Home | Databases | WorldLII | Search | Feedback Court of Appeal of New Zealand

Pacific Farms Limited v Palmerston North City Council [2011] NZCA 187 (16 May 2011)

Last Updated: 25 May 2011

JUDGMENT OF THE COURT

A The appeal by the first and second appellants is dismissed.

2. The cross-appeal by the first respondent is allowed and the judgment of the High Court is set aside.

100. The costs orders made in the High Court are set aside.

4. The costs in the High Court and this Court will lie where they fall.

____________________________________________________________________

REASONS OF THE COURT
(Given by Randerson J)

Introduction

[1] This appeal and cross-appeal relate to subdivisional consents granted by the Palmerston North City Council (the Council) in relation to substantial residential subdivisions on greenfield sites on the outskirts of the city.
[2] The appellants (together PFL) and the second respondent (PNIRD) own substantial areas of adjoining land, originally zoned rural but later zoned in part for intensive residential development. The natural drainage on the land comprised two substantial gullies known as the Johnstone Drive and Eastern Gullies respectively. Stormwater flows naturally from PNIRD’s higher land to PFL’s land.
[3] The Council granted PNIRD four subdivisional consents and some related land use consents under the Resource Management Act 1991 (the Act) between 2004 and 2009. These were:

[4] All the consents were granted by the Council to PNIRD on a non-notified basis. PFL raised concerns with the Council about the effects of increased stormwater received onto its property which it maintained arose from subdivisional work carried out on PNIRD’s land.
[5] PFL subsequently brought proceedings in the High Court at Palmerston North challenging the legality of the grant of the first three consents. Declaratory relief was sought under the Declaratory Judgments Act 1908 but the proceedings were treated as an application for judicial review. The principal ground of review was that the Council had erred in law in granting the consents on a non-notified basis. An order was sought quashing the consents. A further cause of action maintained that PNIRD required the consent of the Wanganui-Manawatu Regional Council (Horizons) for the discharge of stormwater and sought a declaration that, in the absence of any such consent, the discharge of stormwater and sediment by PNIRD was unlawful.
[6] PFL did not discover the existence of the fourth consent (RM2636) until about two weeks prior to the hearing of the judicial review proceeding in the High Court. The existence of RM2636 was important because it was based on a different plan of subdivision and had the effect of replacing the RM2351 consent. Because of the late revelation of the existence of RM2636 the pleadings were not amended and there was no affidavit evidence before the High Court in relation to the grant of this consent. The only material before the court was in the form of documents produced by consent which we understand included the application for consent and the Council documentation dealing with that consent.
[7] Another revelation was the existence of a regional plan which it had not earlier been appreciated may have been relevant to the grant of the consents. At the time the consents were granted, Horizons was of the view that no consent was required from it in relation to the discharge of stormwater but that view had been formed on the basis of a different regional plan.
[8] By a decision issued on 5 February 2010,[1] Gendall J found that the Council did not have sufficient information before it made its decisions not to notify the applications for resource consent and that, in consequence, the applications should have been notified. However, he decided in the exercise of his discretion that an order declaring that the consents should be quashed was not warranted.
[9] In a further judgment issued on 22 March 2010[2] the Judge ordered the Council to pay to PFL the costs of $38,560, discounted by one third to reflect the measure of its “technical success”. No order for costs was made as between PFL and PNIRD.

The appeal and cross-appeal

[10] PFL has appealed against the substantive judgment on the grounds that the Judge erred in fact and in law in declining to quash the consents. PFL seeks an order to that effect. For its part, the Council has filed a cross-appeal in which it seeks an order setting aside the declarations made in the High Court and overturning the costs decision.
[11] It became evident early in the hearing before us that the need or otherwise for PNIRD to obtain resource consents from Horizons was a central issue. This was for two reasons. First, Mr Johnston made it clear on behalf of PFL that the sole concern by PFL was the effects of the discharge of stormwater onto its property from PNIRD’s land. There were no other grounds upon which the resource consents granted to PNIRD were challenged. Second, if consents in relation to water issues were required from Horizons, this would have a significant bearing on the obligations of the Council in relation to the grant of subdivision and land use consents to PNIRD.
[12] A further complication was that PFL had itself obtained a consent from Horizons on 1 November 2007 to fill a portion of the Johnstone Drive Gully on its own land. This step was taken with a view to PFL developing its land for residential purposes. This consent was obtained after the grant of RM2351 but before the grant of RM2604 and RM2636 to PNIRD. PFL subsequently filled part of the Johnstone Drive Gully on its land with consequences for the damming and diversion of stormwater which are of concern to the Council since it is said that stormwater from PFL’s land has been diverted into the Council’s urban stormwater systems.
[13] Against this background, it seemed to us that the resolution of the issues raised by the appeal and cross-appeal would not solve the real issue between the parties. Both wish to proceed with development of their respective properties but there is a lack of agreement as to how stormwater should be controlled and who should pay for it. We urged counsel to endeavour to agree upon a mechanism to resolve the need or otherwise for additional resource consents from Horizons and a process to resolve the engineering and financial issues between them. The issues had not been resolved by the end of the hearing of the appeals but, at the request of the parties, we refrained from issuing a judgment for a period of one month to allow the parties to explore the prospects of resolving the issues. Although some progress towards that end has been made, no resolution has been reached. We now deliver our decision accordingly.

The decision in the High Court

[14] The essential features of the High Court decision may be summarised as follows:

• (a) The Council had wrongly treated RM2111 as a restricted discretionary activity; it should have been regarded as an unrestricted discretionary activity.
• (b) There was inadequate information available to the Council to enable it to assess the potential adverse effects on PFL’s land from the discharge of stormwater from the proposed subdivision. This was the case not only for RM2111 but also for RM2351 and RM2636.
• (c) The applications for resource consents should have been notified having regard to the notification provisions of the Act then in force: ss 93, 94 and 94A to 94D.
• (d) A condition relating to the control of stormwater was inadequate to mitigate any adverse effects from the stormwater runoff. (We note that Mr Maassen for the Council accepted before us that the condition applied only during land clearance, earthworks and other construction activity in relation to the subdivision.)
• (e) PFL was not estopped from challenging the resource consents granted to PNIRD by its actions in seeking and obtaining its own resource consent from Horizons at which time PFL gave an undertaking in relation to the acceptance of stormwater from PNIRD’s subdivision.
• (f) There was insufficient material before the court to express any definitive view as to whether consents from Horizons were required in relation to the discharge of water.
• (g) In exercising its discretion not to quash the consents, the Court found that there had been extensive delay by PFL in bringing the proceedings; the development and drainage work pursuant to the consents had been completed; and the development work by PFL on its own land by the partial filling of the Johnstone Drive Gully meant that the receiving environment was different to that which existed when the applications for resource consent by PNIRD were made.
• (h) The Court made two formal declarations. First, that the Council had erred in not notifying PFL of the applications for the consents RM2111, RM2531 and RM2604. Second, that PFL had been denied the right to be heard as to any conditions to attach to the consents in relation to the discharge of stormwater onto its land.

[15] The position adopted by PFL in the High Court (and before us as well) is captured in the following passage from Gendall J’s judgment:

[100] Mr Johnston contended that Pacific Farms was entitled to be heard as to conditions attaching to the consents – as they may relate to discharge of water – but would continue to receive water onto its property (at the now filled Johnstone Drive Gully) from the pipe of PNDL [PNIRD]. He said that there was no question that PNDL would get “retrospective consent” and that the only issue would be conditions of dealing with water at the boundary of the land of PNDL and Pacific Farms. He said that it was not the case that quashing the consent, requiring notification, and re-considering the application would be futile, because added conditions would be sought to be imposed upon PNDL.

Discussion

[16] The focus of Mr Johnston’s argument for PFL on appeal was a submission that the High Court had erred in exercising its discretion not to quash the resource consents granted to PNIRD. Mr Maassen and Mr Reardon presented substantial argument in support of the Council’s cross-appeal and in opposition to PFL’s case. However, we have come to the clear conclusion that the way in which the case was presented to the High Court has resulted in material error.
[17] First, it was not possible to consider in the context of the High Court proceedings the true impact of the statutory division of responsibilities between the Council as the territorial authority and Horizons as the regional council. The impact of the regional plans and the need or otherwise for resource consents from Horizons was essential to a consideration of the adequacy of information available to the Council in respect of stormwater issues.
[18] Second, the late introduction of the material relating to RM2636 meant that there was insufficient evidence before the court to enable the issues in relation to that consent to be properly determined. Yet this was important since RM2636 replaced RM2351.

The regional plan issues

[19] While territorial authorities have responsibility under the Act for subdivisional and land use consents, regional councils have control over discharges of water.[3]
[20] The relevant starting point in relation to discharges is s 15(1) of the Act which provides:

15 Discharge of contaminants into environment

(1) No person may discharge any—

(a) Contaminant or water into water; or

(b) Contaminant onto or into land in circumstances which may result in that contaminant (or any other contaminant emanating as a result of natural processes from that contaminant) entering water; or

(c) Contaminant from any industrial or trade premises into air; or

(d) Contaminant from any industrial or trade premises onto or into land—

unless the discharge is expressly allowed by a national environmental standard or other regulations, a rule in a regional plan as well as a rule in a proposed regional plan for the same region (if there is one), or a resource consent.

[21] In this context, “contaminants” are widely defined[4] and may include, for example, silt from earthworks or other substances suspended in runoff from land. Discharges falling within s 15(1) are prohibited unless the discharge is expressly allowed by a range of instruments including a rule in a regional plan or a resource consent.
[22] Council officers approached Horizons in relation to the applications by PNIRD for subdivision and land use consents. Mr P J Hindrup, a senior consents planner for Horizons, said in evidence that the regional council considered the discharge of stormwater to be a permitted activity under the Manawatu Catchment Water Quality regional plan (MCWQ) dated October 1998. Under that plan, the discharge of stormwater from existing or new residential stormwater drains is a permitted activity. No resource consent is required unless the standards of MCWQ Rule 1 have been breached or the discharge contains drainage from any industrial or trade premises. Mr Hindrup deposed that there was no evidence to suggest that the performance standards in MCWQ Rule 1 had been breached or that the discharge contained drainage from any industrial or trade premises.
[23] The Council’s evidence was that its officers contacted Horizons in respect of both RM2111 and RM2636. On the first, there was no response. This no doubt reflected Horizons’ view, as later confirmed by Mr Hindrup, that no resource consent was required from the regional council’s perspective. In relation to the second, Horizons’ response to the Council’s officers related only to standard comments in relation to the management of subdivision construction works. There was no suggestion that a discharge consent or permit was needed from Horizons.
[24] Sections 93 and 94 then relevantly provided:

93 When public notification of consent applications is required

(1) A consent authority must notify an application for a resource consent unless –

(a) the application is for a controlled activity; or

(b) the consent authority is satisfied that the adverse effects of the activity on the environment will be minor.

(2) If subsection (1) applies, the consent authority must notify the application by –

(a) publically notifying it in the prescribed form; and

(b) serving notice of it on every person prescribed by regulations.

94. When public notification of consent applications is not required

(1) If notification is not required under s 93(1), the consent authority must serve notice of the application on all persons who, in the opinion of the consent authority, may be adversely affected by the activity, even if some of those persons have given their written approval to the activity.

(2) However, a consent authority is not required to serve notice of the application under subsection (1) if all persons who, in the opinion of the consent authority, may be adversely affected by the activity have given their written approval to the activity.

(Emphasis added.)

[25] Section 94A (a) provided that, when forming an opinion for the purpose of s 93 as to whether the adverse effect of an activity on the environment will be minor or more than minor, a consent authority may disregard an adverse effect of the activity on the environment if the plan permits an activity with that effect. Similarly, s 94B(3)(a) provided that, for the purposes of s 94(1) of the Act, when a consent authority is forming an opinion as to who may be adversely affected by the relevant activity, a person may be treated as not being adversely affected if, in relation to the adverse effects of the activity on the person, the plan permits an activity with that effect.[5]
[26] It was not until PFL’s planning consultant, Mr G C Miller, filed an affidavit sworn on 20 November 2009 that reference was made to a second regional plan which, prima facie, had a material bearing on water discharge issues. Mr Miller referred to the Land and Water regional plan (LWRP) which became operative on 30 September 2003 in relation to the Manawatu region. DL Rule 14 of the LWRP relevantly provides:

DL Rule 14: Discharge of stormwater to land

The discharge of stormwater onto or into land is a permitted activity provided ...

(b) The discharge shall not cause the flooding of any property unless written approval is obtained from the affected property owner; and

(c) The discharge shall not cause erosion of any land or the banks or bed of any water body beyond the point of discharge.

[27] DL Rule 18 of the LWRP provides that any discharge of contaminant onto or into land in circumstances that result in that contaminant entering water is a discretionary activity where the conditions of any rule in the plan are not met. Mr Miller concluded in his affidavit that, in terms of DL Rule 18 of the LWRP, consent for the discharge of stormwater was required by PNIRD as a discretionary activity.
[28] While the Council strongly asserted before us that the performance standards set out in DL Rule 14 would be met, this is clearly a question of fact which neither the High Court nor we are equipped to determine in the context of the present proceedings. Yet, as earlier discussed, whether the discharge of stormwater from the PNIRD subdivision was a permitted activity or whether it required a resource consent was, and remains, a critical issue.
[29] On the one hand, if the effects of stormwater discharge on adjoining land were permitted, then the Council was entitled to disregard them when considering notification issues under ss 93, 94, 94A and 94B. On the other hand, if they were not permitted activities then a resource consent for the discharge of stormwater would have been required from Horizons. In addition, the Council ought to have considered deferring the PNIRD applications for subdivision and land use under s 91 of the Act. That section applies where a consent authority considers that other resource consents may be required in respect of a proposal.[6]
[30] It is well established that the scope of the application for a resource consent is an important determinant in assessing notification issues.[7] We would add that it is also vital to keep in mind that the functions of territorial authorities and regional councils under the Act are carefully differentiated as already noted. It is not the responsibility of the territorial authority to determine issues properly falling within the scope of the regional council’s jurisdiction. In practice, a territorial authority will seek advice from the regional council on issues falling within the latter’s jurisdiction. This occurred in the present case but both the Council and Horizons proceeded on an assumption which may be incorrect.
[31] In this case, the Council (as territorial authority) is not responsible for administering the regional plan or plans and has no authority to authorise point-source discharges of stormwater which would otherwise breach regional plans. Consents issued by the Council could not authorise stormwater effects beyond those permitted by the regional plan.
[32] We accept Mr Maassen’s submission that the responsibilities of the Council were to consider whether, for the purposes of s 91 of the Act, there were reasonable grounds to conclude that discharge consents for stormwater from Horizons (as the regional council) were required. The Council was also required to ensure at the time of issuing the resource consents and before issuing a certificate under s 224 of the Act, that an engineered stormwater system could meet the Council’s minimum engineering standards.

The impact of RM2636

[33] Because the existence of this consent was not brought to the notice of PFL until shortly before the hearing, we are satisfied that there was inadequate material before the High Court to enable a reliable conclusion to be reached on the notification issue. The court had before it a copy of the application and other relevant Council documents but it did not have the benefit of any affidavit evidence addressing the notification issues in relation to RM2636. This new consent replaced RM2351 and effectively rendered the latter redundant. RM2636 related to the second stage of the subdivision but differed materially from the consent in the first stage (RM2111).
[34] Of the 49 lots in RM2111, all except three drain into the head of the Johnstone Drive Gully which is zoned residential. Of the 73 lots in RM2351 (increased to 78 lots in RM2636), all except approximately 12 (which drain into the Johnstone Drive Gully) drain into the Eastern Gully. This is said to be a deep gully, still in its natural state, and zoned rural.
[35] As Mr Maassen pointed out, by the time RM2636 was granted, the Council had before it a substantial body of information accumulated not only from the applications for RM2111 and RM2351, but also from the subsequent steps taken to ensure compliance with the Council’s minimum engineering standards in relation to the prior consents when the issue of s 224 certificates was considered. The extent of information available required separate consideration at the time each consent was sought, but the information could include material available to the Council from the earlier applications.
[36] Mr Reardon (who appeared for the Council in the High Court) informed us that he did not understand the High Court would be asked to review the adequacy of the notification of RM2636 and he did not make any submissions on it.

Conclusion

[37] The High Court was faced with a most unsatisfactory situation at the hearing. The last minute discovery of the consent granted under RM2636 and the late revelation of the second regional plan which had not previously been considered meant that the pleadings were not in proper order and there was inadequate evidence to enable the Court to determine the relevant issues. As the Judge rightly noted, the regional council was not a party to the proceeding. Nor did it place any affidavit evidence before the Court as to the relevance and application of the LWRP. We have considerable sympathy for the Judge who, faced with this situation, naturally did his best to resolve the issue on the basis of the evidence placed before him by the parties.
[38] The cumulative effect of these inadequacies has meant that the critical issues were not able to be addressed in any meaningful way. In the circumstances, the declarations made by the High Court are set aside.
[39] It will be a matter for the parties to determine whether a rehearing in the High Court is feasible. As we see the matter however, this would require a major reconstruction of both the pleadings and the evidence. Given that the only issues of importance to the parties relate to stormwater disposal, an application to the Environment Court for appropriate declarations under the Act in relation to the application of the regional plan or plans may be attractive to the parties as a logical solution. Indeed, Mr Maassen suggested this would be appropriate.
[40] In view of our finding on the substantive proceeding, it follows that the costs orders made in the High Court must also be set aside. In all the circumstances, we consider it is appropriate that all parties bear their own costs in the High Court and in relation to the appeal and cross-appeal. We order accordingly.

Solicitors:
Fitzherbert Rowe, Palmerston North for First and Second Appellant
Cooper Rapley, Palmerston North for First Respondent
Wadham Goodman, Palmerston North for Second Respondent

[1] Pacific Farms Ltd v Palmerston North City Council HC Palmerston North CIV-2008-454-791, 5 February 2010.

[2] Pacific Farms Ltd v Palmerston North City Council HC Palmerston North CIV-2008-454-791, 22 March 2010.
[3] Resource Management Act 1991, s 30(1)(f).
[4] See Resource Management Act 1991, s 2.

[5] Sections 93, 94, 94A and 94B have all been repealed as from 1 October 2009 by s 76 of the Resource Management (Simplifying and Streamlining) Amendment Act 2009 (No 31).

[6] Waitakere City Council v Kitewaho Bush Reserve Co Ltd [2005] 1 NZLR 208 (HC); Mawhinney v Waitakere City Council CA109/04, 23 September 2004.

[7] Westfield (New Zealand) Limited v North Shore City Council [2005] NZSC 17, [2005] 2 NZLR 597; Quarantine Waste (NZ) Limited v Waste Resources Limited [1994] NZRMA 529 (HC); Bayley v Manukau City Council [1999] 1 NZLR 568 (CA).