Ipsofactoj.com: International Cases [2001] Part 6 Case 11 [NZCA]


COURT OF APPEAL, NEW ZEALAND

Coram

Queenstown Airport

Corporation Ltd

- vs -

Skipworth

THOMAS J

TIPPING J

McGRATH J

2 APRIL 2001


Judgment

Thomas J

THE QUESTIONS IN ISSUE

  1. The primary question in issue in this appeal is the scope and purpose of s 185 of the Resource Management Act 1991 and the correctness of the Environment Court’s exercise of its discretion under that section in the circumstances of this particular case.

    THE SECTION AND STATUTORY FRAMEWORK

  2. As the appeal centres on the scope and application of s 185, it is convenient to at once set out the relevant subsections of that section:

    185.

    Planning Tribunal may order taking of land—

    (1)

    An owner of an estate or interest in land (including a leasehold estate or interest) that is subject to a designation or requirement under this Part may apply at any time to the Planning Tribunal for an order obliging the requiring authority responsible for the designation or requirement to acquire or lease all or part of the owner's estate or interest in the land under the Public Works Act 1981.

    .....

    (3)

    The Planning Tribunal may make an order applied for under subsection (1) if it is satisfied that—

    (a)

    The owner has tried but been unable to enter into an agreement for the sale of the estate or interest in the land subject to the designation or requirement at a price not less than the market value that the land would have had if it had not been subject to the designation or requirement; and

    (b)  

    Either—

    (i)  

    The designation or requirement prevents reasonable use of the owner's estate or interest in the land; or

    (ii)

    The applicant was the owner, or the spouse of the owner, of the estate or interest in the land when the designation or requirement was created.

    (4)

    Before making an order under subsection (1) the Tribunal may direct the owner to take further action to try to sell the estate or interest in the land.

  3. It is also convenient at this point to indicate the relevant statutory framework relating to requirements for designations made by requiring authorities under the Act. "Designation" is defined in s 166 as a provision made in a District Plan to give effect to a requirement made by a requiring authority under s 168 or s 168A or cl 4 of the First Schedule. There is no question in this case that the appellant is a "requiring authority". "Requirement" is not defined, but under s 168 a local authority which has financial responsibility for a public work or requiring authority may at any time give notice to a territorial authority of its requirement for a designation of a work. Section 169 sets out the requirements relating to the information, public notification, submissions and hearing in respect of a requirement notified under s 168. Section 170 provides that, if a territorial local authority which has been given notice of a requirement under s 168, proposes to publicly notify a proposed plan under cl 5 of the First Schedule within 40 working days of receipt of that requirement, the territorial authority may, with the consent of the requiring authority, include the requirement in its proposed plan instead of complying with s 169. It is s 170 which is applicable in this case. By virtue of s 178, once a requirement has been included in a proposed plan no person may, without the prior written consent of the requiring authority, do anything that would prevent or hinder the work.

  4. Section 185, as set out above, then provides the form of relief contemplated by Parliament for an owner whose land is made subject to a designation or requirement. The owner may seek an order obliging the requiring authority responsible for the designation or requirement to acquire or lease the land, or part of the land, under the Public Works Act 1981. To warrant an order being made the Environment Court must be satisfied of the matters set out in subs (3), which may be shortly summarised as follows:

    • The owner has tried but been unable to sell the land at a price not less than the market value without the designation or requirement (subs 3(1)(a)); and

    • The designation or requirement prevents the reasonable use of the land (subs (3)(1)(b)(ii)); or

    • The applicant was the owner at the time the designation or requirement was created (subs 3(1)(b)(ii)).

    In the present case, it is not necessary to focus on the question of the reasonable use of the land pursuant to subs (3)(1)(b)(i) as it is common ground that the applicant was the owner at the time the requirement in question was created.

    THE BACKGROUND FACTS

  5. The appellant, Queenstown Airport Corporation Ltd ("QAC"), operates the Queenstown Airport at Frankton in the South Island. The airport has existed since 1935, but it was not until the beginning of 1952 that regular light aircraft passenger services commenced.

  6. The respondent, Mrs. Skipworth, purchased a section in close proximity to the airport in 1955. Four years later she purchased the adjoining site on which a small dwelling was situated (for convenience both sites are henceforth referred to as "the property"). Mrs. Skipworth has since used the property as a single residential unit.

  7. At the time Mrs. Skipworth purchased the property, the small aircraft using the airport used a grass airstrip located some distance away from her property. But she was to see the airport undergo substantial development. The main runway was upgraded to take commercial jets and other large aircraft on a regular flight schedule. Mrs. Skipworth’s property now lies under the western approach of the main runway, the start of which is close to her property.

  8. In 1994 Mrs. Skipworth decided to develop the property. She obtained the necessary consents to subdivide it into four lots and permission to erect eight residential units on the subdivided sites. Working drawings for the units were prepared and a compliance certificate obtained. Mrs. Skipworth proposed starting the development the following year, 1995. But her plans were disrupted.

  9. On 10 October of that year, the second respondent, the Queenstown Lakes District Council, notified its Proposed Plan. The Plan included a designation for "Aerodrome Purposes and Aerodrome Protection". Notice of this requirement had been given to the Council by QAC on 6 October 1995. Various properties surrounding the airport, including Mrs. Skipworth’s, were subject to the requirement. It provided:

    An airnoise boundary has been defined around Queenstown Airport to protect the operational capability of the airport, while at the same time minimising adverse environmental effects from aircraft noise on the community.

  10. The purpose of the air noise boundary was to identify the area of airport operations in which noise-sensitive activities would be prohibited. The required designation, which was to continue for 15 years, followed what was called a 65 Ldn contour. It sought to control both the volume of noise which could be emitted from the airport and the land uses within this boundary. Fifty two residential properties were located within the boundary and, in terms of the requirement,

    any activity other than airport related activity" was not "permitted inside the Ldn 65 air noise boundary ....

  11. Having been frustrated in her development plans, Mrs. Skipworth filed an application for an order under s 185 on 24 September 1996.

    THE HEARING BEFORE THE ENVIRONMENT COURT

  12. The application was heard by the Environment Court on 1 and 4 September 1997. Considerable attention and evidence was directed at the impact of the noise which emanated from the airport. This focus is reflected in the Court’s ultimate decision.

  13. Having concluded the hearing, the Environment Court sought further information by a minute dated 9 September. It is instructive to note the breadth of the information requested:

    1. A copy of the Parliamentary Commissioner for the Environment’s report on noise control at airports;

    2. A copy of the NZS 6805 ....

    3. A further affidavit from an authorised officer of the Corporation dealing with the following matters:

      1. up-to-date predictions of where the noise control boundary or at least the 65 Ldn contour will move to between now and the year 2010.

      2. if possible, a graphic estimate of the creep of the 55 Ldn and 65 Ldn contours since 1955;

      3. evidence as to the efforts of the Corporation to impose a "gate tax" in order to secure funds for compensation either under section 85 or 185 of the Act or otherwise to neighbouring landowners affected by noise.

  14. The Court also invited further submissions from counsel on the following issues:

    1. why the applicant should continue to bear the costs of the existing (and increasing) "nuisance" of noise from the airport;

    2. more specifically why the applicant should have to wait until the 65 Ldn contour reaches the property before it obtains any compensation;

    3. whether a relevant issue (once a notice of requirement is issued under section 185) is not whether a particular noise contour has been reached, but whether it is unreasonable for the applicant to bear the exposure to the noise any longer.

  15. QAC responded by memorandum on 17 October 1997. It filed an affidavit by the Airport Manager, Mr. Day, covering the matters specified in the Court’s minute. It also filed an affidavit by the Chairman of QAC, Mr. Phillips, which indicated that the area subject to the requirement or designation could be substantially reduced. He gave an undertaking to the Court that the requirement would be amended pursuant to the requisite procedure in the Act. Mrs. Skipworth’s property would be excluded from the requirement. The Chairman also confirmed that QAC would consent pursuant to s 170(1)(b) of the Act to the building work proposed by her and would contribute to such additional building sound insulation necessary to achieve a satisfactory residential environment for residential buildings on her property in accordance with NZS 6805.

  16. The terms of QAC’s undertaking bear repeating:

    QAC can now confirm and undertake to the Court that the company will be modifying its ANB [air noise boundary] request for designation to the position shown on Plan "A" attached, with consequent major reduction in the off-airport property encompassed by the designation requested, and the associated outer control boundary ("OCB"). I confirm that QAC therefore no longer seeks a designation for ANB over the applicant’s property in the District Plan Review process, (or otherwise), and that the decision made by QAC on its request will withdraw the ANB request from the applicant’s property as soon as this can be done.

  17. Not unexpectedly, Mrs. Skipworth and her advisers took the view that the recalculation of the air noise boundary, although undertaken as a result of the Court’s request, amounted to a complete revision of the requirement for a designation and appeared to have been done by QAC solely for the purpose of improving its position before the Court.

  18. The Environment Court’s decision was not delivered until 2 July 1998.

    THE ENVIRONMENT COURT'S DECISION

  19. For the purpose of understanding the context of the application the Environment Court thought it necessary to outline the framework of the Act for the "control" of noise generally and, in particular, for airports and other public works. The Court first traversed in some details the general provisions in the Act relating to the restriction of noise. It concluded that a person’s ability to apply for an enforcement order to avoid excessive noise was of "little application" to noise from airports as the phrase "excessive noise" excluded noise emitted from any aircraft being operated during, or immediately before or after, flight. (See s 326).

  20. The Environment Court then turned to what it described as the second method for controlling the effects of a public utility on its neighbours. This method of control, the Court stated, is to be found in Part VIII of the Act, the Part relating to designations and requirements, and including s 185. Adverting to this Court’s decision in Watercare Services Ltd v Minhinnick [1998] NZRMA 113, the Court concluded that, unless Mrs. Skipworth obtained an order under s 185, she had no other effective avenue for obtaining relief under the Act in respect of the "current noise" which she suffered from the airport, with the possible exception of any hearing relating to the designation of the airport itself.

  21. The Environment Court held that it had jurisdiction to make an order under s 185 notwithstanding QAC’s undertaking to exclude Mrs. Skipworth’s property from the requirement. Turning to the question whether it should make an order, the Court accepted Mrs. Skipworth’s counsel’s list of relevant matters as a useful summary, and dealt in detail with a number, including the extent to which the property was receiving nuisance effects and whether that caused hardship to Mrs. Skipworth. Having regard to the fact the requirement was to be withdrawn, however, the Court considered that there would need to be

    quite exceptional circumstances to justify making an order under s 185.

    It noted that the fact the property’s exposure to noise would not exceed the 65 Ldn did not mean that Mrs. Skipworth’s concerns over noise had "gone away". Indeed, the family had been troubled by increasing airport noise since 1955 and now wanted nothing more than to leave the property. The Court did not consider their concerns were overly sensitive and felt that the property was receiving noise which should be ameliorated. Then, noting that Mrs. Skipworth did not come to the nuisance but that the airport had substantially come to her, and that she had no effective way of controlling exposure to the noise from the airport, the Court turned to consider the purposes and principles of the Act. It sought (by s 5(1)) to reach a decision which, if possible, would

    promote the sustainable management and natural and physical resources.

  22. The Environment Court concluded that the most important considerations "in respect of fairness" were the fact

    • that the adverse effects from noise had come to Mrs. Skipworth; that the property received noise which she and her family found annoying;

    • that even though the noise exposure of the property may not exceed 65 Ldn for the next 15 years it was well over 55 Ldn at that time and had been since 1992;

    • that the 55 Ldn is the level at which the New Zealand Standards suggest sound insulation of new buildings or improvements of existing buildings and is a minimum requirement;

    • that the cost of an order under s 185 to QAC may be greater (but not disproportionately so) than the cost to Mrs. Skipworth; and

    • that if QAC is ordered to buy it would be a "one off" purchase as the requirement over other residences was likely to be soon withdrawn.

    Even if that were not so, the Court doubted that many people could successfully apply for an order as, unlike Mrs. Skipworth, they had come to the "nuisance".

  23. Although aware that, in contrast to the flexibility of enforcement orders, s 185 is a "blunt instrument" only giving the Court the power to make a purchase order over the whole property, the Court determined to make such an order. QAC was directed to purchase the property under the Public Works Act 1981 for $400,000 or such other figure as the parties might agree.

    THE DECISION IN THE HIGH COURT

  24. QAC appealed to the High Court. Chisholm J heard the appeal.

  25. The learned Judge readily confirmed that the Environment Court had jurisdiction to make the order. With reference to the Court’s exercise of its discretion, he held that, when the matter was viewed in context, the Court did not misconstrue the situation or act unfairly or unjudicially. He noted that, presumably, QAC had decided to give notice of its requirement notwithstanding that its research into the 65 Ldn boundary was incomplete and that almost two years had elapsed by the time the matter came before the Environment Court for a hearing. At that time the requirement was still in existence. Mrs. Skipworth’s application under s 185 had been before the Court for almost a year. Yet, at the last moment QAC sought to withdraw the requirement, at least to the extent that it affected Mrs. Skipworth’s property. In other words, the Judge observed, QAC had sought to extricate itself from a situation which it had created. Under those circumstances, he held, it was neither unfair nor unjudicial for the Court to start from the premise that there would have to be exceptional circumstances before it would be justified in making an order, and in finding that those exceptional circumstances existed in this case.

  26. Chisholm J noted that s 185 confers an unfettered discretion to grant relief in respect of designations and requirements and considered that the factors relating to the airport noise were relevant. Airport noise, he said, was an integral component of QAC’s requirement.

  27. Chisholm J therefore dismissed the appeal, but later granted QAC leave to appeal to this Court.

    THE ISSUES

  28. In this Court, two issues emerged which need to be addressed.

    • The first issue is whether the Environment Court lacked jurisdiction to make the order on the basis that the requirement was not made under Part VIII of the Act, as expressly specified in s 185, but under the First Schedule to the Act.

    • The second question is whether the Environment Court exercised its discretion in accordance with the scope and purpose of the section.

  29. Each issue may be dealt with in turn.

    JURISDICTION

  30. Mr. Marquet, who appeared for QAC, argued that the requirement was not made under Part VIII as expressly stipulated in s 185 by virtue of the words "under this Part". Requirements, he contended, were made either under Part VIII, which provides a "stand alone" procedure, or under the First Schedule, which relates to the preparation, change and review of policy statements and plans.

  31. We reject this argument. The First Schedule provides the mechanism or procedure for the preparation of regional and district plans. Clause 4 of Part I of that Schedule applies where there is a designation in the district scheme that has not lapsed and the territorial authority invites the requiring authority to give notice stating whether it requires the designation to be included in the proposed plan, with or without modification. But the provisions of the First Schedule cannot be divorced from the provisions of Part VIII. Under the scheme of the Act, there is to be one district plan for each district prepared by the territorial authority in the manner set out in the First Schedule (Section 75(1)). The district plan may then be changed by the territorial authority in the manner set out in that Schedule (Section 75(1)(A) and (2)). Consequently, the provisions of Part VIII and the First Schedule are to be read as being complementary. Clause 4 of the First Schedule provides a direct example. Where there is an existing designation, the requiring authority is to be invited to give written notice as to whether it requires the designation to be included in the proposed plan. But, as the Environment Court noted, this does not mean that the requirement is not made pursuant to the provisions of Part VIII. Indeed, notice of the requirement and designation must be given by the requiring authority to the territorial authority pursuant to s 168. That section is the genesis of a requirement and designation under the Act. The following sections in Part VIII then apply. Moreover, s 170 is specifically referred to in cl 4(5) of the First Schedule. If a modification of the requirement is required, the provisions of s 168(3) are to apply by virtue of cl 4(7) of the Schedule. Mr. Marquet’s argument must fail on a fair and complete reading of the statute.

  32. There is also a substantive reason for rejecting Mr. Marquet’s contended meaning. An owner is affected by a requirement to the same extent regardless of whether it is said to be created under the First Schedule or Part VIII of the Act. The constraint on the owner’s use of the property is derived from the notice for that requirement and the owners use of the land is restricted from the date of its notification. There can be no sound policy reason why an owner whose land is affected by a requirement should be denied the ability to resort to s 185 on the basis that the requirement was notified within 40 days of the notification of a proposed plan so that the First Schedule applies.

  33. We therefore accept that the Environment Court had jurisdiction.

    THE EXERCISE OF DISCRETION

    1) The scope and purpose of the section

  34. Mr. Marquet is on much stronger ground in challenging the Environment Court’s exercise of its discretion under s 185. In our view, the Environment Court misdirected itself as to the scope of the section and stepped outside the purpose of the provision. As a result, the Court exercised its discretion wrongly.

  35. The Environment Court’s approach was basically flawed. It approached the question on the basis that s 185 provided a "control" mechanism of last resort for the noise emanating from a public work or utility. As there was no other statutory provision which would assist Mrs. Skipworth to enforce measures to abate the noise, and the noise was excessive measured against accepted standards, the Court considered she was entitled to an order requiring her property to be purchased by the authority responsible for the noise. It is, however, a misconception to think that s 185 is directed at the nuisance which might be caused by a public work or utility rather than the designation or requirement relating to that work or utility.

  36. A closer reading of the relevant subsections in s 185 indicates the proper scope and purpose of the section. To make an order the Environment Court must first be satisfied that the owner has tried to sell the property subject to the designation or requirement but has been unable to do so at a price

    not less than the market value that the land would have if it had not been subject to the designation or requirement.

    [emphasis added]

    Thus, in the case of a requirement such as the present, the impact of the noise or other nuisance on the value of the land is irrelevant to this subsection. The impact of the noise or nuisance is already part of the market value of the land. It is the reduction in the price due to the designation or requirement that is pertinent. Obviously, in such circumstances, it may be difficult to separate out the reduction in value due to the noise or other nuisance and the reduction due to the designation or requirement. But that is what the subsection requires.

  37. The thrust of the section is then indicated by the matters set out in para (b), either of which the Environment Court must be satisfied of before it can make an order. The designation or requirement must prevent the reasonable use of the land, or the owner (or his or her spouse) must have been the owner when the designation or requirement was created. In the first case the restriction on reasonable use must be due to the designation or requirement. In the latter case, it is enough that the owner owned the property when the designation or requirement was created. In both cases it is the designation or requirement, and not the adverse impact of the public work or utility, which is critical.

  38. In our view, save for some unusual feature, the legislature contemplated that if either of these criterion are met the owner is virtually entitled to an order. This is the statutory protection accorded owners in the event that their land becomes subject to a designation or requirement. For the purposes of subs (3)(1)(b)(ii), the owner does not have to make out a case that the order is justified on some other basis, such as the fact that the adverse impact of the public work or utility is excessive. Section 185(3) does not stipulate that the Environment Court must also be satisfied that the work or utility is a nuisance or of the order of a nuisance. It is not designed to provide relief against the adverse effects of the work or utility to which the designation or requirement relates but against the imposition of a designation or requirement that erodes the value of the land.

  39. In the present circumstances, Mrs. Skipworth was indisputably the owner of the property at the time the requirement was created. She was not able to proceed with her planned development because of that requirement. And she undoubtedly had cause to complain about the noise. Hence, in the ordinary course of events, she would seem to have had a compelling case for the making of an order. It would not have availed QAC to have adduced evidence, were this the fact, that the nuisance was minimal when Mrs. Skipworth was the owner at the time the requirement was created any more than it assists Mrs. Skipworth to demonstrate that the nuisance has become insufferable irrespective of the requirement.

  40. We would not wish, however, to lay down any hard and fast rules which would confine the matters to which the Environment Court might have regard in the exercise of its discretion under s 185, providing that they are within the scope and purpose of the section. It could not be said, for example, that the impact of the public work or utility itself will not under any circumstances be relevant to the exercise of the discretion even where the owner owned the land prior to the designation or requirement being created. If the owner has come to the land after the nuisance had been caused, and the requirement has had little or no effect on the owner’s enjoyment of the land or the value of the land as a result, the Environment Court might not be inclined to make an order. But that is not the situation here. Mrs. Skipworth was the owner of the land prior to its development as an airport providing major air services and prior to the creation of the requirement. We cannot see any reason why in the ordinary course of events she would not be entitled to the relief which Parliament contemplated in such circumstances.

  41. This is not, however, the ordinary case.

    2) The effect of the undertaking

  42. It was not possible for the Environment Court to disregard the effect of QAC’s undertaking in the exercise of the Court’s discretion. In administrative law terms, the Court’s error in doing so can be framed in two ways; the first is that the Environment Court misdirected itself as to the scope of the section. The foundation for making an order under s 185 had effectively ceased to exist. The second formulation focuses on the purpose of the section. The discretion was not exercised in accordance with the purpose for which the discretionary power was vested in the Court. Both ways of expressing the error necessarily lead to the same result.

  43. As traversed above, the idea that the creation of the requirement has diminished the market value of the owner’s land is central to the whole scheme of s 185. If the requiring authority withdraws the requirement, or undertakes to do so, there can no longer be any diminution in value resulting from the requirement. The market value is then assessed on the footing that the requirement no longer exists. It is as if the requirement had not been created in the first place. The section does not allow the Environment Court to order a compulsory purchase or, indeed, any other compensation, on account of the inconvenience or loss occasioned to the intending vendor by the temporary existence of the now withdrawn requirement. The section only allows the Court to order the requiring authority to buy the land if there is an extant requirement whose existence prevents the owner from realising what would otherwise have been the market value of the land.

  44. It follows that the Environment Court misdirected itself in law, as did Chisholm J, when he dismissed the Airport Corporation’s appeal. The essential question was not the effect which the airport noise had on the market value of Mrs. Skipworth’s land. Rather, it was the effect the requirement had on that value. After the undertaking to withdraw the requirement was given, the requirement must, for the purposes of s 185, be regarded as having no effect on that market value. Thus, a necessary foundation for the making of a compulsory purchase order under the section no longer existed, and the Environment Court should not have exercised its discretion as it did.

  45. It is no answer to say that QAC removed the requirement as a means of avoiding the purchase of Mrs. Skipworth’s property. The 65 Ldn air noise boundary of the requirement was substantially realigned and the realignment excluded a large number of properties. But it is the purpose of the section and not QAC’s motive which is in issue. The Environment Court cannot exercise its discretionary power to make an order for a purpose other than that for which the power was given by s 185. As already indicated, that purpose was to ensure an owner whose property is subject to a requirement and who seeks to sell the property does not obtain less than what the market value would be in the absence of the requirement. Thus, in this case, the section cannot be used to provide compensation for the impact on the property and its immediate environment of the airport facility. Once QAC had indicated that the requirement would be lifted, the purpose of the section could no longer be fulfilled by exercising the power to order the acquisition of the property. The Environment Court’s concern at the degree to which Mrs. Skipworth had been inconvenienced over many years by noise from the airport was not a purpose for which the power to direct acquisition under s 185 is given. Thus, there was an invalid exercise of the power under administrative law. This is so even though the express prerequisites for exercise of the power were met at the time. The appeal against the Environment Court’s decision must therefore succeed.

  46. We realise that this decision bears harshly on Mrs. Skipworth. Through no fault of her own, QAC prevented her from developing her property on the basis of a requirement that is now no longer required. That advice was not given until the eleventh hour. We would be inclined to award Mrs. Skipworth damages representing the costs which she has incurred in respect of her frustrated development and in seeking an order under s 185, together with a reasonable sum for general damages. But the Court has no power to do so. Should Mrs. Skipworth have no legal redress the matter must rest on the sense of fair play with which one would hope QAC are imbued.

  47. The appeal is therefore allowed. In the circumstances Mrs. Skipworth is entitled to costs in this Court and in the Courts below amounting in total to $25,000, together with disbursements, including travelling and accommodation expenses, which failing agreement are to be fixed by the Registrar.


Cases

Watercare Services Ltd v Minhinnick [1998] NZRMA 113

Legislations

Resource Management Act 1991, s.185

Representations

N S Marquet and S J Anderson for Appellant (instructed by Berry & Co, Oamaru).
J K Guthrie and S J Weston for Respondents (instructed by Anderson, Lloyd, Dunedin)


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