Palmerston North City Council v Hardiway Enterprises Ltd

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeWhite J)
Judgment Date16 April 2015
Neutral Citation[2015] NZCA 114
Date16 April 2015
Docket NumberCA78/2014

[2015] NZCA 114

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Ellen France P, White and French JJ

CA78/2014

BETWEEN
Palmerston North City Council
Appellant
and
Hardiway Enterprises Limited
Respondent
Counsel:

J W Maassen and N Jesse n for Appellant

R J B Fowler QC and G J Hamlen-Williams for Respondent

Appeal against a High Court decision that remitted a claim for compensation under the Public Works Act 1981 (PWA) to the Land Valuation Tribunal — appeal concerned the value of a 70m2 piece of land that the appellant council sought to purchase — the land was strategically placed to block access from a road to another piece of land over which subdivision consent hadbeen granted — council wanted to extend the road over the subject land as it would allow the subdivision to proceed more expeditiously and economically than any alternative access option — Tribunal applied the “willing seller willing buyer” market value test to its assessment under s62 PWA (Assessment of compensation) — a willing buyer would include the acquiring authority for whom the land might have special value by reason of its unusual or unique features — however Tribunal said s62(1)(d) PWA expressly excluded the special suitability or adaptability of the land if it was a purpose to which it could only be applied pursuant to statutory powers — whether the special suitability of the land for use as a public roadhad to be disregarded because this use could only be achieved through the exercise of a statutory power, namely the vestingof the landas a road by the Council — whether there was a market forthe land other than as access to the subdivision.

The issues were: whether the special suitability of Lot 18 for use as a public road had to be disregarded because its use as a public road could only be achieved through the exercise of a statutory power, namely the vesting of the land as a road by the Council under Pt 21 Local Government Act 1974; and whether the special suitability of Lot 18 as a link to Lot 51 had to be disregarded because there was no market for Lot 18 as a link to Lot 51 “apart from the special needs to the ownerof Lot 51” or the Council's requirements.

Held: It was convenient to address the second limb of s62(1)(d) PWA first. It applied only if:

  • (a) the land had a “special suitability or adaptability” for “any purpose”; and

  • (b) “that” purpose was a purpose for which there was “no market” apart from

    • (i) the special needs of a particular purchaser; and/or

    • (ii) the requirements of any government department or local authority.

If these requirements were met, the “special suitability” of the land for the particular purpose was not to be taken into account in determining the value of the land if sold in the open market by a willing seller to a willing buyer. The valueof the land would then need to be determined on the basis that the land did not have that “special suitability” for the particular purpose. The question became: what would a willing seller and a willing buyer agree the price should be for the land disregarding its “special suitability”?

It was first necessary to identify the “purpose” for which the land had a “special suitability”. The use of the expression “any purpose” recognised that the land could have special suitability for more than one purpose. In a case involving more than one purpose, it would be the particular purpose or purposes which met the requirements of the second limb that were to be disregarded in the valuation exercise. All other purposes which did not meet the requirements could still be taken into account in the valuation exercise.

The relevant purpose had be one for which the land had “special suitability”. The approach in Waters v Walsh Development Agency (EWCA) was to be preferred to that in Peninsula Watchdog Group (Inc) v Minister of Energy. In Waters the Court said that “…s62(1)(d) is not … looking for a unique suitability that is not shared with other land; looking for a particular suitability that only the acquiring authority, or an authority with statutory powers, is able to exploit.”

Adopting that approach here, there was little difficulty in concluding that Lot 18 did have special suitability for the purpose of providing public road access to Lot 51 through the extension of Valley Views Road, an existing public road. Lot 18 could not be used as land for any purpose other than extending Valley Views Road to Lot 51. To use Lot 18 to provide private access to Lot 51 would be a different purpose for which there was also no market apart from the special needs of the owner of Lot 51.

Lot 18 had not lost its “special suitability” in providing road access to Lot 51 because there were other access options available. None of the alternative access options could compare to Lot 18 in terms of suitability. They all faced significant practical difficulties in terms of subdivision (Lot 7), cost and time.

Once it was accepted that Lot 18 did have special suitability for the purpose of providing public road access to Lot 51 through the extension of Valley Views Road, the next question was whether “that” purpose was a purpose for which there was “no market” apart from one or other of the prescribed categories. In this context the meaning of the expression “no market” was crucial. “Market” could be defined in general terms as: “A collection of homogenous transactions … created whenever potential sellers of [land] are brought into contact with potential buyers and a means of exchange is available” (The Penguin Dictionary of Economics 8th ed.)

The references to “no market” in both s62(1)(b)(ii) and s62(1)(d) were to the absence of any actual market for the land for the identified purpose. Evidence establishing as a matter of fact that there was no demand for the land for the identified purpose in the circumstances prescribed by the two provisions was required.

In s62(1)(b)(ii) this was clear because the absence of any “general demand or market” for the particular piece of land was a prerequisite to the application of the special process for the assessment of compensation in the situation covered by that provision. The determination of the “market value” (by the willing seller willing buyer test) applied only if the prerequisite was met. It did not apply to the prerequisite. Evidence establishing as a matter of fact that there was no actual market would therefore be required.

Similarly, in the context of s62(1)(d), evidence establishing as a matter of fact that there was no actual market for the land for the identified purpose would be required. This was clear because:

  • (a) s62(1)(d) created an express exclusion from the application of the willing seller willing buyer test;

  • (b) the focus was on the special suitability of the particular land for a particular purpose for which there was no market apart from the two prescribed categories — there had to be no market for “that” purpose;

  • (c) the two prescribed categories — the special needs of a particular purchaser or the requirements of any government department or of any local authority — were concerned with their position in the actual market; and

  • (d) the provision did not apply to a speculator.

The evidence before the Tribunal did establish as a matter of fact that there was no market for Lot 18 for the purpose of providing public road access to Lot 51 by extending Valley Views Road, apart from the special needs of the owner of Lot 51 and the requirements of the Council. This was implicit in the Tribunal's decision that Lot 18 had no purpose other than being used to extend Valley Views Road to Lot 51.38

The conclusion that the second limb of s62(1)(d) was applicable gave practical effect to the provision in this case. It would be surprising if Lot 18 were to be valued on the basis of the price some hypothetical purchaser might be prepared to pay to obtain control over the land and to block access to Lot 51. That would not be consistent with the purpose of the provision which was to overcome factors which might inflate compensation beyond a level which was considered reasonable in the public interest.

That outcome would also be inconsistent with the purpose of the provision as discerned from its legislative history.

Although the Court had adopted the approach in Waters to the interpretation of the phrase “special suitability”, Waters did not otherwise affect its interpretation of the second limb of s62(1)(d) or its application to the facts of the present case

There was little difficulty in concluding that the requirements of the first limb were also met. Lot 18 had “special suitability” for the provision of access to Lot 51 by extending Valley Views Road as a public road to Lot 51. That purpose was a purpose which could be applied only pursuant to the statutory powers of the Council, namely its power under the Local Government Act 1972 to lay out a public road on Lot 18. Acquisition of Lot 18 by the owner of Lot 51 for the purpose of using Lot 18 to provide access from Lot 51 to Valley Views Road would be a different purpose because it would not involve the extension of Valley Views Road as a public road.

The possibility of the owner of Lot 51 using Lot 18 to provide access from Lot 51 to Valley Views Road was not relevant. The focus of s62(1)(d) was on the “special suitability” of Lot 18 for the identified “purpose”, namely its use to extend Valley Views Road, as a public road, to Lot 51. That purpose was only able to be implemented by the Council exercising its statutory powers.

Section 62(1)(d) applied with the consequence that the special suitability of Lot 18 for the purpose of extending Valley Views Road should not be taken into account in valuing the Lot.

Appeal allowed and the decision of the Land Valuation Tribunal reinstated.

JUDGMENT OF THE COURT

A The questions are answered as follows:

Question 1

Did the High Court err when it reasoned that the Public Works Act 1981, s...

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