KYEBURN DOWNS LIMITED AND ORS V COMMISSIONER OF CROWN LANDS HC DUN CIV-2008-412-000197

KYEBURN DOWNS LIMITED AND ORS V COMMISSIONER OF CROWN LANDS HC DUN CIV-2008- 412-000197 30 October 2008IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY CIV-2008-412-000197BETWEEN KYEBURN DOWNS LIMITED GLENSPEC HOLDINGS LIMITED DAVID JOHN MCATAMNEY GEOFFREY DAVID MCATAMNEY (KNOWN AS THE SOLDIERS SYNDICATE) Plaintiffs AND COMMISSIONER OF CROWN LANDS Defendant Hearing: 21 & 22 July 2008, 29 September 2008 (Heard at Christchurch) Appearances: NRW Davidson QC, C D Mouat & S L Robertson for Plaintiffs M Parker for Defendant Judgment: 30 October 2008RESERVED JUDGMENT OF HON. JUSTICE FRENCH Introduction[1] This judgment concerns the interpretation of Part 3 of the Crown Pastoral Land Act 1998 and in particular the provisions relating to reviews of Crown land held under non-renewable occupation licences. The issue is whether the Commissioner of Crown Lands is required under Part 3 to devise a preliminary proposal in accordance with his review findings or whether he is entitled to devise a preliminary proposal based on the opposite conclusion to that reached in the review.[2] The plaintiffs are a syndicate of high country farmers known as the Soldiers' Syndicate. The syndicate holds a non-renewable pastoral occupation licence over Crown land situated in the Hawkdun and Ida ranges near Ranfurly in Otago. The plaintiffs use the land for summer grazing, a right which the syndicate has enjoyed since the 1920s and which has been the subject of various review processes prior to the 1998 legislation. [3] In February 2008, the plaintiffs issued proceedings against the Commissioner of Crown Lands over the latter's decision to retain the land in full Crown ownership and control as a conservation area. The amended statement of claim alleges three causes of action: an application for a declaration based on the interpretation of Part 3 of the Crown Pastoral Land Act; estoppel; and negligence. The plaintiffs are also contemplating issuing judicial review proceedings. [4] In June 2008, the plaintiffs applied for an order under r 418 for the issues raised by the first cause of action to be determined separately from the hearing of the other causes of action. I granted that application, and two preliminary questions for decision were duly formulated. [5] Before turning to the questions, it is necessary to set out the factual background and the relevant provisions of the Crown Pastoral Land Act ("the Act").Relevant Provisions of Part 3 of the Crown Pastoral Land Act[6] The Act is administered by Land Information New Zealand ("LINZ"). [7] Under s86(2), the Commissioner of Crown Lands ("the Commissioner") is required to undertake a review of land held under a non-renewable occupation licence no later than 15 months before the licence is due to expire.[8] Section 86(2) makes it clear a review is mandatory. Section 86 goes on to state:(3) Subject to subsection (2), the Commissioner may, in the Commissioner's absolute discretion, decide— (a) How many reviews to cause to be undertaken: (b) Which land each review is to relate to: (c) The order in which reviews are to be undertaken: (d) The urgency with which any review is to be undertaken: (e) The resources to be devoted to any review. (4) After conducting any review, the Commissioner must devise a preliminary proposal to designate the land concerned in accordance with subsection (5). (5) The land (or various areas of it) must be designated as— (a) Land to be retained in full Crown ownership and control— (i) As conservation area; or (ii) As a reserve, to be held for a purpose specified in the proposal; or (iii) For some specified Crown purpose; or (b) Either or both of the following: (i) Land suitable for disposal by special lease (on terms specified in the proposal): (ii) Land suitable for disposal in fee simple under the Land Act 1948. (6) If a preliminary proposal designates any land as land suitable for disposal by special lease, land suitable for disposal in fee simple, or both, it may designate it subject to either or both of the following things: (a) The creation of a sustainable management covenant: (b) The continuation in force of an existing easement. (7) If a preliminary proposal designates any land held under an occupation licence as land to be retained in Crown ownership, it may also specify any holder's improvements that are to remain on the land.[9] The Act then continues in ss 88 and 89 to require the Commissioner to give public notice of the preliminary proposal and to undertake consultation, followingwhich the Commissioner may adopt the proposal as it was notified, or a modified version. The proposal once adopted is called "a substantive proposal". [10] Significantly, under s89, the licence holder has the right to apply for a re- hearing of the Commissioner's decision to adopt the proposal. The Commissioner has a discretion to refuse to re-hear the decision. If a re-hearing does take place, the Commissioner may reverse the decision, confirm it or modify it.Factual background[11] In December 1999, the Commissioner initiated a Part 3 review of the land held by the plaintiffs under their licence. The licence was due to expire in December 2003. [12] LINZ's practice at the relevant time was for the work required in a review to be undertaken by a service provider. In this case, the service provider was Knight Frank Limited, later known as DTZ. DTZ's role was to prepare or arrange the initial reports, undertake consultation, obtain reports, conduct its own investigation and then present a recommendation to the Commissioner's delegate. The delegate in question was a Mr Lysaght. He held delegated authority from the Commissioner to exercise the latter's powers under Part 3 of the Act. [13] The plaintiffs themselves did not actually learn a review was underway until 6 November 2001. In between times, DTZ had held what is known as an early warning meeting with various non-governmental conservation groups. [14] As mentioned above, the plaintiffs' licence was due to expire in December 2003. There was evidence that loss of the right to use the land for grazing was likely to have "severe viability implications" for their respective home properties. [15] After notification to the plaintiffs about the review, there followed several inspections of the land, a report called a land status and due diligence report, consultation with Fish and Game, two Department of Conservation reports, a report from local iwi, consultation with the plaintiffs, as well as reports from DTZ. In its first report, DTZ recommended the land be restored to full Crown ownership, but inits second report, having undertaken further work requested by Mr Lysaght, DTZ recommended disposal by way of special lease. [16] On 12 February 2003, Mr Lysaght wrote an email to DTZ in the following terms:After having explored all of the possibilities available to me and having read and re-read the various reports and submissions I have come to the conclusion that there is really only one option for this land, that is to designate the land as suitable for disposal by special lease.[17] The email went on to say that the terms of the special lease would need to be completed before public advertising and advice to the holders. It ended by stating: at this stage whilst I have made a decision as to the future of the land the final conditions are not yet in place so the matter is confidential. I note that at standard 12 clause 7.3 consultation with the DGC [Director General of Conservation] and at least the holder has to take place on the preliminary proposal and I think that will be the appropriate time to disclose the decision.[18] The following month, on 26 March, Mr Lysaght wrote to the Department of Conservation, advising the Department of his decision and seeking their co-operation with the preparation of a special monitoring agreement. The advice as to his decision was formulated in the following terms:I wish to advise that acting under delegated authority I have made a decision in the review under Part 3 of the Crown Pastoral Land Act 1998 of this Occupation Licence. The decision is that the land be designated as land suitable for disposal by special lease pursuant to s86(5)(b)(ii) of the CPLA.[19] The Department of Conservation was highly critical of the decision. Its regional manager wrote to Mr Lysaght to record the Department's very strong disappointment over the decision you have made on this review. Your decision does not meet our legitimate expectations from this review and is not the outcome we were seeking, which, in my opinion does not meet the objectives of section 83 of the CPLA. It is a completely inconcruous [sic] decision[20] The letter concluded:If, following public consultation, your decision remains unaltered, which at this stage I would find surprising, then I reluctantly acknowledge that it makes sense to start work now on the details of the special lease vegetation monitoring agreement.[21] As well as writing to the Department of Conservation, Mr Lysaght also drafted a memorandum for inclusion in a Ministerial status report. The draft stated, "A decision has been made that the land should be designated as land to be disposed of by special lease", and that, "The next stage of the process requires the Commissioner of Crown Lands to give public notice of the preliminary proposal and invite written submissions on the proposal." [22] Mr Lysaght also drafted a suggested response for the Minister for Land Information to use when replying to a letter of concern about the decision from Forest and Bird. The draft reply was in the following terms:I am advised by Land Information New Zealand (LINZ) that the decision to consider the issue of a special lease was taken after consideration of all the options available in the Crown Pastoral Lands Act 1998. This is, however, a preliminary proposal and, as such, will be publicly advertised as required in the Act. You may wish at that time [to] make a submission outlining your views on the proposal which the Commissioner of Crown Lands is required to consider, along with all others, before making a final decision. As the decision and the process is being conducted in terms of the Act and within the authority of the Commissioner it would not be appropriate for me to intervene.[23] In May 2003, Mr Lysaght formally notified the plaintiffs of his decision. The letter stated:The Commissioner of Crown Land's delegate has made some decisions in relation to the review of your unrenewable occupation licence. The delegate has made the decision to dispose of the land by Special Lease pursuant to Section 86(5)(b)(i) Crown Pastoral Land Act. A draft of the special lease document is attached for your information. As you are aware Part 3 of the Crown Pastoral Land Act requires the Commissioner to devise a Preliminary Proposal pursuant to Section 86(4) CPL Act. The Commissioner is then required to give public notice of the Preliminary Proposal pursuant to Section 88(b) CPL Act. Prior to devising the Preliminary Proposal the delegate has requested that I arrange consultation with both yourselves and the Director General ofConservation to establish an appropriate monitoring system to be adopted in association with the terms of the proposed special lease. I wish to convene a meeting with yourselves and representatives of the Department of Conservation in the near future to initiate this consultation. The delegate has requested that DoC and yourselves work collaboratively to formulate monitoring proposal that both parties can be happy with and abide by. By this he expects that the outcome of such collaboration will result in:• The identification of what will be monitored.• How and how often will it be monitored.• What will be the thresholds that will identify whether or not the monitoring is having a positive, negative or neutral impact on the ecological health of the vegetation. Please contact me at your earliest convenience to establish some suggested dates on which this consultation may take place. It is important that this consultation occur in a reasonable timeframe.[24] Between May and September 2003, there were some meetings and discussions about the terms of the special lease and the monitoring programme. [25] The next significant event was that two years later, in May 2005, the Manager of Crown Property Management instructed two LINZ employees, Mr McKenzie and Ms Gillespie, to review the file. Mr McKenzie deposed that the instruction was "to review the process taken to date on the Soldiers Syndicate Part 3 Crown Pastoral Lands 1998 (CPLA) review". [26] After reviewing the file, Mr McKenzie and Ms Gillespie found that consultation with the Department of Conservation had not been completed, and accordingly, in September 2005, instructed DTZ to undertake consultation with the Department. [27] The thrust of Mr McKenzie's evidence was that he considered the Lysaght decision was defective because adequate consultation had not taken place before the decision was made. Rightly or wrongly, Mr McKenzie clearly saw himself as curing a defective decision that had been made at the purported conclusion of a review. In his view, there had been insufficient consultation during the review and therefore the review had to be either re-opened or resumed.[28] Whether or not there was in fact anything wrong with Mr Lysaght's consultation is not an issue I am required to determine for the purposes of answering the preliminary questions. Suffice it to say however, I found Mr McKenzie's evidence on this point somewhat unconvincing. [29] What happened next was that the Department of Conservation was invited to update their previous reports, Mr McKenzie met with the plaintiffs on 29 November 2005, and the Department of Conservation inspected the property in January 2006. [30] Then followed reports from the Department of Conservation and DTZ recommending restoration of the land to Crown ownership as a conservation area. [31] Those recommendations were accepted by the Commissioner's delegate (this time a Mr Usherwood), and in a letter dated 15 October 2007, the Commissioner advised the plaintiffs of his decision in the following terms:Review under Part 3 of the Crown Pastoral Land Act 1998 – Soldier's Syndicate-Part Run 573As you are aware, following expiry of the pastoral occupation licence over Part Run 573, the Commissioner has been undertaking a review of that land under Part 3 of the Crown Pastoral Land Act 1998 to determine whether the land should be retained by the Crown a conservation area or reserve or for some other purpose or designated as suitable for disposal. Any disposal could be by way of a special lease. The principal objects of the review are to promote the management of Crown land in a way that is ecologically sustainable and to enable the protection of significant inherent values of that land. It is not possible to dispose of land if these objects cannot be met. The review is a statutory process, and it is also a staged process. The process requires the Commissioner to undertake a review, devise a Preliminary Proposal, and receive and consider submissions on that proposal prior to adopting any Substantive Proposal. The Commissioner is also required to undertake consultation and obtain provisional consents at a number of steps in that process. The Commissioner is entitled to decide what resources to commit to a review and to prioritise reviews. Delays in the process are not uncommon. The Commissioner approved the content of the Preliminary Proposal for the land originally held under the Soldiers' Syndicate POL on 8 October 2007. I understand that Mr MacKenzie of this office is meeting with you on Tuesday 16 October to advise you of the contents of that Preliminary Proposal. It is proposed that the land be retained in Crown ownership as a conservation area as that is required to protect the land's significant inherent values.I also understand that in May 2003 you were advised that the Commissioner's delegate had decided to dispose of the land under a special lease and a draft copy of the proposed lease was provided to you. That decision was made prior to the Commissioner devising the Preliminary Proposal, and could only proceed if the review concluded that designation for disposal was in accordance with the objects of the Act. The review has concluded the land should not be designated for disposal and so it is not possible to grant you a special lease as previously proposed.[32] Since that letter was written, the preliminary proposal for return to Crown ownership and control has been advertised and public submissions received. According to Mr McKenzie's evidence, those submissions are apparently now being analysed with a view to devising a substantive proposal. Meantime, the plaintiffs' licence has been extended on an interim basis to enable the plaintiffs to continue grazing.The preliminary questions[33] It is against that background that I have been asked to decide the following preliminary questions: i) The Commissioner of Crown Lands, having decided on 12 February 2003 to accept a recommendation that the land be disposed of by special lease and having notified this to the plaintiffs, was he then obliged when devising the preliminary proposal to give effect to that decision? ii) If the answer to question i) is 'Yes', what is the legal effect of the decision made in October 2007 to adopt the preliminary proposal designating the land for retention in Crown control as a conservation area? [34] As was stressed by both counsel, the questions require me to resolve an issue of statutory interpretation. At this stage, I am not being asked or required to review the process.The competing arguments[35] The plaintiffs argue that once the Commissioner had decided to dispose of the land by special lease, he was required to prepare a preliminary proposal in accordance with that decision. [36] In support of that submission, the plaintiffs rely not only on the wording of Part 3 but also on the Court of Appeal decision in Goulding v Chief Executive, Ministry of Fisheries [2004] 3 NZLR 173, and the administrative law principle that once a decision has been communicated to an affected person, it cannot be revoked or varied by the decision maker. [37] Counsel for the Commissioner, however, contends that nothing in the Act requires a decision made during or at the end of the review process to be carried through or incorporated into the preliminary proposal. Mr Parker drew a distinction between an administrative decision and a statutory decision, the latter being a decision made with the express authority of the statute which was binding on the Commissioner, and the former being a decision which the Commissioner was free to change. Mr Parker distinguished Goulding on the grounds that it was about the very different situation of someone making an application to a decision maker for the exercise of a statutory power and the making of a final decision, whereas in the present case we are concerned with a decision about the status of land which did not affect anyone's rights. [38] Much of the plaintiffs' written argument was directed to refuting the proposition that the Commissioner could re-open a review and start afresh. However, the Commissioner's submissions had a different focus. The basis of the Commissioner's argument was not so much the assertion of a right to re-open a review or have more than one review. Rather, the emphasis was on the ability to depart from the review findings at the next stage of the process i.e. when devising a preliminary proposal. [39] In support of their respective arguments, both counsel took me through the legislative scheme created by Part 3.[40] It was common ground that for all practical purposes the Part 3 process is essentially about making a choice between two designation options – either the land is to be retained in full Crown ownership and control, or it is to be designated as suitable for disposal by special lease. [41] It was also common ground there are clearly defined stages in the Part 3 process and that the underlying aim is to achieve final resolution of tenure. The stages in the process are: 1. The review, which is mandatory. 2. The devising of a preliminary proposal to designate the land as either suitable for disposal by special lease or retention in full Crown ownership or control. The devising of the preliminary proposal is also mandatory and it takes place after conducting the review. 3. Public notification of the preliminary proposal, consultation and consideration of public submissions. 4. The adoption of the substantive proposal under s89. [42] Significantly, under s85 of the Act, the Commissioner must consult the Director General of Conservation ("DGC") before undertaking the review, before devising the preliminary proposal and before adopting a substantive proposal.85 Consultation(1) Before taking any action specified in subsection (3), the Commissioner must consult the Director-General of Conservation. (2) At any time, the Commissioner may consult any person or body the Commissioner thinks fit (including the Director-General of Conservation) about taking any action specified in subsection (3). (3) The actions are— (a) Undertaking a review under section 86(1); and (b) Devising a preliminary proposal under section 86(4); and(c) Adopting a substantive proposal under section 89.[43] The existence of this obligation to consult the DGC before devising the preliminary proposal is critical to the Commissioner's argument. [44] Mr Parker points out it is well established that consultation involves the statement of a proposal not yet finally decided upon, and that the party obliged to consult must keep an open mind and be ready to change and even start afresh (Wellington International Airport Limited & Ors v Air New Zealand Ltd & Ors HC Wellington CP403/91, 6 January 1992, McGechan J). [45] Mr Parker submits it follows s85 means the answer to the first preliminary question must be "No". The section clearly contemplates that while the Commissioner may have made a decision about designation at the conclusion of the review, nothing is set in concrete. The consultation with the Director General could involve the Commissioner changing what he already had in mind. [46] For his part, Mr Davidson contends that the consultation which must occur under s85 before devising the preliminary proposal has a more limited purpose. In his submission, it must relate to the implementation of the designation decision, not the decision itself. The consultation that s85 contemplates is thus consultation about the drafting and finalising of the detail of the preliminary proposal. It is not intended to afford an opportunity to reverse the core decision. [47] Thus, while Mr Parker submitted the section allowed the DGC "two bites of the cherry", Mr Davidson submitted it was only a small nibble on the side.The Commissioner's interpretation applied to the facts[48] According to Mr Parker's analysis, there was no statutory basis for Mr Lysaght's decision. His decision was not itself the preliminary proposal. That had yet to be devised. All that Mr Lysaght did in February 2003 was simply accept a recommendation. The decision itself did not change, establish or create any rights.[49] Once Mr Lysaght had made his decision, the process then moved from the review stage into the "devising the preliminary proposal" stage. [50] From February 2003 onwards, all the officials (including Mr McKenzie, whether he appreciated it or not) were at the second stage devising the preliminary proposal. Under s85, that required them to consult with the Director General, which could and did lead to a reversal of Mr Lysaght's designation decision. [51] As Mr Parker himself acknowledged, this analysis is not however consistent with the officials' understanding of the process at the time. [52] For, it is clear from the written record that both LINZ and the Department of Conservation took the view that once Mr Lysaght had made his decision at the end of the review, the subsequent consultation with the DGC about the devising of the preliminary proposal would relate only to the implementation of that decision, ie the terms of the special lease and the monitoring programme, not the decision itself. Further, there was no suggestion when the decision was communicated to the plaintiffs that it was provisional, preliminary or conditional on further consultation with the DGC. [53] Mr McKenzie must also have been of the same view. Otherwise, there would have been no need for Mr McKenzie to be assessing the adequacy of the consultation with the Department of Conservation and to talk of re-opening the review. [54] It follows that either the plaintiffs' interpretation of s85 is correct, or the officials misinterpreted the legislation they were supposed to be administering. [55] According to Mr Parker, it is the latter because the officials were "imbued with the Part 2 process" which is different from the Part 3 process.The Court's findings[56] It appears this case is the first time a Court has ever had occasion to make a ruling about the interpretation of Part 3.[57] After careful consideration of the parties' submissions, I have come to the conclusion that the interpretation advanced by the plaintiffs is more consistent with the overall scheme of Part 3 and with common sense. [58] I accept there is nothing in Part 3 which expressly says the findings of the review must form the basis of the preliminary proposal in so many words. However, in my view, it is implicit. Otherwise, there would seem little point in having a review or having such a carefully staged or stepped process. [59] The legislature obviously saw the review as being of crucial importance. It is mandatory. [60] Further, the devising of the preliminary proposal is expressly stated to come "after" the review. In my view, Parliament must have intended the review findings should 'inform' the preliminary proposal. [61] There are after all only two possible designation choices, and in order to be able to "devise" a preliminary proposal, a choice needs to have been made. That must be the whole purpose of the review: namely to consider the issue of designation, consult about it and reach a decision. [62] The DGC will of necessity have already been consulted about the designation issue in the review. In my view, it would be an absurd interpretation (using the word 'absurd' in its extended meaning as explained in Frucor Beverages Limited v Rio Beverages Limited [2001] 2 NZLR 604) to interpret s85 as meaning the DGC is required to be consulted about that same issue again. There would be no sensible reason why the legislature would want or intend the issue to be able to be re-visited at that point. It would make a mockery of the review process, cause confusion and uncertainty and undermine what is clearly intended to be an orderly, staged process leading to final resolution. [63] The plaintiffs' interpretation still affords real meaning to the consultation obligation under s85. Matters such as the detailed terms of the special lease and themonitoring programme are important matters on which it would be highly appropriate to have input from the DGC. [64] I have considered whether the fact the plaintiffs have a right under s89 to apply for a rehearing in respect of a substantive proposal is something that should bear on my decision. Ironically, both counsel rely on the existence of this right to support their competing interpretations. Mr Parker submits the absence of any equivalent right in connection with a preliminary proposal underscores the fact that Mr Lysaght's decision was not a statutory decision, and that a preliminary proposal does not affect rights and has no legal effect in itself. Mr Davidson submits the existence of the right to apply for a rehearing shows the landholder is regarded as an affected person. He also points out that it is only in connection with the rehearing procedure that the Commissioner is expressly empowered to reverse his decision. [65] The rights of the landholder are undoubtedly limited. The Commissioner is not obliged to consult with the landholder as he is with the DGC. Nor is the Commissioner obliged to even grant the application for a rehearing. [66] However, I am not persuaded this means ss 85 and 86 should be interpreted as empowering the Commissioner to devise a preliminary proposal contrary to the designation findings of the review or to re-open the review and start again when the common sense interpretation dictates otherwise. [67] As was stated in Shannon Realties Limited v Ville De St Michel [1924] AC 185 at 192-193, the Court should, where possible, adopt a construction which is consistent with the smooth working of the system that the statute purports to be regulating. In this case, the plaintiffs' interpretation is consistent with the smooth working of the system, but that advanced by the defendant is not. If evidence of that were required, one need only look at the facts of this case. [68] It follows from all of the above that my answer to question 1 – the Commissioner of Crown Lands, having decided on 12 February 2003 to accept a recommendation that the land be disposed of by special lease and having notifiedthis to the plaintiffs, was he then obliged when devising the preliminary proposal to give effect to that decision? – is "Yes". [69] I reach that conclusion simply as a matter of statutory interpretation and record that I have not found it necessary to rely on the Goulding principle. [70] My affirmative answer to Question 1 requires me to go on to consider Question 2. [71] Question 2, it will be recalled, was "If the answer to question i) is 'Yes', what is the legal effect of the decision made in October 2007 to adopt the preliminary proposal designating the land for retention in Crown control as a conservation area?" [72] When addressing Question 2, Mr Davidson asked me not to make any finding about the lawfulness of the October 2007 decision for fear of creating a res judicata in any future proceeding. [73] I therefore answer the second question in the following terms: "The October 2007 decision did not discharge the obligation which I have found to exist in answering Question 1". [74] I reserve leave to the parties to seek further directions in relation to my answer to Question 2 if required.Costs[75] In the absence of any submissions on costs, my provisional view is that costs should follow the event and the plaintiffs be awarded costs on a 2B basis. [76] If the parties are unable to agree on costs and require me to make an award, then I require submissions of no more than five pages in length to be filed within 14 days.Solicitors: K Mouat, Christchurch NRW Davidson QC, Christchurch Crown Law, Wellington