ROTORUA DISTRICT COUNCIL v NGĀTI WHAKAUE EDUCATION ENDOWMENT TRUST BOARD [2018] NZCA 143

ROTORUA DISTRICT COUNCIL v NGĀTI WHAKAUE EDUCATION ENDOWMENT TRUST BOARD[2018] NZCA 143 [9 May 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA332/2017[2018] NZCA 143BETWEEN ROTORUA DISTRICT COUNCILAppellantAND NGĀTI WHAKAUE EDUCATIONENDOWMENT TRUST BOARDRespondentHearing: 20 March 2018Court: French, Brown and Williams JJCounsel: L F Muldowney and P V Cornegé for AppellantL McEntegart and G J Dennett for RespondentJ M Prebble and R M Polaschek for Valuer-General as IntervenorJudgment: 9 May 2018 at 11.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Brown J)Introduction[1] The primary issue of law on this appeal is whether a specific statutoryprohibition on the sale of land is to be taken into account in the course of applying thehypothetical sale method of determining the land's capital value for rating purposes.A second issue concerns the interpretation of s 21(1)(b) of the Rating Valuations Act1998 (RVA).[2] The respondent, the Ngāti Whakaue Education Endowment Trust Board(the Trust), owns extensive property in downtown Rotorua which is governed by theReserves and Other Lands Disposal Act 1995 (the 1995 Act). Under that Act, whichderives from a commitment of the Crown to Ngāti Whakaue under the Treaty ofWaitangi, the Trust owns the land for educational purposes and (subject to twoexceptions) is prohibited by s 7(1)(b) from selling it:7 Trust property(1) Notwithstanding anything in section 19 of the School Trustees Act1989, or in any other Act or rule of law,—(b) the Board has power to lease the land to which this sectionrelates, but shall not sell or otherwise dispose of any part ofthe land except—(i) for the purpose of subdividing the land to make itmore suitable for leasing; or(ii) for the purpose of providing access or any otherpurpose ancillary to a subdivision:[3] Hence the Trust's properties are leased on perpetually renewable terms.[4] In its 2014 rating assessment the appellant, the Rotorua District Council(the Council), in a departure from its previous practice, did not apply a discount to itsvaluation of a test property of the Trust, a Rotorua lakefront hotel. In doing so, itapplied s 21 of the RVA which provides that where land is subject to a lease,"circumstances particular to the property concerned that do not reflect the prevailingmarket conditions at the date of valuation are to be disregarded".11 Rating Valuations Act 1998, s 21(1)(b).[5] The Trust's objection to the Land Valuation Tribunal was declined.2 Howeveron appeal3 Palmer J ruled that the valuation must take into account the effect of thestatutory prohibition on alienability, reasoning that the valuation should be based onthe price that would be set on a notional sale between a willing but not anxious buyerand seller of the Trust's estate which was burdened by the permanent prohibition onalienability.4 Palmer J did not consider that s 21 of the RVA was applicable becausethe reason why the property might be subject to discount derived from itsinalienability, not from the existence or terms or other circumstances of the applicablelease.5[6] The Council appeals on both issues. The Valuer-General was granted leave tointervene by Palmer J. The parties and the Valuer-General were in agreement that thefollowing issues fell to be determined on this appeal:(a) Should the statutory restriction on alienation in the Reserves andOther Lands Disposal Act be taken into account for rating valuationpurposes?(b) Does s 21 of the RVA require a valuer to disregard the statutoryrestriction on alienation in the Reserves and Other Lands Disposal Actwhen valuing the respondent's property?(c) Did Palmer J direct the prohibition on alienability should diminish thevalue of the respondent's land to some extent and was this improperin the circumstances?Factual background[7] We gratefully adopt the Judge's summary of the history of Māori ownership ofleasehold land in downtown Rotorua and the Fenton Agreement of 25 November 1880between Ngāti Whakaue (and selected representatives of other inland Te Arawa iwi)and the Crown by which the township of Rotorua would be established and Europeansettlement promoted:2 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council[2016] NZDC 7487.3 As the appeal concerned substantially a question of law only, the parties agreed it should be heardand determined by a judge sitting alone under s 13(4)(c) of the Land Valuation Proceedings Act1948.4 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council[2017] NZHC 60, [2017] NZAR 376 at [35].5 At [32].[4] The Fenton Agreement involved land passing through the Native LandCourt and becoming general land. Some land was to be owned byNgāti Whakaue and leased out and some was to be used as reserves and otherpublic purposes. One aspect was the use of rental proceeds from some of theland for secondary education in Rotorua. This evolved in a series of legalsteps:(a) A 1905 Order in Council provided that the rents from the land werereserved for secondary schools under the control of the AucklandEducation Board.(b) Section 12 of the Reserves and Other Lands Disposal Act 1926permanently reserved the land as an endowment for a High School atRotorua and allowed for the vesting of the lands in the Board of theschool.(c) Section 8 of the Reserves and Other Lands Disposal Act 1928provided the net revenue would be applied 55 per cent to the paymentof teacher salaries at Rotorua High School and the balance as agreedwith the Minister of Education.(d) Section 12 of the Reserves and Other Lands Disposal Act 1960 vestedthe land in the Board in trust, as agreed with the Ministry ofEducation, making the revenue also available for a secondHigh School in Rotorua.(e) The Rotorua High Schools Board Empowering Act 1979 extended theBoard's powers to purchase further lands and accept gifts and namedthe endowment lands the Ngāti Whakaue Endowment.(f) Section 6 of the Reserves and Other Lands Disposal Act 1982extended the benefit of the revenue to additional schools.(g) Section 19 of the School Trustees Act 1989 vested the land in thePublic Trustee.[5] In a claim to the Waitangi Tribunal, WAI 94 in 1989, Ngāti Whakaueclaimed the Crown had breached the Treaty of Waitangi through several of itsactions in relation to the Fenton Agreement and 1881 Act. This included that:Ngāti Whakaue have been prejudicially affected by section 12 ofthe Reserves and Other Lands Disposal Act 1926, section 12 ofthe Reserves and Other Lands Disposal Act 1960, the Crown'sacquisition of the Rotorua High School endowment lands and theirsubsequent transfer to the Public Trustee pursuant to theSchool Trustees Act 1989 [6] In 1993, as part of the Settlement Agreement of WAI 94 the Crownagreed:8. The Crown will address two further concerns ofNgāti Whakaue, at administrative cost only to the Crown, asan expression of good faith of the Crown and as part of theCrown's Article I Treaty of Waitangi objectives by:b. initiating legislation to amend the terms of the Trustthat administers the Rotorua High School endowmentland under the terms of section 12 of the Reserves andOther Lands Disposal Act 1960 so that six membersof the governing body (including the Chairperson)shall be representatives of Ngāti Whakaue, asnominated by the Pukeroa-Oruawhata Trust andNgāti Whakaue Tribunal Lands Inc, and fivemembers shall be representatives of the Rotorua HighSchools, and the name of the endowment shall bechanged to the Ngāti Whakaue EducationEndowment; further, the Crown will seek to amendthe terms of the endowment so that the purpose of theendowment shall be the general purpose ofeducation [7] This Treaty commitment was implemented by ss 6 to 12 of theReserves and Other Lands Disposal Act 1995. The Act:(a) establishes the Ngāti Whakaue Education Endowment TrustBoard (the Trust Board), with members appointed by theTrustees of Pukeroa-Oruawhata and the boards of fiveRotorua secondary schools;(b) vests some 16 acres of specified valuable commercialproperties in downtown Rotorua in the Trust Board in trust;(c) provides "the Board has power to lease the land to which thissection relates, but shall not sell or otherwise dispose of anypart of the land" except for subdividing it to make it moresuitable for leasing and ancillary purposes (s 7(1)(b)); and(d) requires the net revenue to be applied by the Trust Board "forthe general purpose of education" (s 7(1)(c)).(Footnotes omitted.)[8] Following this Court's decision in Valuer-General v Mangatu Inc theValuer-General issued guidance notes to assist local authorities to value Māorifreehold land.6 Broadly speaking those guidelines indicated that a discount of between3.5 and 10 per cent when compared with similar properties was appropriate in respectof Māori freehold land, depending on the number of owners.[9] In assessing rates from 1999 to 2011, in the mistaken belief that the Trust'sland was Māori freehold land, the Council followed the Valuer-General's guidance6 Valuer-General v Mangatu Inc [1997] 3 NZLR 641 (CA).notes for valuing Māori freehold land and applied a 10 per cent discount in thevaluation of the Trust's land. However prior to the general valuation of 1 July 2014 itwas realised that the Trust's properties were general land, not Māori freehold, andconsequently no discount was applied.Rating law[10] Rates are set by local authorities under the Local Government (Rating) Act2002 (LGRA) based on the value of rateable land. All land is rateable unless it isspecifically exempted.7 Under the LGRA, local authorities can assess the rateablevalue of land based on one or more of the annual value, capital value or land value ofthe land. In particular we understand that the capital and land value measures areconsistently used for rates purposes. They are defined in the RVA:8capital value of land means, subject to sections 20 and 21, the sum that theowner's estate or interest in the land, if unencumbered by any mortgage orother charge, might be expected to realise at the time of valuation if offeredfor sale on such reasonable terms and conditions as a bona fide seller mightbe expected to requireland value, in relation to any land, and subject to sections 20 and 21, meansthe sum that the owner's estate or interest in the land, if unencumbered by anymortgage or other charge, might be expected to realise at the time of valuationif—(a) offered for sale on such reasonable terms and conditions as a bona fideseller might be expected to impose; and(b) no improvements had been made on the land.9[11] The capital value parameter has applied substantially unchanged for more thana century. The Government Valuation of Land Act 1896, which provided for theperiodical valuation of all landed properties in the colony, originally required that thevaluation roll should state the name of the occupier and owner of the land and thecapital value of the land. In Re Hutt Park and Racecourse Board that was construedto mean that the value of landed property had to be ascertained without reference to7 Schedule 1 of the Local Government (Rating) Act 2002 sets out broad categories of non-rateableland.8 Section 2 (footnote added).9 "Land value" is the phrase which replaced "unimproved value".any restrictions upon the power of the owner to sell or otherwise deal with a particularproperty.10[12] However the Government Valuation of Land Act Amendment Act 1900amended the particulars of the valuation roll to include a requirement to state the nameof the owner of the land and "the nature of his estate or interest therein".11 Theimplications of the changes were explained by Cooper J in Re Hutt Park andRacecourse Board:12Under the Act of 1896 it was the land that was to be valued, and the onlymatter to be ascertained was its capital value. Under the Amendment Act it isno longer the land which has to be valued, but only the owner's estate orinterest therein as if unencumbered by any mortgage or charge thereon; and itis not the theoretical value of the owner's unencumbered estate or interest asif so unencumbered which is to be the capital value, but the marketable valueof such estate or interest.[13] Consequently, with reference to the valuation of a racecourse reserve overwhich the trustees had no power of disposition, Cooper J held:13Under the Act of 1896, prior to its amendment by the Act of 1900, it may verylikely have been that the valuation which could properly have been made ofthis land was the capital value of the land without reference to any restrictions,and that the liability to pay rates had to be determined by the special provisionsof "The Rating Act, 1894"; but the alterations created by the Act of 1900 have,in my opinion, made it quite clear that from the time that Act came into forcethe valuation must be made upon a totally different principle, and that this landmust be valued only upon the basis of the limited powers of disposition whichthe trustees have in law over this reserve.[14] The hypothetical sale construct was considered by this Court inValuer-General v Mangatu Inc which concerned the valuation for rating purposes ofMāori freehold land within the meaning of s 129(1) of the Te Ture Whenua Māori Act1993 (the 1993 Act).14 The key issue was whether constraints on the alienability ofMāori freehold land in the 1993 Act were to be taken into account in arriving at theland value under the Valuation of Land Act 1951.10 Re Hutt Park and Racecourse Board (1907) 27 NZLR 246 (SC) at 249.11 The Government Valuation of Land Act Amendment Act 1900, s 6.12 At 251.13 At 252–253.14 Valuer-General v Mangatu Inc, above n 6. The relevant definition was that of "land value" in s 2of the Valuation of Land Act 1951.[15] The Court identified three crucial features of the RVA statutory scheme:15i. The subject of the valuation is "the owner's estate or interest" in the land;it is not a valuation of the pure fee simple.ii. The valuation is made on the statutory premise that the owner will sell itsestate or interest in the land. The definition envisages a notional sale by awilling but not anxious seller to the hypothetically willing but not anxiousbuyer. It explicitly assumes "a bona fide seller".iii. The land value is the sum which the owner's estate might be expected torealise if offered for sale on such reasonable terms as a bona fide sellermight be expected to impose. The value is what a willing but not anxiousseller would sell for and what a willing but not anxious buyer would beprepared to pay for the property. As in other valuation matters it must beassumed that the hypothetical purchaser is a person of reasonableprudence, properly informed as to all the relevant facts.Issue One: Should the s 7(1) statutory restriction on alienation be taken intoaccount for rating valuation purposes?The High Court judgment[16] The Judge's reasoning on this issue was succinct. Having observed that therestriction in s 7(1)(b) amounted to a prohibition on alienability which was morerestrictive than in most of the other statutes considered in the cases cited in argument,Palmer J concluded:16[34] As made clear by Richardson P for the Court of Appeal in Mangatu,the valuation process for rating purposes estimates the price that would bestruck by a willing but not anxious buyer and seller of the owner's estate in anotional sale. The statutory prohibition on alienability of the Trust Board'sland does not alter that. But it does mean that what is to be valued is theTrust Board's land subject to the prohibition on alienability, as the other caselaw cited by Mr McEntegart also establishes. The same point disposes of thesubmission that no deduction should be made because the prohibition onalienability is personal to the owner.15 Valuer-General v Mangatu Inc, above n 6, at 649.16 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council, above n 4.[35] I hold the valuation should be based on the price that would be set ofa notional sale between a willing but not anxious buyer and seller of theTrust Board's estate which is burdened by a permanent prohibition onalienability. Accordingly the valuation must take into account the effect onthe valuation of the prohibition on alienability.The Council's submission[17] Citing Mangatu, Mr Muldowney for the Council contended that for ratingvaluation purposes an assumption is made that inalienable land can be sold. Indetermining whether restrictions on sale or use of land should be taken into accountfor valuation purposes, it is necessary to draw a distinction between restrictions as toalienability or use which are permanent and those which are personal or which wouldnot apply to a purchaser. In particular reliance was placed on the observations ofHosking J in Thomas v Valuer-General:17The restrictions may be of a character personal to the owner, ceasing to existupon a sale or not devolving on the buyer. On the other hand they may beinherent or immanent so as to pass on to a buyer, with the result that the estateor interest continues subject thereto notwithstanding the alienation.[18] While noting that Mangatu distinguished the restrictions in Thomas from thosein the 1993 Act, Mr Muldowney noted that this Court did not suggest that either theoutcome in Thomas or the Court's general observations as to the distinction betweeninherent and personal restrictions on sale and use were incorrect.[19] The Council criticised the High Court judgment for failing to deal with or evenanalyse the distinction between restrictions inherent to the land and those which arepersonal to the owner. Distinguishing earlier authorities, Mr Muldowney submittedthe s 7(1)(b) prohibition is personal to the Board, existing only because ofNgāti Whakaue's agreements with the Crown.18 Were the land subject to ahypothetical sale, there would be no logical basis for a restriction on alienation toapply. The 1995 Act was said to be similar to a private deed of trust and the fact thatthe restriction was imposed by statute should not elevate its significance.The prohibition did not affect the way in which a hypothetical purchaser would receiveor be required to use the land.17 Thomas v Valuer-General [1918] NZLR 164 (SC) at 173.18 The Fenton Agreement and the Settlement Agreement of WAI 94: see [7] above.The Valuer-General's submission[20] The Valuer-General intervened in the appeal in order to assist the Court inclarifying the approach to the rating valuation process and in particular the place ofthe hypothetical sale assumption within that system. On Issue One theValuer-General's position was aligned with the case for the Council.[21] In the Valuer-General's view this case was an appropriate one for this Court toclarify the law relating to rating valuations and to restate the general principles whichdistinctly underpin rating valuation. He submitted:The ultimate goal of rating valuation is to create an equitable basis for valuinglike properties. The statute directs that the amount that a property would sellfor is used as a proxy for assessing what a property is worth. That valuationreflects the real value of the land in the market: limitations on the owner'sactual estate in land that would pass on any hypothetical sale to the purchaser,or which externally affect the value of the land, must be taken into account.But, the underlying focus on equality of valuation requires that owner-specificlimitations on the use of land are not taken into account. Otherwise, theselimitations will provide an uneven valuation over land that is otherwise similarin value. The statutory hypothetical sale concept in the RVA is central toensuring that equality of valuation is reached.[22] For the Valuer-General Mr Prebble submitted the correct approach to ratingvaluation requires:(i) the assumption that the land is capable of being sold (regardless of anyreal restrictions on that land being sold);(ii) the identification of the estate which would pass to the purchaser, andwhether there are any limits to that estate which would continue toburden the land after sale; and(iii) the factual evaluation of the worth of that estate to a putative purchaser,and specifically whether the restrictions on that estate or other featuresof the land would affect its value.He contended that Palmer J erred in his analysis of both the effect of the hypotheticalsale process and the effect of the restriction on the sale of land on its value, andinsufficiently separated the stages of analysis, in particular stages two and three.[23] Addressing Issue One Mr Prebble submitted that general restrictions affectingland are taken into account in valuation, citing as examples Re Hutt Park andRacecourse Board19 and Valuer-General v Ormsby.20 Similarly planning restrictionsaffecting land are factual circumstances which affect the land regardless of the ownerand must be taken into account when assessing the value of the land under the RVAdefinitions.21 By contrast, personal restrictions on dealing with land are to bedisregarded.22 Echoing the Council's argument that the closest comparison is landheld on a personal trust, the Valuer-General submitted the fact that the restriction inthis case is statutory and would require legislative change does not alter the fact theactual "estate" held by the owner is an unrestricted one.The Trust's submission[24] For the Trust Mr McEntegart submitted that where there is a significantstatutory prohibition on the sale of an owner's estate or interest in the land, the ownerdoes not have an absolute fee simple. Rather, as held in Valuer-General v Ormsby,23the restriction on alienation (or the absence of any power of alienation) is not a chargeon the land but a limitation on the owner's estate or interest in the land.[25] He submitted that a rating valuation is made on the statutory premise that anowner will sell its estate or interest in the land. In the case of land that cannot be sold,the resolution of the conflict between the fiction (that the land can be sold) and thereality (that it cannot) was as explained by Denniston J in Ormsby:24I think the proper standard in respect of this land is, what sum would apurchaser give for being placed, in respect of it, in exactly the same positionas the owner? What, that is, would he give for the possession of the land for19 Re Hutt Park and Racecourse Board, above n 10.20 Valuer-General v Ormsby (1907) 27 NZLR 44 (SC).21 Re An Arbitration between the Auckland Hospital Board and The Auckland Rugby League (Inc)[1966] NZLR 413 (SC).22 Thomas v Valuer-General, above n 17.23 Valuer-General v Ormsby, above n 20.24 At 48.the same estate as the respondent — subject, that is, to the same restrictionson alienation?Mr McEntegart submitted that the High Court correctly adopted such an approach inthe present case.[26] Mr McEntegart contended that the s 7(1)(b) prohibition on sale is not (asthe Council and the Valuer-General maintained) personal to the Trust, with theconsequence that it must be disregarded for the purpose of the valuation. Unlike thecircumstance in Thomas,25 where restriction on alienation was characterised as beingof a personal class because the land was saleable, the subject land cannot be sold. Noris the restriction one unilaterally imposed by the Trust, via for example a trust, lease,licence, mortgage or other charge and therefore irrelevant to rating value.Analysis[27] In our view the answer to Issue One turns on whether the restriction onalienability in s 7(1)(b) is an incident of the Trust's estate or interest in the relevantland.[28] It is helpful as a first step to elucidate the distinction drawn in Mangatubetween what is described as a pure fee simple and an owner's estate or interest inland.26[29] It is recognised today that an estate in land is neither more nor less than abundle of rights which may be exercised in respect of the piece of land in which it isheld.27 An estate in fee simple, which endures until the owner for the time being ofthat estate dies intestate without successors, is the largest estate known to the law.28An estate in fee simple confers on its owner the fullest rights of possession, use,enjoyment and alienation allowed by the law.29 It is for almost all practical purposesequivalent to full ownership of the land itself.3025 Thomas v Valuer-General, above n 17.26 See [15] above.27 Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed, LexisNexis) at [3.001].28 At [6.002(a)].29 At [6.002(b)].30 Mabo v Queensland (No 2) (1992) 175 CLR 1 at 80.[30] Some statutes make provision for valuation by reference to the fee simple ofthe land. As Lord Radcliffe explained in Gollan v Randwick Municipal Council, thefee simple refers not to the actual title vested in the owner but to an absolute or puretitle such as constitutes full ownership in the eyes of the law.31 The GovernmentValuation of Land Act 1896 prior to its amendment in 1900 was such a provision.32[31] In Mangatu the Valuer-General contended that in making a valuation he wasrequired to assume the sale of the land and to ignore restrictions on sale. Reliance wasplaced on Lord Radcliffe's observation in Gollan:33It is not in dispute that a formula of this kind requires the making of certainhypotheses. A sale of the fee simple has to be assumed whether or not the landin question can legally be sold, and the fact that there is some lawfulimpediment to sale cannot be allowed to enter into the assessment of value [32] It was in response to that submission that this Court emphasised the first of thethree crucial features in the RVA scheme, namely that the definition of land value inthe New Zealand statute focused on the owner's estate or interest, not on the pure feesimple.34 It was there held that the determination of land value must recognise thelegal constraints on alienability in the 1993 Act.[33] It is convenient next to consider the implications for land valuation of statutorylimitations on interests in land. As Peter Butt recognises,35 the common law's conceptof fee simple, developed by the courts since medieval times, may of course beamended by statute, either in general or in particular circumstances. Consequently therights conferred then become a question of interpretation of the statute. The authoritiescited for that proposition include decisions of the High Court of Australia concerningthe Aboriginal Land Rights Act (Northern Territory) Act 1976 (Cth).36 The estate orinterest in land the subject of grants under that Act were not intended to completely31 Gollan v Randwick Municipal Council [1961] AC 82 (PC) at 101.32 See [11] above.33 Gollan v Randwick Municipal Council, above n 31, at 94.34 See [15] above.35 Peter Butt Land Law (6th ed, Law Book Co, Sydney, 2010) at 125.36 Northern Territory of Australia v Arnhem Land Aboriginal Land Trust [2008] HCA 29, (2008) 236CLR 24; and Wurridjal v Commonwealth of Australia [2009] HCA 2, (2009) 237 CLR 309.accord with one of fee simple as reflected in the denial of the essential characteristicof alienability.37[34] The variety of restrictions imposed by statute in Australia are reviewed in detailin The Law Affecting Valuation of Land in Australia.38 Because in Australia valuationis undertaken by reference to the fee simple of the land, the inquiry is directed towhether the statutory restriction impacts on the pure fee simple. However of someinterest for the present case is the decision of the State Administrative Tribunal ofWestern Australia in Broadcast Australia Pty Ltd v Valuer General39 which concerneda restriction on transfer imposed by s 18 of the National Transmission Sale Act 1999(Cth). It was held that the restriction was not an incident of the absolute or pure titlebut rather an incident of Broadcast Australia's estate or interest in the land.40[35] Of course in New Zealand the relevant question is whether a statutoryrestriction is an incident of an owner's estate or interest in the land or merely alimitation that is confined to or "personal to" the owner and consequently does notaffect subsequent owners.[36] The Valuer-General acknowledged that in most cases New Zealand statutoryrestrictions will continue and affect subsequent owners of land. However he made thepoint that the reasoning process must be clearly stepped through. Emphasising thedistinction drawn between general and personal restrictions, he stressed theimportance of clearly identifying the nature of a restriction and whether it affects theactual estate being sold. Limitations that only affect the current owner of land, suchas restrictive trust structures, were said not to be relevant to assessing the marketablevalue of the land.[37] Criticism was directed at Palmer J's alleged failure to consider the nature ofthe restriction under the 1995 Act by, so it was said, simply stating that, followingMangatu, the purchaser was assumed to take the land subject to the statutory37 Northern Territory of Australia v Arnhem Land Aboriginal Land Trust, above n 36, at [143], perKiefel J.38 Alan A Hyam The Law Affecting Valuation of Land in Australia (5th ed, The Federation Press,Sydney, 2014) at 138–145.39 Broadcast Australia Pty Ltd v Valuer General [2011] WASAT 58.40 At [66]–[67].restrictions and that this rendered irrelevant the submission that it was a "personal"restriction.41[38] The Valuer-General considered that Palmer J's observation did not correctlyanalyse what estate the owner would be able to pass on a hypothetical sale. Hecontended that under the rating valuation process it is conceivable that a statutoryrestriction could still only be personal to the owner and therefore would not affect theestate being "sold" by the owner. Hence Mr Prebble submitted that, by treating it asaxiomatic that all statutory restrictions on dealing with land must be treated asaffecting the value of the land to a subsequent purchaser, Palmer J did not correctlyapply the hypothetical sale stage of analysis.[39] We do not consider that the Valuer-General's criticism of the judgment isjustified. In our view his approach proceeds on an erroneous view of the Trust's estateor interest in the land. That is demonstrated by the Valuer-General's following analysisof the implications of s 7(1)(b):The Trust is therefore limited in its power to deal with the land: it can leasethe land, but cannot sell it. The Trust's actual interest in the land is not limited,despite its powers being restricted. In practice, the various sections are leasedon perpetually renewable terms. Given the absolute prohibition on the Trustselling the land, the [1995 Act] does not contemplate what restrictions wouldaffect subsequent owners of the land.(Emphasis added.)[40] Then after reviewing Mangatu, Re Hutt Park and Racecourse Board and othercases,42 the submission continued:Under [the 1995 Act], there is no wider statutory regime applicable to the land.This is unlike previous cases dealing with land affected by statutorilydesignated categories like Maori freehold land (under [the 1993 Act]) orreserve land. In those cases, there is no statutory basis for assuming that therestrictions which affect the land would not affect a subsequent buyer. Bycontrast, here there is no enduring category land which would continueregardless of the owner: the property is held as a fee simple, and therestrictions are related to the Trust structure itself.41 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council, above n 4,at [34]. See [16] above.42 Valuer-General v Trustees of the Christchurch Racecourse HC Christchurch AP343/92,13 September 1994; and Carter Holt Harvey Forests Ltd v Valuer-General HC ChristchurchAP7/98, 27 November 1998.(Emphasis added.)[41] We view the nature of the Trust's estate or interest in the relevant landdifferently. Section 6 of the 1995 Act established the Trust as a body corporate withperpetual succession. The land specified in s 7(2) was vested in the Trust in trust onthe conditions set out in s 7(1) which we set out in full:7 Trust property(1) Notwithstanding anything in section 19 of the School Trustees Act1989, or in any other Act or rule of law,—(a) the land to which this section relates, together with all assetsand liabilities associated with that land that were vested in thePublic Trustee immediately before the commencement of thissection, is hereby vested in the Ngati Whakaue EducationEndowment Trust Board in trust and shall hereafter be knownas the Ngati Whakaue Education Endowment:(b) the Board has power to lease the land to which this sectionrelates, but shall not sell or otherwise dispose of any part ofthe land except—(i) for the purpose of subdividing the land to make itmore suitable for leasing; or(ii) for the purpose of providing access or any otherpurpose ancillary to a subdivision:(c) the Board shall not exercise any of its rights, powers, andprivileges except for the purposes of performing its functionsin relation to the land, assets, and liabilities referred to inparagraph (a):(d) the net revenue (after payment of all administration charges)received by the Board from the land to which this sectionrelates shall be applied by the Board for the general purposeof education:(e) the vesting of the land, assets, and liabilities referred to inparagraph (a) of this subsection in the Public Trustee pursuantto the said section 19 is hereby revoked.[42] In our view the proper construction of s 7 viewed in its entirety is that thespecified land was to be vested in trust, subject to a constraint on its saleability. Theconsequence is that the estate or interest reposed in the Trust comprises the rights ofpossession, use and enjoyment but not the right of absolute alienation of the fee simple.The Trust's estate or interest in the land is thereby confined. Hence, contrary to theValuer-General's submission, the actual estate held by the Trust is a restricted one.Properly construed the restrictions contained in s 7 do not relate merely "to the Truststructure itself".[43] Hence this particular statutory restriction is not of the personal class, as inThomas, where the land is saleable. Rather, properly analysed, the restriction is asdescribed in Ormsby, namely a limitation on the Trust's estate or interest in the land.We do not consider that Westpark Marina Ltd v Auckland Council,43 to which Palmer Jmade reference, is relevant here because there appears to have been no suggestion thatthe restriction on alienability in the Waitemata City Council (West Harbour)Empowering Act 1979 had the consequence that something less than the Council's feesimple title could be sold.[44] From our analysis it follows that, in the hypothetical sale which the definitionof capital value requires, the estate or interest of the Trust, which is hypotheticallyconveyed to the willing but not anxious seller, is no more than the estate granted to theTrust by the 1995 Act. The fact of the hypothetical sale does not result in the Trust'srestricted estate being miraculously transformed into a broader estate that thereafterincorporates the power to alienate.[45] We reject the Valuer-General's argument to the contrary reflected, for example,in the following submissions:Although some cases have stated that a buyer must take the land subject to allexisting restrictions, the present restriction on alienation has no relevancebecause of the hypothetical sale itself. For the purpose of all future ratingvaluations, the land will also be deemed to be saleable. This reflects theprimacy of the hypothetical sale within the ratings assessment.If the land were able to be sold (ie in reality, if the land was removed from thestatutory trust) there would be no restriction on the use of the land. Therewould be no reason to assume anything other than the unrestricted fee simpleestate, held by the Trust, would pass to the next owner.(Emphasis added.)43 Westpark Marina Ltd v Auckland Council [2012] NZHC 623, [2012] NZAR 619.[46] Consequently, for reasons which differ somewhat from those in the High Court,we answer Issue One in the affirmative.[47] Before leaving this issue, we comment briefly on the question of the correctapproach to rating valuation which was advanced as the primary justification for theValuer-General's intervention. We agree with Mr Prebble's submission that the correctapproach reflects the three-stage process recorded at [22] above.[48] While the Judge expressed his reasons with admirable economy we do notconsider that there was any error in the observance of the first and second stages. Ifthere was a failure, as the Valuer-General recognised, it concerned the sufficiency ofthe separation of stages two and three. We therefore defer consideration of the pointto our discussion of Issue Three below.Issue Two: Does s 21 of the RVA require a valuer to disregard the s 7 restrictionon alienation when valuing the Trust's property?[49] Section 21 states:21 Value of land subject to lease(1) For the purpose of determining under this Act the capital value or landvalue or annual value of a rating unit that is subject to a lease,—(a) regard is to be had to the desirability for rating purposes ofpreserving uniformity with contemporaneous roll values ofcomparable parcels of land; and(b) any lease provisions or circumstances particular to theproperty concerned that do not reflect the prevailing marketconditions at the date of valuation are to be disregarded.[50] In its 2014 rating assessment the Council relied on s 21 in declining to apply adiscount to its valuation of the test property and the Trust's objection was declined bythe Land Valuation Tribunal.[51] On appeal Palmer J considered s 21 was a red herring because the reason whythe land might be subject to a discount derived from its inalienability, not from theexistence or terms or other circumstances of the lease. He explained:4444 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council, above n 4.[32] Section 21 is stated to exist "[f]or the purpose of determining the value of a rating unit that is subject to a lease". While the property at issuehere is subject to a lease, the reason why it might be subject to discount doesnot derive from the existence or terms or other circumstances of the lease, butfrom its inalienability. The value of the land for rating purposes does notdepend on whether it is leased. Accordingly I consider, as did the Court inWestpark Marina Ltd, that s 21 of the RVA is something of a red herring inthis case and that only the statutory restrictions on alienability requireconsideration.The legislative history[52] In significant part the arguments advanced on Issue Two drew upon thelegislative history of s 21.[53] According to the Explanatory Note to the Rating Valuations Bill,45 cl 21 wasintended to "nullify" and "overcome" the decisions of the High Court inValuer-General v Radford and Co Ltd46 and the Wellington Land Valuation Tribunalin Diffey v Valuer-General.47 In the former, the High Court had held that the realisablevalue of the owner's estate or interest must take into account any effect of leases,which in that instance was negative. In the latter, the Land Valuation Tribunal appliedRadford although the effect of the leases on the realisable value of a property in thatcase was positive.[54] As introduced cl 21(1)(b) of the Bill provided:(1) For the purpose of determining under this Act the capital value or landvalue of land that is subject to a lease,—(b) Any unusual lease provisions or circumstances relating to thelease that are peculiar to the property concerned and do notnormally pertain to properties of an otherwise similar natureare to be disregarded.[55] The Government Administration Committee recommended amending cl 21explaining:4845 Rating Valuations Bill 1998 (113-1) (explanatory note) at ii and iv.46 Valuer-General v Radford and Co Ltd [1993] 3 NZLR 721 (HC).47 Diffey v Valuer-General Land Valuation Tribunal Wellington LVP4/94, 8 May 1996.48 Rating Valuations Bill 1998 (113-2) (select committee report) at vi.Most of us consider also that clause 21(1)(b) should be amended to providethat any lease provisions or circumstances particular to the property concernedthat do not reflect the prevailing market conditions at the date of valuation areto be disregarded. Most of us recommend that the bill be amendedaccordingly.[56] Consequently the text of s 21(1)(b) reflects the following amendments to theoriginal proposal:(a) "unusual" qualifying "lease provisions" was deleted;(b) the phrase "circumstances relating to the lease that are peculiar to theproperty concerned" was widened to read "circumstances particular tothe property concerned"; and(c) the phrase "do not normally pertain to properties of an otherwisesimilar nature" was replaced with "do not reflect the prevailing marketconditions at the date of valuation".The parties' submissions[57] For the Council Mr Cornegé submitted that the High Court placed an undulynarrow interpretation on the provision which was inconsistent with the plain words ofs 21(1)(b), inconsistent with the amendments discussed above made in the course ofthe passage of the Rating Valuations Bill 1998, and one which rendered the sectioneffectively meaningless.[58] Mr Cornegé submitted that s 21 is designed to ensure that where properties aresubject to a lease, like is to be treated with like, the section being aimed at ensuringthat lessors do not receive a commercial advantage, or disadvantage, on the basis ofthe applicable lease or circumstances particular to the property. This was said to beconsistent with the statutory exhortation in s 21(1)(a) that regard is to be had to thedesirability for rating purposes of preserving uniformity with contemporaneous rollvalues of comparable parcels of land.[59] He submitted that the interpretation adopted by Palmer J effectively read backin the words which were deleted during the passage of the Bill, thereby confining s 21to situations where the lease had some impact on the value of the rating unit.[60] In response Mr McEntegart submitted that s 21(1)(b) does not create, as theCouncil implies, separate categories in respect of lease provisions affecting aproperty's value and other matters affecting its value that are unrelated to that tenure.Properly read the provision required the valuer to disregard:(a) any lease provisions particular to the property concerned; or(b) any circumstances particular to the property arising by reason of itsleased status, for example the burden of achieving vacant possession inrespect of redevelopment land.[61] Surprisingly the Valuer-General did not take a position on the interpretation ofs 21(1)(b).Analysis[62] On Issue Two we are persuaded by the Trust's argument. The meaning ofs 21(1)(b) is informed both by the heading of the section, which refers to land subjectto lease, and by the first two lines of subs (1) which refer to a rating unit that is "subjectto a lease". The Explanatory Note to the Bill does not contain any suggestion that theclause was intended to overrule the line of cases which state that the rateable value ofinalienable land is to be assessed on the basis that a hypothetical purchaser is acquiringit subject to the restriction.[63] We agree with Mr McEntegart's contention that it cannot be the case that therateable value of an owner's interest in inalienable land depends on whether or not itis leased. If that were so, the value of the interest would reduce simply by virtue of,for example, the lessee surrendering its lease. That, inexplicably, would result ininalienable land not subject to a lease having a different value to inalienable landsubject to a lease. The Council could provide no convincing response for thedifference in value depending upon whether the land was subject to a lease, save toemphasise that it was not logical for otherwise identical properties to have a differentvalue for rating valuation purposes simply because a lessor could not sell the land.[64] Hence we answer Issue Two in the negative. Section 21 of the RVA does notrequire a valuer to disregard the s 7 restriction on alienation when valuing the Trust'sproperty.Issue Three: Did Palmer J direct the prohibition on alienability should diminishthe value of the Trust land to some extent and was this improper in thecircumstances?[65] Having held that the valuation must take into account the effect on thevaluation of the prohibition on alienability49 Palmer J then commented:[36] I expect the prohibition on alienability would diminish the value ofthe Trust Board land to some extent. Economic theory suggests that there islikely to be value attached to the ability to sell land in addition to the abilityto use it. The Trust Board land does not suffer from the sorts of restrictionson use that other statutory restrictions in the case law established. But theprohibition on alienability can be expected to make the land less desirable insome respects than it would be if there was no such prohibition. The value inthe land for a notional purchaser would derive from its use, including itsleasing, but not from its value in exchange.[66] Because he considered the Tribunal was wrong to decline the objection on thebasis that there should be no discount, Palmer J made an order quashing the Tribunal'sdecision. He did not uphold the original objection, which sought reinstatement of the10 per cent discount. However he accepted Mr McEntegart's submission that theamount of such a discount was a matter for a valuer to determine using the statutoryprocess on the basis of the High Court's judgment.50[67] Both the Council and the Valuer-General took issue with the observations at[36] and the direction implicit in [38] that a discount should be made and that thequestion for the valuer was simply the extent of the discount.[68] While the Judge's comments were in the nature of obiter and in any event oneconomics rather than law, there is force in the Valuer-General's point that the appeal49 Ngāti Whakaue Education Endowment Trust Board v Rotorua District Lakes Council, above n 4,at [35]. See [16] above.50 At [38].was presided over by a Judge alone under s 13(4)(c) of the Land Valuation ProceedingsAct 1948 because the parties agreed the matter in issue involved substantially aquestion of law only.[69] In Mangatu this Court acknowledged that the actual value of land affected bya restriction was a question of fact which should be evaluated by a valuer.51 Thescheme of the Land Valuation Proceedings Act also clearly provides for a systemwhereby a valuer sits with a High Court Judge on appeals to provide assistance andfactual expertise. Where that process is not in play, because the appeal is proceedingas an issue of law, we accept the Valuer-General's submission that there is no basis onwhich the High Court should make definitive findings on matters of fact.[70] While the Judge's comments were plainly not definitive findings of fact, weaccept that in the circumstances it was not appropriate for the Judge to venture intothe third factual stage of the rating valuation process discussed in the context of IssueOne, whether by obiter comment or otherwise.[71] The Land Valuation Tribunal's decision having been quashed, the appropriatecourse is for the Tribunal constituted in terms of s 19 of the Land ValuationProceedings Act to consider expert valuation evidence directed to the issue of whetherthe s 7 restriction has an effect on the valuation of the test property and, if so, to whatextent.[72] Consequently the answer to Issue Three is that the Judge did not make adirection. However insofar as he indicated a view that there should be a discount, thatwent beyond the proper scope of his inquiry and should be ignored by theLand Valuation Tribunal.51 Valuer-General v Mangatu Inc, above n 6, at 651.Result[73] The appeal is dismissed.[74] The appellant must pay the respondent costs for a standard appeal on a band Abasis and usual disbursements.SolicitorsCrown Law Office, Wellington for Valuer-General as Intervenor