NEW PLYMOUTH DISTRICT COUNCIL V WAITARA LEASEHOLDERS ASSOCIATION INCORPORATE CA CA259/05

NEW PLYMOUTH DISTRICT COUNCIL V WAITARA LEASEHOLDERS ASSOCIATION INCORPORATE CA CA259/05 20 March 2007IN THE COURT OF APPEAL OF NEW ZEALAND CA259/05 CA260/05 [2007] NZCA 80BETWEEN NEW PLYMOUTH DISTRICT COUNCIL Appellant AND WAITARA LEASEHOLDERS ASSOCIATION INCORPORATE Respondent Hearing: 26 June 2006 Court: O'Regan, Arnold and Ellen France JJ Counsel: D J Goddard QC and J Shackleton for Appellant D J King and S Hucker for Respondent R J B Fowler and P C Mitchell for Taranaki Regional Council, as Intervener Judgment: 20 March 2007 at 11 amJUDGMENT OF THE COURT A The application for leave to appeal against the decision of Harrison J dated 27 October 2004 on the preliminary questions is granted. To the extent that the preliminary decision is inconsistent with the judgment of this Court, the appeal against that decision is allowed. B The appeal against the decision of Harrison J dated 4 November 2005 is allowed. The declaration made is quashed. C There is no order as to costs. Costs in the High Court are to be determined by that Court in the light of this decision.REASONS OF THE COURT(Given by Arnold J)Table of Contents Para No. Introduction [1]Background [4]Should leave to appeal be granted? [18]Did the Council hold the land on trust? [27]The harbour improvement land [28]Statutory context [28]Discussion [32]The town improvement land [46]Did the Council breach its obligations in making its decision? [51]Acting for improper purpose [52]No tender or open market process [68]Decision [74]Introduction[1] This case concerns the decision of the appellant, the New Plymouth District Council (the Council), to offer to sell to the Crown certain land that it holds under statute and Crown grant for specified purposes. The decision was subject to various conditions. [2] In the High Court Harrison J answered two preliminary questions by holding that the Council held the land "on trust according to various specified statutory purposes": CIV-2004-443-162 27 October 2004 (the preliminary decision). In his later decision on the trial of the action, the Judge held that the Council's decision to offer to sell the land to the Crown was unlawful: CIV-2004-443-162 4 November 2005 (the trial decision). This was essentially because the Council failed to act in accordance with its duties as a trustee in resolving to offer to sell the land to the Crown. [3] The Council has appealed against the trial decision and seeks leave to appeal against two aspects of the preliminary decision.Background[4] Since 1876 the Council (either itself or through predecessor bodies) has acquired various tracts of land from the Crown, comprising in total over 179 hectares. This land is now known as the Waitara Endowment Land (the land).Uur 8 ‚ ‚ vtvhyy’ hp„ˆv rq €‚†‡ ‚s ‡ur yhq i’ p‚sv†ph‡v‚ s ‚€ H ‚ v vcircumstances which have caused local tangata whenua, Te Atiawa, to feel a deep sense of grievance. [5] The land comprises three main categories - land acquired for harbour purposes (165 hectares) (the harbour improvement land), land acquired for town improvement purposes (15 hectares) (the town improvement land) and land acquired for library purposes (less than two hectares) (the library land). Most of the land is leased for a variety of uses, under more than 700 leases. The respondent, the Waitara Leaseholders Association Incorporated (the Association), is an organisation of over 200 leaseholders. [6] In 1989 the Council decided that it would take steps to facilitate the freeholding of the land to the leaseholders. In 1992 it promoted local legislation, the New Plymouth District Council (Land Vesting) Bill, to enable it to do so. However, both the Government and Te Atiawa raised concerns about this proposal. As a consequence in 2002 the Council decided to undertake a full review of the position. [7] The review was completed in early 2004. Having considered the extensive material generated by the review, the Council decided in March 2004 to offer the land (excluding parks and reserves) to the Crown for inclusion in the Crown's offer of settlement to Te Atiawa for their historical grievances. It seems now to be accepted that the process which the Council followed in reaching this decision complied with the provisions in Part 6 of the Local Government Act 2002. The Council did not, however, follow ss 140 and 141, which provide a mechanism by which local authorities may sell or exchange lands which they hold as endowments or on trust.[8] As the terms of the Council's decision are critical to the resolution of the case, we set out the relevant portion of the Council's minutes of its meeting of 30 March 2004 in full:Waitara Leasehold Land Final DecisionFile Reference: A60 20 01 2, DM 80765 This report reviews the Waitara preliminary decision, submissions and makes a recommendation for the final decision. It is the culmination of over eighteen months of research, hearings, submissions and council reports. The report addresses a long-standing problem whereby the council has tried to balance the interests of the community before deciding on the future of its Waitara land. The recommendation proposes a way forward for the council and the community. Cr Gill ) Mayor ) That having considered all matters raised in the report and all options for the future ownership of the Waitara lands and with regard to the preliminary decision: The Council: 1. Notes that the major considerations of its decision are, to achieve a comprehensive solution to an issue that has caused a long standing social disharmony within our community by;• Achieving fiscal neutrality, by being financially prudent and acting in a commercially sound manner;• Promoting social, economic, environmental and cultural well- being of the district;• Promoting community outcomes, of Quality of Life, Iwi Relationships, Environment, Youth, and District Growth, and in particular, the interests of tangata whenua, the Waitara community, and the current rights of leaseholders; and• To release the land from legislative constraints. 2. Resolves that the option presented in the report that best fulfils the considerations outlined in (1.) above is Option A – Transfer to the Crown with contingent protection for leaseholders and tangata whenua. 3. Resolves that the land be offered to the Crown, on the following terms: a) That the land be included in the Crown's offer to settle Te Atiawa's historical claims; b) That the Council receive a fair market value for the land;c) That the rights of leaseholders under existing leases are preserved; d) That settlement legislation provides for the land to vest free of all statutory trusts, restrictions and other reservations; e) That transfer of the land only occur once the settlement legislation has been passed and the Council would continue to own the land and administer existing leases; 4. That the Council: i) Advocates for the significance of the land to be recognised by the Crown and be in addition to any negotiated settlement. ii) In the interim, advocates for the Crown and Te Atiawa mandated negotiators to deal with interested leaseholders and consider freeholding after settlement. 5. Resolves that the Chief Executive be delegated the authority to negotiate the terms of an agreement with the Crown, for approval by the Council. 6. That the New Plymouth District Council (Land Vesting) Bill be withdrawn. NOTE 1: The Council's expectation is that disposal of the Waitara Land to the Crown will facilitate the completion of the settlement process and enhance the ultimate settlement. NOTE 2: For the purposes of these recommendations, "land" means the land in Waitara that the Council wishes to dispose of [as contained in Appendix Four] and specifically excludes reserves and other land which is currently used for community purposes which the Council wishes to retain.[9] The Association challenged the Council's decision. Initially the Association applied to the High Court under s 60(1)(d) of the Charitable Trusts Act 1957 for orders directing the Council to offer the freehold of the land for sale to particular lessees under ss 140 and 141 of the Local Government Act. At the request of the parties, Venning J directed that two questions be determined at a preliminary hearing. They concerned (a) whether the Council held the land on trust; and (b) if so, whether the trust was for charitable purposes. [10] In the course of the argument on the preliminary questions, it became clear that the Association's reliance on s 60(1)(d) of the Charitable Trusts Act was misplaced. The Association's real objective was to enforce representations which itsaid the Council and its predecessors had made to some or all of the lessees about freeholding individual properties. Counsel for the Association accepted that substantial amendment to the statement of claim would be required. [11] Despite this, the argument on the preliminary questions proceeded, on the basis that a determination as to whether the land was held on trust might be material. Harrison J said at [4]:A local authority is prohibited from selling or exchanging property vested in it in trust without completing a process requiring satisfaction of four criteria (ss 140 and 141 Local Government Act 2002). It is common ground that [the Council] did not follow this process before offering the land to the Crown. In that context my decision on whether any or all of it is held in trust may be material. And whether a trust is created in a particular situation will depend in part upon whether or not the subject land is held for a charitable purpose; in other words, both parts of the question formulated for determination fall within the one inquiry. However, whether a determination favourable to [the Association] ultimately proves material in the different context of its reformulated case is now highly problematic.[12] The Judge reached the following conclusion:[70] In summary, I am satisfied that all of the Waitara endowment land except for 1.5 hectares acquired in 1905 and what is known as the other land is held by [the Council] on trust according to the various specified statutory purposes. [71] However, as I have earlier indicated, this finding is not determinative for or against [the Association's] claim. Indeed, I repeat my reservations about its ultimate relevance to the true questions at issue in this proceeding. I agree with [counsel for the Council] that it would be inappropriate for me to make any declarations about [the Council's] compliance with the provisions of ss 140 and 141 Local Government Act 2002. That issue was not raised for determination by me on the current application. Also, [the Association's] statement of claim will require substantial amendment to re-orientate it towards formulation of individual claims.[13] Following this, the statement of claim was amended, twice. Both amended statements of claim contained three causes of action – breach of trust, failure to comply with s 76 of the Local Government Act and failure to comply with ss 140 and 141 of the Local Government Act. Mr Goddard QC, who appeared for the Council on the appeal but not at trial, advised us that the ss 140/141 claim was not pursued at trial.[14] In the trial decision Harrison J identified two questions for determination (at [3]): (a) Whether or not the Council had breached its duties as trustee under the three statutory trusts by failing to take their objects into account when resolving to offer the land for sale to the Crown; and (b) If so, whether the decision was nevertheless lawful as a result of its compliance with the relevant provisions of the Local Government Act. [15] The Judge held that: (a) The Council had failed to act in accordance with its duties as a trustee when resolving to offer the land to the Crown. The Judge noted that the evidence suggested that the Council did not consider that it was a trustee in relation to most of the land. He said at [37]: "It is difficult, if not impossible, for a party to assert that it has discharged its duties as trustee when it does not recognise that it holds or owns property in that capacity." (b) The specific respects in which the Council failed to meet its obligations were (at [44]-[45]):• it did not consider whether or not it was prudent to sell the land in order to discharge the statutory purposes of the trusts. Rather, it acted for what it saw as the good of the community as a whole; and• it did not arrange for a tender or some other open market sale process in order to obtain the best price available, in the best interests of the objects of the trust .(c) The Council's compliance with Part 6 of the Local Government Act did not alter or affect the lawfulness of its decision to offer to sell the land to the Crown (at [58]). [16] However, the Judge went on to say:[62] I record that the terms of this decision are not meant to and do not amount to a prohibition on Council's power to sell the Waitara Endowment Land. I repeat my acknowledgement of its statutory power of sale if it acts in accordance with its duties as trustee and the provisions of ss 140 and 141 Local Government Act 2002.[17] We turn now to the issues on the appeal, namely: (a) Should the appellant be granted leave to appeal against the preliminary decision? (b) Did the Council hold the land as a charitable trustee? (c) Was the Council in breach of statutory or trustee obligations in making its decision concerning the land?Should leave to appeal be granted?[18] The Council seeks leave to appeal against two findings made by Harrison J in the preliminary decision, namely that the Council: (a) Held the harbour improvement land on trust for specified public purposes set out in s 9 of the Waitara Harbour Act 1940 (the 1940 Act); and (b) Held the town improvement land on trust for public purposes under a Crown warrant of 27 June 1885. There is no appeal against the Judge's decision in relation to the library land or in relation to the land which the Judge found was held absolutely by the Council.[19] Rule 29(4) of the Court of Appeal (Civil) Rules 2005 enables a party to apply for leave to appeal under Part 2 of the Rules where the time for bringing an appeal has expired. Under R 29(1) the Council had 20 working days to appeal. Harrison J gave his preliminary judgment on 27 October 2004. Accordingly the Council should have filed its appeal by 24 November 2004. In fact, the Council filed its application for leave to appeal on 1 December 2005. It was a little over a year out of time. [20] The grounds advanced by the Council in support of its application are that: (a) The relevant findings were not seen as determinative of the Association's claim, or even necessarily relevant to it; (b) The Council anticipated that the statement of claim would be amended to plead claims based in tort and/or contract; (c) The judgment did not provide for any order or judgment to be entered; and (d) In the circumstances, an appeal against the preliminary decision would have been premature. [21] Mr King for the Association argued that leave to appeal should be denied because: (a) The delay was inordinate; (b) The Association would suffer prejudice if leave were granted. This was because it had conducted its case at trial on the basis that the Council did hold the land on trust; (c) If leave were denied, the effect on the Council would be minimal as it still had the option of starting the sale process again; (d) On the merits, the appeal was weak; and(e) The Council's delay in seeking to appeal was not the result of understandable mistake or of third party error, but was simply the result of a change of mind. [22] The principles applicable to leave applications are well known and accurately summarised in McGechan on Procedure at CR29.04. The Council must establish that the justice of the case requires that it be given the opportunity to challenge the judgment of the Court below. The Court has a wide discretion and will take account of all the circumstances, including matters such as the conduct of the parties, the reasons for the delay, the extent of any prejudice to other parties, the nature of the litigation and the importance of the issues it raises. Leave will not be given lightly. [23] Mr King is correct that the delay is a long one and that leave has been declined in cases where the delay was much less. He cited, for example,Langridge v Wilson (1989) 3 PRNZ 341 (CA) in which the delay was only six weeks but leave was refused. We also agree with Mr King that the Council's explanation for its failure to file an appeal within the appropriate time is weak. The Council says that it anticipated that an amended statement of claim would be filed adding in contract and/or tort. But the first amended statement of claim is dated 22 November 2004, and was presumably filed and served on that date. This was shortly before the period for appeal had expired. The amended statement of claim made it clear that the Association was pursuing a breach of trust claim. It follows from this that we do not accept Mr Goddard's argument that it was reasonable for the Council to refrain from filing an appeal, at least from the time that it received the first amended statement of claim. [24] Despite these considerations, however, we consider that leave to appeal should be granted, for three reasons: (a) The interests of justice favour the grant of leave. As Mr Goddard emphasised, this is not simply a matter between these parties but is one involving public interest considerations. These include issues as to the processes adopted by public bodies and the proper administration of public funds;(b) The appeal against the trial decision was brought within time. It makes little sense that the trial decision be the subject of appeal if the preliminary decision cannot be appealed; and (c) From the perspective of this Court, it has been beneficial to have the assistance of the Judge's findings and reasoning on the issues in the trial to put the preliminary questions in their proper context. Had an appeal against the preliminary decision been filed within time, the hearing of that appeal would likely have been delayed until the outcome of the trial was known. In that sense the Association has not suffered any prejudice or hardship as a result of the delay. [25] To the extent that there has been any prejudice to the Association as a result of the Council's delay, it can be taken into account in costs. [26] Accordingly, we grant leave to appeal against the two findings in the preliminary decision specified at [18] above.Did the Council hold the land on trust?[27] If the appellant's arguments in relation to the trial decision succeed, the questions whether the Council holds the land on trust and if so, what is the extent of its obligations, become irrelevant. However, we heard extensive argument on this aspect of the case and have been asked to address it even if the appeal against the trial decision succeeds, against the possibility that the proposed sale does not proceed. Accordingly we will express our views on this aspect of the case. We begin with the harbour improvement land.The harbour improvement landStatutory context[28] Although the Council's predecessors originally acquired the harbour improvement land by means of various transfers and dispositions, the Council nowholds it in terms of the 1940 Act. The Judge found that the 1940 Act superseded all pre-existing statutory regimes and charitable trusts applicable to this land. That finding is not appealed. [29] The 1940 Act dissolved the Waitara Harbour Board (s 4) and transferred its property to the Corporation of the Borough of Waitara. Sections 5(1), 7 and 9 of the 1940 Act provide (the marginal notes are included in the modern style):5. Assets and liabilities of Board transferred to Waitara Borough - (1) With the exception of the lands described in Schedule 1 hereto, all property, real and personal, belonging to the Board is hereby vested in the Corporation for municipal purposes subject to the provisions of section nine hereof..7. Foreshore endowments vested in New Plymouth Harbour Board - The lands described in Schedule 1 hereto are hereby vested in the New Plymouth Harbour Board in fee-simple as a foreshore endowment in trust for harbour purposes: .9. Application of revenue from endowments – (1) All moneys received by the Council in respect of any lands hereby vested in the Corporation shall be placed to the credit of a separate account and, after payment thereout of the costs and expenses of collecting, receiving, and administering the same and any costs incurred in connection with the promotion and passing of this Act, and the maintenance and improvement of such lands, shall be applied in and towards the following purposes:- (a) The prevention of erosion by the Waitara River within the Borough of Waitara, with power to construct and maintain works within and outside the said borough for such purpose: (b) The maintenance and reconstruction of any bridge over the Waitara River within the said borough: (c) The payment of interest and principal on the loans heretofore raised in connection with any such bridge: (d) The payment of the costs and charges incurred by the Council in complying with the provisions of section six of this Act:(e) The payment of a retiring-allowance of one hundred pounds per annum to the Secretary and Harbourmaster of the Board for a term of four years. (2) The Governor-General in Council may at any time after the first day of April, nineteen hundred and sixty-one, and from time to time thereafter, if it appears that there are surplus moneys in the separate account which may not be required by the Council for the purposes set out in the last preceding subsection, appoint any person or persons to be a Commission under the Commissions of Inquiry Act 1908, to determine whether the whole or any part of those moneys is required by the Council for the purposes set out in the last preceding subsection. If the Commission determines that the whole or any part of the surplus moneys is not so required by the Council, the surplus moneys, or so much thereof as the Commission shall determine, shall be paid by the Council out of the separate account to the New Plymouth Harbour Board for general harbour purposes. .[30] The Judge held at [54] that these provisions had the effect of settling on the Council all of the land previously vested in the Board (with one small exception), "on trust for the specified public purposes set out in s 9". By the words "on trust" the Judge appears to have meant that the Council held the lands subject to a charitable trust, although that is not reflected in the formal judgment. That is the way in which the parties have interpreted the judgment and it is that aspect against which the Council appeals. [31] It will be noted that s 9(2) creates a contingent entitlement to surplus funds in favour of the New Plymouth Harbour Board for general harbour purposes. The Taranaki Regional Council is the successor to the Board and appeared as an intervener on the appeal. Its submissions were directed only to the issues raised on the appeal against the preliminary judgment. In general the Regional Council's submissions supported the preliminary judgment.Discussion[32] All parties accept that the Council is not free to do as it chooses with the harbour improvement land. The Council accepts that it holds the land subject to the restrictions set out in the 1940 Act. That is why it made its decision to offer the land for sale subject to the passage of appropriate legislation. The Association agrees that the Council holds the land subject to the restrictions in the Act, but argues that theCouncil holds the land subject as well to the general obligations of a charitable trustee. [33] Section 5 of the 1940 Act vests all property of the Waitara Harbour Board in (now) the Council for municipal purposes subject to s 9, except the lands vested in the New Plymouth Harbour Board under s 7. The lands vested in the New Plymouth Harbour Board under s 7 are described as being "a foreshore endowment in trust for harbour purposes." Mr Goddard submitted that the Judge was right to find that s 5 did not create a trust. He also submitted that the absence of language in s 9 similar to that in s 7 meant that there was no endowment or trust in relation to the land covered by s 9, which includes the land at issue. [34] The marginal note to s 9 reads "Application of revenue from endowments". There was some argument about the significance of this. Ultimately, however, it does not advance matters. As the historical analysis undertaken by the Judge shows, the land was originally treated as an endowment, to generate income for specified public purposes. That essential character remains under s 9 – the income from the land must be applied for specified statutory purposes. The land can accordingly properly be described as an endowment. The question is whether s 9 creates a charitable trust. [35] Parliament has not been consistent in its use of language in relation to endowment lands, in the sense that some endowment lands are described as being held "on trust" while others are not. This distinction is carried through in s 140 of the Local Government Act. [36] Sections 350 – 353 of the Municipal Corporations Act 1876 enabled the Governor in Council to reserve any of the wastelands of the Crown, for the purpose of granting them to the Corporation of a borough. Section 351 read:A description of all lands so reserved shall be laid before Parliament during its next Session thereafter; and unless both Houses of Parliament by resolution express their disapproval thereof, the Governor may, after the conclusion of such Session, grant such land or so much thereof as he thinks fit, to the Corporation of the borough in trust, either for the use and enjoyment of the inhabitants of the borough, or as sites for public buildings or other special uses, or as an endowment in aid of the borough funds. But ifany such resolution is passed by both Houses, the land shall cease to be so reserved.In this provision endowment lands are described as being held "in trust". [37] In some statutes land was vested in councils or harbour boards "as endowment land" for specified purposes with no explicit use of the word "trust" – see, for example, the Gisborne Harbour Board Empowering Act 1884, s 13; the Akaroa Borough Council Reserves Vesting and Reclamation Act 1887, ss 3, 5, 6, and 11; the Hokitika Harbour Act 1905, s 5; the Whakatane Harbour Vesting Act 1933, s 3. [38] In other cases, however, the word "trust" was used in relation to endowment lands – see the Port Chalmers Compensation Act 1877, s 4; the Bluff Harbour Foreshore Act 1879, s 2; the Reserves and Other Lands Disposal and Public Bodies Empowering Act 1922, s 61(2); s 7 of the 1940 Act. [39] Turning to s 140 of the Local Government Act, that section provides:Restrictions on disposal of endowment property(1) In this section and section 141, property -(a) means real property of every type; and (b) includes every type of estate and interest in property. (2) This section and section 141 apply to property or part of a property vested in a local authority in trust or as an endowment. (3) The property must be retained by the local authority for the purpose for which the property was vested in the local authority. (4) However, - (a) the Minister may approve in writing additional or different purposes - (i) for which the property may be used; or (ii) for which income derived from the property may be used; or (b) unless expressly prohibited by the instrument that vested the property in the local authority, the local authority may sell or exchange the property and use the proceeds of the sale orexchange for a purpose identified by the local authority in accordance with section 141.As can be seen, subsection (2) appears to differentiate between land held on trust and land held as an endowment, although, as Mr Fowler for the Regional Council said, the terms are not mutually exclusive. [40] Clearly land held by a local body under statute as an endowment must be utilised for the purposes for which it was endowed, and the owner's power to deal with the land may be circumscribed in other ways as well (there may be a statutory prohibition against sale, for example). In that general sense, such land is held "on trust", and the owner must meet such obligations in respect of that land as are imposed specifically, or by necessary inference, in the relevant enactment. Whether the relevant statute uses the word "trust" or not, land held in this way may properly be described as being held subject to a statutory trust – seeAuckland City Council v The King [1941] NZLR 659 at 665-7. By "statutory trust" we mean that the land is held on the terms contained in the statute, whether express or implicit. We do not mean that the local body will be subject to all the obligations of a trustee holding property under an ordinary trust. [41] This Court has held that a charitable trust was created where the Crown, acting under a general statutory authorisation, has vested land in a local authority "in trust" for some public purpose - see Kaikoura County v Boyd [1949] NZLR 233 at 261-2 (CA) and Morgan v Wellington City Corporation [1975] 1 NZLR 416 at 419-420 (CA). But that does not necessarily mean that all land held by a local body under statute as an endowment or on trust for some public purpose will be treated as subject to a charitable trust. As Shorland J noted inAuckland Harbour Board v Commissioner of Inland Revenue [1959] NZLR 204 at 210 (SC), the Court is entitled to remove a trustee of a charitable trust, or to remove the trust fund from the control of the trustee(s) in certain circumstances. In the case of a body holding land for harbour purposes under statute such an outcome is not possible, as it would require the Court to override the statute under which the body holds the land. As the case illustrates, the context in which the question of the landholder's obligations arises is important.[42] In Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 (HC) the Hutt City Council held land under statute "on trust" for recreational purposes. The Wellington Harness Racing Club Inc argued that the Council held the land subject to a charitable trust. Hammond J rejected this. He noted that the word "trust" is capable of more than one meaning (at [59]), and went on to say:[61] To my mind, this is a specific statutory scheme in which the word "trust" has been employed, but in the sense and within the provisions of the 1854 Act. There is a "trust" in the sense that the superintendent could not turn the land to his own account, or even to an improper purpose in the hands of the province. But I find it impossible to see how there could be an independent, free-standing trust in the equity sense, somehow standing apart from the provisions of the very statute which enabled the grant. The argument is simply inconsistent with the statute, and even incongruous. The problem, with respect, is the familiar one of counsel seizing upon one word, and taking it out of context (and in this case a statutory context). [63] In my view, from the outset the word "trust" was used as part of and within the distinct statutory scheme to which I have just adverted, and which was then "rolled forward" through the subsequent legislative enactments to which I have also referred.The Judge said that this was "a very distinct form of statutory trust of a public character, on the terms contained in the legislation" (at [67]). [43] In the result, we consider that lands held as an endowment for specified statutory purposes maybe described as being held "on trust" in the sense referred to in [40] above. In some instances, depending on the terms of the relevant statute, a charitable trust may be created. However, that does not give rise to a general proposition that all public entities which hold lands as endowments under statute for specified public purposes hold that land as charitable trustees. The precise extent of the holder's obligations in any particular case will depend on the terms of the statute under which the land is held, assessed in the context in which the issue arises. The holder of the land will be required to meet those obligations that arise expressly or by necessary inference from the relevant statute. [44] Like Hammond J in the Wellington Harness Racing Club case (albeit in a different statutory context), we consider that the 1940 Act creates a statutory trust of a public character in respect of the harbour improvement land. The obligations towhich the Council is subject are those derived from the Act, either expressly or by necessary inference. [45] It follows from this that we agree with Harrison J's conclusion that the Council holds the harbour improvement land on trust according to the specified statutory purposes. But, to the extent that the Judge found that the trust was a charitable trust and that the Council was subject to all the obligations of charitable trustees, we do not agree. Accordingly we allow the appeal against the preliminary decision to this extent.The town improvement land[46] The town improvement land was set aside by the Crown for town improvement by Gazette notice dated 30 October 1876. This was done under statutory authority, namely the New Zealand Settlements Act 1863 and the New Zealand Settlements Amendment and Continuance Act 1865. A warrant to issue certificates of title to the Waitara Borough Council was issued on 27 June 1885. Under the heading "Trusts, Reservations & Restrictions affecting the Land & General Remarks (if any)" the warrant records "As Endowments for the Town of Waitara for Town Improvements". [47] The power of the Council in relation to that land is accordingly circumscribed - the Council holds the land for "town improvements" and so must use it for that purpose. In that sense, the Council holds the land on trust. [48] In Kaikoura County v Boyd this Court held that land vested by the Crown in the Kaikoura County "for an estate in fee simple in trust for the improvement and protection of the Waimanarara River" created a charitable trust for special public purposes. As a consequence, the County was not entitled to deal with the land as though it held it absolutely. Similarly, in Morgan v Wellington City Corporation the Superintendent of Wellington Province, acting under a general statutory authority, vested land in the Wellington City Corporation in trust for public recreational purposes. This Court held that the Corporation held the land under a charitable trust.[49] While the vesting instruments in each of these cases used the word "trust" whereas the vesting instrument in the present case uses the word "endowment", we consider that there is no legitimate basis on which we can distinguish the cases. However, we have some reservations about the analysis adopted in them. While we agree that the County and the Corporation were not entitled to deal with the relevant land as if they owned it absolutely, we doubt that charitable trusts were created, given the nature and extent of the Court's supervisory powers in relation to such trusts. [50] In view of our conclusions on the appeal against the trial decision we are content to proceed on the basis that the town improvement land was held subject to a charitable trust. If, however, the point had been critical we would have wished to consider more fully whether the charitable trust analysis in Kaikoura County andMorgan should be maintained.Did the Council breach its obligations in making its decision?[51] The Judge found that the Council's resolution was "a wrongful exercise of its discretionary power of sale" (at [46] of the trial judgment). As noted at [15] above, the Judge found that the Council failed to meet its obligations as a trustee in two respects. They were: (a) Failing to consider whether or not it was prudent to sell the land in order to discharge the statutory purposes of the trusts; and (b) Failing to arrange for a tender or some other open market process in order to obtain the best possible price. We deal with each reason in turn.Acting for improper purpose[52] In considering the question whether the Council breached its obligations it is important to pay close attention to the terms of the Council's decision (see [8] above). Accordingly that is where we begin. [53] The Council's decision to offer to sell the land to the Crown was subject to important conditions. For present purposes, three require emphasis: (a) The Chief Executive of the Council was authorised to negotiate an agreement with the Crown "for the approval of the Council." In other words, a further decision of the Council was required; (b) The offer was subject to the Council receiving "fair market value" for the land; and (c) The transfer was to take place only after the passage of legislation enabling the sale "free of all statutory trusts, restrictions and other reservations." [54] Before addressing the principal point on this part of the appeal we make two preliminary observations. [55] First, Mr Goddard said that the Judge had misinterpreted the Council's decision to offer the land for sale subject to conditions as a firm decision to sell. It is true that the Judge said at one point that the Council had "exercised its power of sale". Clearly that was wrong as the Council had not made a final decision. But the Judge recognised this at several other points in his judgment (at [37], [45] and [61]). Accordingly we do not accept that the Judge was under any misapprehension in this respect. [56] Second, while the Judge was correct when he said that the Council did not regard itself as holding the bulk of the land "on trust", this is not of any significance in the present context. This is because the Council clearly recognised that it held theland subject to statutory restrictions and resolved that it would not proceed with the proposed sale unless those restrictions were removed. [57] Turning to the principal point, the Judge found that the Council's purpose in making its decision was "contrary to the terms of the statutory trusts", and that the Council "acted for an ulterior purpose" (at [56]). In terms of the statutory restrictions under which it held the land, it is correct that the Council's decision was taken outside the scope of those restrictions. But does that mean that it was wrong for the Council to make a decision contingent on the legislative restrictions being removed? [58] Mr Goddard submitted that when the trustees of a charitable trust apply to the Court for the cy-près application of trust funds under Part 3 of the Charitable Trusts Act 1957 they do not act in breach of trust even though the proposed application will necessarily be outside the terms of the trust. Nor do they act in breach of trust when they seek the passage of a private Act to permit a different use of the funds (for example, the Anglican Church Trusts Act 1981 and the Carter Trusts Act 1961). [59] While Mr Goddard is correct, there is some difficulty with this analogy. Trustees of a charitable trust may seek a cy-près application of trust funds where it is "impossible or impracticable or inexpedient" to give effect to the settlor's original intention (s 32 of the Charitable Trusts Act). The proposed application must be "as close as possible" to the settlor's original intentions. In the present case, there is no suggestion that the statutory purposes for which the Council held the land are incapable of fulfilment, nor can it be said that the Council's proposed sale is as close as possible to the statutory purposes. Moreover, it was accepted that the Council did not consider the statutory purposes in making its decision. [60] However, Mr Goddard's example of trustees seeking legislative changes to enable different uses of trust funds is apposite, as is his reference to statutory corporations seeking changes to their statutes. As to the latter, Mr Goddard submitted that a statutory corporation which wishes to alter or extend its objects may promote legislation for this purpose (see Halsbury's Laws of England (4th ed) vol9(2), para 1145) He drew our attention to s 2 of the Finance Act 1978, which provides:Local Authorities may promote Bills(1) Any local authority may expend money in and about preparing and passing through Parliament, or assisting or opposing in its passage through Parliament, any Bill in cases where the interests of that local authority or the inhabitants of its district are concerned. (2) For the purposes of subsection (1), local authority means any local authority within the meaning of the Local Government Act 2002. .[61] Mr Goddard argued that a statutory corporation may enter into contracts that require it to take actions which are outside its current powers, provided that those contracts are conditional on the passing of legislation extending its objects to include the proposed transaction. He cited Taylor v Chichester and Midhurst Railway Co(1870) LR 4 HL 628. [62] We agree that what the Council did in passing its resolution was analogous to the statutory corporation example. The Council was entitled to decide to offer the land for sale subject to the passage of legislation removing any relevant restrictions, statutory or otherwise. In this connection we note that when the Council originally decided that it would facilitate the freeholding of the land to the leaseholders it promoted a local Act to enable it to do so. As far as we know, there was no suggestion that the Council was acting outside its powers or in breach of its obligations in doing so. Yet the logic of the Association's position in these proceedings is that the Council acted in breach of its obligations on that occasion also. [63] The principle of parliamentary sovereignty supports this analysis. Clearly Parliament is entitled to legislate to free the Council of the statutory restrictions subject to which it holds the land. The courts could not interfere to prevent the Executive from presenting such a Bill to Parliament for its consideration. As Cooke P said in Te Runanga o Wharekauri Rekohu Inc v Attorney-General[1993] 2 NZLR 301 at 308 (CA): public policy requires that the representative chamber of Parliament should be free to determine what it will or will not allow to be put before it. Correspondingly Ministers of the Crown must remain free to determine, according to their view of the public interest, what they will invite the House to consider.[64] Similarly, we can see no basis on which the courts could prevent the Council from seeking to persuade Parliament to enact, or a Minister to promote, such a Bill, given that it is within the Council's competence to do so. [65] Mr King accepted that the Council had the power to seek the passage of legislation removing the statutory restrictions on the sale of the land. However, he argued that in deciding to seek such legislation the Council was obliged to consider the statutory purposes for which it held the land. They were relevant considerations. Mr King noted that this had been accepted by counsel for the Council at trial (see [56] of the trial decision). [66] We do not agree with this analysis. Taking the harbour improvement land as an example, the Council held that land under statutory restrictions. The Council was also the principal organ of local government in the district. It was entitled to seek the removal of the statutory restrictions for what it perceived to be the broader good of the community. Ultimately it would be up to Parliament to determine whether the restrictions should be removed. If they were not, the Council would be obliged to deal with the land in terms of the 1940 Act. But there is no requirement that the Council act within the framework of the 1940 Act when it seeks to have the restrictions imposed by that Act removed. [67] We therefore accept Mr Goddard's submission that, given the terms of the Council's resolution, there was no breach of trust or of the statutory obligations relating to the land in terms of acting for an improper purpose as found by the Judge.No tender or open market process[68] We turn now to the second reason that the Judge gave in support of his finding that the Council had breached its obligations as a trustee, namely that it did not establish a tender or similar open market process for the sale of the land. Theterms of the Council's resolution were that it required a "fair market price" for the land. [69] There are two reasons why this finding cannot be upheld. [70] First, the Judge cited no authority for the general proposition that a trustee is obliged to sell trust property by way of a tender or open market process. The proposition is inconsistent with the provisions of the Trustee Act 1956. Section 14(6) of that Act provides that a trustee will not be guilty of a breach of trust by reason of an alleged inadequacy of price if, before making the sale, the trustee ascertains the value of the land in accordance with s 28 of the Act. Section 28 provides for the trustees to value the property, either themselves if they are qualified to do so, or by obtaining a valuation from a duly qualified person. [71] Mr King sought to meet this point by arguing that s 14(6) does not relieve a trustee of the obligation to execute a trust with reasonable diligence and to conduct the trust's affairs prudently. Acting prudently to obtain the best price, he said, required some form of competitive process. Section 14(6), he submitted, protected a trustee where the competitive process failed, so that the trustee had to resort to selling the property on the basis of a registered valuation. [72] We reject this submission. No authority was cited for it and it is contrary to the plain words of the provision. [73] Second, the finding on breach of trust or statutory obligation in this respect is premature. The Council's decision to offer the land for sale was conditional on the passage of appropriate legislation. If that legislation were to fix the price for the land there would be no question of breach. Even if it did not do so, the terms of the legislation might well address the question of price in some other way. What will be important is the legislative position at the time the Council finally makes its decision to sell. If such a decision is made, the legislative position at the time will determine whether or not the Council's decision is lawful.Decision[74] We grant leave to appeal against the preliminary decision and uphold the appeal against that decision to the extent that it is inconsistent with the judgment of this Court. We allow the appeal against the trial decision and quash the declarations made. While costs would normally follow the event, we make no order as to costs in this instance as a result of the Council's delay in filing its appeal against the preliminary decision. Costs in the High Court are to be determined by that Court in light of our decision.Solicitors: Simpson Grierson, Wellington for Appellant Till Henderson King, New Plymouth for Respondent Phillips Fox, Wellington for Taranaki Regional Council