West Coast Regional Council v Attorney- General CA253/95 [1997] NZCA 324 (10 June 1997)

Last Updated: 5 February 2019

IN THE COURT OF APPEAL OF NEW ZEALAND C.A.253/95

BETWEEN THE WEST COAST REGIONAL COUNCIL

First Appellant

AND THE GREY DISTRICT COUNCIL Second Appellant

AND THE BULLER DISTRICT COUNCIL Third Appellant

AND THE WESTLAND DISTRICT COUNCIL

Fourth Appellant

AND WEST COAST TIMBER ASSOCIATION (INCORPORATED)

Fifth Appellant

AND L M GILLIONS, JR PAYNTER and others

Sixth Appellants

AND THE ATTORNEY-GENERAL Respondent

Coram: Gault J Blanchard J Cartwright J

Hearing: 19, 20 and 21 May 1997

Counsel: JG Fogarty QC, WJ Palmer & ML Godfrey for Appellants

MT Scholtens, C Mathieson & GJ Praat for Respondent

Judgment: 10 June 1997

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

Introduction

This case is about an unusual document which has become known as the West Coast Accord. It is dated 6 November 1986 and was signed on behalf of the Crown by the Minister for the Environment, the Hon. Mr Goff, and by representatives of organisations concerned with conservation (Native Forest Action Council, Royal Forest and Bird Protection Society of New Zealand and Federated Mountain Clubs of New Zealand), and the West Coast United Council, the West Coast Timber Association Inc. and the Westland Timber Workers’ Union.

The general background to the document was the desire of the Crown to limit the logging of native or indigenous forests to a level compatible with sustainable yield management but at the same time to minimise the impact on the West Coast community generally and especially on those whose livelihood was derived from forestry and milling. A particular problem was that the new policy would involve a drastic reduction in availability of native timber, yet most plantings of exotic timber (pinus radiata) on the Coast were not ready for production.

The document may be very broadly described as dealing with the allocation of very large areas of land on the West Coast (a) for national parks and reserves, (b) for transfer to the new Forestry Corporation for forestry production on a sustainable yield basis and (c) for allocation to the new Department of Conservation (DOC) to be held in “stewardship” pending future decision about use. It takes the form of an agreement with three recitals and 13 covenants and has been found in the High Court to have contractual effect. The Crown had

there argued to the contrary but on this appeal now accepts Greig J’s decision on that question. That is understandable because, although the Accord may appear to a reader as embodying no more than a general statement of Government policy settled after consultation and negotiations with the conservation and West Coast interests, together with some specific provisions, and although the Crown’s representatives at the signing of the document on the West Coast seemed doubtful about its status, there are indications in prior documents that they intended to obtain a legally binding contract. This Court must now so regard it.

The contents of the document

The three recitals to the Accord were as follows:

AND [Sic] WHEREAS the Government has consulted with the West Coast United Council, environmental and industry groups, conservation groups and community authorities to devise an overall strategy for West Coast State forests.

AND WHEREAS the strategy provides for gazetting of reserves and the Paparoa National Park.

AND WHEREAS the strategy also provides for the allocation of sufficient indigenous production forest areas to make possible the maintenance, subject to competitive market forces, of the sawmilling industry on the West Coast at its current allowable level of cut until exotic species become available in adequate quantity, planned to be

2006 in Buller and between 1990 and 1995 in North Westland (except for Karamea for which adequate quantity is available at present level of allowable cut until at least 1994)

The portion of the third recital in italics was not present when the agreement was signed (on 5 November) by the conservation interests. It was handwritten into the document on 6 November before signature in Greymouth by the West Coast parties. The amendment was not afterwards ratified by the prior signatories but no point has been taken about that, for the litigation does not involve them. The West Coast signatories and other West Coast individuals and bodies corporate claiming to have been represented by those signatories are

seeking from the Crown monetary compensation only, not any change in the present or future physical activities on the areas of land in question.

The portions of the agreement which are expressly stated to be covenants can be summarised as follows:

• 136,776 ha of land identified on maps to be gazetted immediately as national park and reserves and another 44,545 ha to be advertised for public comment on a proposal for similar treatment.

• The Pike River coalfield to be allowed to proceed.

• Current mining operations in new reserve areas to be allowed to continue.

• All State Forest production areas to be offered to the Forestry Corporation for management on a commercial basis subject to certain constraints, including

that indigenous forest be managed to allow a continuing supply of indigenous timber in perpetuity (cl.4i).

• The Saltwater and North Okarito State Forests (in South Westland) to continue to be managed on a sustainable yield basis, subject to specific constraints.

• All other State Forest areas (i.e not reserves, protection zones or production areas) to be classified as “stewardship areas” and allocated to DOC.

• Exotic forests within wildlife corridors to be allocated for production.

• Competitive tenders to be immediately invited by the Crown for a supply of

21,000m³ in Karamea and 52,000m³ in Buller of podocarp (indigenous)

timber (cl.8).

• A sustainable yield beech scheme “may proceed” with tenders to be invited by the Crown “as soon as possible.”

• The Crown to pay $1 million to the West Coast United Council as trustee for expenditure in South Westland to assist in the transition from existing logging practices to the new sustainable yield management of forests. This payment was in particular to discharge any Crown commitment to the planting of special purpose timber (Tasmanian blackwood) in South Westland.

• The Crown to consult with the West Coast United Council to consider whether transitional assistance measures were required in the Karamea district if gazetting of reserves led to closure of sawmills.

The signatories and the appellants

Since 1986 local government has been re-structured. The first to fourth appellants are the West Coast Regional Council, the successor to the rights of the West Coast United Council, and the three district councils on the Coast as successors of certain former local authorities. They say the West Coast United Council was acting as agent and representative of their predecessors in signing the Accord. The other appellants are the West Coast Timber Association Inc. and members of that association. They include Mr Lionel Gillions who played a leading role for the industry in the negotiation of the Accord and seems to have been responsible for the last minute amendment to the third recital.

In the sealed judgment it was adjudged that the signatories “and other Plaintiffs deriving title and status through such signatories, except for Westport Sawmilling Company Limited, are entitled to the benefit of the contract.” Counsel for the Attorney-General has conceded that Westport Sawmilling Company Ltd should not have been excluded, although it will emerge that, on the view that we take, this point becomes immaterial, as does an argument made by the Crown and rejected by Greig J that the signatories were not acting as agents for the other appellants or their predecessors.

The issues

The production of a small forest has been employed in the considerable amount of paper associated with the litigation but there is no appeal from the Judge’s determination of several questions. The remaining issues, as they appeared towards the end of the hearing before us, have been substantially transformed by concessions then made by the parties and are relatively straightforward. They are entirely concerned with the status and effect of the third recital to the agreement. Does it, in the particular circumstances in which the document came to be signed, operate as a covenant by the Crown rather than a mere recital? If so, what obligations does it place upon the Crown, and is the Crown in breach?

The Judge’s conclusions

Because in the High Court the Crown was contending that no part of the agreement had contractual effect, Greig J did not hear any separate argument dealing with the first of these questions. He did, however, express the following views concerning what commitment he thought the Crown had made:

The kernel of the Council case, is that the allowable annual level of cut of podocarp resource, predominantly rimu, at 166,000m³ per annum would be maintained until it could be replaced by an adequate quantity and quality of exotic timber. That required some two to three times the nominal quantity measured in cubic metres. In light of the known facts as to the availability of exotic timber this would lengthen the period during which indigenous timber would be made available until about 2005 and would thus require a suspension of sustained yield management and continuous over-cutting in a number of areas and forests. While such an arrangement was no doubt the aim of the West Coast interests, it could not objectively be sustained as a term of any arrangement, contract or understanding between or be a commitment as between the Crown and the parties involved in this case from any of the transactions involved. Indeed, in my judgment, the whole tenor of the matter is against that.

And:

It was not and was never the case that the industry or any part of the industry was to be guaranteed or to be maintained or to be kept viable or profitable, either indefinitely or until the exotic resource reached its peak. All that was proposed, and all that was agreed to, was that there would be a prolongation of the indigenous resource outside the sustainable yield regime for certain periods until, at various times, certain planned quantities of exotic timber would become available. That was in the full knowledge by all the parties that those quantities could not be sufficient. In fact the exotic resource quantities still are available and it appears that the indigenous quantities, in accordance with the dates, are also available.

The Judge was, however, of the view that certain terms had to be read into the agreement by implication. These are set out in the sealed order of the High Court as follows:

3. The terms of the contract are derived from the West Coast

Accord document dated 6 November 1986 and are as follows:

(a) Those set out in the West Coast Accord document (a copy of which is annexed hereto as Schedule B), save for the additions or modifications referred to in (b) - (f) below.

(b) As provided by the hand written addition to the third recital of the West Coast Accord document:

(i) The Defendant had an obligation to maintain the production and the availability of indigenous podocarp timber in North Westland to 1995; and

(ii) The Defendant had an obligation to maintain the production and the availability of indigenous podocarp timber in Buller amounting to 17,000 cubic metres per annum to 2006.

(c) The supply of podocarp in Buller in terms of clause 8 of the West Coast Accord document was to be for three years.

...

(f) The Defendant had an obligation to provide the necessary resources to enable an investigation into the forests in South Westland south of the Cook River to proceed.

But he found that the terms of the contract had not been breached by the

Crown.

Argument for appellants

The argument for the appellants, as refined before us, is that the third recital is to be read as a covenant because it provides a large part of the consideration for the agreement moving from the Crown. It was noted that Crown counsel admits that the strategy referred to in the recital was “critical” to the West Coast

interests. It was submitted that without what is promised in that recital, the West

Coast parties would never have signed up to the Accord.

There are no express covenants implementing the third recital. Therefore it must be taken to have been itself a covenant. The form of the document should not prevail over its substance:

No technical language is required to create a covenant in a deed, and as such, any words in a deed (including a recital) which evidence and intention that one or more of the parties will be bound to do or not to do a thing will constitute a covenant...it will always be a question of construction as to whether the parties intended a recital to act as a covenant.(Halsbury’s Laws of Australia 140-620)

We were referred to the words of Lord Denman in Aspdin v Austin (1844) 5

QB 671, 683:

...where words of recital or reference manifested a clear intention that the parties should do certain acts, the courts have from these inferred a covenant to do such acts, and sustained actions of covenants for the non-performance, as if the instruments had contained express covenants to perform them.

Reference was also made to the judgments of the High Court of Australia in

Ansett Transport Industries Pty Ltd v The Commonwealth [1977] HCA 71; (1977) 139 CLR 54.

But Mr Fogarty QC accepted that other considerations were to be found in the express covenants summarised above, so that the document can have contractual force, consistently with the position now accepted by the Crown, even if any assurances given in the recital are themselves non-contractual.

On the question of construction of this “covenant” (which we will continue to call a recital without determining its status for the moment) the appellants submit that it must be read objectively as a summary of the Government’s strategy referred to in the preceding recitals. The agreed statement of the strategy was not finally negotiated and placed before the West Coast interests

until the culmination of the meeting at which the Accord was signed. It may be that the Crown’s actual strategy was materially different from that stated in the third recital (after the amendment) and that, subjectively, the Crown had not intended to depart from it. But it is said that the Crown’s representatives accepted a form of words which appeared to summarise the Crown’s position and which they knew would secure the West Coast signatures. The idea that there had been an earlier consensus which was now being confirmed is rejected by the appellants, in our view correctly so, for there is no basis for it in the evidence, particularly in view of the letter of concern from the West Coast United Council to the Minister as late as 3 November and the comments made at the meeting on 6 November.

Mr Fogarty submits that it is not to the point that the proper objective reading of the amended document may differ from what the Crown’s representatives thought they were agreeing to. They agreed to the language which the West Coast negotiators sought, knowing at the time that the West Coast interests were unwilling to submit to the strategy which the Crown had announced at an earlier stage. In Mr Fogarty’s words, “they gave the language the other side wanted, not realising contract law requires objective intention.” The Crown must therefore show that “the other side were not fooled into thinking that they had made some gains” at the lengthy meeting which preceded the signing of the Accord on the West Coast.

The objective meaning of the recital is said by the appellants to be that the strategy was for a continued allocation to production (i.e cutting for sawmilling) of indigenous forests to enable maintenance of the sawmilling industry at its current (1986) level of cut not merely in volume but in economic terms until existing exotic plantations became fully productive. The words “in adequate quantity” were added to the recital to make it clear that the strategy was one of economic equivalence. The first of the passages from the judgment of Greig J quoted above indicates the magnitude of the difference in volumes which would be required for economic equivalence or, as it is put in the pleadings,

...the maintenance of the sawmilling industry at the same or similar levels of commercial activity and viability as were achievable by the sawmilling industry on the West Coast in 1986.

The argument for the appellants emphasises that the first part of the recital is concerned with the industry on the whole of the West Coast. The recital then proceeds to refer in the handwritten portion to specific planning, i.e implementation of the general strategy, dealing with the Buller, North Westland and Karamea regions only. The plan was that quantities of exotics, adequate in an economic equivalence sense, were to be available by 2006 in Buller and between 1990 and 1995 in North Westland. Until those dates in the respective regions, it is submitted, the Government was accepting an obligation to bridge the economic gap by making an exception to its general policy and by giving access to indigenous timber additional to the quantities available on a sustainable yield basis. In Karamea it was agreed that an adequate quantity of indigenous timber was available at the 1986 level until at least 1994.

It is said to be of great significance that, although the printed portion of the recital refers to “the West Coast”, and must mean the whole of the West Coast, the handwritten details of the planning have nothing to say about the situation in South Westland. It is submitted that the recital promises an adequate (economic) quantity of indigenous timber in all areas, including South Westland.

Argument for respondent

The argument for the Crown presented by Mrs Scholtens traced the history of the development of Government policy towards the West Coast forests and endeavoured to identify the strategy referred to in the recitals to the Accord. We were advised that the Government remained committed to the strategy and believed that it had been honoured, the argument being as to the meaning and extent of the commitment. Counsel submitted, however, that the strategy was a policy commitment only and was not intended to be given contractual effect. Once formulated, it was said not to have been changed by the amendment to the recital. It was intended to offer no more than interim support to the industry -

until the arrival of sufficient exotics - but on a volume for volume basis. The Government had given a non-binding assurance that it would suspend the sustainable yield policy for indigenous forests to that extent only and for the periods specified in the recital in relation to particular regions; and in those regions only, not in South Westland, where the only policy commitment was to a further investigation. Any contractual implementation was strictly limited to the terms of the express covenants of the Accord; in particular, the agreement to immediately invite competitive tenders for supplies of specific quantities of podocarp timber in Karamea and in Buller (cl.8).

Events preceding the Accord

Mrs Scholtens took us carefully through the events which led up to the Accord, beginning in 1979 with a statement of West Coast Forest Policy. She referred us (inter alia) to a strategy document from the NZ Forest Service in 1985 which spelt out the difficulties in the transition to sustainable yield management. The latter paper considered the problem on a volume for volume basis, as did all those which followed.

A Working Party was established in 1986 to investigate and come up with a solution. Its members consisted of one person from each of the following: the West Coast United Council, the timber industry on the West Coast, DOC, the Forestry Corporation and the conservation movement. It circulated a preliminary report and discussion document on 4 September containing three strategies, including a so-called Industry Strategy. All are formulated on a volume for volume basis as can easily be seen from the accompanying graphs. After consultation, the Working Party then produced a draft report on 24 October. On

31 October a final report was submitted to Government. It appears that while the West Coast members of the Working Party had input into the draft, the final report, which contains some significant changes, was largely the work of Dr Blakeley, Secretary for the Environment, and was not seen by anyone other than Ministers and officials before the Accord was signed. However, as the Crown case need not depend upon the suggestion of a consensus prior to 6

November 1986, that would appear to be of no moment. The search is for the

Crown strategy to which the recitals referred.

The Working Party’s final report contains a statement of overall strategy and of its consequences. Its recommendations were adopted by the Cabinet Committee, which noted that the strategy would serve both to:

(a) Establish reserve and wildlife corridor proposals; and

(b) Provide sufficient production zone indigenous forests to make possible maintenance, subject to competitive market forces, of the sawmilling industry on the West Coast at its current allowable level of cut until exotic species become available (with the possible exception of one sawmill in Karamea).

There was also a note that sawmills in the southern part of South Westland might have difficulty in competing successfully for exotic supplies from North Westland when indigenous resources were available in reduced supply beyond about 1992.

The Cabinet Committee adopted the recommendations without material alteration and, of present significance, directed the Secretary of the Environment

to convene a committee consisting of representatives from relevant government agencies, the West Coast United Council, environmental and industry groups to secure an agreed package consistent with existing government policies for the allocation of State forest for reservation and production in South Westland south of the Cook River, once the South Westland Management Evaluation Report is completed, and report back to the Committee with associated reports from the State Services Commission and Treasury by 30 June 1987.

Mr Fogarty referred to this direction in order to make the point that it was part of the strategy referred to in the Accord. No doubt that is so, for it appears as such in the draft press release to be mentioned shortly, but it can amount to no more than an undertaking to do further exploratory work and cannot be taken to be a commitment, binding or non-binding, actually to establish production areas

south of the Cook River. Indeed, the very nature of this part of the strategy supports the argument that its adoption or endorsement in the recitals to the Accord cannot have had contractual effect.

By the time the Cabinet Committee’s decision was made on 4 November

1986 it had already received a letter of 3 November from the West Coast United Council expressing at length its “extreme concerns” about “the strategy proposed.” The Council put forward its own proposals.

Notwithstanding this, Dr Blakeley and the Hon. Kerry Burke took the Accord document to Greymouth on 6 November. At the meeting at the Council Chambers in Greymouth they began by tabling a draft press release. As Greig J said, in substance it copied the Cabinet Committee decisions. On its first page it contained a quotation from the Hon. Mr Goff.

“Given the conflicts inherent in this issue, it would be impossible to reach a solution that completely satisfied everyone”, said Mr Goff. “However, I believe that the decisions by Government meet the primary objective of industry and community groups by allocating sufficient area for production to maintain the industry in Buller and North and South Westland at the present level of allowable cut until exotics become available in adequate quantity. The package also meets the primary objective of conservation groups by approval of substantial additional reserve and wildlife corridor proposals.” [Emphasis added]

This appears to be the first time that the fateful words “in adequate quantity”

appear. But later there is the following passage:

Government has invited the West Coast United Council to include the overall strategy in the West Coast Regional Planning scheme.

The key elements of the strategy are:

* all of 120,000 ha of indigenous State forest for production purposes, with sufficient volume to maintain the sawmilling industry at its present level of allowable cut of:

(a) 7,500 m³ per year in Karamea for at least 8 years;

(b) 17,000 m³ per year in Buller until exotics become available in 2006;

(c) 141,500 m³ per year in North and South Westland until exotics become available in adequate quantity between

1990 and 1995.

These production areas are to be immediately offered for sale to the Forestry Corporation. [Emphasis added - note also that only the first of the “key elements” is quoted here.]

Importantly, the figures in the draft Working Party report and in earlier documents available to those attending the meeting - figures which must have been well known to them - show that the quantities of exotics available in the years in question from plantations in North and South Westland could not possibly approach any level required to guarantee the industry a 1986 level of profitability or any other form of economic equivalence.

Conclusions

It can hardly be clearer that the strategy referred to in the recitals to the Accord was the Government’s strategy detailed in the draft press release. The phrase “in adequate quantity” where it appeared in this document, tabled at the meeting at which the West Coast interests were invited to sign the Accord, was plainly referring only to a volume for volume measure of quantity, as did all the preceding materials.

The same words added to the third recital cannot have been taken by any signatory to have a meaning different from that in the statement of strategy in the press release. This is a classic case of the parties to the agreement providing their own dictionary, by way of a cross-reference to the strategy.

Furthermore, as the strategy in relation to South Westland went no further than a direction to an official to carry out consultation to identify areas for reserves and production south of the Cook River and to consider the economic, social and environmental implications for the South Westland region and report back to Government, the absence of any reference to South Westland in the handwritten addition to the recital is no indication that the earlier portion of the recital is intended to apply in an unrestricted way to South Westland. In fact, the indication is completely to the contrary: that no commitment, policy or otherwise, was being made in respect of that region other than a commitment to a further investigation, which Greig J found was later done “thoroughly and to good effect.”

On the basis that the third recital created a legally binding obligation on the

Crown, Greig J adjudged that the Crown:

(1) had an obligation to maintain the production and availability of indigenous podocarp timber in North Westland to 1995; and

(2) had an obligation to maintain the production and availability of indigenous podocarp timber in Buller amounting to 17,000 m³ per annum to 2006.

but that none of the terms of the contract had been breached and the claim in contract failed.

Mrs Scholtens expressed some concern about this formulation. Any obligation on the part of the Crown was not for the maintenance of production but related solely to the allocation of production areas and the suspension of the sustainable yield policy. Moreover, she said that there was no promise of a definite quantity in any particular year. The Forestry Corporation had to be left with sufficient commercial flexibility and there was, of course, the qualification about the effect of competitive market forces.

We agree. Even if this Court found that the third recital had contractual effect, the sealed judgment of the High Court would require amendment in these respects. However, we are of the opinion that the recital should not be treated as if it were a covenant, nor was it intended to be. The argument could not very well have been made if the recital had not been amended. It simply referred to the strategy which provided the impetus for the making of the specific agreements recorded in the covenants. The amendment was made at the last minute and apparently in a relatively casual manner to a document of considerable significance for the West Coast and for the Crown. As has emerged in this litigation, the implications if it were held to give contractual effect to the third recital could be very considerable. There is nothing in the surrounding circumstances to suggest that the Government was willing to accept the risks involved in any such contractual commitment. A claim that nevertheless the amendment had such an effect is to be approached with caution. Notwithstanding all that Mr Fogarty has been able to say on behalf of the appellants, we are convinced that the recital merely summarised a Government policy. The amendment simply added some detail of that policy. We accept Mrs Scholtens’ submission that the Crown was making a policy commitment in terms of the strategy it had outlined to the meeting but, in contractual terms, was going no further than the express covenants in the Accord.

In summary, therefore, we conclude that the third recital is not binding upon the Crown and that, even if it were, it does not bear the meaning contended for by the appellants.

Estoppel

Brief mention was made in the written submissions for the appellants of an alternative claim in equity but understandably it received scant mention in oral argument. In this context there is simply no room for the presence of any estoppel. As the Crown, in our view, has made no contractual commitment

going beyond the covenants, it cannot be taken to have made any representation giving rise to an estoppel. Nor can it be taken to have joined with the appellants in entering into the contract on a common assumed basis. We are in entire agreement with the views expressed by Greig J on this point.

Result

We accordingly dismiss the appeal and allow the Attorney-General’s cross- appeal. Paragraph 3(b) is struck out of the order of the High Court. No determination is required in respect of paragraph 2 of the order save that the words “except for Westport Sawmilling Company Limited” are deleted. The respondent is entitled to costs of $15,000 together with its reasonable disbursements as fixed by the Registrar.

Solicitors

Buddle Findlay, Christchurch for Appellant

Crown Law Office, Wellington for Respondent