AUCKLAND REGIONAL COUNCIL V LIVING EARTH LTD CA CA651/2007

AUCKLAND REGIONAL COUNCIL V LIVING EARTH LTD CA CA651/2007 5 September 2008IN THE COURT OF APPEAL OF NEW ZEALAND CA651/2007 [2008] NZCA 349BETWEEN AUCKLAND REGIONAL COUNCIL Appellant AND LIVING EARTH LIMITED Respondent Hearing: 20 August 2008 Court: William Young P, Ellen France and Baragwanath JJ Counsel: R B Enright and L S Fraser for Appellant D A Kirkpatrick and T Daya-Winterbottom for Respondent Judgment: 5 September 2008 at 3 pmJUDGMENT OF THE COURT A The appeal is dismissed. B The appellant is to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by William Young P)Introduction[1] Living Earth Ltd makes and sells compost. On 15 July 2004, it applied for resource consents from the Manukau City Council and the Auckland RegionalCouncil in relation to its proposal to establish a composting facility on Puketutu Island in the Manukau Harbour. These applications were refused and Living Earth appealed. In a decision given on 4 October 2006, following 19 days of hearing, the Environment Court allowed Living Earth's appeals and granted resource consents as sought. There were many opponents of the proposal who participated in the hearing before the Environment Court, but of these, only the Auckland Regional Council appealed to the High Court. This appeal was dismissed by Frater J in a judgment that she delivered on 26 June 2007. The Regional Council now appeals to this Court pursuant to leave granted by Duffy J on 15 November 2007. [2] The Regional Council's opposition to the resource consents applied for by Living Earth was based on both the proposal's inconsistency with the policies and objectives provided for in its Auckland Regional Policy Statement ("ARPS") and more general planning considerations. [3] Leave to appeal was granted on three questions. First:Whether the High Court erred in finding that the integrity of the regional planning instruments did not require separate evaluation to the integrity of the district planning instruments under s 104(1) of the Act.Secondly:Whether the High Court erred in finding that "provided [the Environment Court] has specifically considered the ARPS in reaching its ultimate decision, that decision, or the process in reaching it, can not be called into question" and in finding that it was sufficient for the Environment Court to address "themes" rather than the wording of material provisions of the Auckland Regional Policy Statement relating to the non-environmental effects of urban development.And thirdly:Whether the High Court erred in its approach to the statutory baseline under s 104(2) including its finding that "Scale, intensity, duration and frequency [in comparisons between a proposed activity and a permitted activity] are irrelevant" to the application of the statutory baseline, and its finding that application of the statutory baseline involves a 2-step test involving a threshold question and the exercise of a discretion.[4] It is common ground that these questions are to be determined in accordance with the provisions of the Resource Management Act 1991 ("RMA") as amended in2003, and that the amendments made in 2005 do not apply. All references to the RMA will therefore be to the statute as it was prior to the 2005 amendments. [5] Before we address the questions of law on which leave to appeal was granted, we will explain briefly the relevant factual and legal background.The factual and legal background[6] Living Earth operated a composting business at Pikes Point in Onehunga, where it processed around 50,000 tonnes of green-waste into compost per annum. Living Earth's applications for the resource consents in issue in this appeal were made in anticipation of the expiry of its lease of the property at Pikes Point. [7] After the dismissal of the Regional Council's appeal to the High Court, Living Earth implemented the resource consents granted to it and its operations are now under way on Puketutu Island. Living Earth decontaminates and shreds green- waste that it receives from transfer stations around Auckland. The shredded waste is then placed in open windrows and turned frequently for about 12 weeks while it decomposes. At the end of the process, Living Earth screens out larger remaining material and bags and distributes the final product. [8] Puketutu Island was created by volcanic activity and is linked to the mainland by a causeway. Since 1954 it has been extensively quarried and this activity continues on the western side of the island. Living Earth's site is on the southern corner of the island and covers about 12 hectares. It is adjacent to a public walkway (referred to in the Environment Court as the "Watercare walkway"). To the north lie a function centre and restaurant, and some farm cottages and associated buildings. Otherwise, and leaving aside the areas used for quarrying and now for composting, the island is predominantly in pasture. Much of the island is owned by the Kelliher Trust, which consented to the applications for resource consents. [9] The key planning issues the case raises relate to the appropriateness of permitting an industrial activity on Puketutu Island which:(a) lies outside the metropolitan urban limits (and thus outside the area which the Regional Council sees as appropriately the subject of urban (and thus industrial) uses); and (b) has a rural character and cultural, heritage, coastal and geological values which may be adversely affected by a composting facility. These issues must be assessed in light of the relevant planning instruments of which there are a number but only two (the ARPS and the Manukau City District Plan) are material to the appeal. [10] The District Plan makes no provision for composting or waste management in the relevant zone. For this reason, the land use consents were assessed on the basis that what was proposed was a non-complying activity. [11] The composting operation on Puketutu Island is also contrary to the objectives and policies of the ARPS. This was recognised and accepted by the Environment Court. But in assessing the applications, that Court did not explicitly address the impact of granting the consents sought on the integrity of the ARPS except indirectly via its assessment of the impact on the integrity of the District Plan. The key issue, which is addressed by the first question, is whether the Environment Court's approach in these respects was erroneous in point of law. And, as will become apparent, the same issue is raised by the second question. [12] The third question addresses a quite different point. In assessing the effects of what was proposed, the Environment Court applied (at least to some extent) the permitted baseline test and thus compared the adverse externalities of the composting operation with those that could result from activities which are permitted under the District Plan (including pig-keeping). In doing so, the Environment Court recognised that there were differences in the scale, intensity, duration and frequency of the adverse effects of: (a) the composting operation; and(b) activities which could be carried out under the District Plan. It did not, however, regard those differences as being of controlling significance. Although the third question of law addresses the approach adopted in the High Court on the application of the baseline test, the real issues for us are whether the approach taken by the Environment Court was wrong and, if so, whether any error on the part of the Environment Court was sufficiently material to the eventual decision reached to warrant us allowing the appeal.First question: the integrity of the regional planning instrumentsThe relevant functions of the Regional Council and the City Council[13] Under the RMA, land based activities are primarily subject to the direct control of district planning instruments (ss 9(1) and 31) and this is true of the composting operation here. So the rules that define the status (as permitted or otherwise) of this operation are to be found in the Manukau City District Plan. [14] The relevant function of the Regional Council is set out in s 30(1)(a) of the RMA:The establishment, implementation, and review of objectives, policies, and methods to achieve integrated management of the natural and physical resources of the region[.]This function involves the preparation of a regional policy statement. Section 59 describes the purpose of such statements as: to achieve the purpose of the Act by providing an overview of the resource management issues of the region and policies and methods to achieve integrated management of the natural and physical resources of the whole region.As to all of this, see Auckland Regional Council v North Shore City Council [1995] 3 NZLR 18 (CA).[15] The objectives and policies provided for in a regional policy statement are not directly implemented by rules adopted by the regional council but rather through district planning instruments. In accordance with the top down framework of national, regional and district planning documents, a district plan must not be inconsistent with a regional policy statement, see s 75(3)(c).The relevant provision of the ARPS[16] In issue is chapter 2 of the ARPS, which is titled "Regional Overview and Strategic Direction". This establishes a series of "strategic objectives" under which are a number of "strategic policies". The most important of these, for present purposes, is the adoption of metropolitan urban limits ("MUL") outside which "expansion of urban activities is not permitted" (strategic policy 3). [17] Puketutu Island is outside the MUL and thus expansion of urban activities on the island "is not permitted". It is important, however, to keep steadily in mind the reality that this is a policy and not a rule. [18] There are other provisions of the ARPS, which were relied on by Mr Enright in his submissions to us. But rather more scene setting is required before discussing them.The relevant provisions of the Manukau City District Plan[19] Puketutu Island is in the Mangere-Puhinui Rural zone and partially in the Mangere-Puhinui Heritage zone, both provided for in the District Plan. It is described in the plan in this way:It is an isolated rural area, generally in farming and quarrying use, with a restaurant and conference venue. It is the intention of the owner of the land that quarrying be phased out of the site in or before the year 2010. As each area of quarrying is completed on the island, that land will be rehabilitated and developed and used for a variety of rural, forestry, heritage, tourist related, and recreational and open space activities. These developments are subject to any necessary resource consents and will respect the Island's heritage values and its unique Island character.[20] The plan refers to a number of resource management issues associated with the Island, including:Issue 17.3.2.1 Activities, particularly activities not associated with farming, have the potential to adversely affect the rural character of the area.An associated objective (17.3.3.1) includes the maintenance of the rural character of the area. There is also a policy (17.3.4.1) that non-farming activities in the area should be confined to those which require a rural location. Permitted uses in the zone include farming, farmstay accommodation, greenhouses, pig-keeping (but with limited numbers of pigs), home enterprises, development of open space, buildings accessory to any permitted activity, household units on approved subdivisions, temporary household units, and clean fill involving deposit of less than 200 cubic metres of material. [21] There is no doubt that the District Plan is consistent with the ARPS. Indeed the District Plan says of the Mangere-Puhinui Rural Area:This rural area is identified in the Proposed Auckland Regional Policy Statement as being outside of the Metropolitan Limits. A policy of theProposed Auckland Regional Policy Statement is that urban development is permitted only within the metropolitan urban limits. This policy seeks to achieve, amongst other things, the objective of avoiding adverse effects on the environment and the effective and efficient use of natural and physical resources. Chapter 4 – City's Environment establishes the principles and strategies of urban containment and consolidation with the urban limits and restraints on urban development in the rural areas of the City, consistent with the Proposed Regional Policy Statement.The legislative provisions relevant to the consideration of the land use consents sought by Living Earth[22] For present purposes, the primarily relevant statutory provisions of the RMA are ss 104(1) and 104D(1). [23] Section 104(1), the general provision which applies to all resource consent applications, provides:104 Consideration of applications(1) When considering an application for a resource consent and any submissions received, the consent authority must, subject to Part 2, have regard to— (a) any actual and potential effects on the environment of allowing the activity; and (b) any relevant provisions of— (i) a national policy statement: (ii) a New Zealand coastal policy statement: (iii) a regional policy statement or proposed regional policy statement:(iv) a plan or proposed plan; and(c) any other matter the consent authority considers relevant and reasonably necessary to determine the application.(2) When forming an opinion for the purposes of subsection (1)(a), a consent authority may disregard an adverse effect of the activity on the environment if the plan permits an activity with that effect. (Emphasis added)[24] Section 104D(1) applies where the activity for which a resource consent is sought is non-complying. It provides:104D Particular restrictions for non-complying activities(1) Despite any decision made for the purpose of section 93 in relation to minor effects, a consent authority may grant a resource consent for a non- complying activity only if it is satisfied that either— (a) the adverse effects of the activity on the environment (other than any effect to which section 104(3)(b) applies) will be minor; or (b) the application is for an activity that will not be contrary to the objectives and policies of—(i) the relevant plan, if there is a plan but no proposed plan in respect of the activity; or (ii) the relevant proposed plan, if there is a proposed plan but no relevant plan in respect of the activity; or (iii) both the relevant plan and the relevant proposed plan, if there is both a plan and a proposed plan in respect of the activity.(Emphasis added)[25] The provisions of the ARPS were thus of relevance to the applications made by Living Earth under s 104(1)(b)(iii) (and possibly under s 104(1)(c)).The relevance of plan integrity and precedent effects[26] Under s 74(2)(a) of the Town and Country Planning Act 1977, a consent authority could grant a specified departure if satisfied that:The effect of the departure will not be contrary to the public interest and will have little town and country planning significance beyond the immediate vicinity of the land concerned, and the provisions of the scheme can remain without change or variation[.] (Emphasis added)Necessary considerations under this test were: the exceptionality (in terms of the scheme) of what was proposed, the precedent effect of granting a departure, and public confidence in (and the continuing integrity of) the scheme if consent were granted. The focus was, of course, on the provisions of the district scheme from which departure was sought as s 74(2)(a) was not addressed to planning documents issued by regional councils. [27] Although the language of ss 104 and 104D of the RMA is very different from that used in s 74(2)(a) of the Town and Country Planning Act, the concept of plan integrity (and issues associated with the precedent effect of granting resource consents) has continued to have some relevance under the RMA, see Batchelor v Tauranga District Council (No 2) [1993] 2 NZLR 84 at 89 (HC). This relevance arises (or can arise) in relation to s 104(1)(c) and (d) and what is now s 104D(1)(b), see Dye v Auckland Regional Council [2002] 1 NZLR 337 (CA). In fact, where granting consent would undermine the integrity of the relevant plan, s 104D(1)(b) will not usually be satisfied. [28] It seems to us that the position was properly explained by Cooper J in Rodney District Council v Gould [2006] NZRMA 217 at [99] (HC):The Resource Management Act itself makes no reference to the integrity of planning instruments. Neither does it refer to coherence, public confidence in the administration of the district plan or precedent. Those are all concepts which have been supplied by Court decisions endeavouring to articulate a principled approach to the consideration of district plan objectives and policies whether under s 104(1)(d) or s 105(2A)(b) [now s 104D(1)(b)] and their predecessors. No doubt the concepts are useful for that purpose but their absence from the statute strongly suggests that their application in any given case is not mandatory. In my view, a reasoned decision which held that a particular non-complying activity proposal was not contrary to district plan objectives and policies could not be criticised for legal error simply on the basis that it had omitted reference to district plan coherence, integrity, public confidence in the plan's administration, or even precedent. Consequently, I am not prepared to hold that the Environment Court erred in any way by "fusing its consideration of plan integrity and precedent (failing to separately consider each doctrine)" as the council alleges. Neither do I think that it was obliged to make a specific finding on plan integrity, or as to whether public confidence in the administration of the relevant planning instruments would be shaken or challenged, which are the subject of separate questions raised by the appeal under this heading[29] As this passage suggests, arguments about the integrity of planning instruments which are made in the context of land use consents apply more obviously to district plans than to regional planning statements. Indeed, Mr Enright was unable to identify any cases involving land use consents where a court has expressly addressed the impact of granting consent on the continuing integrity of a regional planning statement.The approach of the Environment Court[30] In its decision, the Environment Court referred to the ARPS in some detail (see [38] – [48]). Towards the beginning of the Court's analysis of the merits of the proposal, it addressed the question whether the proposed activity's industrial character (albeit with rural elements) mattered. The resulting discussion (at [91] – [99]) focused necessarily on the ARPS. The ARPS featured again in the discussion of whether the proposal involved regionally significant infrastructure ([139] – [162]). [31] At [407] – [421] the Court recognised that the granting of consents would have some precedential effect.[32] The Court noted the contention that the importance of the integrity of planning instruments is not limited to district plans and that integrity of the ARPS would be "challenged" if consent were granted (see [425]). The Court did not specifically return to this particular contention, confining its conclusion to a finding that granting consent would not undermine the integrity or coherence of the District Plan or public confidence in it (see [436]). Interestingly, later in its decision (at [471]), the Court described this conclusion in broader terms, namely as a finding: that consenting to the proposal would not have adverse effects on the integrity and coherence of the planning instruments, or on public confidence in them.[33] The Court then addressed the relevance of the various planning instruments (in the context of the broader assessment required by s 104(1)(b)):[472] Having previously identified the relevant provisions of the applicable planning instruments, we have now to have regard to them by considering the proposal by reference to them. To do so in a reasonably concise way, without making a point-by-point examination in respect of each provision, we have identified the important themes of the regional and district instruments. The themes are: (a) The Island's natural character (b) Protection and maintenance of the environment, including the coastal environment (c) Inappropriate use and development (d) Efficient use of resources (f) Significant heritage values, including geological values (g) Features of significance to iwi (h) Air, land and water quality (i) Adverse effects of waste management (j) Activities which could occur on the composting site as of right.The Court discussed the theme of "Inappropriate use and development" in this way:[477] We consider whether the activity is an appropriate or inappropriate use or development, as this question relates to other objectives and policies. We have found that the proposed composting would be an industrial, and urban, activity. As such it is a use and development of a site outside themetropolitan urban limits, that is not appropriate in the general terms of the strategic direction of the ARPS.And in its conclusions as to this aspect of the case, the Court said:[485] In summary we find that the proposal would be generally consistent with the relevant themes of the planning instruments except that, being an urban, industrial activity, locating it beyond metropolitan urban limits would not serve the strategic direction and urban growth provisions of the ARPS. Even so, on our findings about environmental effects, the composting plant would not have any of the classes of adverse effect identified as threats posed by urban development beyond the metropolitan urban limits. Nor, being a temporary activity, would it prematurely foreclose or compromise options for future growth or development of urban areas.[34] The Court also addressed whether the proposed activity would be contrary to the objectives and policies provided for in the relevant planning documents. In the course of this discussion, the Court again referred to the ARPS (see [538] and [540]) but given that the ARPS is not itself a "plan", the ARPS was not directly relevant to the application of s 104D(1)(b). [35] Finally, in the wrap-up section of its judgment, the Court again referred to the ARPS. It recognised that granting consents would be in conflict with the "important strategic direction and management of growth of the ARPS" (at [601]).The complaint by the Regional Council[36] Mr Enright's primary complaint is that the Environment Court did not address (at least explicitly) the question whether granting the consents sought would undermine the integrity of the ARPS. [37] At this point it is necessary to refer to three other provisions in the ARPS on which Mr Enright relied. The first two are by way of discussion of the proposition that the effects of some activities on the resources and the environment of rural areas can be "significantly adverse" (issue 2.3.3):The effects on the environment that result from activities in rural areas are often separated from those activities by time and space and the cumulative effects must be considered. The consistent administration of policy statements and plans is of key importance for the management of cumulative effects, and in order to achieve the objectives of policy statements and plans. The scale and significance of issues in rural areas varies – not all are RM issues nor are they all of regional significance. Regional significance can arise through the scale of the issue, its area, extent, or because of actual or potential cumulative effects. These issues should be managed by the consistent administration of statutory resource management policies.The third passage is the definition of "cumulative effects", which is in these terms:The term "effects" is defined in section 3 of the RM Act. Within that definition, "cumulative effects" include: (d) effects which would arise over time as a result of implementing a particular policy, as well as the effects which may stem over a period of time from a particular decision.We note in passing that this definition proceeds on the basis of an interpretation of "cumulative effects" that was rejected in Dye at [39]. [38] Mr Enright also maintained that the Environment Court had, by its reference to the contention that integrity considerations were relevant, in effect decided to have regard to the impact granting approval would have on the integrity of the ARPS but had then failed to make any specific evaluation on that issue. He contended that the statutory requirement that the two planning instruments not be inconsistent was not enough to justify the Environment Court confining its integrity assessment to impact on the District Plan.The approach of the High Court[39] In the High Court, Frater J accepted, or appeared to accept, that what she described as "the integrity issue" could arise in relation to a regional policy statement (see [50]). But she ruled against the Regional Council's argument on the basis of the statutory requirement for consistency between the District Plan and the ARPS:[52] that need for consistency, it seems to me, is the very reason why the Court did not err in focusing its attention on the District Plan, rather than the ARPS. It was not suggested that the District Plan breached s 75(2). Rule 17.3.1 of the District Plan records that its provisions in relation to theMangere-Puhinui area are specifically drafted to give effect to the MUL. Accordingly, I agree with Mr Kirkpatrick that it is difficult to see how the Court, having concluded, at [436], that granting consent would not undermine the integrity or coherence of the specific provisions of the District Plan or public confidence in it, would or could come to a different decision in respect of the more general provisions of the ARPS. [53] The provisions of the ARPS are not determinative: Runciman Rural Protection Society v Franklin DC [2006] NZRMA 278 at [40]-[41]. The ARPS can impose rules in the ordinary sense of the term but these are not directly binding on ordinary individuals: Auckland Regional Council v North Shore City Council [1995] 3 NZLR 18. Section 104(1)(b)(iii) required the consent authority – in this case, the Environment Court – to "have regard" to the ARPS. Provided it is apparent from the decision, as a whole, that it has done so, in the sense that it has specifically considered the ARPS in reaching its ultimate decision, that decision, or the process in reaching it, can not be called in question. [54] There can be no doubt that the Court was very conscious of the impact that its decision would have upon the integrity of the ARPS. It accepted that locating the composting operation beyond the MUL would not serve the strategic directions and urban growth provisions of the ARPS: see [540], [485] and [601]. But ultimately, that was not sufficient, either alone, or in conjunction with other potential adverse effects, to outweigh the positive or beneficial effects of the proposal: see [605]. [55] Given the consistency between the ARPS and the provisions of the District Plan in issue in this case, I do not regard the Court's failure to make a specific finding in relation to the impact of the proposal on the integrity of the ARPS to constitute an error – or certainly not one that is material.Our evaluation[40] We start by observing that the approach of the Environment Court was very orthodox. The proposal before it involved an industrial activity and thus infringed the policy that urban development not be permitted outside the MUL. But composting is a very unusual type of industrial use with rural elements, as the Court recognised. Its conclusion that the proposal involved something of an exception and that its approval would therefore not be inconsistent with the integrity of the District Plan was not surprising. [41] Concepts associated with the integrity of planning instruments are of most obvious application to the planning instrument that directly constrains the activity in question: in this case, the Manukau City District Plan. Since the Regional Council does not have direct control of land-based activities, the land use consents sought byLiving Earth did not directly derogate from the Regional Council's planning instruments. It is therefore unsurprising that the Environment Court did not address the impact that granting the consents would have on the integrity of the ARPS. Indeed, as we have noted, Mr Enright was not aware of a single decision in which a court has sought to assess the impact of granting a land use consent on the continuing integrity of a regional policy statement in the manner contended by the Regional Council. [42] It is far from easy to identify an error of law in the approach taken by the Environment Court. It cannot sensibly be said that the Court was required, as a matter of law, to have regard specifically and explicitly to the impact of granting consent on the integrity of the ARPS. So its "failure" to do so was not an error of law. Nor can it sensibly be said that a court is required to address and answer, specifically one way or the other, every submission that is recorded as being advanced. So the fact that the contention recorded in [425] was arguably not specifically addressed is not an error of law. It likewise cannot support an argument that the Court failed to address what it saw as a relevant discretionary consideration: the Court was not necessarily accepting that this was a distinct discretionary consideration that it was required to address independently of integrity considerations associated with the District Plan. [43] Indeed the whole argument seems to us to be misconceived: (a) The inconsistency between the proposal and the ARPS was recognised and allowed for by the Environment Court along with the potential for precedential effect. The fact that the Court did not mention the word "integrity" in relation to the ARPS is of no moment. (b) References in the ARPS to the importance of consistency in the administration of planning documents do not carry the argument any further. There is the problem, which we have already noted, that they in part proceed on the basis of a misconstruction of the definition of "cumulative effects". But more significantly, the Environment Court undoubtedly recognised the importance of the consistent administrationof planning documents – as exemplified by it addressing integrity considerations in relation to the District Plan. (c) The Environment Court did not fail to allow for anything specific in the ARPS that was material to the application. In any event, the relevant District Plan provisions gave effect to the ARPS. (d) To conclude, as the Court did, that the consent could be granted without challenging the integrity of the District Plan is tantamount to a conclusion that it can remain without change. Accordingly, the legislative scheme under the RMA in which there must be consistency between the District Plan and the ARPS is not impugned and likewise the role of the ARPS is not itself challenged. (e) Given this, we see no occasion for the Environment Court to have embarked on a sterile analysis of the impact granting consents would have on the integrity of the ARPS.Second question: the use of themes[44] This question (which is in the form of two questions) is directly addressed to [53] of Frater J's judgment, which we have already set out. That paragraph, if construed literally, is obviously too broad to be correct but in the context of the case as a whole, this is irrelevant. What is important for present purposes is whether the Environment Court was wrong to take the general approach it did. [45] Again we can see no credible issue of law raised by the question. It is self- evident that the Environment Court was not required to set out seriatim and construe all allegedly relevant sections of the ARPS. While its thematic approach necessarily provides no more than a summary of the relevant planning documents, there can be no suggestion that it was in any respect materially in error. Indeed, dealing with the planning instruments on a thematic basis seems to us to have been entirely sensible and desirable. The concern that it may have misconstrued some relevant provision in the APRS is entirely theoretical.[46] When pressed by us to identify anything relevant in the ARPS that was not captured by the themes identified by the Environment Court, Mr Enright referred to the three passages from the ARPS that are set out above at [37]. So in effect the Regional Council's arguments in relation to this question of law are substantively the same as those dealt with and rejected in relation to the first question.Third question: the statutory baseline testThe permitted baseline test[47] Section 104(2) involves a partial codification of the permitted baseline test that emerged from the decisions of this Court in Bayley v Manukau City Council[1999] 1 NZLR 568, Smith Chilcott Ltd v Auckland City Council [2001] 3 NZLR 473 and Arrigato Investments Ltd v Auckland Regional Council [2002] 1 NZLR 324. Under those judgments, consent authorities were required to apply the permitted baseline test, whereas under s 104(2), its application is expressed to be discretionary.The approach of the Environment Court[48] In the Environment Court, the baseline test was addressed in this way:[380] the district plan permits these activities on the site: farming, farm- stay accommodation, greenhouses, pig-keeping, home enterprises, development of open space, buildings accessory to any permitted activity, household units on approved subdivisions, temporary household units, and clean fill involving deposit of less than 200 cubic metres of material. What adverse effects would those activities have? [381] Relevantly, farming may have effects of tilling the soil, including the noise of machinery working; and effects of odour from the making of silage, or from the treatment of dairy-shed wastes. Pig-keeping may also have effects of odour from pig excrement. Farming, greenhouses and pig-keeping may have visual effects of ancillary buildings. Development of open space and deposit of clean fill may also have the noise effects of heavy trucks, and of machinery working the soil. [382] We are not persuaded that pig-keeping on the site should be discarded from the permitted activities on the basis of being unlikely, or a little fanciful. Mr Serjeant's opinion in that respect seemed to depend on the remoteness of the site from the existing dwellings on the island, yethousehold units on approved subdivisions and temporary household units are also permitted activities, as are buildings accessory to any permitted activity. Would the subject activity have those effects? [383] The proposed green-waste composting activity would have effects of earthworks to create a working surface, and the noise of machinery working to shred the green waste, to work the composting waste in windrows, and to load or bag the product for despatch. It would have odour effects, and the noise effects of heavy trucks bringing green waste, and taking finished product to the market. How should the discretionary power be exercised in the circumstances? [384] The Regional Council submitted that we should exercise the discretion not to disregard those effects, because of the sensitivity of the receiving environment and its location in the coastal environment. [385] It is our understanding that the purpose of the power to disregard the effects of permitted activities is that those effects are contemplated as contributing to the character of [the] environment. As the environment is treated as potentially including those effects, allowing the activity in question would not adversely impact on the environment. [386] We accept the Regional Council's contention that the site is in a sensitive environment, and is part of the coastal environment to which the New Zealand Coastal Policy Statement and the [Auckland Regional Plan: Coastal] apply. Even so, section 104(2) is directed to the effects of activities that the plan (in this case the Manukau City district plan) permits on the site. [387] There would, of course, be differences of intensity, frequency, duration and character between the noise, odour and earthworks effects of the permitted activities and the noise, odour, and earthworks effects of the green-waste composting activity. But that would be true in at least most cases to which section 104(2) would apply. The differences cannot be an adequate reason for not exercising the power to disregard the effects of the proposal, particularly as the duration of its effects would be limited in duration to the proposed term of 10 years. [388] Nor do we consider that odour effects from pig-keeping should be discarded from the permitted baseline on account of Mr Serjeant's opinion that this activity is unlikely, and a little fanciful. The point is that the district plan has, by specifying permitted activities, defined the effects that are to be expected, even though the site is in a sensitive part of the coastal environment. The effects so defined include those of farming (not excluding the depasturing of livestock) and pig-keeping (to the limited extent prescribed). [389] So it is our judgement that exercising the power to disregard the noise, odour and earthworks effects would serve the purpose for which the power to do so is conferred; and to have regard to those effects even though they are also effects of activities that the district plan permits on the site would not serve the purpose of section 104(2).[390] In short, it is our judgement that in the circumstances we should exercise the power to disregard the effects of the activity in question that would be effects of activities on the site that the plan permits. We will do so.[49] The primary focus of the complaints about this passage of the judgment is in relation to odour. But although the passage we have cited makes it clear that the Environment Court regarded the likely odour from pig-keeping activities as relevant to the assessment of the odour likely to be associated with the composting operation, it is far from clear to us that this conclusion was actually carried through into the relevant effects assessments. [50] We note that in the Environment Court, counsel for Living Earth did not rely on the permitted baseline test as to adverse effects. The broad proposition was that the adverse effects of the proposal were, on any basis, not more than minor, see [295]. And our impression of the judgment of the Environment Court is that, broadly, it accepted that characterisation of the adverse effects. [51] The necessary starting point to the Environment Court's consideration of the effects of the proposal was its assessment of the receiving environment, see [173] – [217]. The concept of the "receiving environment" involves principles that, to some extent, overlap with the those which are relevant to the application of the permitted baseline test, cf Queenstown Lakes District Council v Hawthorn Estate Ltd [2006] NZRMA 424 at [65] - [68] (CA). [52] After discussing the likely beneficial effects of the proposal ([218] – [231]), the Court then turned to address the relevant adverse environmental effects. For present purposes what is primarily relevant is how the Court approached odour. In this respect it identified the competing arguments in this way:[294] The Regional Council contended that the proposal would result in adverse odour effects that would be more than minor. Watercare also contended that odour from the composting activity would be detectable on the coastal walkway; that it would be noxious, offensive or objectionable; and that it could not be satisfactorily avoided, remedied or mitigated by consent conditions. Villa Maria Estate, too, contended that there would be a low probability of adverse odour effects beyond the boundary of the site, and that if unplanned malodours occur, they could have a high potential impact. [295] Living Earth disputed that. It also submitted that (due to its written approval) any effects on the Kelliher Trust are not to be taken into account,and conceded that there is potential for odour effects on users of the Watercare walkway, but submitted that the effect would not be more than minor.[53] Having reviewed the relevant evidence and submissions the Court concluded as follows:[323] On that basis we find that if there are people using the walkway at its closest point to the composting site at a time when odours generated by the composting can be perceived there, they would be likely to find odours from the composting annoying. [330] However we bear in mind that the consent-holder would be required to, and would be likely to intend to, avoid emission of odour that would be experienced by users of the walkway. If any such emission were to occur, it would be a low-probability coincidence of events beyond the consent- holder's control. In short, it would be rare and relatively brief. [331] To conclude, we find that as the level of odour is expected to be "annoying" to users of the walkway, and the walkway is a place of "high significance", the low probability of a relatively brief experience of odour emitted from the proposed composting would be a potential adverse effect on the environment to which we should have regard in deciding whether consent should be granted or refused.[54] It will be noted that all of this discussion occurs in the judgment well in advance of the analysis of the permitted baseline test (at [362] to [390]). [55] The actual assessment of adverse environmental effects comes much later in the judgment. We should refer, in particular, to two relevant passages. (a) The first was in relation to the s 104D(1)(b) exercise:[483] Activities which could occur on the composting site as of right: Comparing the green-waste composting with the range of activities that could be carried on there as of right, we find that their effects on landscape, amenity, and the other qualities of concern to the planning authorities' objectives and policies are of a similar character. [484] The annoying odour being experienced by users of the walkway and immediate foreshore for relatively brief periods would be an adverse effect on the environment. We assess it as a minor effect because of the combination of low probability and relatively brief duration.On the face of it, the Court took into account the permitted baseline in [483] but assessed odour, in [484,] "in gross", ie without regard to, for instance, the likely smell that might be caused by pig-keeping in the vicinity of the walkway. (b) The second passage appears in the context of the application of s 104D(1)(a) and refers to the arguments of the Regional Council as to possible adverse effects that would be more than minor.[531] Returning to the topics listed by the Regional Council, we have made these findings: (e) On odour from the composting process, we find that there would be a low probability of relatively brief adverse effects that would be annoying to users of the Watercare walkway (a place of high significance) adjacent to the composting site; but taking into account that this would be rare and brief, and over a limited term, we judge this as being an effect that would not be more than minor. (f) The composting windrows will introduce a character element onto the Island which is not there at present. However, when this is placed in the context of existing quarrying and pasture activities, and taking into account the operating maximum of 10 years which has been applied for, the effect on character would be no more than minor. [56] The limited significance placed on the permitted baseline test comes through in [601], which is in the wrap-up section of the judgment:[601] Some effects in conflict with that remain after our consideration and making findings on the evidence. In particular, there are the important strategic direction and management of growth of the ARPS; the risk (a low probability) of annoying or even offensive odours from the composting process affecting users of the coastal walkway and adjacent foreshore; potential adverse effects (though minor) on archaeological evidence and other heritage values, and on visual and landscape values. There would also be some potential of a precedent effect.The challenge by the Regional Council[57] Mr Enright challenged the approach in the Environment Court on the basis that s 104(2) calls for a comparative exercise in which four issues must be addressed:(a) What are the effects of the proposed activity? (b) What effects are permitted by the (district or regional) plan? (c) Are the effects of the proposed activity the same as (or less than) the permitted effects? (d) If so, should the discretion be exercised to disregard those effects? [58] The complaint therefore is particularly focussed on [387] of the Environment Court judgment. [59] In the High Court Frater J dealt with this issue in this way:[84] Section 3 of the RMA defines "effect" by what it includes, rather than what it is. It states that:3. In this Act, unless the context otherwise requires, the term "effect" includes – (a) Any positive or adverse effect; and (b) Any temporary or permanent effect; and (c) Any past, present, or future effect; and (d) Any cumulative effect which arises over time or in combination with other effects – regardless of the scale, intensity, duration, or frequency of the effect, and also includes – (e) Any potential effect of high probability; and (f) Any potential effect of low probability which has a high potential impact.[85] Applying this definition to s 104(2) it seems to me that any type of effect, apart from a positive effect which is necessarily excluded by the reference in that section to adverse effects, can be considered. Scale, intensity, duration and frequency are irrelevant. If a consent authority is satisfied that a permitted activity and proposed activity each produce an adverse effect of the same type – be it noise, odour, visual effect or whatever, the threshold for applying the baseline is established. So the first question is, "Can the baseline apply?" The Authority then has to decide whether, in its discretion, the baseline should apply. In doing so, it will necessarily undertake a comparative exercise. In some cases the District Plan will provide a measure against which to make comparisons: see Kapiti Environmental Action v Kapiti Coast District Council [2002] NZRMA 289at [127]. In others, the similarities or dissimilarities of effect will be obvious, especially to decision-makers experienced in this field. As long as the consent authority has indicated a basis for comparison that is not unreasonable, its decision can not be called into question. [86] The Court at [380]-[382] clearly identified the activities and effects making up the baseline in this case. While Mr Enright focused on the odour effects of pig-keeping, this was not the only permitted activity identified as providing odour effects. Also included in this group were silage making and dairy shed wastes. Nor is it correct to say that it did not evaluate the differences between the permitted and proposed activities. At [387] it specifically acknowledged that there were differences of degree, but did not spell out what these were. I do not consider it had to. It conducted a detailed assessment of the adverse environmental effects of the proposed activity, including odour effects, and determined that they would be minor. In the circumstances any differences between the adverse effects of the permitted and proposed activities would not have been significant.Our evaluation[60] The Environment Court did not spell out why it concluded in [387] that differences of intensity, frequency, duration and character were not a controlling consideration. [61] The Court can hardly have meant that a certain adverse effect of trivial significance (eg noise) which is part of the permitted baseline warrants ignoring the same sort of effect, no matter how serious, associated with a proposal. Presumably, the Court's observation in [387] was referable to a situation where the adverse effects of permitted activities are broadly the same as, or similar to, the corresponding effects likely to be associated with the proposed activity. So if it were the case that say the odour of permitted pig-keeping (or other permitted activities) would cause a degree of annoyance which broadly corresponded to the likely annoyance associated with composting odours, it would have been open to the Court to ignore the latter even though the odours were not identical in character. [62] We are of the view that a precise correspondence between effects permitted under the baseline and those associated with a proposal is not fundamental to the application of the permitted baseline test. Accordingly, we see no error of law in [387].[63] In any event, we do not regard the permitted baseline approach adopted by the Environment Court as critical to the result it reached. In saying this, we recognise that the Court specifically noted that it was taking pig-keeping odour into account, as part of the permitted baseline. Our own assessment, however, is that its conclusion that the relevant odour effects were no more than minor was reached independently of the permitted baseline test.Disposition[64] The appeal is dismissed. The appellant is to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.Solicitors: Kensington Swan, Auckland for Appellant Martelli McKegg Wells & Cormack, Auckland for Respondent