ZYXCBA Developments Limited v Auckland Council [2015] NZHC 1085 (19 May 2015)

Last Updated: 2 June 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2306 [2015] NZHC 1085

UNDER	the Declaratory Judgments Act 1908
BETWEEN	ZYXCBA DEVELOPMENTS LIMITED Plaintiff
AND	AUCKLAND COUNCIL Defendant

Hearing:	18, 19 May 2015
Appearances:	M E Casey QC and A Davidson for the Plaintiff D J Neutze and M C Allan for the Defendant
Judgment:	19 May 2015

_{ORAL JUDGMENT OF MUIR J}

Counsel/Solicitors:

M E Casey QC, Barrister, Auckland

P Castle, Castle Brown, Auckland

D J Neutze, Brookfields, Auckland

M C Allan, Brookfields, Auckland

ZYXCBA DEVELOPMENTS LIMITED v AUCKLAND COUNCIL [2015] NZHC 1085 [19 May 2015]

[1] At the conclusion of the first day of trial the plaintiff tabled proposed amendments to its prayer for relief and foreshadowed an application for leave to amend its statement of claim accordingly. Argument took place in that respect this morning.

[2] The background to that proposed amendment is as follows. The statement of claim was filed on 2 September 2014. That statement of claim sought by way of relief three declarations:

(i) The vested Lots are to be valued on the basis of a zoning as Flatbush

Residential 1.

(ii) The trees and bush cover are to be separately valued and added to the value of the underlying land.

(iii) The consent notice is to be disregarded in the valuation exercise.

[3] At the first case management conference before Bell AJ, the plaintiff indicated that it may wish, in the words of the Minute of His Honour, to “refine the relief sought and also address some minor glitches in the statement of claim”. Directions were made accordingly. Pursuant to that direction an amended statement of claim was filed on 24 February 2015. The relief sought in the amended statement of claim was in terms that:

When valuing the land for the purposes of determining the price to be paid by the defendant counsel to the plaintiff consent holder in terms of conditions 52 and 53 of the subdivision consent the valuers are to:

(i) value the land on the basis of its value for reserve purposes, including the added value of the features of the land (including topography, trees and bush cover) for such purposes;

(ii) the value of the trees and bush cover should be added to the value of the land as if it were without trees and bush cover;

(iii) treat the consent notice D37504244.2 as adding value to the land when acquired or vested for reserve purposes.

The Council filed an amended statement of defence to that pleading on

10 March 2015.

[4] Evidence was exchanged on the basis of the amended pleadings and was complete by 10 April 2015.

[5] The close of pleadings date was 20 April 2015.

[6] Now, in the course of the hearing, the plaintiff seeks quite significant changes to the prayer for relief. Its proposed new pleading is in terms that:

(1) When valuing the land for the purpose of determining the price to be paid by the defendant Council to the plaintiff Consent Holder in terms of Conditions 52 and 53 of the subdivision consent, the valuers are to:

(a) Value the entire block of which the land forms a part on the basis of its highest and best use, which may include its value for reserve or stormwater purposes provided those purposes are not precluded by the assumed residential zoning; and that the value be pro-rataed to apply to the vested land;

(b) The value of the bush cover (including trees) and topography are to be valued as features of the vested land that add value, having regard to the purpose for which the vested land is required by the Council;

(c) The consent notice (D375044.2) is to be either: (i) Disregarded; or

(ii) Treated as adding value to the land when acquired or vested for reserve purposes.

The relevant principles

[7] Applications to amend at this stage of the proceedings are governed by r 7.7 of the High Court Rules:

7.7 Steps after close of pleadings date restricted

(1) No statement of defence or amended pleading or affidavit may be filed, and no interlocutory application may be made or step taken, after the close of pleadings date without the leave of a Judge.

(2) Subclause (1) does not apply to—

(a) an application for leave under that subclause; or

(b) a pleading or an affidavit that merely brings up to date the information before the court; or

(c) an application for amendment of a defect or an error under rule 1.9.

[8] The onus is on the plaintiff to satisfy the Court that leave should be granted.

[9] There are a number of relevant cases which have been cited to me this morning, including the Court of Appeal decision in Elders Pastoral Ltd v Marr.¹

[10] Katz J has recently set out, what is to my mind, a very useful summary of the principles including those established in Elders Pastoral Ltd v Marr in Body Corporate 325261 v McDonough:²

[10] Previous case law has identified a number of factors that should be taken into account in determining whether it is appropriate to grant leave to file an amended statement of claim. It is generally recognised that the paramount consideration is that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding. Due regard must also be had to whether the proposed amendment will cause significant delay or prejudice another party. Even where serious prejudice and significant delay will arise, an amended pleading may nevertheless be permitted if the proposed claim has substantial merit and will not cause injustice to the defendants.

[11] The Court of Appeal in Elders Pastoral Ltd v Marr stated that an applicant must surmount three hurdles in order for leave to amend pleadings to be granted:

(a) The amendment must be in the interests of justice.

(b) The amendment must not significantly prejudice the other party. (c) The amendment must not cause significant delay.

[12] Another relevant factor in considering whether to grant leave or not is the merit, or absence thereof, in a proposed amended pleading. The impact of granting the amendment on case management issues must also be taken into account. Consideration must also be given to whether a proposed amendment includes a fresh cause of action and whether or not any fresh cause of action is statute barred. The timing of an application for leave to amend is also relevant.

[13] As Mr Mills QC submitted, on behalf of SML, in reliance on Swain- Mason v Mills, there is a heavy burden on a party who seeks to raise a new and significantly different case at the opening of the trial. In that case the trial Judge had allowed an amendment at the commencement of the trial which resulted in the trial having to be adjourned. The English Court of Appeal allowed an appeal, noting that a heavy onus lies on a party seeking to

¹ _{Elders Pastoral Ltd v Marr [1987] NZCA 18; (1987) 2 PRNZ 383 (CA).}

² Body Corporate 325261 v McDonough & Ors [2014] NZHC 2306.

make a very late amendment to justify it, as regards his own position, that of the other parties to the litigation, and that of other litigants in other cases before the Court. The continuing inadequacy of the pleading in that case, even post amendment, was also a significant factor.

(Footnotes omitted)

[11] It is clear, therefore, that among the considerations are the interests of justice, whether the amendment will significantly prejudice the other party, whether it will cause significant delay, the merits of the proposed amendment, and the timing of the application for leave. The observation that it is a heavy burden on a plaintiff who seeks to raise a significantly different case is one that is clearly relevant.

[12] The plaintiff submits that leave should be granted as it is in the interests of justice and will not significantly delay or prejudice the Council. As to the interests of justice it says that the purpose of these proceedings is to provide a road map effectively for such forum as will ultimately determine the outcome of this dispute. It says that the maximum signage possible in the context of that road map is to the value of all parties. It says, essentially, that the proposed amendments simply clarify to the benefit of both plaintiff and counsel those considerations which it would be necessary for any such Tribunal ultimately to consider.

[13] Of course, in putting the matter that way the plaintiff does identify one of the core concerns in relation to this litigation which the case management Judge before me has already commented on; and that is the extent to which, by the procedure adopted, legal issues are being divorced from their factual background in a way which may ultimately be quite unproductive. However, that is an issue for argument in the context of the substantive application and I say no more about it at this stage.

[14] In turning to whether the application would significantly prejudice the other parties, the plaintiff says that in relation to the new proposed relief in paragraph 1(a):

(i) that reference to valuing the entire block of which the land forms part is part of Rule 15.15.2.2.3 of the relevant District Plan and which is the focus of both parties’ case. It says the change simply reflects the wording of the rule;

(ii) that the reference to valuing the land on its highest and best use basis is dealt with in Council’s evidence, referring particularly to Mr Delbridge’s affidavit;

(iii) that in valuing the land for reserve or stormwater purposes all it is doing is recognising a consistent feature of the plaintiff’s case and the words “provided these purposes are not precluded by the assumed residential zoning” are for clarification and the avoidance of doubt only; and

(iv) that the reference to the value being pro-rated is one which has emerged in the evidence and which is, in any event, essentially a question of law.

[15] In relation to the new proposed paragraph 1(b) of the prayer for relief, Mr Casey QC says that the amendments reflect the special value the bush cover and topography have and reflect the evidence given by Mr Bennett.

[16] In relation to the new proposed relief 1(c) it is said that the amendments sought in relation to the consent notice simply provide an option for the Court to conclude that the consent notice should be disregarded if it considers that appropriate.

[17] For the Council, Mr Neutze calls significantly on the history of these proceedings. He says that the plaintiff has previously taken the opportunity to amend its pleadings in February and that the Council had appeared at this hearing to answer that amended claim and the amended declaration sought. He emphasises the fact that evidence was filed to meet the specific declarations in the amended statement of claim.

[18] Mr Neutze further emphasises the shifting sands of the plaintiff’s case with particular reference to reply evidence that was filed by the plaintiff ’s valuer, Mr Bennett, on 13 April 2015. Whereas previous valuations given by Mr Bennett had proceeded on the basis of a market value analysis of the land to be taken, the

reply identified for the first time that fair value or special value were the appropriate bases of valuation. That reply evidence also raised the pro-rata issue which now features in the proposed amended prayer for relief (1)(a). Mr Neutze submits that those matters were entirely new and not signalled in the amended statement of claim or the plaintiff’s evidence-in-chief. He says, however, that despite the embarrassment of that position Council was prepared to proceed with the hearing on the basis of the specific relief sought. Later in his submission he places particular emphasis on the relief sought under paragraph (1)(b) of the amended statement of claim, which he says was amenable to a clear legal answer and did not require any further evidential support. He submits that it is significant that no relief was sought in that amended statement of claim in relation to the proposed pro-rated approach.

[19] I agree with Mr Neutze that amendments to relief in declaratory judgment proceedings are in a different category, typically, to those sought in relation to a damages or analogous claim. The amendments cannot be viewed as minor in the context of a declaratory judgment proceeding where the wording of the proposed declarations is, I agree with Mr Neutze, the critical aspect of the claim. As he submits, this is not like a normal claim where the essential elements of the cause of action are set out in some detail in the pleadings and the relief might be amended to correspond with proof as it emerges in the course of a trial. In a declaratory judgment claim the relief is paramount to the pleading. So there is a close analogy, in my view, to adding a new cause of action at this stage in the proceeding.

[20] I turn now then to consider the specific amendments sought. As to 1(a), I accept that the question of whether the District Plan Rules require a pro-rated approach is one of interpretation and it is not significantly informed, in my opinion, by matters of evidence. Of course, how such an approach might be applied in practice is an issue which would be relevant to the Court. The Court is not here to determine theoretical issues and the absence of such evidence may be telling in terms of the discretion ultimately exercised; but it is not, in my opinion, decisive at this stage of the analysis. I also accept that the exchange of submissions, to the extent that they are relevant, did identify a difference between the parties on the pro-rata issue. I would not preclude the amendment, therefore, simply for the fact that it has raised that particular (the pro-rata) issue.

[21] However, paragraph 1(a) also seeks that the valuation be on the basis of the highest and best use which may include valuation for stormwater purposes. Mr Casey submits the highest and best use would inform the fair value or the special value approach. The allegation that reserve purposes may be the highest and best use is new. It is related to Mr Bennett’s realisation, he says only a month before trial, that fair value (he says including elements of special value) is the appropriate basis of valuation.

[22] There is no evidence at all before the Court as to the outcome of a valuation on this basis. Mr Casey submits there does not need to be; but this, in my view, again emphasises the somewhat theoretical examination the Court is being asked to undertake.

[23] In my view the Council must have been entitled to advance evidence of what is the highest and best use of the property in the face of a pleading alleging that it may include reserve or stormwater purposes. It has not done so for the reason that that was not the pleading it faced. That is evidence which undoubtedly would have been of benefit to the Court if I were required to decide whether highest and best use may include a particular application. It is quite a separate inquiry from fixing a specific valuation figure for the property, which I accept might be the subject of a discrete analysis, albeit not ideally so. I ask myself could the Council’s case have been improved if, within proper time, this amendment had been foreshadowed. Evidence that reserve purposes were not the highest and best use, if available, would have undoubtedly weighed in the Court’s consideration in whether to grant the declaration. All the discussion by the respective valuers, at least until Mr Bennett’s reply evidence, had assumed that the highest and best use was residential.

[24] In my view, it would be unfair to Council to preclude that line of inquiry. Likewise, there is no evidence from Council as to what can be done under the assumed zoning. So, again, the declaration would proceed on a basis which seems to me to be quite theoretical.

[25] All this underscores the considerable unfairness to Council in the way in which this case has, in my view, developed. Its suggestion that what it has faced is a

“movable feast” does have some resonance with me. It has faced allegations of fair value and special value and the necessity of a pro-rated approach for the first time in reply evidence, and it now faces a significant alteration of relief in mid trial. These are the very issues which efficient case management are designed to preclude, and the plaintiff’s identification of relief as something which needed attention at the time of that conference should have eliminated the sort of surprise and embarrassment which, in my opinion, has resulted to the defendant here.

[26] In terms of paragraph 1(b) of the proposed amended pleading the Council was, in my opinion, entitled to approach the case on the basis that the existing authorities precluded relief in the manner sought. It formed the view that the plaintiff had no chance of success. It says that there is unfairness because it could, in that context, sensibly elect not to call evidence.

[27] I initially struggled to identify what specific additional evidence Council would require in this respect. Clause 15.15.2.2.3 always envisaged that the valuation would take into account all the features of the land, and it remains open to Council to argue that there is nothing in the section which compels an added value. But ultimately I consider this amendment should be declined also because of its new emphasis on the purposes for which the vested land has been acquired by Council. Had this previously been pleaded one can envisage additional evidence or at least a change in the focus of the evidence of Council, particularly insofar as what it is about the specifics of topography, which allegedly add value from a stormwater management perspective. Where an affirmative proposition is now advanced – bush and topography do add value – and a declaration is sought which would bind any subsequent adjudication, Council should in fairness have had an opportunity to meet that evidentially. It was entitled to proceed on the basis that it had, in its assessment, a king hit, and not to explore those issues further on the pleadings.

[28] In relation to the proposed amendment 1(c), I am not similarly exercised in favour of the Council. The history indicates that the initial pleading was that the consent notice was to be disregarded. The amended pleading was that it was to be treated as adding value to the land, and the proposed further amendment is a combination of both. I do not see that proposed amendment as requiring any

additional evidence; nor the responsible exploration of whether such evidence is necessary. In my view, the changes that are foreshadowed could be adequately dealt with in submission.

Result

[29] I decline to allow the amendment sought to paragraphs 1(a) and 1(b) of the relief.

[30] I allow the amendment in relation to 1(c) of the relief.

[31] I fix costs as payable to the defendant in relation to the application on a 2B

_basis.

Muir J