NORTHLAKE INVESTMENTS LTD v OTAGO REGIONAL COUNCIL [2020] NZCA 567

NORTHLAKE INVESTMENTS LTD v OTAGO REGIONAL COUNCIL [2020] NZCA 567 [18 November2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA331/2020[2020] NZCA 567BETWEEN NORTHLAKE INVESTMENTS LIMITEDApplicantAND OTAGO REGIONAL COUNCILRespondentHearing: 30 September 2020Court: Collins, Mallon and Ellis JJCounsel: A F Pilditch for ApplicantN M Laws for RespondentJudgment: 18 November 2020 at 9.00 amJUDGMENT OF THE COURTThe application for leave to appeal is granted.____________________________________________________________________REASONS OF THE COURT(Given by Mallon J)Introduction[1] The applicant (Northlake), a property development company, was convicted inthe District Court of discharging a contaminant in contravention of s 15(1)(b) ofthe Resource Management Act 1991 (the RMA), which is an offence under s 338 ofthe RMA.1 It was fined $42,500 and ordered to pay legal costs and disbursements.2[2] Northlake appealed the conviction on the grounds that:(a) The charge should have been brought on the basis that any liability forthe discharge was vicarious. Pursuant to s 340 of the RMA, this wouldhave meant that Northlake had a defence if it established that it couldnot reasonably be expected to have known the offence was to be or wasbeing committed, or that it had taken all reasonable steps to preventthe offence.(b) The Judge erred in finding the charge proven on the basis that Northlakehad not taken the precautions of a prudent developer to preventthe discharge.[3] The High Court dismissed the appeal.3[4] Northlake applies for leave to bring a second appeal. This Court may grantleave only if satisfied that the appeal involves a matter of general or public importanceor that a miscarriage of justice may have occurred, or may occur, unless the appeal isheard.4 Northlake contends the question of when primary liability under s 15 orderivative liability under s 340 applies is a question of general or public importance.It also contends there was a miscarriage of justice because the Courts below relied onexpert evidence of a prudent developer rather than on the basis of the information andadvice available to Northlake at the time.1 Otago Regional Council v Northlake Investments Limited [2019] NZDC 11710 [District Courtdecision].2 Otago Regional Council v Northlake Investments Limited [2019] NZDC 17582 [Sentencingnotes].3 Northlake Investments Limited v Otago Regional Council [2020] NZHC 1144 [High Courtjudgment]. The Court also dismissed an appeal against the sentence.4 Criminal Procedure Act 2011, s 237(2).The legal issue[5] Northlake submits that there are a range of permutations by which liability fora discharge offence may arise:(a) as a person who is a primary or active discharger of the contaminant(s 15);(b) as a person who is a passive discharger of the contaminant (s 15);(c) as a person who has permitted the discharge (s 338(1)); or(d) as a principal with vicarious liability for the acts of its agent (s 340).[6] The possibility of two permutations under s 15 (active and passive discharger)arises from this Court's decision in McKnight v NZ Biogas.5[7] In this case the charge was framed as follows:Northlake Investments Limited together with Civil Construction Limiteddischarged contaminants (silts and sediments) onto land in circumstanceswhich might have resulted in those contaminants (or any other contaminantsemanating as a result of natural processes from those contaminants) enteringwater, namely water in the Clutha River, when the discharge was not expresslyallowed by a National Environmental Standard or other regulations, a rule ina Regional Plan as well as a rule in a Proposed Regional Plan for the sameregion (if there is one), or a resource consent.Legislative reference: Sections 15(l)(b), 338(l)(a) and 339 of the ResourceManagement Act 1991 and Section 66 of the Crimes Act 1961.[8] Northlake submitted that its liability under s 15 could only be for allowing theescape (that is, as a passive discharger) in terms of Biogas.6 The District Court Judgefound Northlake liable as both an active and a passive discharger under s 15.75 McKnight v NZ Biogas Industries Ltd [1994] 2 NZLR 664 (CA).6 It did not give notice of an intent to rely on either of the defences to s 15 provided for in s 341.Difficulties for Northlake would appear to be proving the "necessary for the purposes of saving orprotecting life or health" component of s 341(2)(a)(i) and the event could not reasonably havebeen "provided against" limb of s 341(2)(b)(i).7 District Court decision, above n 1.[9] Civil Construction Ltd (CCL), Northlake's contractor, pleaded guilty beforetrial. It seems that the inclusion of s 66 of the Crimes Act 1961 may have causedconfusion. Northlake says it understood that it was a party to CCL's offending. Infinding Northlake liable, the Judge amended the charge to remove the reference tos 66. The Judge did so because he had determined they had played different roles inthe chain of causation and contributed to the discharge in different ways and wereindependently liable.8[10] Northlake maintained before and during the trial that it ought to have beencharged under s 340 and that it would not be liable if it could establish the statutorydefence under s 340(2)(a)(ii). The District Court Judge rejected this becauseNorthlake had played an active role in the discharge irrespective of CCL's failings.This meant s 15 was available and the Judge determined it had been proven. In anyevent, the Judge considered a defence under s 340 would not have been established.9[11] In the High Court Clark J did not consider whether Northlake was liable as anactive discharger (as found by the District Court relying on Biogas).10 The Judgefocussed on Northlake's defence that it had taken all reasonable care. She consideredthe formulation of the charge (as between ss 15 and 340) had little bearing becauseboth required Northlake to have taken all reasonable care.11 This meant the appealturned on the Judge's evaluation of the evidence as to the steps Northlake took toprevent a discharge and the sufficiency of those steps.12[12] Both the District and High Courts considered, therefore, that on the evidenceit would have made no difference whether the charge was formulated as principalliability under s 15 or vicarious liability under s 340. Unless there is an error in theirassessment of the evidence, the legal issue Northlake raises will not result inthe quashing of its conviction if leave is granted. We turn to consider the miscarriageground for leave.8 At [77].9 At [79].10 High Court judgment, above n 3.11 At [27].12 At [30].The miscarriage issue[13] As to the miscarriage ground, the key point as it was advanced at the hearingwas whether the lower Courts properly took into account that Northlake had expertadvice that differed from that adduced at the trial and whether Northlake was entitledto rely upon it.[14] The Courts below relied on the expert evidence of Mr Dent called by Northlakeabout silt and sediment controls. He is a civil engineer rather than an expert developer.Northlake's expert had communicated to the Queenstown Lakes District Council on28 July 2017 that "the stormwater control measures currently in place at Northlake[are] fundamentally working as designed".[15] The District Court Judge accepted that Northlake took a responsible andstructured approach to the project and sought to avoid environmental problems.13However, "[h]aving regard to Mr Dent's evidence", a reasonably prudent developerwould have initiated a full review of the SMP after the July discharge. The High CourtJudge similarly concluded:[48] It is the failure of Northlake to insist on a stronger sediment controlsystem, in accordance with the expectations of expert opinion at the time(albeit Northlake says it was not informed of this by its own expert), thatprevents Northlake from demonstrating that a miscarriage of justice hasoccurred.[16] The Court in Biogas did not need to address whether a defendant is liable unders 15 if they reasonably rely on expert advice. The present case, unlike Biogas, involvesa case where the defendant engaged expert advice. The issue is whether a defendantis liable under s 15, whether as an active or passive discharger, if it acted reasonablyin engaging expert advice and in relying on it. As this issue was not squarely addressedin the lower courts, we consider leave should be granted. A further issue is whetherliability potentially arises under ss 15 or 340 or both.13 District Court decision, above n 1, at [67].Conclusion and result[17] We consider leave to appeal should be granted. The issues for the appeal are:(a) Is a developer liable under s 15, as an active or passive discharger, if itacted reasonably in engaging expert advice and in relying on it?(b) If a developer is relying on expert advice to address the risk ofdischarge, does the developer's liability potentially arise under ss 15 or340 or both?(c) Did Northlake act reasonably in engaging expert advice and in relyingon it?Solicitors:Justin Hollows, Winton Group, Auckland for ApplicantRoss Dowling Marquet Griffin, Dunedin for Respondent