ATHENDALE PROPERTY LTD v WESTERN BOP DISTRICT COUNCIL [2014] NZHC 635

ATHENDALE PROPERTY LTD v WESTERN BOP DISTRICT COUNCIL [2014] NZHC 635 [2 April 2014]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2012-470-36[2014] NZHC 635BETWEEN ATHENDALE PROPERTY LIMITEDPlaintiffAND WESTERN BOP DISTRICT COUNCILDefendantHearing: 23 September 2013Appearances: M D Branch for the PlaintiffP J Crombie for the DefendantJudgment: 2 April 2014JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 2 April 2014 at 11:00 a.m. pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarSolicitors / Counsel: Mr M D Branch, Harkness Henry, Solicitors, HamiltonMr P J Crombie, Cooney Lees Morgan, Solicitors, Tauranga[1] The plaintiff (Athendale) has applied for review of an Associate Judge's decision ordering the plaintiff to provide security for the defendant Council's costs in a sum of $60,000.1[2] The threshold question under r 5.45 of the High Court Rules is whether there is reason to believe that the plaintiff will be unable to pay the defendant's costs if there is an order for costs against the plaintiff. Athendale accepts that this is the case. The broad issue that arises on this application for review is whether there was error by the Judge in concluding that it was just in all the circumstances to make an order that Athendale provide security for costs. In coming to this conclusion the Judge was exercising a discretion. In consequence, for the plaintiff to succeed it must show that the Judge acted on a wrong principle, or failed to take into account some relevant matter, or took into account some irrelevant matter, or was plainly wrong.2The claim[3] Athendale is suing the Council for negligence, breach of statutory duty and misfeasance in public office. The claims relate to actions taken by Council officers in preparing proposals for, and implementing decisions on, district plan changes which affected Athendale's land in Athenree (the Athendale land).[4] The Athendale land abuts Tauranga Harbour. Athendale alleges that certain Council officers had a plan to extend an existing coastal reserve further onto the Athendale land and that they put this forward in proposals for plan changes. The Council made a number of formal decisions not to extend the reserve. Athendale alleges that the Council officers nevertheless took or failed to take various steps in an attempt to circumvent or unjustifiably delay the implementation of the formal decisions declining to extend the reserve. Athendale claims this was done in order to restrict Athendale's use of land and thereby preserve the Council's ability to construct a viewing platform on it.1 Athendale Property Ltd v Western Bay of Plenty District Council [2013] NZHC 965.2 May v May (1982) 1 NZFLR 165 (CA) at 170. And see Alex Harvey Industries Ltd v CIR (2001) 15 PRNZ 361 (CA) at [12]-[15].[5] Broadly speaking the actions and omissions of Council staff of present relevance are said to be as follows:(a) They recommended the amendment of the District Plan by marking the Athendale land with red dots on planning maps available to the public such that it appeared that anyone wanting to build on the property would have to apply for iwi and Council approval. The red dots were said to indicate the location of heritage sites. On the Athendale land these were designated H118 and H123. Athendale alleges that, although it was represented that a local iwi had identified the location of these sites, in fact they had been identified on maps for the Athendale land by a Council officer.(b) Having been directed by the elected councillors in a formal decision in March 2006 to remove the relevant red dots from planning maps, and the Environment Court having ordered in December 2006 that that decision be implemented "without further delay", they failed to do so until August 2008.[6] There are other pleaded allegations of Council acts or omissions said to have caused loss to Athendale, but Mr Branch for Athendale said that those set out above are the ones requiring consideration on this application for review. The Athendale land was subdivided for sale. Athendale alleges that these acts and omissions, and the uncertainty this created for prospective purchasers, undermined Athendale's ability to market and sell sections during the key selling phase of the subdivision which commenced in or about 2005 and which it had planned to complete by mid- 2006.[7] In terms of causation Athendale claims that, had the Council's acts and omissions not occurred, it would have sold all of the sections before the global financial crisis began in mid to late 2008. However, because the Council's actions prevented the sales, Athendale suffered substantial loss, which is also the cause of the plaintiff's current impecuniosity.Athendale's grounds for review in summary[8] The essence of Athendale's argument was put by Mr Branch as follows:In the instant case, Associate Judge Doogue appears to have placed the greatest weight on his perception of the merits of the case. His Honour formed the view, based in counsel's submission on erroneous factual findings, that the proceedings had little or no merit and therefore gave little or no weight to the additional matters the Court is required to consider in an application for security for costs.It is submitted that His Honour's approach in this respect, given the plaintiff's clear indication it would be unable to proceed if security of more than a nominal amount was ordered, rendered the security for costs application a de facto strike out. Before ordering security for costs in those circumstances, His Honour was required to satisfy himself that the claim as a whole had so small a chance of success that access to the Court should be denied: Du Claire v Palmer.3[9] The Judge did consider the merit of the claims in considerable detail and I agree that his conclusion on this was central to his decision. On this application for review the primary contentions for Athendale as to the merit of the claim were focussed on the evidence, although the evidence is not set out in detail in the judgment. For these reasons it is necessary to set out the factual allegations of Athendale in some detail.It is submitted that the claim is not so weak as to reach that high threshold.[10] It is also appropriate to set out Athendale's assertions of fact in reasonable detail because these come from affidavits for Athendale in opposition to the Council's application for security and the Council did not file any affidavits in response. Mr Crombie explained why there were no affidavits in response, but this has no bearing on the significance of this evidence. The important consideration at this stage of the proceeding is that there is unchallenged evidence which is central to assessment of the strength of Athendale's claim. In recording the relevant evidence for Athendale in this judgment I fully recognise that at this stage of the proceeding it is untested evidence, and if the proceeding continues there may be challenges to much of it. However, to avoid unnecessary repetition, I will record what is contained in this evidence as a narrative of fact without regularly introducing qualifications to the effect that it comes from presently untested contentions.3 Du Claire v Palmer HC Wellington CIV-2009-485-2638, 29 October 2010 at [20].The evidence[11] The Athendale land was purchased in 1994 by Mr Douglas and Mrs Patricia Yeoman. They are the directors and shareholders of Athendale. They transferred the land to Athendale in 2004.[12] In 1995 the Council created an esplanade reserve which extended 40 metres into the Athendale property. This was variously referred to as the "Tauranga Landward Edge protection yard", the "esplanade reserve" and the "significant landscape feature".[13] In 2002 the Council advised Mr and Mrs Yeoman and neighbouring land owners that the Council was proposing to rezone the district from rural to residential. The letter of advice from the Council was written by Mr Grant Bridgewater, who was a resource management policy analyst with the Council. In November 2002 Mr Bridgewater had a meeting on site with Mr and Mrs Yeoman and other land owners affected by the proposals. Mr Yeoman said that Mr Bridgewater advised them that rezoning to residential would mean that they would all lose 70 to 80 metres of their land closest to the harbour. What Mr Bridgewater was discussing with the property owners was, in effect, a substantial extension of the esplanade reserve created in 1995.[14] Mr Yeoman told Mr Bridgewater that at most 20 metres was needed and explained why, by reference to survey pegs. Mr Yeoman continued in his affidavit:Mr Bridgewater later said to Mr Carrad (our neighbour) 'Doug can put his pegs where he likes, they don't mean a thing to us'. In retrospect, I can see that this was the beginning of our problem with [the Council] and my view is that Mr Bridgewater had a plan then to grab as much waterfront land as possible for [the Council] and his desired viewing platform at the top of the escarpment.[15] In February 2003 the Council's resource management manager, Mr Martelli, wrote to Mr and Mrs Yeoman. He said that "at a recent workshop" the Council had agreed to continue with the proposed re-zoning. The letter concluded:Council also agreed to provide for an over width esplanade reserve in some areas to provide for ecological protection and for the provision of a walkway in the future.[16] Mr Yeoman said:In later discussions with a councillor who was present at the workshop, Noeline De Luca, she told me that Mr Bridgewater and Mr Martelli had not given the councillors the full picture at the workshop and they (the councillors) had not intended that [the Council] would take as much land from us as was now being sought.On 5 February 2003, I called [the Council] offices and spoke to Mr Martelli. I asked him where exactly the over width reserve would be. He said to me, 'you may not like to hear this, Doug, but the only place the reserve is over width is on your property'.[17] The Council's proposed re-zoning, and proposal for extension of the reserve, was publicly notified as plan change 23. The publicly notified reserve proposal was less than had been advocated by Mr Bridgewater; it stopped at the top of an escarpment on the Athendale land, rather than extending beyond it.[18] Mr and Mrs Yeoman and others supported the more limited reserve. At a public hearing on 1 December 2003, after the time for submissions had closed, Mr Bridgewater recommended to the Council officers conducting the hearing that the reserve be extended further into the Athendale land beyond what had been publicly notified. As I understand the evidence the councillors conducting the hearing said that the more limited reserve was, or would be, confirmed. Mr Yeoman said that he and his wife thought that this was a win for them but that it turned out to be short- lived.[19] It was short-lived because of advice of the formal decision contained in a letter of 18 December 2003 to Mr and Mrs Yeoman from Mr Bridgewater. Mr Bridgewater referred to an attached "schedule of the decisions Council has made on the relevant sections of the Plan Change to which you have submitted". This is the point at which Mr and Mrs Yeoman became aware of the red dots added to planning maps held by the Council. These were dots purporting to identify "Significant Heritage Features" on the Athendale land (and on some neighbouring land) and said to be areas of, amongst other things, cultural and historic significance to local iwi. There was one red dot, labelled H123, on one boundary of the Athendale land. This was said to identify an area containing cultural and archaeological features. Therewere three dots on the Athendale land labelled H118. These were said to identify areas relevant to "access, contamination of kaimoana and water quality". Mr Yeoman said that the position of the three H118 red dots "mirrored identically the land that Mr Bridgewater and the Council had previously sought to create a reserve on"; that is, the dots were positioned along the inland boundary of the proposed new reserve on the Athendale land.[20] The change to the District Plan in relation to the significant heritage features had not been publicly notified and had not been discussed at any public hearing.[21] The record of the reasons for the Council's formal decision, apparently reached by a committee of the Council, states that the heritage features were identified in a report to the Council from Te Kupenga o Ngati Hako and "some other Iwi groups". In this regard Mr Yeoman's evidence includes the following:(a) The Ngati Hako report was prepared with Mr Bridgewater's assistance.(b) The Ngati Hako report is dated 21 November 2003. The Council planning map on which the red dots H118 and H123 had been superimposed has a revision date of 23 November 2003.(c) Contrary to what was indicated in Mr Bridgewater's letter of 18 December 2003, the heritage features had not been part of any publicly notified plan change or any informal advice.(d) A further letter from Mr Bridgewater to Mr and Mrs Yeoman of 23 December 2003 dealt specifically with the heritage sites. Mr Bridgewater referred to the receipt of a submission from Ngati Hako and said that Ngati Hako identified heritage sites and these had been included in the District Plan. Mr Bridgewater had in fact assisted Ngati Hako in preparation of the report.(e) The inference to be drawn from the present evidence is that Mr Bridgewater was responsible for the placement of the red dots on an amended planning map.(f) On 9 January 2004 Mr Yeoman met Ms Alice Anderson, a kaitiaki adviser of Ngati Hako. Ms Anderson agreed with Mr Yeoman that there were no culturally significant sites on the Athendale land. This was confirmed in a letter from Ms Anderson of 23 January 2004.(g) In a letter to the Council of 2 March 2004 Mr Tuhua Taikato advised on behalf of Otawhiwhi Marae that the Marae holds the mana whenua for the Athenree area and that there were no archaeological sites on the Athendale land that he was aware of.[22] Mr and Mrs Yeoman challenged the Council's purported plan change in relation to the heritage sites. On 17 February 2004 the Council, in a letter from Mr Bridgewater, advised that this part of the plan change was withdrawn because property owners had not had a fair opportunity to make submissions and be heard. Mr Bridgewater advised that there would be a new plan change proposal directed specifically to heritage features and owners would then have an opportunity to make submissions.[23] Notwithstanding the Council's formal decision to reverse the purported decision relating to heritage features, Council records recording the red dots on the Athendale land were not withdrawn and remained available to the public. Mr Bridgewater continued to advocate for a more extensive reserve into the Athendale land and a viewing platform at the top of the escarpment on the Athendale land.[24] On 3 June 2004 Mr and Mrs Yeoman obtained resource consent from the Council to subdivide the Athendale land. They then incorporated Athendale and title was transferred to the company in September 2004. Marketing of subdivided sites began in September 2004.[25] In June 2005 the Council publicly notified plan change 35. This was a proposal to identify heritage sites and make provision in respect of them in the District Plan. The proposal was the same as the change that had gone through unnotified with plan change 23. Athendale made submissions and attended a public hearing in February 2006. On 7 March 2006 the Council, in its formal decision, directed that the three red dots labelled H118 on the Athendale land were to be deleted and the red dot labelled H123 on the boundary of the Athendale land and the neighbour at 65 Athenree Road be moved into the property at 65 Athenree Road. H123 related to an archaeological site that had been identified as being solely on the 65 Athenree Road land.[26] There was an appeal in relation to plan change 35, by an unrelated party. On 15 December 2006 the Environment Court upheld the Council's decision and directed that the District Plan was to be altered in accordance with the Council's original decision "without further delay".[27] Around June 2006 Athendale had sought compensation from the Council for the esplanade reserve which had been created as a result of plan change 23. A valuation obtained on behalf of Athendale supported a claim for $220,000. On 30 August 2006 a Council employee, Mr Brian Norton, told Mr Yeoman that Mr Bridgewater and Mr Martelli had been "extremely disappointed" that the Council decided that the extended reserve should not be approved. Mr Norton said that Mr Martelli and Mr Bridgewater were therefore very reluctant to pay anything to Athendale for the limited reserve that had been created. On 6 September 2006 the Council, with the support of an apparent valuation, offered $9,200 plus GST, or $6,100 plus GST "if betterment was factored in". This issue went to arbitration. Athendale was awarded a total of $135,907 plus GST.[28] Mr Yeoman said that in February 2007 "we" (presumably referring to himself, his wife and Athendale) noticed that the planning maps had not been updated and that red dots remained. They wrote to the Council asking them to get the maps amended. In May 2007 a neighbour advised that the red dots were still there. A further request was made to the Council to take action.[29] There is an affidavit in support of Athendale's opposition to security for costs from Mrs Cindy Benfield. Mrs Benfield says that in the middle of 2007 she and her husband looked into purchasing lot 15 on the Athendale land and they went to the Council to obtain information on lot 15. They were told by a Council employee that it was "just as well that we liked lot 15 and not lot 14, because lot 14 plus anything closer towards the waterfront would need iwi approval to build on". Mrs Benfield said that she understood that this related to red dots recorded on the District Plan and which affected the Athendale subdivision. Mrs Benfield said that she and her husband decided not to purchase a section in the subdivision. She said this was because "we were not prepared to deal with any problems with our ability to build on the section which we knew could arise".[30] Mr Yeoman said that he wanted to get the red dot problem sorted. He went to the Council on 26 July 2007 and requested LIM reports for lots 10, 11 and 12. He said he was advised by an employee that she could not find any trace of the decisions on plan change 35 on the Council's computerised records.[31] In October 2007 Athendale discovered that LIM reports requested for Athendale land showed the presence of red dots on the land. On 27 November 2007 one of the subdivision engineers acting for Athendale went to the Council's offices and spoke to Mr Martelli in relation to the red dots. Mr Yeoman says that the engineer was told by Mr Martelli that there was no problem to have the red dots removed and that it would be done. A follow-up letter from the engineer refers to a LIM report which wrongly recorded an archaeological site on the Athendale land.[32] On 7 December 2007 Athendale began marketing lot 9 with an auction scheduled for February 2008. Athendale received advice on 29 January 2008 that the Council's planning maps continued to show a red dot recording a cultural heritage site on lot 9. On 29 January Mr Yeoman asked that this be removed. He was told it had been. To check this he then ordered a LIM report. The LIM report includes the following:(a) In a section labelled "Erosion, Alluvion, Avulsion, Falling Debris, Subsidence" there is a notation "part of this property is sited within a Significant Landscape Feature; refer to the district plan map".(b) In another section labelled "Other" there is a notation "there is a Significant Heritage Feature on the property; refer to the district plan map".(c) The district plan map provided by the Council with the LIM report records the three H118 dots and the H123 dot on the boundary of the Athendale land and 65 Athenree Road.(d) There is a detailed archaeological site plan relating to archaeological site U13/82 which records the site as straddling the boundary. This is the site which the Council identified with a red dot labelled H123. The archaeological site plan labelled U13/82, which is recorded on a separate Council plan, is described by Mr Yeoman as "a 100 metre red square centred on the boundary of the Athendale property and 65 Athenree Road such that it impacted on lots 9 and 10 [of the Athendale land]".[33] Mr Yeoman said he immediately advised the Council (and I infer this was oral advice to someone at the Council) that the LIM report was incorrect and that he again asked that the red dots and references to a significant heritage feature be removed. To check that this had been done he requested a further LIM report for lot 9 on 30 January 2008. The map provided by the Council for this LIM report did not have the red dots. However, the other matters referred to and provided with the 29 January LIM report remained the same, including the large rectangle for archaeological site U13/82.[34] The auction of lot 9 was on 16 February 2008. There were no bidders.[35] In March 2008 Athendale began marketing lots 7, 8, and 10 and re-marketing lot 9. On an enquiry by Mr Yeoman to the Council on two occasions in April 2008,in relation to lot 7, he was told that a LIM report would show a cultural heritage site on lot 7 and that the red dots recorded on the property and on the neighbouring property meant that an archaeological dig would be necessary before anyone was able to build on the property. LIM reports obtained on 21 April 2008 for lot 7 and lot 9, and on 30 April 2008 for lot 8, continued to refer to cultural heritage sites.[36] There was an auction on 7 May 2008. Lot 7 was not sold. Lots 8, 9 and 10 were sold for a total which was 55% of what is recorded as "the Government valuation".[37] The Council's decision on 7 March 2006 that the reference to heritage sites H118 and H123 be removed from Council maps and other records for the Athendale land was not implemented until August 2008. Athendale's claim, and Mr Yeoman's affidavit, refer to subsequent steps taken by the Council which are said effectively to have reinstated the red dot problem by another means. This will require consideration if the claim is able to proceed, but does not require consideration for this review.[38] There was an affidavit for the Council filed in support of an application by the Council for further particulars of the claim as well as being in support of the application for security for costs. Approximately half of the affidavit is directed to the application for particulars and to the question whether Athendale could meet an order for costs. This affidavit was from Mr Stephen Hill, a group manager for the Council responsible for staff managing processing of subdivision applications and preparing proposed plan changes. I have taken account of Mr Hill's evidence to the extent that it bears on the issues that now arise on the application for review. However, because Mr Hill's affidavit preceded those for Athendale it does not address the matters recorded in the preceding summary. Mr Hill's affidavit might be read as contesting in an indirect way some of the things that Mr Yeoman says. However, none of it engages with the specific allegations of fact that I have outlined.The Associate Judge's decision[39] Following an introduction on matters which were not in issue, and noting that there had been considerable argument on the strength of Athendale's claim, theJudge provided a brief summary of the background facts and some of the allegations of fact. The Judge then turned to the strength of the claim and dealt with this in considerable detail.[40] He firstly considered an issue as to the legal effect of the inclusion of the red dots (H118 and H123) shown on the map supporting plan change 35. The Judge recorded Athendale's position as being that, from the moment of the inclusion of the dots in the plan change documents, the heritage sites recorded took immediate effect in relation to any resource consent application. The Judge noted that the argument on the point was limited, but that it seemed to him that the legal position in 2006 was that the effect of the Resource Management Act is not to make proposed change as part of the current district plan immediately on their notification; that proposed changes publicly notified did not have "immediate legal effect on being notified" as the plaintiff had argued. The Judge concluded that the Council could not be answerable for any adverse effects to any particular private individual as a consequence of the Council's exercising its power to publicly notify a proposed change to the district plan.[41] The Judge next considered whether the Council could owe a duty of care to Athendale in preparing information for plan change 35, and in particular in relation to the location of heritage sites. He said that the Council had identified "a number of potential pitfalls which the plaintiff will have to surmount if it is to succeed with this part of its claim".4 The Judge agreed with a submission for the Council that to the extent that the Council was exercising a quasi-judicial function in deciding whether or not to make changes to a district plan, the Court would not readily acknowledge the existence of a duty of care. He referred to Bella Vista Resort Ltd v Western Bay of Plenty District Council.5[42] The Judge said that the same legal hurdles may not arise in relation to the functions of Council staff in preparing documents for plan change 35, but concluded that there were problems with the plaintiff's claim. This related to the siting of heritage sites. The Judge's observations in this regard were as follows:4 Athendale Property Ltd v Western Bay of Plenty District Council, above n 1, at [21].5 Bella Vista Resort Ltd v Western Bay of Plenty District Council [2007] NZCA 33, [2007] 3 NZLR 429.[22] The obligation on the Council staff is not one of infallibility but is an obligation to take reasonable care in the discharge of their functions. The fact that the Council may at one point have included the Maori midden on the boundary of the plaintiff's property and yet dropped any reference to it in later iterations of the district plan does not mean that the inclusion in the first place gives rise to rights of action on the part of the plaintiff. As Mr Crombie pointed out, the Council is dependent upon the accuracy of information that is provided to it. In the case of the Maori midden, it would appear that the defendant's staff located the midden where they did as a result of information which had been provided to them by the Ngati Hako iwi. Information contradicting the assertions of that iwi which was provided by the Otawhiwhi marae came to hand at a later stage, namely 2 March 2004. That information was apparently provided at the instigation of Mr Yeoman who is one of the principals of the plaintiff company.[43] The Judge then considered the Athendale claim based on the allegation of delay by the Council in removing references to the heritage sites from Council information available to the public. The Judge referred briefly to Athendale's allegations of fact and in particular to what the Judge describes as Athendale's allegation that between October 2007 and April 2008 the Council was still issuing LIMs which recorded the presence of the red dots. The Judge then said:[25] I will not comment on the merits of this part of the claim other than to say first of all that it seems doubtful as a matter of fact that the red dots ever found their way onto the district plan. While there are gaps in the information before the Court as to how the process works, it would seem that after a proposed change to the district plan is adopted by the Council, some amendment to the maps which are part of the district plan will be required so that they reflect the updated position. For that reason it seems inherently unlikely that any correction would be required in regard to a proposed change that never took effect. I agree that the LIM documents are in a different category. Once the Council resolved that PC 35 would not be proceeding in 2006, it is difficult to see that there would be any justification for the Council issuing documents which conveyed an impression that changes in the abandoned review actually or potentially affected a particular landowner's property. It might be possible for the plaintiff to establish that copies of such LIM documents were actually distributed to potential buyers and affected their decisions. Given that the documents were part of a proposed change to the district plan, there would no doubt be argument about whether any intending purchasers would read the documents as stating with certainty what the future position was going to be about cultural heritage sites on the plaintiff's property.[44] The Judge did observe that the Athendale claim in this regard was one directed at matters of Council administration rather than quasi-judicial activities. He also observed that, acting in its administrative capacity, the Council should have taken steps promptly to alter Council records "so that it would be apparent tomembers of the public making enquiries about the [Athendale] properties that the waterfront zone and the Maori midden were no longer features of Plan Change 35".6[45] Following a discussion of the strength of some other claims, but which claims do not require consideration for this review, the Judge then noted the misfeasance claim. The full discussion of this claim is as follows:The Judge referred to the statutory obligation under s 21 of the Resource Management Act.[37] It should also be noted that the plaintiff puts its claims on the alternative basis that Council officers are liable under the tort of malfeasance in public office. Given that in order to succeed, a plaintiff must establish either deliberate action made in the conscious knowledge that it was an excess of the officer's powers to so act or that the officer acted with maliciousness, commission of the tort in this context would be difficult to establish.[46] The remainder of the judgment in relation to the strength of the claim addresses questions of causation and quantum of loss. The Judge referred to five matters indicating that Athendale would have difficulty in establishing causation. The Judge also considered that Athendale would have difficulty in establishing the quantum of any loss that could be attributed to acts or omissions of the Council.[47] The Judge then considered other matters bearing on exercise of the discretion. First, he concluded that Athendale's argument that wrongful acts or omissions of the Council had caused Athendale's impecuniosity was not a strong one for the same reasons for his assessment of the strength of the claim by reference to liability, causation and loss.[48] Second, the Judge addressed a submission for Athendale that the Council's delay in bringing the application weighed against an order. The application was brought 12 months after the proceeding was commenced and after it had been set down for trial. The Judge weighed competing considerations and concluded that, overall, there had been some delay but it was not great.6 At [27].[49] Third, the consequences of an order were addressed. The Judge concluded that if an order was made it would be likely to prevent Athendale bringing its proceeding to trial and that the amount of the order would be unlikely to make any difference unless it was an order for a nominal sum. The Judge cited observations of the Court of Appeal in A S McLachlan Ltd v MEL Network Ltd and of this Court inHamilton v Papakura District Council.7[50] The Judge then said:[60] There are features of the plaintiff's claim which cause concern. First, the way in which the case has been laid out can fairly be described as "over-complicated". It is difficult to understand. As I have noted, a further iteration of the plaintiff's claim is imminent which will be the second amended statement of claim. Unfortunately, the draft retains some of the undesirable features of the earlier statements of claim to which I have referred already. As well, the formulation of the various claims does not suggest that they have been rigorously analysed before being advanced in the statement of claim. There are also the issues of causation that I have made reference to. There is a lack of proportionality between the size of the claim - approximately $5.3 million at a minimum - and the extent of the arguable contribution, if any, of the Council to the plaintiff's loss.[61] The plaintiff's claim is unconvincing in many respects. The most fundamental problem is how the Council through publishing a proposed amendment to the district plan which it carried out in accordance with its statutory obligations can have exposed it to liability for a large claim of damages.[62] Finally, there are the other competing explanations for why the plaintiff's subdivision was not a success.[63] For all of these reasons I consider that the justice of the case requires that an order for security for costs be made. I also consider that the quantum of the order sought is reasonable.SubmissionsSubmissions for Athendale[51] The heart of Mr Branch's submissions for Athendale was earlier recorded.87 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [15]-[16]. These paragraphs are reproduced below atMr Branch expanded on the general submission that the Judge was in error in concluding that the claims had little or no merit. He then turned to more detailed[59]. Hamilton v Papakura District Council (1997) 11 PRNZ 333 (HC) at 336.8 Above at [8].submissions of what were said to be eight errors of fact or law which underpinned the Judge's assessment of merit and which, it was submitted, were errors of consequence. These submissions have been taken into account, but it is unnecessary to summarise them.[52] For the Council, Mr Crombie submitted that there was a sound foundation in law for the Judge's conclusions that Athendale would face considerable difficulty in establishing any of the causes of action. In essence:(a) The claim in negligence was a novel one and the Judge was correct when he made the following statement:9It is not an area where the Court is likely to readily acknowledge the existence of a duty of care to a party in the position of the plaintiff.It is convenient to note at this point that the Judge there was not referring to negligence claims against Councils in general, but claims directed to quasi-judicial functions of the Council.(b) The claim for breach of statutory duty for delay, founded on s 21 of the Resource Management Act 1991, is also "fraught with difficulty" because s 23(2) effectively directs that duties and restrictions described in Part 3 of the Act, which includes s 21, must be enforced through provisions of the Act.10(c) The Judge was correct in his statement of the legal elements of the claim of misfeasance in public office and in his conclusion that9 Athendale Property Ltd v Western Bay of Plenty District Council, above n 1, at [21].10 Section 21, in Part 3 of the Act, provides:Every person who exercises or carries out functions, powers, or duties, or is required to do anything, under this Act for which no time limits are prescribed shall do so as promptly as is reasonable in the circumstances.Sections 23(2) and (3), also in Part 3, provide:(2) The duties and restrictions described in this Part shall only be enforceable against any person through the provisions of this Act; and no person shall be liable to any other person for a breach of any such duty or restriction except in accordance with the provisions of this Act.(3) Nothing in subsection (2) limits or affects any right of action which any person may have independently of the provisions of this Act.See Mawhinney v Auckland Council [2013] NZHC 159 at [9]-[12].Athendale would, because of these legal elements, have considerable difficulty in establishing the claim.11[53] Mr Crombie challenged what he said was Athendale's contention to the effect that the red dots H118 and H123 placed material restrictions on development of the subdivision sites. He referred to the actual provisions of the relevant part of the district plan and submitted that, even if H118 and H123 had remained on Athendale's land, restrictions on use were unlikely to apply to the construction of new homes on sites of the sort to be anticipated. The only restriction would have related to use of heavy machinery but, Mr Crombie submitted, that would not have been required.[54] Mr Crombie then addressed each of the submissions for Athendale of alleged errors of fact and law. As with the submissions by Mr Branch in that regard I will take the submissions for the Council into account.Relevant principles on applications for security for costs[55] As earlier noted, because Athendale is impecunious the threshold for an order for security for costs has been met. However, impecuniosity does not require the making of an order.12 The issue is how the Court should exercise its discretion. The discretion is broad and should remain unfettered by the construction of rules from decisions in other cases.13[56] First, it is relevant to consider the merits of the claim in a broad way. The Court should not predetermine the outcome, but should form an impression based on a prima facie case.Nevertheless, a number of factors, when relevant, should be borne in mind. There are four in this case.14[57] Second, if it is the case the Court should take into account the fact that the plaintiff's inability to meet an order for security for costs would effectively strike out the claim. In Highgate on Broadway Ltd v Devine the High Court said: 1511 The Judge's statement in this regard is recorded above at [45].12 Highgate on Broadway Ltd v Devine [2012] NZHC 2288 at [20].13 McLachlan v MEL Network Ltd, above n 7, at [14]-[15].14 McLachlan v MEL Network Ltd, above n 7, at [21].15 Highgate on Broadway Ltd v Devine, above n 12, at [22](e).Security for costs is relatively exceptional. Where it is likely to result in the denial of access to justice, it is entirely exceptional. But in some situations to allow litigation to proceed without the checks and protection of security will be oppressive to the interests of other parties, particularly where the litigation is unjustified or unmeritorious, over-complicated or unnecessarily protracted.[58] In Du Claire v Palmer the Court balanced that factor when assessing the merits of the plaintiff's claim in a broad way:16It appears to me that the plaintiff will face significant difficulty in establishing all of these ingredients. This tort [misfeasance in public office] is generally recognised as a difficult cause of action in which to succeed. However, I do not consider that they can be said to have so little chance of success that access to the Court should be denied. Further, the question whether or not security should be ordered must be considered having regard to the totality of the claims. It would not be appropriate to order security because only some, but not all, of the causes of action may have little chance of success.[59] However, the possibility of a de facto strike out should not be decisive because many impecunious plaintiffs will struggle to meet an order for security for costs. Ultimately, as the Court of Appeal said in McLachlan, it is a balancing exercise between the interests of the plaintiff and the defendant:17[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.[16] Of course, the interests of the defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.[60] Third, when considering the impact on a defendant if there is no order for security there is a difference between public bodies and private persons. In Du Claire v Palmer noted that the Crown does not suffer hardship if it cannot recover costs, only injustice:1816 Du Claire v Palmer, above n 3, at [20].17 McLachlan v MEL Network Ltd, above n 7, at [15]-[16].18 Du Claire v Palmer, above n 3, at [25].I must weigh the potential injustice to the plaintiff if she is unable to pursue her claims against the potential injustice to the defendants if they are required to defend the claims, with no security for the costs which might ultimately be awarded in their favour if they are successful. The possibility to be addressed is injustice, not hardship. The first defendant is sued in his capacity as an officer of the Crown, and the second defendant is an entity of the Crown. The Crown may suffer an injustice if it is unable to recover costs if it is ultimately successful, but that injustice will not result in hardship, as it might to a defendant which is itself of limited means. That injustice is entitled to weight, but the weight is less than would be the case if hardship to the defendants might result.(emphasis added)In my judgment the same will in general apply to local authorities.Discussion[61] In my respectful opinion the Judge was in error and an order for security for costs should not have been made.[62] As the Judge recognised, the practical effect of the order was to bring the proceeding to an end. The claim has not been struck out in a technical sense, but the order for security has had the same effect. As the Court of Appeal said inMcLachlan, this should not occur unless the claim has little chance of success.19[63] The Judge summed up his view of the merits in a statement that the "claim is unconvincing in many respects".20[64] In any event, I am satisfied that it cannot be said that all three of the causes of action have little chance of success. This conclusion arises from the presently unchallenged evidence for Athendale. Important parts of this evidence do not appear to have been taken into account by the Judge. And in my judgment his conclusions on some other matters of fact are not borne out by the evidence. I set this evidenceOn a close reading of the Judge's consideration of each of the causes of action it is not entirely clear that the Judge firmly concluded that all three of the causes of action had little chance of success. He certainly did not conclude that all three of the causes of action were untenable.19 A S McLachlan Ltd v MEL Network Ltd, above n 7, at [15]. The relevant passage is cited above at [59].20 Athendale Property Ltd v Western Bay of Plenty District Council, above n 1, at [61].out in some detail because it indicates a reasonably strong case at this stage of the proceeding. A reasonably strong case is well removed from a claim which has little chance of success.[65] This evidence indicates the following, either directly or by reasonable inference:(a) There were acts and omissions by Council employees which were improper to the extent that they amounted to an abuse of power.(b) There were acts and omissions by Council employees which were also negligent. These were not acts or omissions of the Council acting in a quasi-judicial way so that the difficulties that would have arisen for Athendale in that regard do not arise.(c) There was inordinate delay by the Council in removing the heritage designations from Athendale's land. This was to such an extent that it appears to provide some foundation for a claim for breach of statutory duty for the purpose of recovering economic loss so that Athendale would not be confined to remedies provided by the Resource Management Act.21(d) These acts and omissions constituted wrongs actionable by Athendale because they did affect Athendale.(e) The presently unchallenged evidence gives rise to a reasonable inference that the Council employees knew, or should have known, that the acts and omissions were likely to cause some financial harm to Athendale.(f) On the quantum of the loss claimed by Athendale, I agree with the Judge's broad conclusion that Athendale may have difficulty in establishing loss to the extent claimed. However, there is evidence,21 Compare s 23, noted above at [52](b) and n 10.and not simply allegations in a statement of claim, indicating that Athendale has a reasonably arguable claim that the acts and omissions complained of caused some actual loss to Athendale. An assessment at this stage that the recovery may fall short of what is claimed does not provide a basis for a conclusion that the claim has little chance of success. This point appears not to have been addressed by the Judge; his focus was on the difficulty Athendale may have in establishing liability for the actual amount claimed.22[66] Athendale's claim, which for present purposes includes the evidence for Athendale, needs to be considered in a broad way. At the conclusion of the hearing I had formed a provisional view that there was a prima facie case for Athendale of wrongful conduct by the Council and, more specifically, by identified Council employees. This has been confirmed by my review of the evidence, with this weighed against the submissions for both parties as well as the judgment under review. There is presently uncontradicted evidence that acts and omissions of Council employees directly affected the Athendale land with further evidence that this had adverse economic consequences for Athendale. Other things may have contributed to the loss. It may be, at the conclusion of a defended hearing, that the Court will conclude that these other things were causative of the loss Athendale claims, with no contribution from acts or omissions of the Council. But that possibility does not mean that this case has little chance of success.[67] Assessing Athendale's contentions in this broad way I am satisfied that these are circumstances in respect of which an order should not be made preventing a hearing. If this presently unchallenged evidence is borne out at trial Athendale will be entitled to a remedy. It may be that Athendale would be entitled to a remedy even if it does not prove direct economic loss, although this may require further amendment to the claim in relation to the relief sought. Amendment is something which occurs often enough when there are formal applications to strike out. One22 I do note that the total claim is $2.43 million, not $5.3 million as noted by the Judge at [60] and recorded above at [50]. The amount claimed in the statement of claim that was current at the time of the hearing before the Judge was $5.3 million, but the amount in a draft amended statement of claim tendered for the hearing was $2.43 million and this is the amount claimed in the further amended claim that was subsequently filed.form of relief, in addition to what is presently sought, might include a declaration coupled with an order that the Council pay Athendale's costs.[68] Those are my principal reasons for concluding that the application for review should be granted and the order set aside. However, because I have reached a different conclusion from the Judge, and on a matter involving exercise of a discretion, it is appropriate to go into a little more detail on some aspects. In doing this I have taken account of the submissions of both counsel, but it is unnecessary to address those in detail.[69] The Judge agreed with a submission for the Council that Athendale would have difficulty in establishing a duty of care owed by the Council in making formal decisions on proposed changes to the District Plan.23 That proposition is firmly based on authority.24 On this application for review Mr Crombie, for the Council, relied on the Judge's conclusion in support of a proposition that Athendale's claim in negligence is a novel one.25[70] In respect of administrative acts or omissions the Judge expressly acknowledged that there were not the same legal hurdles as with quasi-judicial decisions. But in this regard there appear to have been errors of fact by the Judge which underpin his effective conclusion that Athendale would have difficulty in establishing negligent acts or omissions. This relates in particular to the extent of Mr Bridgewater's involvement in preparation of the report to the Council from Ngati Hako and the extent of Mr Bridgewater's involvement in identifying the position of what were said to be the heritage sites on the Athendale land. The Judge essentially concluded that the Council was not liable for the accuracy of a third party's report.However, Athendale's negligence claim is not directed to the Council's formal decisions on proposed plan changes, or other quasi-judicial functions of the Council, but to administrative acts or omissions of Council staff.2623 See above atThose conclusions do not appear to take account of the presently uncontradicted evidence of Mr Bridgewater's actions and the inferences that can be drawn from that[41].24 Bella Vista Resort Ltd v Western Bay of Plenty District Council, above n 5.25 See above at [52](a).26 See above at [42].evidence. The most relevant evidence is also set out above.27[71] The Judge was also in error stating, in effect, that the location of the heritage sites, which he understood to have been done by Ngati Hako representatives, was only contradicted by advice obtained by Mr Yeoman from the Otawhiwhi Marae. This also implies a conflict between Otawhiwhi Marae and Ngati Hako. The Judge's conclusions were repeated in his overall summary later in his judgment when he said:From this evidence an inference may be drawn that the H118 red dots on the Athendale land, and quite possibly the H123 red dot on one of the boundaries to the Athendale land, were not sites identified by Ngati Hako representatives but by Mr Bridgewater, and that he was responsible for the implementation of an unnotified plan change.28[I]t would appear that the Council staff based their views about the location of the midden on a cultural report received from Ngati Hako, a local tribal organisation. In the absence of some indications that this report might have been flawed, it is difficult to accept that the Council staff were negligent in proceeding on the basis that it was accurate. The fact that a second report from the representatives of the Otawhiwhi marae came to a different conclusion which the Council ultimately came to accept as being the correct position does not prove negligence.[72] The clear evidence is that Ngati Hako as well as Otawhiwhi Marae provided written confirmation that there were no culturally significant sites on the Athendale land. The written advice from Ngati Hako was in fact more emphatic than that from Otawhiwhi Marae. There was no conflict. I have addressed this particular point at relative length because, in my judgment, the evidence, which appears to have been overlooked, demonstrates a solid foundation for a claim of misfeasance as well as a foundation for a negligence claim. These are matters bearing on liability, rather than causation and loss, but they are of significance when considering an application for security for costs which will bring the claim to an end if granted. There is a good deal of additional and unchallenged evidence supporting the claim of misfeasance as well as the claim of negligence.27 See above at [19]-[21].28 Athendale Property Ltd v Western Bay of Plenty District Council, above n 1, at [46].[73] In my opinion the Judge was also in error in his conclusion on the question whether planning maps were altered to record the heritage sites – the red dots.29 The Judge said that it was inherently unlikely that maps would have been changed for plan change 35, because it was a proposal and it was not adopted by the Council. The Judge has overlooked the evidence that the red dots were added to planning maps held by the Council in late December 2003 or early January 2004 when plan change 23 was implemented.30 This was the occasion when the District Plan was modified, and plans altered, without any public notification and, based on the present evidence, with this done by or at the instigation of Mr Bridgewater. These red dots – H118 and H123 – remained on Council plans for the Athendale land until August 2008. The evidence as it stands appears to be clear. There is what appears to be an official planning map, with the revision date of 23 November 2003, issued as part of the Council's decision on plan change 23.31[74] Also contrary to what the Judge said at [25], the Council did not resolve that plan change 35 would not proceed. Plan change 35 proposed that the District Plan (and therefore planning maps) be amended by adding, or amending, existing provisions relating to heritage sites and identifying a number of additional heritage sites on various properties, including the Athendale land. What the Council determined in a formal way in relation to the Athendale land was that the red dotsalready on planning maps for Athendale land be deleted (the H118 red dots) and moved from the Athendale land well into the neighbour's land (the H123 red dots). But the maps were not altered. Athendale's evidence shows that maps continued to be publicly available, as apparently official planning maps, improperly recording H118 on the Athendale land and H123 on the boundary or, on some maps issued with LIM reports, extending well into Athendale land. The Judge at [25] did refer to the LIM report. He accepted that the LIM reports were "in a different category" from Athendale's contentions about planning maps. But the LIM reports expressly refer to "the district plan map" in respect of the references in the report to "a significant landscape feature" and planning maps were provided with the LIM reports.3229 At [25], recorded above at [43].30 See above at [17]-[19].31 See above at [19].32 See above at [28]-[35].[75] Based on the evidence presently before the Court, the issuing of planning maps in late 2003 or early 2004 with the red dot designations on the Athendale land, and the subsequent failure to remove these maps from Council records, were both wrongful. And the fact that the wrong maps remained on the record until August 2008 does not appear to be in dispute.[76] The Judge concluded that a claim for misfeasance in public office would be difficult to establish.33[77] I have to this point in large measure considered whether Athendale has reasonable prospect of establishing liability. The Judge's broad conclusion that Athendale would have difficulty in establishing liability on any of the causes of action does appear to have been the main reason both for his assessment that "the claim is unconvincing in many respects".He did not explain the reasons for his conclusion other than by brief reference to the formal elements of such a claim. The viability of Athendale's claim was not assessed by reference to the evidence. It may be that this claim was not given prominence in the submissions to the Judge. It is also possible that the evidence as to the extent of the involvement of Mr Bridgewater, and adverse inferences that could be drawn from the direct evidence, were not sufficiently drawn to the Judge's attention.34[78] The Judge touched on an aspect of this at [25] when he said that it might be possible for Athendale to establish that copies of the LIM reports "were actually distributed to potential buyers". The Judge noted that there would then be issues "about whether any intending purchasers would read the documents as stating with certainty what the future position was going to be about cultural heritage sites". There is some evidence from a potential purchaser about enquiries from the Council, Mrs Benfield. The Judge did not refer to this. Although Mrs Benfield did not say that she and her husband obtained a LIM report, this is relevant evidence of the reaction of a potential purchaser who received information that should not have beenHowever, the Judge, as earlier indicated, also concluded that Athendale would have difficulty in establishing causation and the loss claimed.33 See above at [45].34 See in particular the Judge's summary at [61], reproduced above at [50].in the Council records. In addition, an important consideration when weighing the impact of the information may be the response of a reasonable potential purchaser to the fact of a district plan designation on land, as opposed to a conclusion in law as to the meaning of provisions in the District Plan. This is discussed further below at[81].[79] On questions of causation and loss Mr Branch submitted that there were errors by the Judge and his submissions were firmly countered by Mr Crombie. I am satisfied that there were some relevant errors by the Judge. For example, he interpreted a valuer's report given in November 2006 as indicating that public notification of plan change 35 had no negative impact on value of the Athendale subdivision.35[80] The Judge was of the opinion that "there is a good argument available that the plaintiff suffered a stroke of bad luck in that the marketing of the sections overlapped with the global financial crisis".The Judge's interpretation was based on the fact that the valuer referred to "a significant landscape feature registered along the harbour frontage". However, the significant landscape feature was not connected in any way with the matters Athendale complains about, nor was it related to plan change 35. The valuer was referring to what I have described as the esplanade reserve, including the modest addition to it when plan change 23 was implemented.36 Given the way Athendale advances its claim this does not appear to be relevant; Athendale contends that the intention was to market and sell in 2006 and 2007, although the evidence is that in fact it was continuing to market lots for sale in early 2008. The Judge did expressly acknowledge that the GFC was unlikely to have had an impact until 2008.37[81] In one of the passages just referred to the Judge observed, in essence, that even if there was an adverse effect from steps taken by the Council, this would have affected "only a few of the sections (possibly three or four)". That is a point of contention and will, as with many of the matters in contention, depend on the full evidence at a hearing. In any event, if there were wrongful acts or omissions by the Council which affected only a small number of sections, that would not mean that35 At [42].36 At [43].37 At [43].the claims have little chance of success. It would merely affect quantum. In addition, and contrary to submissions of Mr Crombie, this will not turn solely on questions as to the precise technical effect of what was proposed, or effected, in a formal planning sense. As briefly adverted to above, if there is liability, issues of causation and loss may turn on evidence as to the likely approach of a reasonable potential purchaser. For example, if potential purchasers of Athendale land would also generally be looking at sections in other places, the evidence may establish that a reasonable purchaser is likely to prefer a section without specific planning designations, such as heritage sites, and not be concerned to understand the correct legal interpretation of the designation. The correct legal interpretation may also not be relevant if the documents supplied by the Council to a reasonable purchaser were misleading.[82] The Judge was critical of the way in which the claims were pleaded. And he considered that there "is a lack of proportionality between the size of the claim and the extent of the arguable contribution, if any, of the Council to the plaintiff's loss".38Other considerationsThere is force in both observations. However, in my judgment points of that nature cannot properly be brought into account in determining that this claim had little prospect of success. This comes back, at least in part, to the point just noted. If Athendale has some prospect of recovering some money from the Council the claim cannot be said to have little prospect of success. What is more, if there are defects in the pleading, or if the claim is inflated, both matters can be the subject of amendment.[83] Matters bearing on exercise of the discretion were weighed by the Judge against his primary conclusion as to the strength of the claim.3938 At [60], recorded above atGiven my conclusion that the Judge was in error in his assessment of the strength of the claim, it is unnecessary to consider these further discretionary factors at any length. This is because there are no other considerations that might point in favour of an order[50].39 See above at [47]-[50].which come close to counter-balancing the fact that an order for security will operate as an effective strike out.[84] Following the hearing of the present application for review Mr and Mrs Yeoman, as the shareholders in Athendale, advised that they are prepared to accept personal liability for any costs awarded against the plaintiff up to a maximum of $60,000. This effective undertaking to the Court and to the Council was provided following an enquiry from me. The Judge did note that there was no evidence before him about the possibility of the shareholders being able to contribute additional capital to the company which might be used to meet an order for security for costs. That observation was made in the context of the Judge's assessment that an order for security was likely to prevent Athendale from continuing with the claim. The undertaking from Mr and Mrs Yeoman is in a memorandum from Mr Branch. The memorandum includes advice that the financial circumstances of Mr and Mrs Yeoman are intertwined with those of Athendale and that they have "been ruined financially and they do not have a pool of assets from which to draw". In those circumstances the undertaking may be of limited financial value, but it is nevertheless a commitment which I am satisfied should be given effect to.[85] The Council was not willing to accept the personal guarantee from Mr and Mrs Yeoman as a substitute for an order for security. Mr Crombie submitted, however, that if the Court decided to take account of this offer, there should be an undertaking in writing, to the Court and the Council, from Mr and Mrs Yeoman. I agree that it is appropriate that there be an undertaking in writing signed by Mr and Mrs Yeoman, and this is taken into account in the formal orders that follow.Result[86] The review is allowed, the order that the plaintiff provide security for the defendant's costs is set aside and the defendant's application for security for costs is dismissed.[87] The preceding orders will lie in Court pending receipt of a written undertaking to the defendant from Mr and Mrs Yeoman that they will be personallyliable to the Council for any costs awarded against the plaintiff in favour of the defendant up to a maximum of $60,000.[88] Athendale is entitled to costs on a 2B basis on the original application and on this application for review. If the parties are unable to agree on the quantum this is to be fixed by the Registrar.____________________________ Woodhouse J