The Minister for Canterbury Earthquake Recovery and Another v Fowler Developments Ltd and Another

JurisdictionNew Zealand
JudgeO'Regan P,Ellen France,Stevens JJ
Judgment Date03 December 2013
Neutral Citation[2013] NZCA 588
Docket NumberCA571/2013
CourtCourt of Appeal
Date03 December 2013
BETWEEN
The Minister For Canterbury Earthquake Recovery
First Appellant
The Chief Executive Of The Canterbury Earthquake Recovery Authority
Second Appellant
and
Fowler Developments Limited
First Respondent
Quake Outcasts
Second Respondents
Human Rights Commission
Intervener

[2013] NZCA 588

Court:

O'Regan P, Ellen France and Stevens JJ

CA571/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court (“HC”) decision upholding an applications for judicial review by the respondents concerning offers made to the respondents to purchase their properties which had been damaged by the Christchurch earthquakes and located in the Red Zone — respondents either owned undeveloped residential land or uninsured properties — offer was for 50 per cent of the 2007 rating value of their land — owners of insured residential properties in the red zone were offered 100 per cent of the 2007 rating value of both land and improvements — HC determined that the red zone decision had to be made pursuant to the powers contained in the Canterbury Earthquake Recovery Act 2011 (“CER Act”) — appellants contended the decision was made under the residual freedom of the Government to do anything that was not in conflict with any obligation under common law or statute — whether the decisions challenged could only be made only pursuant to provisions of the CER Act.

Counsel:

D J Goddard QC and A A Jacobs for Appellants

S P Rennie and J E Bayley for First Respondent

F M R Cooke QC, M S R Palmer and L J C McLoughlin-Ware for Second Respondent

V E Casey and M J V White for Human Rights Commission

  • A The appeal is allowed in part.

  • B The orders made in the High Court are set aside and replaced with a declaration that the decision of the second appellant to make offers to purchase the properties of owners of vacant land and owners of uninsured improved properties in the red zone was not lawfully made.

  • C The appellants must pay to each of the respondents costs for a complex appeal on a band B basis and usual disbursements. We certify for two counsel for each respondent.

  • D We reserve leave to apply for further directions in the event that there are any practical difficulties in relation to the Court. relief granted in this

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by O'Regan P)

Table of Contents

Para No

Introduction

[1]

Parties

[8]

Issues for determination

[11]

Decisions under challenge

[17]

Factual background

[19]

June 2011 decision

[22]

September 2012 decision

[34]

Other developments

[50]

Statutory context

[51]

The CER Act

[52]

State Sector Act 1988 and Public Finance Act 1989

[66]

Residual freedom of executive

[75]

Dealing with the issues

[86]

Could the challenged decisions be made under the residual freedom?

Scope of the June 2011 decision

[87]

Legal effect of the red zone decision

[92]

Did the red zone decision require the exercise of statutory power?

[109]

Did the Chief Executive act consistently and comply with the CER Act in making the September 2012 decision?

[134]

Was the High Court right to grant the relief that it granted?

[154]

Result

[168]

Costs

[169]

Leave reserved

[170]

Introduction
1

This is an appeal against a decision of Panckhurst J in which he upheld applications for judicial review by the respondents, Fowler Developments Ltd (Fowler) and Quake Outcasts. 1

2

The High Court proceedings were triggered by an offer made to Fowler and to the members of the Quake Outcasts by the second appellant, the Chief Executive of the Canterbury Earthquake Recovery Authority (CERA), to purchase their properties. Their properties are situated in an area of Christchurch which in June 2011 was declared a “red zone” after the significant earthquakes that occurred in Canterbury in 2010 and 2011. 2

3

The underlying grievance of the respondents is that the offer made to them in September 2012 set the price of their properties at 50 per cent of the 2007 rating value of their land. (We will call this the “50 per cent offer”.) This contrasted with an offer that had been made some 15 months earlier to the owners of insured residential properties in the red zone, where the offer price had been 100 per cent of the 2007 rating value of both land and improvements in exchange for the transfer of the property and of the seller's rights against their insurers and against the Earthquake Commission (EQC). 3 (We will call this the “100 per cent offer”.) The reason the lower offer was made to the respondents was because, in the case of Fowler, it owned undeveloped residential land (on which there were no improvements and which was uninsurable) and, in relation to the members of the Quake Outcasts, because their properties were uninsured. 4 The practical effect of the properties being uninsured was that there was no EQC cover.

4

In the High Court, Panckhurst J made declarations that:

  • (a) the decision to create the red zone did not lawfully affect the property rights of the respondents; 5 and

  • (b) the decision to offer to purchase the properties of the respondents on the terms announced by the Minister for Canterbury Earthquake Recovery (the Minister) 6 and the offers subsequently made by the Chief Executive of CERA (the Chief Executive) were not made according to law. 7

5

The Judge effectively found that the red zone was not lawfully established, but did not grant a declaration to that effect because he mistakenly thought the Quake Outcasts had abandoned their application for such a declaration. 8

6

The Judge set aside the offers made to the respondents and directed that the first appellant, the Minister, and the Chief Executive reconsider and reach a new decision to purchase the respondents' properties, such decision to be made in accordance with law as required by the purposes and principles of the Canterbury Earthquake Recovery Act 2011 (CER Act) and with regard paid to the reasons contained in Panckhurst J's judgment. The direction did not extend to the offers made to offerees other than the respondents. 9

7

The Minister and the Chief Executive appeal. They argue both decisions were lawful and effective.

Parties
8

Fowler is a property developer. It owned 11 vacant residential sections in the red zone. Its claim was narrower than that of the Quake Outcasts, focused only on

the decision to make the 50 per cent offer (so the relief it claimed was limited to that described at [4](b) above). Its counsel, Mr Rennie, adopted the submissions made by Mr Cooke QC for the Quake Outcasts and made additional submissions addressing matters in respect of which Fowler's position differed from that of the Quake Outcasts
9

Quake Outcasts is an unincorporated body of 46 owners of properties in the red zone. All were eligible to receive the 50 per cent offer, although their positions are not all the same. Some own undeveloped, vacant land. Some own uninsured residences. One owns an uninsured commercial property. Fowler and some of the Quake Outcasts have accepted the 50 per cent offer subject to an agreement that the present proceedings could still proceed. Others of the Quake Outcasts received, but did not accept, the 50 per cent offers, while some did not complete the necessary consent form and did not therefore receive any offer.

10

The Human Rights Commission was given leave to intervene. We considered the written submissions provided by its counsel but did not call upon her to address us.

Issues for determination
11

At the heart of the case is the proper identification of the source of executive authority under which the decision to declare the red zone and the consequent decisions to purchase properties located in the red zone were made. The High Court Judge determined that the red zone decision had to be made pursuant to the powers contained in the CER Act. The appellants contend that the decision could be, and was, made under the residual freedom of the Government to do anything that is not in conflict with any obligation under common law or statute, sometimes also referred to as the “third source” of authority. We will explain later what that concept entails. It was common ground that the residual freedom (as we will call it) did not provide authority to take action impacting on the rights of those affected by the action.

12

There was no dispute that the executive has a residual freedom to act in the absence of statutory or common law constraints. But there was a dispute about the nature and scope of this source of executive authority. There was also a dispute about the nature of the decisions under challenge, particularly whether they affected rights and whether they were in the field of activity governed by the CER Act. The parties identified two issues for determination:

  • (a) Was the High Court right to conclude that the rights of property owners, including their human rights, were affected by the decisions challenged in this case?

  • (b) Was the High Court right to conclude that the decisions challenged in this case could be made only pursuant to provisions of the CER Act?

13

We have found it more convenient to combine these and deal with this aspect of the case as one issue, namely, could the decisions under challenge be made under the residual freedom? Those two questions encompass the nature and scope of the residual freedom and the applicability or otherwise of the constraints on its exercise. That is the first issue.

14

The second issue focuses on the decision made by the Chief Executive to offer to purchase the properties of the respondents (and others in similar positions) which was made pursuant to a power given to the Chief Executive under s 53 of the CER Act. The issue, as framed by the parties, is whether the High Court was right to conclude that the...

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