Quake Outcasts v The Minister for Canterbury Earthquake Recovery

• Jurisdiction: New Zealand
• Judge: Glazebrook J
• Judgment Date: 13 March 2015
• Neutral Citation: [2015] NZSC 27
• Docket Number: SC 5/2014
• Court: Supreme Court
• Date: 13 March 2015

BETWEEN

Quake Outcasts

Appellants

and

The Minister for Canterbury Earthquake Recovery

First Respondent

The Chief Executive of the Canterbury Earthquake Recovery Authority

Second Respondent

Fowler Developments Limited

Third Respondent

Human Rights Commissioner

Intervener

BETWEEN

Fowler Developments Limited

Appellant

and

The Chief Executive of the Canterbury Earthquake Recovery Authority

Respondent

Human Rights Commissioner

Intervener

[2015] NZSC 27

Court:

Elias CJ, McGrath, William Young, Glazebrook and Arnold JJ

SC 5/2014

SC 8/2014

IN THE SUPREME COURT OF NEW ZEALAND

Appeal against a Court of Appeal decision that an offer by the Crown to purchase properties of owners of vacant land and owners of uninsured improved properties in the Christchurch earthquakes red zone was unlawful because of non-compliance with s10 Canterbury Earthquake Recovery Act 2011 (CERA) — offer had been made to owners of insured properties in June 2011 to purchase the properties at 100 percent of the 2007 rating valuation — in September 2012, owners of uninsured or vacant land were offered purchase at 50 per cent of the 2007 rating value for the land only component of the properties and not the land and improvements — whether the establishment of the red zones was a legitimate exercise of any common law powers or “residual freedom” the Crown had, given the terms of the CERA — whether the offers made by the Crown to red zone property owners under s53 CERA were lawfully made or whether there was a material failure to comply with the Act — whether there was a rational basis for the distinction drawn between insured owners and uninsured owners.

Counsel:

F M R Cooke QC, M S R Palmer QC and L J C McLoughlin-Ware for the Appellants in SC 5/2014

D J Goddard QC and A A Jacobs for the First and Second Respondents in SC 5/2014 and the Respondent in SC 8/2014

S P Rennie and J E Bayley for the Third Respondent in SC 5/2014 and the Appellant in SC 8/2014

V E Casey and M J V White for the intervener in SC 5/2014 and SC 8/2014

• A The appeal is allowed in part.

• B There is a declaration that the September 2012 decisions relating to uninsured improved residential property owners and to vacant residential land owners in the red zones were not lawfully made.

• C The first and second respondents in SC 5/2014 and the respondent in SC 8/2014 are directed to reconsider their decisions in light of this judgment.

• D Leave is reserved to apply for any supplementary or consequential orders.

• E The first and second respondents in SC 5/2014 are to pay to the appellants costs of $40,000 plus usual disbursements. We certify for three counsel.

• F The respondent in SC 8/2014 is to pay to the appellant costs of $20,000 plus usual disbursements. We certify for two counsel.

JUDGMENT OF THE COURT

REASONS

McGrath, Glazebrook and Arnold JJ	[1]
Elias CJ	[212]
William Young J	[289]

McGRATH, GLAZEBROOK AND ARNOLD JJ

(Given by Glazebrook J)

Table of Contents

	Para No
Introduction	[1]
Canterbury Earthquake Recovery Act	[13]
Legislative history	[30]
Further background	[39]
CERA work	[42]
Cabinet committee's decisions	[45]
Purchase offers	[60]
Consultation	[62]
Recovery strategy	[64]
Offers relating to other categories of property	[69]
Current position of Quake Outcasts group	[86]
Submissions	[89]
Quake Outcasts' submissions	[89]
Fowler Developments' submissions	[93]
Human Rights Commission's submissions	[97]
Crown's submissions	[100]
Issues	[105]
Was the Crown merely providing information in June 2011?	[106]
Should the procedures under the Canterbury Earthquake Recovery Act have been used?	[109]
Does the Act cover the field?	[110]
What procedures under the Act should have been used?	[122]
Use of s 53 of the Act?	[138]
Funding decisions?	[142]
Conclusion	[146]
What matters were relevant to the September 2012 decisions?	[147]
Was the insurance status of the properties relevant?	[148]
Were the purposes of the Act properly considered?	[172]
What should be the effect of the delay?	[182]
Conclusion	[189]
Relief	[200]
Parties' submissions	[200]
Discussion	[203]
Result and costs	[206]

Introduction

1 The Canterbury region suffered a series of significant earthquakes and aftershocks in 2010 and 2011. The first major earthquake was on 4 September 2010 and resulted in extensive property damage and some injuries. A further major earthquake on 22 February 2011 was particularly devastating, resulting in 185 deaths and thousands of injuries. In addition, the February earthquake caused significant additional property damage, extensive damage to infrastructure and widespread liquefaction.

2 After a third significant earthquake on 13 June 2011, Cabinet authorised a committee of senior Ministers to make decisions on land damage and remediation issues. On 22 June 2011, a number of decisions were recorded in a memorandum for Cabinet signed by the Hon Gerry Brownlee dated 24 June 2011. The decisions were announced to the public by the Prime Minister and the Hon Gerry Brownlee on 23 June 2011.

3 The Cabinet committee categorised greater Christchurch into four zones according to the extent of land damage and the prospects of remediation. As well as identifying the four zones, the Cabinet committee decided that there would be an offer to purchase insured residential properties in the red zones, which were characterised by the Committee as areas where “rebuilding may not occur in the short-to-medium term”.

4 Owners of insured properties in the red zone were to be given two options:

• (a) purchase by the Crown of their entire property at 100 per cent of the most recent (2007) rating valuation for the properties (land and improvements), with all insurance claims against the Earthquake Commission (EQC) 1 and private insurers to be assigned to the Crown; 2 or

• (b) purchase by the Crown of the land only at 100 per cent of the most recent (2007) rating valuation for the land only component of their properties, with the owner assigning all insurance claims against the

• EQC for the land to the Crown but retaining the benefit of all insurance claims relating to improvements.

5 Property owners were to be given a nine-month period to decide whether they wanted to accept the offer. If they did accept, they could defer settlement of the purchase up to 30 April 2013. 3 Offers were subsequently made by the Canterbury Earthquake Recovery Authority (CERA) to owners of insured properties in the red zone under s 53 of the Canterbury Earthquake Recovery Act 2011 (the Act). 4

6 The position of owners of some other categories of property in the red zones (including of owners of uninsured improved residential properties and owners of uninsurable bare residential land) was not addressed until September 2012. In essence, the offer approved for those two groups by Cabinet was at 50 per cent of the 2007 rating value for the land component only of the properties and not the land and improvements. 5

7 The appellants, Quake Outcasts and Fowler Developments Ltd, issued proceedings for judicial review (heard together in the High Court) challenging the lawfulness of the 50 per cent offers, alleging that they were not made in accordance with the Act. It was also alleged that the offers were oppressive, disproportionate and that they breached the appellants' human rights.

8 Quake Outcasts is an unincorporated group of some 46 6 individual or joint-

owners of uninsured improved properties, or vacant land 7 in the red zone. Fowler Developments is a property development company and is the owner of 11 residential sections in Brooklands, which was zoned red in November 2011. 8

9 Quake Outcasts and Fowler Developments largely succeeded in the High Court. Panckhurst J held that the June 2011 decision creating the red zones was not lawfully made. 9 The Minister's announcement of the September 2012 decision and the 50 per cent offers made pursuant to that decision were set aside. 10

10 The Court of Appeal allowed the Crown's appeal in relation to the June 2011 decision. 11 The Court of Appeal did not see it as appropriate to provide relief in respect of the Minister's announcement of the September 2012 decision. 12 The September 2012 offer to purchase the properties of owners of vacant land and owners of uninsured improved properties in the red zone was, however, held to be unlawful because of non-compliance with the Act and in particular s 10 of that Act. 13 The Court of Appeal made a declaration to that effect. 14 The Court accepted, however, that there was a rational basis for distinguishing between property owners on the basis of their insurance cover. 15

11 On 5 May 2014, this Court granted leave to appeal 16 in both cases on the following questions:

• (a) Was the establishment of the Residential Red Zones in Christchurch lawful as being a legitimate exercise of any common law powers or “residual freedom” the Crown may have, given the terms of the Canterbury Earthquake Recovery Act 2011?

• (b) Were the offers made by the Crown to Residential Red Zone property owners under s 53 of the Canterbury Earthquake Recovery Act 2011 lawfully made? In particular:

  • (i) Was there a material failure to comply with the Act?

  • (ii) Was there a rational basis for the distinction drawn between those owners who were insured and those who were uninsured?

12 Before dealing with those questions, we canvas the relevant legislation, the legislative history and the factual background in more detail. We then summarise the parties' submissions and identify the issues arising from those submissions.

Canterbury Earthquake Recovery Act

13 The Canterbury Earthquake...