures set out the Panel's wide powers to invite or require submitters, the Council, or anyone else it considers appropriate, to attend a pre-hearing meeting. The meetings, which will generally be held in the Panel's Queen Street premises, will begin in August and will be open to the public. As specified in the Hearing Procedures, their purpose is to clarify any matters or issues relating to submissions and determine whether mediation or any other alternative dispute resolution process is worthwhile in respect of particular issues.  Pre-hearing meetings will also be used to confirm or report to the Panel any agreement reached between parties, and confirm expert and non-expert witnesses, expert conferencing and any joint witness statements. 

Considerable emphasis has been put on this feature of the process, with the Chair of the Panel, Judge Kirkpatrick, calling for attempts to negotiate directly and find solutions with the Council and other submitters without involving the Panel. Positive, collaborative approaches towards resolution of issues will be important and, as such, participation in pre-hearing meetings will be strongly encouraged. The Hearing Procedures specifically state that a submitter's failure to attend may result in the Panel refusing to consider a submission, with no rights of appeal or chance to later join an appeal as a section 274 party. The Panel's website will be the first port of call for all information and documents related to pre-hearing meetings and other aspects of the hearings process.

Under the Hearing Procedures, the Panel may also direct expert conferencing, resulting in a joint statement setting out the key facts, assumptions and any agreements the experts reach. The rules around expert conferencing follow the Code of Conduct for Expert Witnesses in the Environment Court's Practice Note, including the Panel's expectations of expert witnesses and the preparation of “will say” statements. Expert conferencing will not be open to members of the public or submitters who are not experts.

If, at pre-hearing meetings, submitters consent to participating in mediation, the Panel may refer a matter to mediation or any other alternative dispute resolution. The Hearing Procedures note that it is essential that those attending are authorised to agree or otherwise settle the matters or issues that are the subject of the mediation.  Mediation will also not be open to members of the public. However, written records of both expert conferencing and mediation will be able to be requested from the Panel office subject to lawful grounds for withholding that information.

As per the Hearing Procedures, at least three members of the Panel will need to be present at each hearing, and submitters must be advised of the time, date and venue at least 10 working days prior to the hearing.  While this is not specified in the Hearing Procedures, the Panel is intending to separate the hearings by topic. The overall structure of the PAUP is likely to be considered first, then the strategic issues contained in the Regional Policy Statement, followed by the Auckland-wide issues, and finally the more specific place-based zone and Precinct provisions. The schedule for hearings is due to be released in late July 2014, with hearings to begin in October/November 2014 and continue until around April 2016. 

The Panel is required to direct pre-circulation of evidence, which must be prepared in accordance with the guidance set out in the Environment Court's Practice Note, and the Hearing Procedures note that the Panel will, in most cases, pre-read submissions and evidence in advance. Due to the large number of submissions and the limited time available, the Hearing Procedures also provide that submitters will be given a fixed amount of time to make the main points of their submissions, and witnesses will be required to present concise summaries of their evidence, taking at a maximum 10 minutes. The Hearing Procedures allow for cross-examination of witnesses by the Panel and by parties, subject to the Panel's agreement, and give the Panel the power to summon witnesses in certain circumstances.

Annabel Linterman

Notification of Auckland Local Board Plans

Auckland's 21 Local Boards are currently preparing their second generation Local Board Plans for notification on 7 July 2014.

Each of Auckland's Local Boards is required under the Local Government (Auckland Council) Act 2009 to prepare a Local Board Plan every three years. The first set of Local Board Plans were adopted in 2011, and must be replaced by the second-generation Plans by 31 October this year. 

Local Board Plans are intended to guide how each of Auckland’s Local Boards make decisions on local activities and projects. The Plans are also intended to inform the development of Auckland Council (Council) documents such as the Council’s Long-term Plan (which sets out the Council’s priorities and funding allocations over a ten-year period) and how Local Boards intend to work together at a local level with other Council-controlled organisations and central Government agencies.  

The Council is not required to consider Local Board Plans in determining applications for resource consent under the Resource Management Act 1991. However, the Council will be entitled to take a Local Board Plan into account, where it is considered relevant, in determining applications for discretionary or non-complying activity resource consents. 

In addition, each week the Council provides each Local Board with a summary table of all consent applications for activities within each Local Board’s particular area. Local Boards are able to request copies of particular applications and provide comment on those applications for the Council's consideration during its processing.  We expect some Local Boards will take the opportunity to provide comments to Council as to whether particular applications are in line with the Boards’ aspirations as set out in their Local Board Plans. 

Following notification on 7 July 2014, the proposed Local Board Plans will be open for submissions until 6 August 2014.

Simon Pilkinton

Rena: Application to leave wreckage on reef accepted for consideration by BOPRC

The owners and insurers of the Rena (under the name of Astrolabe Community Trust) have recently lodged a resource consent application with the Bay of Plenty Regional Council (Council) to leave the wreckage of the Rena on the Astrolabe Reef. This is coupled with a discharge consent application for the contamination likely to be caused by the materials that are unable to be removed from the ship. The application has been accepted for consideration by the Council. 

Despite a number of sensationalist headlines in the media, the Council has not granted consent to the proposal, but has simply accepted the application for lodgement, which is the first step in the resource consent process. The application will still be required to be publicly notified, with the Council extending the usual submissions period from 20 working days to 40 working days to “reflect the importance of this process to the people of the Bay of Plenty” (Eddie Grogan, Deputy CEO of the BOPRC).

Due to the significance and potential impacts of this application, the indications are that it will be directly referred to the Environment Court for hearing.

The Council has established a standalone website to provide all interested parties with information on the process, including the application itself.

Submissions are due by Friday 8 August to the Council.

Daniel Minhinnick and Brad Ross

RMA reforms put on hold

Sections 6 and 7 of Part 2 of the RMA outline, respectively, “matters of national importance” and “other matters” that are to be taken into account in decision-making. The amendments proposed to combine sections 6 and 7 into one set of “principles” that decision-makers would be required to recognise and provide for, following the findings of the RMA Principles Technical Advisory Group (TAG), commissioned by the Government in 2011 to conduct an independent review of the principles of the RMA.  In its report, released in 2012, the TAG considered that merging sections 6 and 7 would minimise duplication and support a more balanced approach to decision-making.

In February 2013, the Government released a discussion document largely adopting the TAG’s recommendations and seeking feedback on the proposed reforms. Although many of the changes in other areas were welcomed, the proposal to amend the principles contained in sections 6 and 7 was the subject of robust debate and met with some substantial opposition. Both United Future and the Māori Party raised concerns that merging sections 6 and 7 in the way proposed would undermine the fundamental principles of the RMA by affording greater importance to economic development rather than environmental protection. Without the support of United Future and the Māori Party, National did not have the requisite support to proceed with Phase two. 

As a result, the Government announced that it was putting the proposed reforms on hold until after the election.  Labour responded by offering its support for some of the proposed changes to the RMA, but only in relation to housing affordability, and sought that any reform bill would have to be split in this regard. The Government rejected this proposal.  

Whether the Government will be able to move its proposed RMA reforms forward will depend on the election outcome. Should National continue to lead the Government after the election, and still need the support of minor parties to pass the legislation, it will need to think carefully about what it can do to make any proposed changes to sections 6 and 7 of the RMA more palatable to the likes of United Future and the Māori Party.

The Government may also need to reconsider its rationale for the proposed changes to Part 2. One of the reasons for the proposed changes was to explicitly import the requirement for decision makers to take an “overall broad judgment” approach, which had developed through the case law on Part 2, into the wording of that Part.  However, the Supreme Court, in Environmental Defence Society Incorporated v The New Zealand King Salmon Company Ltd [2014] NZSC 38, held that an overall broad judgment approach under Part 2 was not appropriate in determining whether a proposed plan change would give effect to the provisions of the New Zealand Coastal Policy Statement. The Government will therefore need to think carefully about how it goes about most effectively importing the overall broad judgment approach, to ensure that Part 2 is required to be considered in all appropriate circumstances under the Act and that, when it is, an overall broad judgment approach is taken by decision-makers.

Whether it effectively wishes to overrule the Supreme Court by importing the overall broad judgment approach into the wording of Part 2, or codify the Court’s judgment. 

Allison Arthur-Young / Lauren Eaton

Labour announces Canterbury Earthquake Policy

The Labour party announced its first tranche Canterbury Earthquake Policy on 9 June 2014, including a proposal to establish a special Earthquake Court exclusively tasked with processing outstanding earthquake insurance claims.

Several years after the February 2011 earthquake, Labour suggests that over 10,000 insurance claims are yet to be settled. The proposed Earthquake Court would operate as a special division of the Canterbury District Court, working to reduce the existing backlog with the assistance of new streamlined processes. The Court would have jurisdiction to process claims of up to $1 million; a significant uplift from the District Court's current limitation of claims up to $200,000.  

Labour intends that all costs related to processing outstanding claims through the special Earthquake Court would be paid by the Crown, including Court, lawyer and expert witness costs. Costs would ultimately be recouped from insurance companies and the Earthquake Commission through levies proportionate to payouts made. 

Labour's policy may have met with some approval from Canterbury locals, but the response from elsewhere has been largely critical. Questions have been raised as to whether a new fast-track process is actually necessary, and the Chief District Court Judge has taken the unusual step of penning a letter to the editor with an update on the response of the Christchurch District Court to earthquake-related claims. In particular, the Judge was at pains to clarify that a fast-track procedure for qualifying earthquake cases was introduced in February 2012 (refer the Christchurch Civil Practice Note for Earthquake Related Claims) and that since February 2012 the vast majority of cases have been disposed of within 55 working days, without the need for a hearing.

Nor is it clear from Labour’s announcement whether there are sufficiently experienced lawyers or existing judges who would be available and willing to sit on a new division of the District Court. (If the proposal were to proceed, a Labour Government may need to look to retired judges or senior lawyers in other regions to fill the necessary places on the bench). The Chief District Court Judge appears to see no need for such a step, noting that the civil work of the District Court is undertaken by a discrete number of experienced civil judges, who closely monitor earthquake claims on the open list.

Labour’s intention to levy insurance companies to cover the costs of claims has provoked outrage from insurers, who see the proposal as an incentive for claims to be made, irrespective of merit. The cost proposal has also raised concern amongst those who consider that the Earthquake Commission (EQC) should focus payouts on long-term flood mitigation measures and social housing. Christchurch City Council received a $15 million payment from the EQC on the day of Labour’s announcement, intended to fund the repair and replacement of hundreds of social housing units before the end of the year. However, at the same time the EQC is seeking a High Court declaration on whether it should also be required to fund flood mitigation and prevention work.

Labour’s announcement also included a promise to amend the law to make it clear that the EQC must pay for earthquake damage in the form of land subsidence or other geological changes; an intention to split the $20 million cost of protecting Christchurch’s 500 most flood-prone homes between the Government and local authorities; and an undertaking to provide temporary housing for those whose homes are being worked on. We must await the election outcome to see which, if any, of these promises will be advanced by the new Government.

Francelle Lupis

Green Party launches controversial new carbon tax policy

The Green Party announced a new climate change policy earlier this month, to scrap the Emissions Trading Scheme (ETS) in favour of a carbon tax.

Dr Russell Norman announced the new policy on 1 June 2014, outlining that industry participants would be charged $25 per tonne of carbon emitted.  The Greens are also proposing to establish a Climate Change Commissioner, at an initial cost of around $2 million, which would be funded by phasing out the ETS.  Dr Norman referred to New Zealand as the “worst performing developed country” with regard to climate change issues. The Green Party wants the country to achieve carbon neutrality by 2050.

The dairy industry, currently exempt from the ETS, would pay a reduced rate of $12.50 per tonne (as opposed to the standard $25). The Greens estimate this would result in a 12.5 percent reduction in farmers' income including an extra 2 percent cost on the working expenses of the average farm.  An independent report, prepared by Business and Economic Research Limited, and released alongside the policy, stated that dairying would be “adversely affected”, but that at the currently projected pay-out for milk solids, even dairy farmers in the lowest decile would remain well above break even in the face of an emissions levy. Other gas-emitting industries, such as electricity and road fuels, were considered less likely to be affected as they would be able to pass on production cost increases to households. Forestry would be credited with $12.50 per tonne to encourage the planting of trees, and international air travel would not be subject to the tax. Sheep and beef farms would not be subject to a tax at all as they “cannot afford it” according to Dr Norman; a feature of the proposal which has been met with some criticism from environmental groups. 

Reactions to the policy have been mixed, although a UMR Research poll showed that a “personal tax cut funded by a charge on climate change polluters” would make 32 percent of those polled “a little more likely” to vote for the party. 

Criticisms of the policy include that it would create a burden on households, who would be forced to pay higher electricity and fuel costs.  However, the Greens claim that any cost passed onto households would be offset by a “climate tax cut” on the first $2,000 of income overall making households, on average, $319 better off every year under this policy, as estimated by the Greens. The Green Party has estimated that revenue from the proposed tax would be $955 million per year, which would be used to fund these tax cuts, including a company tax cut of 1 percent.  Business NZ Chief Executive, Phil O'Reilly, has voiced concerns that the levy may threaten jobs, and that New Zealand's approach should be “unlocking business solutions rather than taxing businesses more.” Federated Farmers President Bruce Wills said that the tax will make dairy farming less competitive in international markets. National’s climate change issues minister Tim Groser called the policy “extreme” and part of a “relentless attack” on the dairy industry by the Green Party. Prime Minister John Key said it would make New Zealand less competitive and would cost jobs. Perhaps most significantly, the Labour Party favours retaining but strengthening the current ETS system.

Positive reaction to the policy has also varied. Forest and Bird have supported the policy as being a clear and simple system which fairly attributes tax liability to those who pollute and discourages pollution. The World Wildlife Fund sees the policy as having the potential to put New Zealand on the path to becoming a low carbon economy. The Taxpayers’ Union, an unlikely supporter, has commented that it appears that the policy would result in a simpler, more transparent tax system than the current ETS, and would reduce New Zealand’s overall tax burden. This support for the carbon tax is conditional upon the money raised by the tax being used to reduce taxes on personal and company income. 

Evie Rainey

ETS arbitrage

Following the release of the Budget, forest owners were surprised to learn that the Government had singled them out with respect to obligations under the Emissions Trading Scheme (ETS). On 16 May 2014, the Climate Change Response Act 2002 was amended so that only New Zealand Units (NZUs), rather than international units, can be surrendered by forest owners when deregistering post-1989 under the ETS (but not other ETS participants). 

The amended legislation is intended to put an end to arbitraging - the practice of taking advantage of a price difference between markets. In this case, ETS participants take advantage of the difference between high value NZUs and cheaper international units.

Forest owners (from 1989 onwards) earn NZUs from the Government for the carbon that their forests absorb, and they are obliged to repay those units when they harvest the forest or leave the ETS early. However, forest owners have had the ability to profit from selling high value NZUs, while meeting their ETS obligations using cheaper international units. Arbitraging was probably inevitable for the ETS as a result of allowing unrestricted volumes of cheap international units into the country. On average, international units sell for one tenth of the price of NZUs.

Minister Tim Groser announced in December 2013 that international units would not be able to be used to meet ETS obligations from mid-2015. The forestry industry has been seeking a ban on international units for several years, but certainly not a ban without forewarning, and not without treating other ETS participants equally. Those who have already bought international units to meet their ETS obligations for the next 12 months will be likely to sell those units at a loss, whereas other participants in the ETS will continue to benefit from the loop hole in the law which will still enable arbitraging to occur.

The amended legislation has seen a flurry of media attention and criticism for its focus on forestry owners only. Minister Groser claims that this change brings forestry broadly in-line with other sectors in the ETS. While many would agree that arbitraging needs to be addressed, it will be interesting to see whether the Government addresses the issue with other ETS participants.

Allison Arthur-Young and Jess Riddell

Housing update

Local and central governments’ attempts to battle the “housing crisis” are proceeding full steam ahead, with the announcement of the third tranche of Special Housing Areas (SHAs) on 7 May 2014; applications for qualifying developments being steadily submitted and granted; and an increasing number of cities being included under the Housing Accords and Special Housing Areas Act 2013 (HASHA).

SHAs

Since the HASHA came into effect, 63 SHAs under three tranches have been recommended for the Auckland area. These are expected to supply approximately 10,000 dwellings or sections over the three years of the Auckland Housing Accord, and will (if consents are pursued) eventually deliver some 30,000 new dwellings.  The Housing Project Office has approved, or is currently considering, 22 consents (for 317 sites/dwellings), and 18 master planning pre-applications are underway, including more than 10 plan variations. 

The first application for a “qualifying development” was granted just before Christmas last year, consenting the Weymouth development in South Auckland, which will establish 92 dwellings.

The third tranche of SHAs was announced in early May, and is awaiting confirmation by Order in Council. It is also anticipated that there will be a fourth tranche of SHAs announced by August this year.

Progress in Auckland

With the increase in consenting activity across Auckland, the Year 1 Housing Accord target to achieve 9,000 new residential building consents or consented sections is likely to be exceeded by almost 1,300.  Nevertheless, Auckland Council has admitted that the activity thus far is yet to impact the headline figures, and significant effort is still required to achieve the Year 2 and Year 3 targets (13,000 and 17,000 respectively).

There is also concern from some sectors about the location of the SHAs. Despite efforts to limit urban sprawl in Auckland, of the 63 SHAs already announced, 10 are outside the Metropolitan Urban Limit (ie beyond the boundary set for urban development in the legacy plans). These 10 SHAs could accommodate over 25,000 people.

Nationwide

Other regions in New Zealand are jumping on the bandwagon and have been included within the HASHA provisions. So far, the regions that have been added to Schedule 1 of the HASHA as having “significant supply and affordability issues” are the districts of: Christchurch City Council, Hutt City Council, Kapiti Coast District Council, Porirua City Council, Tauranga City Council, Upper Hutt City Council, Wellington City Council and Western Bay of Plenty District Council. Queenstown has just become the latest district to be added to Schedule 1 and earmarked for the development of a Housing Accord. Once included in the Schedule, SHAs can be announced in these areas and qualifying developments sought.

The future

The HASHA is making significant progress; however, its effect is not yet clearly visible, with dwelling prices in Auckland continuing to trend upwards, reaching an average median price for the last 12 months of $585,000.  Additionally, concern about the “housing crisis” is still very high at central government level. This is clearly visible through Environment Minister Amy Adams’ submission on behalf of Cabinet on the Proposed Auckland Unitary Plan (PAUP), which submits that major changes to the PAUP are required if it is to appropriately remedy the current housing issues in Auckland. With the “housing crisis” a hot topic in the lead up to the election, the progress of the HASHA process is one to keep an eye on.

Rosa Winter

Supreme Court clarifies scope of agreements under the Public Works Act

In its decision in Planet Kids Limited v Auckland Council, the Supreme Court has shed light on an area of long-standing confusion in respect of agreements to acquire land under the Public Works Act 1981 (PWA). 

Previously, when land was acquired by agreement under section 17 of the PWA (rather than through the compulsory acquisition process) it had been unclear how the amount of compensation payable was to be determined. Part 5 of the PWA prescribes a strict compensation assessment regime for compulsory acquisitions; however, no reference is made to the part of the Act in respect of agreements that are reached to acquire land voluntarily.

Although public bodies acquiring land for public purposes cannot simply give money away, users of the PWA have often wondered: in appropriate circumstances, is there any constraint on public authorities agreeing to pay more compensation than would be required if the taking was compulsory? The Supreme Court held that the PWA's compensation assessment provisions do not dictate the compensation to be paid where land is acquired by agreement. Instead, in such cases the compensation will be whatever is agreed between the parties.

On 3 June 2010, Auckland Council entered into an agreement with Planet Kids Limited (Planet Kids), a New Lynn based childcare business operating on land leased from Auckland Council, to acquire Planet Kids Limited's business and lease to enable a roading project.

The parties agreed to a figure of $538,000.00 plus GST in full and final settlement of any claim for compensation under the PWA. However, prior to settlement, the Planet Kids building was destroyed by a fire.  The lease provided that if the building was destroyed or rendered un-tenantable the lease would revert to the Council.

Auckland Council argued that the Part 5 compensation assessment provisions must apply to its agreement to acquire Planet Kids' interests in the land taken. Those provisions dictate that compensation should be assessed on the day of settlement, in which case there would have been nothing for the Council to acquire, as Planet Kids' lease had reverted to the Council, so no compensation would be payable.

Planet Kids argued that the agreement was not subject to the PWA's compensation assessment provisions and should therefore be treated no differently from any other agreement. That is, the agreement was enforceable under contract law, and no regard should be had to the PWA's compensation assessment provisions.

In coming to its ultimate decision and finding in favour of Planet Kids, the Court stated that the PWA's compensation assessment provisions cannot (and do not purport to) dictate the compensation to be paid where land is acquired by agreement. Instead, in such cases the compensation will be whatever is agreed between the parties.

This decision will have important practical implications for future agreements to acquire land for public works.  Where public bodies may have previously felt constrained in the amount of compensation payable, they can now be assured that there is no legal barrier. This will enable greater flexibility, and may result in swifter resolution of acquisitions, resulting in savings in time and money.

There may be a concern that a public body may pay too much under an agreement, resulting in misuse of public money; however, there is no obligation under the PWA to enter into an agreement.  If an appropriate compensation figure cannot be agreed, the compulsory acquisition process remains available as a fall-back.

An example where this decision will be relevant is where negotiations to acquire land occur in tandem with the process under the Resource Management Act 1991 to obtain necessary resource consents or other approvals.  A landowner who faces acquisition of part of his or her land is likely to participate in both processes in order to ensure compensation is fair and that any adverse effects on any remaining land are addressed.

If the PWA's compensation assessment provisions were to apply, the landowner may be unable to recover many of the costs associated with the acquisition. However, by agreement, the public body and landowner can agree to a compensation package that enables the landowner to recover those costs, as well as address any adverse effects the project may have on the remaining land.  In exchange, the landowner may agree not to become involved in the resource consenting process. It is easy to see how this could benefit both parties.

A copy of the decision can be viewed here.

Michael Doesburg

That's not cricket – the hidden costs of fast-tracking an application

In two recent costs decisions of the Environment Court, the Canterbury Cricket Association Incorporated (CACI) was ordered to pay $224,146 to the Christchurch City Council (Council) and $17,928 to Hands off Hagley (HOH) following CACI's successful application for resource consent for the development of Hagley Oval in Christchurch. The application was directly referred to the Environment Court in order for that the venue to be used for the Cricket World Cup in 2015. 

In total, the Council was awarded 100% of its total costs claimed (being legal and witness fees and expenses incurred), and HOH were awarded approximately 23% of its total witness fees and expenses incurred (after seeking 80% of these fees). The decisions confirm a clearly emerging trend that a consent authority can recover its costs following a direct referral and suggests that unsuccessful section 274 parties will also be able to recover their costs in some circumstances.

Council costs

In Re Canterbury Cricket Association Incorporated [2014] NZEnvC 107, CACI opposed the Council's costs application on the basis that it was the Council, rather than CACI, who lodged the bid to host World Cup matches in Christchurch and, given the time constraints imposed by the impending World Cup, direct referral was the only viable option. CACI pointed out that had these time pressures not been present, CACI would have pursued its application in the usual way. Furthermore, CACI pointed out that the Council stood to gain from a successful grant of consent, through the benefits to Christchurch from hosting World Cup.

In determining whether costs should be awarded, the Court gave weight to the fact that, had the application been considered by the Council in the first instance, the Council would have been able to pass on all its costs under section 36 of the Resource Management Act 1991 (RMA). Regarding the submission that the Council would benefit from hosting the tournament, the Court considered that it was open to CACI and the Council to have come to a commercial arrangement in relation to the costs of the direct referral, including recognition of the benefits to the Council of hosting the tournament, and it was not prudent for the Court to second guess such arrangements between the parties. 

The Court was satisfied that the costs claimed were reasonable and considered that refusing to make the order would burden Christchurch ratepayers.

Section 274 party costs

In Re Canterbury Cricket Association Incorporated [2014] NZEnvC 106, CACI opposed the application by HOH to recover 80% of its witness fees and expenses, on the basis that HOH were unsuccessful, HOH’s evidence did not assist the Court, HOH’s conduct at the hearing (including an unfocused approach to cross-examination) unnecessarily lengthened the proceedings and that there is no presumption in the RMA that costs will be awarded in favour of a section 274 party.

The Court disagreed, concluding that HOH did not conduct its case in a manner that would disentitle it to an order for costs. The Court declined to award the 80% of witness costs sought by HOH, but did order costs of $17,928 against CACI (some 23%).  HOH did not seek a contribution towards its legal costs, most of which were undertaken pro bono, but the Court noted that had HOH done so, an order would likely have been made.  The decision aligns with Road Metals Company Ltd v Selwyn District Council [2013] NZEnvC 94, which created a precedent for ordering costs in favour of unsuccessful section 274 parties following a directly referred application.  

These decisions highlight the significant costs likely to be faced by an applicant who successfully pursues a directly referred application. Given that the Court will also seek to recover its total costs incurred, applicants are likely to face substantial costs awards against them to both the Court and a consent authority. It now appears that these costs can be extended to include costs to unsuccessful section 274 parties as well. 

Given that submitters cannot recover costs incurred in opposing an application at a council hearing, and risk being faced with an award of costs against them if they unsuccessfully appeal a council decision, it is questionable whether the legislation intended that unsuccessful section 274 parties should be entitled to recover their costs following a direct referral. Even if this were the case, it is also questionable whether the legislators would have intended the test for whether section 274 parties should be awarded costs to be that they did not “disentitle” themselves to such an order. This approach seems to create a presumption that an unsuccessful section 274 party is entitled to an award of costs, provided they do not deprive themselves of this right. 

The debate appears to be far from over.  With more than one hundred section 274 parties joining Waiheke Marinas Limited’s directly referred application for consents for a 160-berth marina on Waiheke Island, it will remain to be seen what approach the Court takes if faced with costs applications from the numerous parties.

With the RMA, the Environment Court Practice Note and recent discussion documents released by the Ministry for the Environment failing to give clear guidance on the approach to, or quantum of, costs awards following direct referrals, applicants are being faced with the uncertainty of facing significant costs orders to a number of different parties. These rapidly rising costs are becoming a strong disincentive on applicants looking to directly refer an application, with the supposed benefits of “fast-tracking” an application likely being far outweighed.

Anna McConachy

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