Cox v Auckland Council [2012] NZHC 3384 (13 December 2012)

Last Updated: 29 January 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-5804 [2012] NZHC 3384

UNDER the Declaratory Judgments Act 1908

IN THE MATTER OF land purchases for public works at Massey

North

BETWEEN MARLENE J COX & ORS Applicants

AND AUCKLAND COUNCIL Respondent

Hearing: 22 November 2012

Counsel: G P Curry for Applicants

M Casey QC for Respondent

Judgment: 13 December 2012

JUDGMENT OF KATZ J [Application for directions]

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment with a delivery time of 4 p.m. on 13 December 2012.

Solicitors: Leigh Judd Law, Auckland – [e-mail]

Auckland Council, Auckland – [e-mail]

Copy to: G P Curry, Auckland – [e-mail]

M Casey QC, Auckland – [e-mail]

COX & ORS V AUCKLAND COUNCIL HC AK CIV-2011-404-5804 [13 December 2012]

Introduction

[1] The applicants all owned land at Massey North, which they agreed to sell to the respondent, Waitakere City Council (“WCC”). The respondent, the Auckland Council (“Council”) is the successor to WCC. The terms of sale were set out in various land purchase agreements entered into under the Public Works Act 1981 (“PWA”).

[2] Those agreements contemplated that three confined disputes would be referred to the High Court for a determination under the Declaratory Judgments Act

1908. The dispute that is relevant to this application for directions is whether compensation for the applicants’ land should be calculated on the basis of notional industrial zoning or countryside living zoning.

[3] The issues in dispute are common to the properties of each of the applicants. However, for convenience, the declaratory judgment proceedings focus on the land (“Cox land”) owned by the first five applicants (“Cox owners”).

[4] At the declaratory judgment hearing the applicants wish to rely on four affidavits which refer to representations allegedly made by WCC staff at public meetings and on other occasions from the early 2000s to 2008. Essentially the applicants say that WCC employees or agents represented to them they would be compensated for their land on the basis of notional industrial zoning being applied (“the representation issue”).

[5] The applicants seek a direction that such affidavits are relevant to the declaratory judgment proceedings. The Council submits that the affidavits relating to the representation issue are not relevant. Accordingly, I must determine whether the affidavits are relevant to the issues in the proceedings (and therefore admissible) or not.

[6] The applicants’ land (or former land) is within the area of Plan Change 15 to the former WCC District Plan (“PC 15”). The proposed plan change was publicly notified on 31 March 2005. PC 15 (or at least that part of it that affects the applicants’ land) became operative on 20 June 2007. It provides for the establishment of a new town centre at Massey North which requires roads, services and stormwater management facilities. The Council has accepted responsibility for providing some of those roads, services and stormwater management facilities and acquiring land for such purposes.

[7] Following PC 15 becoming operative on 20 June 2007, the Council obtained an opinion from Mr Matthew Casey QC as to the basis on which the Council should compensate any landowners whose land was to be acquired under the PWA. Mr Casey provided an opinion dated 12 November 2007 (“Casey Opinion”) setting out his views as to the appropriate basis for compensation. The Casey Opinion turned in part on the correct interpretation of s 62(1)(c) of the PWA, which provides as follows:

62 Assessment of compensation

(1) The amount of compensation payable under this Act, whether for land taken, land injuriously affected, or otherwise, shall be assessed in accordance with the following provisions:

...

(c) where the value of the land taken for any public work has, on or before the specified date, been increased or reduced by the work or the prospect of the work, the amount of that increase or reduction shall not be taken into account:

...

[8] Mr Casey concluded that the correct interpretation of this section was that the relevant landowners (including the applicants) should be compensated on the basis of a notional “countryside living” zoning applying to the acquired land.

[9] The applicants did not accept this view. Their view was that they should be compensated on the basis of a notional industrial zoning applying to the land.

[10] This issue had not been resolved by 7 October 2010, when the Council entered into a land purchase agreement (“Agreement”) with the Cox owners under s 17 of the PWA.[1] Section 17 authorises a local authority to enter into an agreement to purchase any land for any public work for which the local authority is responsible.

[11] Recital C of the Agreement recorded that the Council would compensate the Cox owners under the PWA for the areas of riparian margin, ecological open space and stormwater treatment/detention ponds the Council required. Clause 5 then set out the following mechanism for resolution of three disputed compensation issues:

5 Resolution of quantum of compensation

(a) Despite their best endeavours the parties have been unable to agree on all aspects of the quantum of compensation to be paid. They disagree on whether the areas of land designated on the plans as Stormwater Ponds (coloured blue). Riparian Margin (coloured light green) and Draingage/Ecological Open Space (coloured dark green) should be compensated:

(i) on the basis of the zoning that applied prior to or subsequent to PC 15 [i.e. industrial or countryside living zoning].

(ii) with or without an adjustment for curtilage. ...

(iii) inclusive or exclusive of the goods and services tax. ...

(b) The parties agree to apply to the High Court for declarations under the Declaratory Judgments Act 1908 that would resolve all of the disagreements. ... For that purpose they will produce an Agreed Statement of Facts and will file evidence on additional relevant matters that they wish to be taken into account by the High Court. ...

(c) The quantum of compensation payable in respect of all declarations are set out in the letter from Darroch dated 11 August 2010 and signed by Ken Stevenson (Valuer for the Owners) and M J Bristow (Valuer for the Council) (copy attached).

...

(f) Pursuant to s 66(1)(a) of the PWA the Council will reimburse the reasonable valuation and legal fees or costs incurred by the Owner in respect of the High Court application mentioned in clause 5 and any appeal thereof...

[12] The annexed letter from Darroch (referred to in clause 5(c)) set out “the agreed parameters and the resulting compensation figures under the various different assumptions, with the end result to be determined by Declaratory Judgment at the High Court”. The two key “agreed parameters” referred to in the Darroch letter were:

(a) A GST exclusive rate of $51.11 per square metre “if Casey Opinion

prevails, i.e. Countryside Living rate”; and

(b) A GST exclusive rate of $80 per square metre “if Industry Rate prevails”.

[13] The Darroch letter included various tables which set out the agreed compensation payments for different portions of land on the basis of each of the two alternative scenarios.

Declaratory Judgments Act

[14] The substantive proceedings are not ordinary proceedings. Rather, pursuant to clause 5 of the Agreement the parties have agreed to seek (at the Council’s expense) a declaratory judgment that would resolve “all of the disagreements” between them, namely the three disagreements set out in clause 5(1), which relate to different aspects of compensation. The key issue for present purposes is the notional zoning applicable to the land.

[15] This declaration is to be made pursuant to s 3 of the Declaratory Judgments

Act, which relevantly provides as follows:

3 Declaratory orders on originating summons

Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any statute ...; or

Where any person claims to have acquired any right under any such statute

... [or] agreement ... or to be in any other manner interested in the

construction or validity thereof,—

such person may apply to the High Court by originating summons for a declaratory order determining any question as to the construction or validity of such statute ... [or] agreement ... or of any part thereof.

[16] It is therefore necessary to first identify the particular construction issue before the Court which the affidavits might be relevant to.

The issues for determination in the declaratory judgment proceedings

The statement of claim

[17] The statement of claim sets out the background and the “competing contentions” of the parties, namely that:

(a) the applicants say that the compensation payable to them is to be paid on the basis of a notional industrial zoning applying to the land; and

(b) the respondent says that the land so designated is to be valued on the basis of its pre-existing zoning as countryside living.

[18] A declaration is sought that the compensation to be paid to the applicants for the purchase of their land by the respondent is to be calculated on the basis of a notional industrial zoning applying to the land. The statement of claim does not expressly identify the statutory provision or clause of any agreement which the Court is being asked to construe or interpret.

Is the Agreement the relevant document?

[19] The first argument for the applicants was that the Agreement itself is the relevant document. It was submitted that the Agreement empowers the High Court to determine what notional zoning should apply the land, because the parties have agreed that the High Court can determine this issue. In doing so, the High Court is entitled to take into account whatever information may be relevant, including the affidavits on the representation issue.

[20] Counsel for the applicants submitted that those affidavits tend to establish that the compensation to be paid to the Cox owners for the taking of their land was to be assessed at the industrial rate. Evidence of those representations should be weighed in the Court’s determination at the substantive hearing as both:

(a) part of the context of fair dealing/good faith negotiations; and

(b) an indication of what the Council itself believed was appropriate compensation.

[21] Further, it was submitted, pre-contractual material is admissible to shed light

on the parties’ intentions as to the meaning of the Agreement.

[22] This line of argument fails to take into account however the nature and scope of declaratory judgment proceedings. To invoke the declaratory judgment jurisdiction there must first be a dispute over the construction or interpretation of an agreement or statute. If there is, the Court can be asked to decide which (if any) of two or more competing interpretations is the correct one.

[23] In this case there is no dispute over the interpretation of the Agreement itself. Clause 5 of the Agreement refers to a pre-existing dispute over the appropriate basis for compensation. The Agreement records the parties’ agreement to refer that pre- existing dispute to the High Court for determination under the Declaratory Judgments Act. It is therefore necessary to look beyond the Agreement itself to identify the nature of the pre-existing dispute between the parties at the time the Agreement was entered into.

Is the PWA the document that the Court must interpret?

[24] The PWA requires the Council to pay “full compensation” to land owners from whom land is acquired.[2] Section 62 PWA provides the method by which compensation “shall” be assessed and provides no discretion to determine the compensation on any other basis.

[25] It is clear from the Darroch letter, which is expressly referred to in the Agreement, that the core of the dispute between the parties is whether the “Casey Opinion” is correct. For present purposes the relevant part of the Casey Opinion is

_{Mr Casey’s conclusion that the correct interpretation of the relevant provisions of the}

PWA (including in particular s 62(1)(c)) is that compensation must be paid for the land in accordance with notional countryside living zoning being applied.

[26] Counsel for the applicants submitted that, to the extent that interpretation of s 62 of the PWA is the issue for determination by the Court, then the phrase “except as otherwise provided” in s 62(1)(b) is relevant. That subsection essentially provides that the value of land taken under the PWA shall “except as otherwise provided” be calculated on a willing buyer/willing seller basis on the open market, unless the compensation relates to a matter which is not directly based on the value of the land or only part of the land of an owner is taken and there is no general market for that part.

[27] Sections 62(c), (d), (e) and (f) then set out exceptions or qualifications to this general principle. Section 62(c), which is relevant in this case, provides that valuation increases associated with the public work or proposed public work “shall not be taken into account.” Subsections (d), (e) and (f) set out further specific qualifications to the general valuation principle in s 62(1)(b).

[28] Counsel for the applicants argued, in effect, that s 62 did not apply to the assessment of compensation in relation to the applicants’ land, because the parties had “otherwise provided” in the Agreement that the Court could determine the appropriate valuation approach. The affidavits on the representation issue were relevant to the Court’s determination as to an appropriate valuation.

[29] Counsel for the respondent submitted however that the phrase “except as otherwise provided” in s 62(1)(b) simply refers to the other subsections of s 62, which set out the exceptions and qualifications to the “default” willing buyer/willing seller approach to valuation of land taken under the Act.

[30] I accept that submission. Section 62 is expressed in mandatory terms. It does not contemplate that the parties could reach agreement on compensation which is entirely outside the scope of the methodology set out in the PWA. This is consistent with the use of the phrase “except as otherwise provided” (i.e. provided in the PWA) rather than a phrase such as “except as otherwise agreed.”

[31] I further note that if, contrary to my view, this argument had any substance it would almost certainly take the parties dispute outside the scope of the declaratory judgments regime. If s 62 of the PWA does not apply in this case and the construction of that section is not in issue, then there would be no disputed issue of statutory construction for this Court to determine. The Court needs some statutory or contractual framework of reference in order to be able to determine an issue under s 3 of the Declaratory Judgments Act. Under the Act the Court cannot simply impose whatever valuation it thinks may be “fair”, without reference to any applicable contractual or statutory framework.

[32] The issue raised by clause 5(a)(i) of the Agreement therefore appears to be whether, correctly interpreted, the PWA (including in particular s 62) requires the Council to compensate the applicants for the acquisition of their land on the basis of the countryside living zoning (as the Casey Opinion contends) or the industrial zoning (as the applicants contend).

[33] A review of the key documents before the Court, including in particular the Agreement and the annexed Darroch letter, supports the view that this is the interpretation issue which the parties contemplated would be put before the Court (at the Council’s expense). Quite simply, there does not appear to be any other dispute between the parties involving the interpretation or construction of a statute or contract.

Are the affidavits relevant to the interpretation issue before the Court?

[34] Affidavit evidence as to what Council officers may or may not have said to various land owners prior to the agreement being entered into will not assist in the construction of the correct meaning of the relevant provisions of the PWA. If, for example, a Council officer gave incorrect advice as to the basis on which compensation was to be assessed, that cannot alter the correct interpretation of s 62.

[35] Section 62 does not provide scope for taking into account representations allegedly made to the land owner being compensated, or provide any element of

discretion to pay a higher amount of compensation than would otherwise be required.

[36] It was submitted that the affidavits are relevant in establishing the context of fair dealing/good faith negotiations between the parties and also as providing an indication of what the Council itself believed was appropriate compensation prior to the Agreement being entered into. However such evidence is simply not relevant to the correct construction of the relevant provisions of the PWA. Affidavits on the representation issue cannot prove or disprove anything of consequence to the determination of the proceeding. Evidence that is not relevant is not admissible in a proceeding.[3]

[37] I further note that, whatever may have been said to the applicants by Council officers or agents prior to the Agreement being executed in October 2010, by the time of execution the Council’s position (that countryside living zoning applied) was clear. A copy of the Casey Opinion had been provided to the applicants and their advisers and it was referred to in the Darroch letter. The parties agreed in the Agreement that the correctness of Mr Casey’s opinion should be tested in this Court, by way of declaratory judgment.

[38] I also accept the Council’s submission that, if the directions sought were made, a significant element of disputed fact would be introduced into the declaratory judgment proceedings. The case law is clear that the declaratory judgment procedure is inappropriate where there are mixed questions of fact and law. There are numerous cases expressing this principle, the most often cited being New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd.[4] The Courts will normally decline to issue a declaration in a case in which the factual context is unclear.

[39] The declaratory judgment procedure is intended to “provide a speedy and

inexpensive method of obtaining a judicial interpretation”.[5] Introducing the representation issue into this proceeding would significantly lengthen the hearing

and add considerably to its cost. The Council indicated that it would wish to file evidence in response and that it would probably wish to cross-examine the applicants’ deponents. This would clearly take these proceedings outside the ambit of the declaratory judgments regime. The representation issue is simply not appropriate for determination through the declaratory judgment procedure.

[40] Obviously, the applicants may have other causes of action available to them arising out of the representations that were allegedly made. However such causes of action would not be amenable to determination by way of declaratory judgment and would need to proceed by way of ordinary proceedings.

The applicants’ costs

[41] The application for directions also seeks a direction that the Council “is required to pay the applicants’ reasonable legal costs involved in preparing and swearing the affidavits and in litigating the issues arising from the affidavits.”

[42] Given my finding that the four affidavits which have been prepared are not relevant and therefore inadmissible in the declaratory judgment proceedings, I decline to make that direction.

[43] Finally, I note for completeness that this judgment relates to the interlocutory application for directions only. Determining whether the applicants’ four affidavits are relevant and admissible has necessarily required me to express some passing views on substantive issues. It goes without saying that any observations I have made in relation to substantive issues will not bind the Trial Judge in any way.

Result

[44] The four affidavits on the representation issues that the applicants seek to file are not relevant to the interpretation issues before the Court in these declaratory judgment proceedings and are accordingly inadmissible.

[45] I decline to make either of the directions sought.

[46] If the issue of the costs of this application cannot be resolved between the parties then the Council, as the successful party, is to file a memorandum by 1

February 2013. The applicants are to file a memorandum in response by 15

_{February 2013.}

Katz J

---

[1] Cox Land Purchase Agreement, cl 3 and Recital E.

[2] PWA, s 60(1).
[3] _{Evidence Act 2006, s 7(2).}
[4] _{New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84.}
[5] Ibid at 85.