Quake Outcasts v The Minister for Canterbury Earthquake Recovery

JurisdictionNew Zealand
CourtSupreme Court
JudgeGlazebrook J
Judgment Date13 March 2015
Neutral Citation[2015] NZSC 27
Date13 March 2015
Docket NumberSC 5/2014

[2015] NZSC 27



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

SC 5/2014

SC 8/2014

Quake Outcasts
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
Fowler Developments Limited
The Chief Executive of the Canterbury Earthquake Recovery Authority
Human Rights Commissioner

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

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.

The issues were: (1) 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; (2) 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; (3) whether there was a rational basis for the distinction drawn between insured owners and uninsured owners.

Held (per majority, Elias CJ and William Young J dissenting): (1) Information provision v decision: The Government was not merely providing information to the public. The committee made a number of decisions on important matters including (inter alia) that the Christchurch situation warranted a central government response, the setting of criteria for determining the identification of zones, detailed criteria for identifying areas where re-building was unlikely to be practical in the short-to-medium term and in particular, the decision that this was to include a cost/value analysis, the decision not to leave matters to individuals and their insurance companies, the decision not to use the compulsory powers in CERA and the decision to offer to purchase insured residential properties at a sum in excess of their current value. The fact that decisions were based on information and that some or all of the information on which the decisions were based was communicated to the public at the same time as the decisions, did not mean that the decisions were subsumed in the information on which they were based. Nor did it mean that communication of the decisions was merely communication of information.

(2) Use of CERA: CERA covered the field and therefore that the procedures under that Act should have been used. The title and purposes of the Act (which were comprehensive) indicated that it was intended to be the main and only vehicle for earthquake recovery measures. This was reinforced by the requirement of CERA for the preparation of an overarching Recovery Strategy for the reconstruction, rebuilding and recovery of greater Christchurch. It must have been envisaged that all major recovery strategies and measures were to be included in that Recovery Strategy. A further indication was the safeguards on the use of the powers in the Act. These were particularly important because many of the powers in CERA were highly coercive. It could not have been intended that these safeguards could be circumvented by acting outside of the Act.

The conclusion that the Act covered the field was reinforced by the legislative history. The measures decided upon by the Cabinet committee in June 2011 were significant earthquake recovery measures and should have been made under CERA as Parliament envisaged.

The prescribed legislative mechanisms were expressed in terms indicating that they were intended to be comprehensive. There was no misalignment with the terms of the Resource Management Act 1991 (RMA). The committee's decision did not purport to affect the RMA; it therefore was difficult to see why s23 CERA (Councils not to act inconsistently with Recovery Plan) would have been engaged. As s16 CERA (Recovery Plans generally) recognised, Recovery Plans could be used for a range of matters, including any social, economic, cultural or environmental matters. They were not limited to RMA issues and indeed the RMA was not even mentioned in s16.

The Crown did not, by its June 2011 decision, purport to alter planning documents. CERA recognised that the Crown should not use coercive powers like s27 CERA (Suspension of plan, etc) if the same outcome could be achieved by less coercive means under the Act. This was the approach mandated by s10 (Powers to be exercised for purposes of this Act) which only allowed powers to be used when necessary.

The red zoning decisions made in June 2011, despite not using the compulsory powers available under CERA and despite not affecting property rights, were designed to facilitate and encourage movement out of the red zones. The intention to facilitate and encourage voluntary withdrawal reinforced the link between the red zone decisions, the purchase offers and recovery from the earthquake, and also reinforced the significant character of the decisions. It also highlighted the need for such measures to have been the subject of a Recovery Plan. This would have required at least the minimum consultation provided for by s20 CERA (Public notification of draft Recovery Plans). Given the significance of the decisions made for all of Christchurch and in particular for those in the red zones, it might be that further consultation, albeit expedited, would have been required.

Even if the Recovery Plan did not need to refer to the purchase decisions, those purchase decisions were so tied to the red zoning decisions, and to government policy in relation to voluntary clearance of the red zones, that the s53 CERA (Acquiring or disposing of property) powers should not have been used unless there had been an antecedent Recovery Plan setting up the red zones.

Although the Crown did not use compulsory acquisition powers, it was unrealistic to describe the transactions that occurred as voluntary. Inhabitants of the red zones had no realistic alternative but to leave, given the damage to infrastructure and the clear message from the government that new infrastructure would not be installed and that existing infrastructure might not be maintained and the compulsory acquisition powers could be used.

The June 2011 decisions could not be characterised as funding decisions. The red zoning decision and the related decision to encourage voluntary withdrawal from red zones were significant earthquake recovery measures that should have been made under CERA. It would not be legitimate for the Crown effectively to side-step the Act by characterising such decisions as funding decisions, able to be made outside of the processes required by the Act. That would risk such “funding” decisions not according with the purposes of and bypassing the processes and safeguards provided by CERA. Section 5 CERA provided that the Act bound the Crown.

(3) Insured v Uninsured owners: Some owners were uninsurable rather than uninsured. There was also no inquiry into the individual circumstances of the members of the uninsured group. The committee did recognise that with some there was a conscious choice to be uninsured. In the Quake Outcasts group, it was not in all cases a “choice” to be uninsured. A number of the Quake Outcasts group were uninsured through inadvertence or bad luck or lack of financial resources. Failing to take into account individual circumstances was not an error. It was, however, unfair to take into account a factor (that of a conscious choice to remain uninsured) that might or might not have been applicable to each member of the uninsured group.

The concern about compensation for uninsured loss was undermined by the fact that in June 2012 the Crown extended 100 per cent offers to red zone properties under construction and non-residential properties owned by not-for-profit organisations. In these cases, the land was not insured and not insurable, but yet the Crown still offered to purchase the property (including the land) at its most recent rateable value.

Some insured property owners would be paid more than the insured value of their properties. It was not clear what steps had been taken to test whether and to what extent insured home owners in the red zone considered it unfair for their uninsured neighbours to be assisted in similar terms to them. This was an unjustified assumption of public lack of generosity for those in need that stood in marked contrast to the public's actual response to the earthquakes. If the Recovery Plan procedure had been implemented as required, the Crown would have had the benefit of community views on these issues.

The argument...

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