The Property Lawyer Volume 25 Issue 3

The Property Lawyer

The Property Lawyer is the quarterly magazine of the Te Kāhui Ture o Aotearoa | New Zealand Law Society Property Law Section (PLS), and is distributed to all section members and subscribers.

Member benefits include a subscription to The Property Lawyer, email bulletins, access to the PLS Accredited Specialist scheme for qualifying members, access to the members’ section of the website including guidelines and other resources, and the ability to tap into the expertise of section members throughout the country. Members also receive preferential pricing for CPD and collegial events. Subscriptions are available to non-members at $120 per annum.

To join the section, or to subscribe to The Property Lawyer, please email property@lawsociety.org.nz or visit our website www.lawsociety.org.nz/pls

Property Law Section

Ngā Rōia Ture Rawa

Kim Bull

Property Law Section Manager

 DX SP20202 or PO Box 5041, Lambton Quay Wellington 6145

 0275 511 559

 kim.bull@lawsociety.org.nz

Advertising

Rebecca Cook

Member Services Coordinator

 04 463 2916

 property@lawsociety.org.nz

The views expressed in The Property Lawyer are not necessarily those of, or endorsed by the Property Law Section or the New Zealand Law Society. No responsibility whatsoever is accepted by the Property Law Section or the New Zealand Law Society for any opinion, information, or advertisement contained in this publication. Unless otherwise stated, all articles in The Property Lawyer are licensed under a Creative Commons Attribution-NonCommercial 3.0 New Zealand license, the full terms of which are available at creativecommons. org/licenses/by-nc/3.0/nz/. This allows you to copy any item for your own use or for educational purposes or to republish articles for non-commercial purposes. Attribution should include The Property Lawyer, the volume and issue number, and the Author's name if listed. The Property Lawyer is printed on an environmentally responsible paper, produced using elemental chlorine free (ECF), FSC® certified mixed source pulp sourced from well managed & legally harvested forests

Growth Charges’ impact on ADLS Deed of Lease (Sixth Edition, 2012(4)) and a spotlight on the Public Works Act

Section Manager: Section news pitopito kōrero

Registrar-General of Land: Landonline: then and now By Robbie Muir

ABOVE: Highway in New Zealand

FROM THE CHAIR

Setting the pace

Early accomplishments of the New Year

BY MARK SHERRY

We’ve had a very energetic start to the year, with a strong emphasis on our members’ educational needs as we approach the end of the Law Society’s CPD year on 31 March. The Property Law Section (PLS) aims to complement the Law Society’s CLE programme by offering educational opportunities focused on property practice and compliance. We often collaborate with government stakeholders, leveraging our longstanding relationships to deliver short-format events that provide excellent value and CPD-qualifying education.

Our first Thinking Property seminar took place in Wellington on 20 February. We introduced a refreshed format featuring guest speakers from the Real Estate Authority (REA). The session was both engaging and interactive, and we’re now planning on how we might include them more often in future seminars across the country. This will be alongside our regular update from Toitū Te Whenua LINZ.

Our engagement with the REA has resulted in an invitation for the PLS to participate in an upcoming REA-hosted industry forum, which will be attended by leaders in the real estate industry. This forum presents a valuable opportunity to

raise awareness about current issues in real estate transactions, such as managing deposits, working with vendors to mitigate risk, the importance of understanding key clauses, and encouraging buyers and vendors to seek legal advice before signing contracts. The forum will also highlight the positive contributions of licensees to real estate transactions, and what they are doing well. There are clearly opportunities for licensees and lawyers to work well together for the benefit of clients and we look forward to ongoing collaboration with the industry.

I enjoyed facilitating our recent webinar with Te Uru Rākau – New Zealand Forest Service, which aimed to help property lawyers understand the mandatory obligations for owners of property containing pre-1990 forest land. The session was practical and will help us to make more informed decisions regarding the sale and purchase, and land use, for properties containing pre-1990 forest land. The knowledgeable speakers encouraged the profession to contact the Forest Service with questions or to seek rulings when necessary. The webinar recording package is available at bookwhen.com/ propertylawsection

Regarding law reform, the proposed amendment to the Lawyers and Conveyancers Act (LCA), mentioned in my last column, was introduced last year in the Regulatory Systems (Occupational Regulation) Amendment Bill. The proposed new section 38A of the LCA addresses issues around the enforceability of conveyancers’ undertakings and, once enacted, should greatly improve and streamline settlements between lawyers and conveyancing practitioners.

Late last year, we formed a working group to respond to a targeted review of probate conducted by the Ministry of Justice. This review focuses on the threshold for probate, the statutory legacy, and process improvements. The group met with MoJ officials on 6 November.

We are also working with the Law Society’s Law Reform team to contribute to the Ministry of Justice’s review of the AML/CFT regime. Our specific input has been on proposals to establish a beneficial ownership trust register, a proposal signalled in the proactively released Cabinet paper by Hon Minister McKee on 5 February.

I wish you all the best for the year ahead. ▪

SPECIAL FEATURE | ENDURING POWERS OF ATTORNEY

A reminder to consider independent legal advice

BY RYAN KEEN

In April 2024 the Law Commission published its Second Issues Paper as part of its review of the law relating to adult decision-making capacity. A fundamental part of the review is to consider the Protection of Personal and Property Rights Act 1988 (the Act) and whether the law should be changed.

For property lawyers, the main engagement we have with the Act is assisting clients with putting in place Enduring Powers of Attorney in relation to both Personal Care and Welfare and Property (EPAs).

In 2024, the Property Law Section’s comments, along with the Law Society’s Family Law Section and Health and Disability Law Committee, helped to inform the New Zealand Law Society’s submission on the Law Commission’s Issues Paper. This has provided us with an invaluable opportunity to consider what works well and what could be done better – both from a lawyer’s perspective but also from our clients’ perspective.

These discussions, and members’ questions to the Property Law Section, indicate some ongoing confusion with the exemptions available for lawyers or registered legal executives advising the donor executing EPAs. Junior lawyers and registered legal executives often advise donors executing EPAs. Therefore, it is important that they clearly understand the requirements, and what they are certifying.

Independence and the exemptions

The starting point is the requirement under s 94A(7)(c) that the witness to the donor’s signature must certify the witness is independent of the attorney (or of each attorney) unless certain exemptions apply.

Section 94A(4A)(a): The first exemption enables two lawyers or registered legal

executives within the same firm to witness the signature of two donors who appoint each other as attorney. This enables a couple to mutually appoint each other as attorney without needing to engage two different law firms. The same flexibility is provided to employees or officers of a trustee corporation such as Public Trust. As discussed further below, independent advice may still be required depending on the appointment of the successor attorneys. Although the Act does not specify it, a practitioner would still need to consider whether it is appropriate to act for both donors in circumstances where there is a more than negligible risk that the practitioner may be unable to discharge the obligations owed to either donor as is contemplated by rule 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (Client Care Rules).

Section 94A(4A)(b): The second exemption enables a lawyer or registered legal executive to witness the signatures of two donors who appoint each other as attorney if, having regard to the matters the lawyer or registered legal executive is required to certify in their certificate pursuant to

s 94A(7)(a) and (b), the witness is satisfied that witnessing both signatures does not constitute more than a negligible risk of a conflict of interest. This exemption is presumably intended to assist sole practitioners in acting where a mutual appointment takes place. The language here also aligns with rule 6.1 of the Client Care Rules. In cases where the same person witnesses both donors using this exemption, it is important to note the requirement for an independent witness when the same people sign to accept their appointment as an attorney. This is referenced later in this article.

Section 94A(8): The third exemption applies where the attorney is a trustee corporation and an officer or employee of the trustee corporation can witness the donor’s signature. Similarly, if a lawyer in their capacity as a lawyer is being appointed as an attorney, another lawyer or legal executive within the firm is authorised to witness the donor’s signature.

Are you independent?

The exemptions mentioned above to the independence requirement are helpful, but do not cover all situations. If no applicable exemption applies, the practitioner is required to make a judgement call as to whether the practitioner (and their firm) is independent of the attorney(s) (or successor attorney(s)) being appointed. It is an important reminder that while it is up to an individual practitioner to decide whether they are independent, there is no discretion to continue in circumstances where a practitioner is not independent. This requirement is more restrictive than some practitioners may believe.

A common situation that is not covered by an exemption is where a donor appoints one or more attorney(s) or successor

attorney(s) where a mutual appointment does not take place, and the law firm acts or previously acted for the attorney(s) and/ or the successor attorney(s). Given how often law firms act for multiple generations of families, it is perhaps unsurprising that this issue arises reasonably often where spouses appoint their children as their successor attorneys.

For example, a law firm acts for a husband and wife couple (John and Jane) who have three adult children, Adam, Betty and Carl. John and Jane wish to appoint each other as their respective attorneys, but also wish to appoint their children as successor attorneys, not jointly, but in the order of their age. Adam is the first successor attorney, Betty is the second successor attorney and Carl is their third successor attorney. If the firm has acted for Adam two years ago in buying a house, for example, there is a question as to whether the practitioner can certify that they are independent. If there is a dispute later between Adam, Betty and Carl, they could allege that the firm was not independent of Adam.

Unfortunately, there is not a lot of guidance provided for law firms to judge whether they are independent of an

“For property lawyers, the main engagement we have with the Act is assisting clients with putting in place Enduring Powers of Attorney in relation to both Personal Care and Welfare and Property (EPAs)”

attorney or successor attorney – perhaps because the individual circumstances are so important. It seems that firms take a variety of approaches, with some adopting a guideline on when practitioners within a firm can and cannot witness the donor’s signature. The safest approach would be for a practitioner not to act if the practitioner (or their firm) has previously acted for the attorney or successor attorney. If a law firm

has ever acted for an attorney, it could be argued they are not independent of the attorney. Consideration should also be given to whether a practitioner or their firm is independent of the attorney or successor attorney for other reasons such as where there is a friendship or relationship other than that of lawyer and client which may call the firm’s or practitioner’s independence into question.

Some firms take one or more of the following into consideration as to their independence where they have acted for an attorney or successor attorney previously, such as:

(a) the number of years since the firm has acted for the attorney or successor attorney;

(b) whether the attorney or successor attorney no longer instructs their firm and uses a different law firm;

(c) the type of legal work that the firm has undertaken for the attorney or successor attorney in the past; and

(d) whether the attorney or successor attorney has a connection, relationship or business relationship with any practitioner within the firm.

For clarity, the author of this article is

not advocating that one or more of the above factors will be sufficient to judge independence and the circumstances of each situation need to be considered.

It is worth reiterating that there is no opportunity for a practitioner to make a value judgement that they can continue to act for a donor who appoints attorney(s) or successor attorney(s) where an exception does not apply. Even if the children of a couple are in total agreement with their parents as to the appointment of one sibling as attorney or successor attorney, the independence requirement applies in the absence of such an exemption.

What happens if you are not independent?

If you consider that you (and your firm) are not independent of the attorney or successor attorney, you will need to arrange for the donor to be independently advised. If possible, it can be helpful to have a reciprocal arrwangement in place with another local law firm or firms, so that the process can be streamlined, subject to your client donor being satisfied with receiving advice from that firm. In respect of process, some firms may refer the donor out for the entire process, whereas other firms may prepare the documentation and arrange for the donor to be independently advised. Either way, it is prudent to consider where the original deeds should be kept in either situation – the originating firm’s deed system perhaps making the most sense if all other deeds are held by that firm already.

Unfortunately, the independence requirement is difficult for practitioners in more rural areas. While it is not a valid reason for refusing instructions pursuant to rule 4.1 of the Client Care Rules, practically speaking practitioners in rural areas might be reluctant to accept instructions on the basis that doing so may give rise to a conflict of interest on another matter in future. This is particularly so when the donor is likely to return to their original law firm once the independent advice has been provided. If the attorney or successor

attorney are prominent members of a small community, a practitioner’s independence could be called into question for other reasons.

Reform

There is an argument that reform is necessary to add another exception where a donor is appointing their child as an attorney (where the donor no longer has a spouse) or successor attorney. The counterargument is that the independence requirement exists for good reason and should not be diluted by too many exceptions. It has also been suggested that practitioners should be able to witness a donor’s signature by video call as was the case during the COVID-19 pandemic. This would be a pragmatic solution that has been suggested and perhaps the best path forward.

Witnessing an attorney’s signature

It is also worth briefly touching on the witnessing requirements for any attorney or successor attorney. Section 94A(5) requires that the signature of each attorney (and successor attorney) needs to be witnessed by someone other than the donor or the donor’s witness. The witness must be an adult (i.e. at least 20 years old) and should not be a relative of the attorney or of the attorney’s spouse or partner or live at the same address as the attorney.

Where two donors are appointing each other as attorney and two practitioners within a firm are witnessing their signatures as donors, the same witness who witnesses the donor’s signature can witness their signature as attorney under the corresponding EPA.

Where two donors are appointing each other as attorney and one practitioner has witnessed their signatures as donors, a different witness will be required to witness their signatures as they accept their appointment as an attorney under the corresponding EPA.

Where the practitioner and their firm does not act for the attorney and there

is no reciprocal appointment, it is best practice that the attorney has their signature witnessed elsewhere – a neighbour is often a good witness, for example. The same is the case for successor attorneys generally.

Dating of enduring powers of attorney

Another question is when the EPA should be dated. I expect most practitioners date the EPA immediately when the donor signs, particularly where a mutual appointment takes place by a married couple, when the couple sign as donor and attorney. However, given the EPA is a deed, in theory the EPA should be dated when the last person signs, which would include any successor attorney(s). The practitioner’s certificate should be dated when the advice is given to a donor.

Conclusion

It is recommended that each law firm or trustee corporation adopt a process for legal staff to assess whether an exemption applies and to ensure the independence requirement is otherwise met. The key takeaway for all practitioners is that the usual benchmark of rule 6.1 as to whether their acting constitutes more than a negligible risk of a conflict of interest but also the higher bar of independence for the practitioner or their firm set under the Act. It is common to hear of examples where practitioners of all levels misunderstand the exemptions available and genuinely believe a value judgement can override the independence requirement. This is a reminder to refresh ourselves on the requirements, and to support junior lawyers or registered legal executives who are often asked to provide advice on EPAs. This article also does not cover every situation. ▪

Ryan Keen is a Partner at Corcoran French Lawyers in Greymouth. He is a member of the PLS Executive Committee, and the Executive liaison member on the PLS Property Transactions Subcommittee.

Lessons from recent cases

Watercare Infrastructure Growth Charges’ impact on ADLS Deed of Lease (Sixth Edition, 2012(4)) and a spotlight on the Public Works Act

BY JOHN GREENWOOD

The High Court’s decision, following an appeal from the Arbitral Tribunal in the case of Max Fortuna 3 Ltd vs Kitchener Trust Investments Ltd [2024] NZHC 3458, addressed whether the tenant was liable for the Infrastructure Growth Charges (IGCs) levied by Watercare Services Limited (Watercare).

The particular case centred on whether Watercare is a local or territorial authority and whether the IGCs constituted an outgoing or levy under the standard ADLS Deed of Lease Sixth Edition 2012(4).

The Tribunal described the IGCs as “a charge imposed by Watercare to fund Watercare’s growth related capital investment costs”, noting “where a commercial property increases (or expects to increase) its demand on the network, Watercare levies IGCs in accordance with the level of increased demand”.

In March 2020 Watercare charged the landlord, Kitchener Trust Investments Ltd (Kitchener), $72,120 excluding GST in respect of the IGC. However, in August 2021 Watercare reassessed the liability in respect of the IGCs having regard to the actual measure of water used by the tenant, Max Fortuna 3 Limited (Max), at/on the premises. Consequently, an additional $61,600 excluding GST was imposed, resulting in a total payable of $133,720 plus GST.

Perhaps it is not surprising that the tenant, who operated a laundry business from the premises, challenged the imposition of the IGCs.

The Tribunal considered and decided upon the following issues:

Whether Watercare is a local or territorial authority

The lease provided specifically that

outgoings included rates or levies payable to any local or territorial authority. The Tribunal made the following observations: Watercare is a Council controlled organisation;

• Watercare’s role is to discharge the Council’s responsibility for the public water network;

• Watercare operates under the Water Supply and Wastewater Network Bylaw 2015; and

• Watercare is owned by the Council, there being no doubt it stands in the shoes of the Council for all practical purposes. Therefore finding the tenant failed on the first issue.

Whether IGCs constituted a levy charge

IGCs are in the nature of an assessment, fee or contribution that is payable to a government organisation. The IGCs are in the nature of levies payable to a local authority. The Tribunal held that IGCs are not amenable to negotiation, whether as to liability or threshold or amount. Finding then that the tenant was liable to pay a fair proportion of the IGCs incurred by the landlord.

Whether IGCs are a charge for

water

The Tribunal held that IGCs are not a charge for water. Holding that all elements listed in the First Schedule of the lease should be considered consumables. IGCs are not consumable in the same way, for example, as a periodic charge for water passing from the public network into a property and out to wastewater. Rather holding that IGCs constitute a one-off charge for an asset that the holder can then transfer from one property to another.

High Court appeal

The appeal to the High Court was on

the basis of the Tribunal granting a partial award in favour of the landlord, with the appeal on a question of law supported by both the landlord and tenant.

Justice Brewer agreed on the first issue that Watercare is a local or territorial authority.

Secondly, the Court upheld the Tribunal’s decision that IGCs constitute a levy given the fact the charges increase as water use increases and are imposed on top of standard water charges. Further noting that the additional charges imposed are not optional nor negotiable, and the fact parties are given the right to transfer or sell IGCs does not necessarily deprive it of its character as a levy. Also, if IGCs are not levies they are water charges.

Thirdly, contrary to the Tribunal’s finding, if IGCs are not payments in the nature of levies, then they are water charges. IGCs are assessed and charged directly on water consumption. If they are not paid, then water would not be supplied.

Finally, the High Court agreed with the landlord that the lease is a net lease,

thereby entitling the landlord to rent clear of outgoings incurred because of the tenant’s use of the premises. It noted that the generic term “water charges” need not be read restrictively. IGCs are charges for the tenant’s water use. Both the tenant and the landlord knew that IGCs would be levied and, in the Judge’s view, there was no reason of policy or interpretation to exclude IGCs from being considered water charges.

In passing I note the new ADLS Deed of Lease 2024 Seventh Edition does not cover the IGC regime imposed by Watercare. The decision in Max is useful for practitioners. Practitioners may however wish to avoid any uncertainty by inserting a specific provision concerning both present and future capital charges which relate to water charges.

Pascoes challenge process of authority regarding eminent domain

The Court of Appeal decision in Pascoe v Minister for Land Information [2024] NZCA 557 concerned Tony and Debbie Pascoe landowners who commenced proceedings against the Crown over the taking of their land under the Public Works Act

“The Court also did not find any conflicts of interest between NZTA, the acquiring agency, and the Minister, the decision-maker, which could disqualify TPG from negotiating”

1981 (PWA). The Pascoes’ land comprised wetlands and an old native forest which was taken for the Mt Messenger Bypass Project, situated east of State Highway 3 between Taranaki and the Waikato.

Since the Pascoes took their own case, albeit supported by some crowd funding, the Supreme Court decided they would benefit from the assistance of counsel to act as an effective contradictor. As a consequence, Ms Gepp KC was appointed to assist the Court.

The case centred on the Pascoes’ consideration that acquisition negotiations with the Crown needed to be conducted by either the Minister personally or a Land Information New Zealand (LINZ) official with formal delegation to carry out the negotiations directly.

The earlier High Court case of Pascoe v Minister of Land Information [2022] NZHC 3173, in the judgment of Justice Grice, favoured the Crown. Finding that the Minister is not required to personally carry out operational tasks, including negotiations, under s 18(1)(d) of the PWA.

The Court of Appeal agreed with Justice Grice that The Property Group Limited (TPG) were not exercising any statutory power or making any statutory decision of a kind that requires delegated authority when TPG attempted to negotiate an acquisition agreement with the landowners. This was so notwithstanding the Pascoes’ insistence on negotiating directly with the Minister or their delegate.

The Court of Appeal considered the relevant statutory framework which, in the Court’s view, does not require any formal delegation of authority to carry out negotiation on a day-to-day basis particularly given the fact that a negotiating entity

is not exercising any statutory power or making any statutory decision of a kind that requires delegated authority. It held that the Minister is not required by the PWA to negotiate directly with landowners. In traversing the statutory framework, the Court made the following observations:

• It noted that compulsory acquisition for public works first appeared in 1863 and made the somewhat surprising comment that the PWA had been extensively amended since 1981. The reality, with respect, would suggest the opposite. Dozens of cases have evolved because the PWA is not fit for purpose, principally in the offer back space. Furthermore, the reforms signalled in 2002 have been shelved, with the recent expert panel appointment in 2024 being given only a limited brief of review.

• Section 23 of the PWA, which is the notice of intention to take land, requires the Minister in the case of Government work, or local authority in the case of local work, to cause surveys to be undertaken and notices to be published in the Gazette

• Section 4C of the PWA expressly provides for delegation of the Minister’s powers under the PWA to any officer of the

Minister’s department, other than the power of delegation itself. Also noting in particular section 4C(2) expressly provides that the Minister must not delegate the power to issue a notice of intention of land under section 23(1).

• Further, the powers conferred on the Minister are able to be delegated to the Chief Executive of LINZ under s 28 of the State Sector Act 1988 and, with the Minister’s written approval, subdelegated to other LINZ officials under s 41 of that Act.

Importantly, the Court noted that the New Zealand Transport Agency (NZTA) is only responsible for constructing and managing the project on behalf of the Crown and any acquired land is vested in the Crown, not NZTA.

The arrangements of the acquisition process do not allow LINZ officials to negotiate directly with affected landowners. Rather, the acquiring agency, such as NZTA, is expected to retain a “LINZ-accredited supplier” to conduct negotiations. Here, NZTA contracted with TPG, a supplier with LINZ accreditation, in relation to the project, including to pursue acquisition agreements.

The LINZ accreditation system did not permit TPG to exercise statutory powers, and importantly, it was the LINZ Clearances Team, under the leadership of Trevor Knowles, who held delegated powers under ss 17(1), (2), (4) and (7) and ss 18(1) and (4) of the PWA. It is the Clearances Team’s responsibility to review the chronology of negotiations and provide a briefing note to the Minister detailing whether good faith negotiations have been undertaken, but with the Minister ultimately making the decision as to whether a s 23 notice should be issued.

As the Court noted, requiring landowners to negotiate through a central Government employee would be impractical, potentially reducing the quality of negotiations, imposing greater burdens on landowners and may not meet the required “good faith” standard.

The Court also did not find any conflicts of interest between NZTA, the acquiring agency, and the Minister, the

decision-maker, which could disqualify TPG from negotiating. It specifically noted that the Minister personally makes the s 23 decision which “recognises the significance of the decision to take land, and ensures there is direct democratic accountability for that decision at the highest level of Government. The purpose of this requirement is not to introduce some sort of separation of functions between agencies.” In addition, finding that negotiations towards an acquisition agreement with landowners are properly seen as administrative or supporting functions that can be performed by a person other than the relevant statutory decision-maker, provided that decision-maker retains control over the manner in which negotiations are conducted as well as responsibility for whether a contract is entered into and, if so, on what terms.

(a) The Pascoes have applied for leave to appeal in the Supreme Court. It is difficult to understand the Pascoes’ continued insistence even with band A costs awarded against them.

Declaration sought on appropriate approach to assess compensation

A nice segue to the Pascoe case is the excellent decision of Justice Jagose in the decision of Attorney-General v Auckland Council [2024] NZHC 3740. Both parties sought a declaration under the Declaratory Judgments Act 1908 on what test was required to determine the market value of two parcels of recreation reserve. Both the Constellation Reserve and Rook Reserve required taking under the Public Works Act 1981 (PWA) as part of the realignment of State Highway 18. These works involved constructing a motorway connection between State Highways 1 and 18. Both valuers had adopted the appropriate underlying principles to valuation, being in summary: Highest and best use

• The property is to be valued in accordance with its highest and best use.

Hypothetical sale between willing buyer and seller, but not over-anxious to deal

• Value is to be assessed on the basis of

“The Council contended the land should be valued as if it was sold on an open market, with restrictions on sale or disposal disregarded for the purposes of s 62(1)(b) of the PWA”

a willing buyer and willing seller. This principle contemplates a hypothetical sale in an open market as at the date of valuation between willing parties, whom are both fully informed but not over-anxious to deal. Nor is any party compelled to purchase, while a seller is similarly motivated but under no duress to sell. Such assessment needs to include all of the advantages, possibilities and potentialities impacting the subject sites: Palmerston North City Council v Hardiway Enterprises Ltd [2015] NZCA 114 and Hall v Chief Executive of Land Information New Zealand [2014] NZAR 749 (HC). Liberality

This holds that the dispossessed owner should be given the benefit of any reasonable doubt.

Equivalence

• Equivalence can be described as “ the fundamental principle that the owner’s compensation should be equivalent to what they have lost by reason of the compulsory acquisition”: see Squire Speedy on Land Compensation (NZIV 1985) at pages 6-7. As the Court noted, in other words, the owner of the recreation reserves is to be no better off and no worse off as a result of the Crown’s acquisition. There are, of course, other features of

compensation. This includes injurious affection and also betterment, disturbance payments, loss on repayment of a mortgage, business loss solutions and legal costs and fees incurred among other possible claims.

The Crown argued that there was a need to consider restrictions imposed on the use of the land by the Reserves Act 1977 (Reserves Act) and to look at the values of both reserves, their alternative uses and their current uses represented by the likelihood of the issue of whether the reserves could be rezoned and used accordingly adopting a 20% chance factor.

The Crown argued reserves need to be valued at the highest and best use on the assumption their reserve status has been or will be revoked and, taking into account by way of deduction, the value of the cost of rezoning the land for the most likely alternative zone and use.

The Council contended the land should be valued as if it was sold on an open market, with restrictions on sale or disposal disregarded for the purposes of s 62(1)(b) of the PWA. As noted above, that approach required that the land be valued at its highest and best use without its reserve status, but deducting the regulatory and administrative costs of

revoking the reserve status and rezoning.

The Court did acknowledge the need not to ignore the principle of full compensation, sometimes referred to as “fair compensation” being “an award of the monetary equivalent of what is lost”: see Te Marua Ltd v Wellington Regional Water Board [1983] NZLR 694 (CA) at 697. Alternatively expressed as putting any dispossessed owner in a position as similar as possible to that it was in when the land was acquired or taken: see Russell v Minister of Lands [1898] 17 NZLR 241 (SC) at 253.

The Court did not agree with the Council’s view that reserves cannot be sold as reserves, finding that reserve status does not prohibit sale nor exclude any potential purchase. The Court rejected the argument that the statutory test required removing any limitations on the land to achieve its optimum value. Simply put, the land’s reserve status or zoning may be off-putting to potential purchasers but that it is not prohibitive or exclusionary and instead merely a quality of the land in the hands of whoever it may be vested.

The Court held for the purposes of s 62(1) (b) of the PWA assessment that the subject land is to be valued:

(a) with all restrictions associated with it being a reserve, including those under the Reserves Act and any local planning documents; and

(b) taking into account the chance (if any) those restrictions may be removed and the land is able to be used for its highest and best use. ▪

John Greenwood is a consultant at Greenwood Roche in Wellington. He is a specialist in all aspects of property law and is regularly called on as an expert witness in civil claims and to conduct expert determinations and arbitrations. He is also the co-convenor of the PLS Property Law Reform Panel. greenwoodroche.com

SECTION MANAGER

Section news pitopito kōrero

BY KIM BULL

Recently, our Law Society sections team remarked that it felt more like mid-year than February, likely due to the intense activity we’ve all packed into the first two months of the year. Despite the busyness, there is immense satisfaction in supporting our section members in the areas of education, collegiality, law reform and advocacy. I look forward to working with all our wonderful volunteers to maintain this momentum.

Membership

PLS membership continues to grow under the Law Society’s new membership model; a 56% increase on the same time last year. We are delighted that membership has become more accessible to many, and we hope our new members enjoy the benefits and collegiality that section membership brings. Members’ support also enables us to be a strong voice for property lawyers across the profession.

Executive Committee

Since our last publication, the PLS Executive Committee met in Nelson on 21 November and in Wellington on 20 February. Additionally, a virtual meeting was held at the end of January to set the PLS budget for the 2025/26 financial year. On 13 February, we called for nominations for three vacancies on the PLS Executive Committee. Nominations close on 7 March, around the time this issue of The Property Lawyer is distributed. If the number of nominations exceeds the vacancies, an election will be held, with voting opening on 21 March.

Land Titles Subcommittee (LTSC)

The LTSC attended Toitū Te Whenua LINZ’s first Customer Day for the year on

19 February. The event, which was a hybrid of online and in-person participation, provided updates and gathered practitioner feedback as we approach the switch-off of Legacy Landonline.

The business case for modernising Landonline included benefits anticipated as customer-facing elements of the project are delivered. It is estimated that significant savings and efficiencies have been achieved with the introduction of Notice of Change and Notice to Mortgagee via Landonline. In LINZ’s latest customer survey, more respondents reported the same or greater level of productivity compared to previous surveys. This demonstrates that productivity is improving as practitioners become more proficient with new Landonline.

LINZ is currently analysing feedback from the Digital Visualisation of Survey Plans consultation and will present the findings at a future date. The LTSC looks forward to being involved in the development of this application, should a decision be made to proceed.

Richard Cross – retirement

Richard Cross has announced his retirement from legal practice on 31 March. The Property Law Section, along with its Land Titles Subcommittee, extends heartfelt thanks and recognition to Richard for his many years of service.

During Richard’s 40+ year career, he dedicated 24 years to public service, primarily within land-focused departments such as Lands and Survey, Housing Corporation, Rural Bank, and the Land Titles Office. He served for 12 years as the District Land Registrar for Hawke’s Bay, where his role included reconstructing the land titles records destroyed during the 1931 Napier earthquake.

Richard has contributed to several Law Society committees and subcommittees. He was a founding member of the PLS Land Titles Subcommittee (formerly the Law Society’s Working Party on Automation) and the PLS Executive Committee. In 2020, Richard was inducted into the Property Law Section’s Hall of Fame, which recognises individuals whose contributions have been truly outstanding and who have demonstrated exemplary service to the legal profession and the practice of property law throughout their careers. We extend our best wishes to Richard for a fulfilling and enjoyable retirement.

Property Transactions Subcommittee (PTSC)

The PTSC is on standby to review and update the PLS Guidelines once the Regulatory Systems (Occupational Regulation) Amendment Bill is passed–refer to the Chair’s column on page 3. They are also commencing a review of the Law Society’s Guidelines for the Retention of Records on Termination of Retainer

Events

In person – PLS – Thinking Property, 12.30-2pm 3 April – Invercargill 29 May – Auckland CBD 24 July – Tauranga 18 September – Christchurch 20 November – Queenstown

Livestream webinars

Digital signing – a follow up to our Updated A & I Requirements for E-dealing Standard and Guideline 2024 webinar (in partnership with Toitū Te Whenua LINZ) 26 March, 11am-12pm

For more details and to register for any of these events, visit lawsociety.org.nz/events ▪

REGISTRAR-GENERAL OF LAND

Landonline: then and now

BY ROBBIE MUIR

The modernisation of Landonline will reach a significant milestone in March 2025, when we switch off legacy Landonline for law firm users. This will bring to a close more than 20 years of successful use of legacy Landonline as the primary system for searching titles and registering dealings. This is an appropriate time to acknowledge the work that has gone into the development of our system and look back at how far we’ve come.

Many practitioners will remember the paper registration system that operated prior to the introduction of Landonline. All dealings were processed manually and customers regularly visited the public counters in each of the 12 land registration districts to conduct searches and lodge dealings. While the paper system involved more face-toface contact between practitioners and land registry staff, it was a labour-intensive system with a delay between lodgement and registration. By contrast, the vast majority of transfer dealings are now processed automatically and registered immediately.

Landonline was made available to practitioners through a pilot programme in 2002 and then nationwide in 2003,

following an extensive conversion project in which millions of title and survey records were checked and scanned into the system. Current titles were then converted to a structured digital format known as a “computer register” (now a record of title).

As practitioners became familiar with the system, LINZ made electronic lodgement compulsory for an increasing range of instruments, until in February 2009 the mandatory requirements were extended to cover the full range of conveyancing instruments.

Of course, a lot has changed since those early days – the introduction of smart phones, a shift towards remote and flexible working, and the entry of a new generation of digital natives to the workforce. All these factors mean that the introduction of a modern, flexible platform for property transactions is timely and sets us up well for future innovations.

New Landonline is modern and easy to use, and we have seen broad uptake by practitioners and legal staff. It is important to acknowledge the efforts of the many people who have worked on the modernisation of Landonline, as well as the New Zealand

Beyond books

Law Society’s Property Law Section, whose members have participated in numerous customer days and provided feedback that has shaped the development of new Landonline. All of these contributions have allowed us to refine the system and ensure that it is as useful as possible.

Switching off legacy Landonline brings the initial stage of our modernisation project to a successful conclusion. It also allows us to turn our focus to the future and consider what further innovations we can add to the new system. We are well placed to consider new technological developments such as Application Programming Interfaces (APIs), which might enable useful software products to interact directly with new Landonline.

From a title registration point of view and as the regulator of the land transfer system, we are very pleased to celebrate this important milestone in the history of New Zealand’s title system. The completion of the move to new Landonline maintains New Zealand’s place at the forefront of Torrens title registration and sets us up to make the most of new technology in the future. ▪

We’re switching off Legacy Landonline – what to expect

BY ANDREA WATSON

After six years of developing New Landonline, we are now ready to fully migrate all eSearch and eDealings users to the new system. Legacy Landonline is now truly becoming a wonderful legacy. This is a major milestone for our Modernising Landonline programme and a key step towards entirely decommissioning Legacy. But the work won’t end when Legacy retires. We’ll continue to employ in-house software development expertise, to keep Landonline world-leading and avoid the need to do this again in 20 years.

For the next while, the primary focus of the team will shift to migrating our database and the internal functions our staff use to process dealings and generate new titles. We will continue to release improvements and new functionality to enhance the New Landonline workflow over the coming years, to ensure it continues to meet the needs of an always changing property and technology environment.

The Great Migration

The final pieces of Legacy functionality are in development at the time of writing this article (early February), and the Legacy switch-off is planned to proceed in stages between 3-12 March. The migration is staged into four tranches to allow customers to access quick and in-depth support via the Contact Centre if they have any questions or experience any issues with their account. It also means any issues can be flagged and responded to swiftly while limiting flow on effects.

Voluntary uptake of New Landonline is already high, with over 80% of dealings already being created and submitted in New Landonline. This is testament to the effort much of the profession made to be early adopters of New Landonline. Over the

last few of years we’ve seen a high level of engagement through our webinars, support articles, videos, desk guides, and updates via industry bodies. This all helps the decommissioning process to be as smooth as possible.

Andrea says the ongoing support and feedback from our legal customers has been pivotal to the programme. “From the beginning, we’ve sought to consult directly with our customers and design the features with their needs in mind. Meeting regularly with the Property Law Society’s Land Titles Sub-Committee was crucial in testing our ideas and making them fit for purpose. We’ve also had lots of great feedback via our in-app form, our Contact Centre, pilot groups, and a legal executive network we stood up for the programme. I’m so grateful for the thought and effort these volunteers put in to providing such good intel, as this was

“For the next while, the primary focus of the team will shift to migrating our database and the internal functions our staff use to process dealings and generate new titles”

able to inform and steer our build. This is a major Government IT infrastructure programme that was delivered early and on budget – I think our legal customers should be proud of the work they’ve done to get us here.”

Reverting to the name Landonline

Throughout the build phase we have referred to the original Landonline as Legacy Landonline and the modernised platform as New Landonline. At the completion of the final switch off, the official name we will be referring to our current platform as, will simply be, Landonline. ▪

Andrea Watson is the Hoa Kotui Hononga Matua Senior Relationship PartnerConsulting Solicitor, Sector Engagement at Toitū Te Whenua Land Information New Zealand. linz.govt.nz

LEASES

New commercial lease form

BY MICHELLE HILL, ISH FRASER AND AMY CHRISTIAN

The Law Association of New Zealand (previously Auckland District Law Society Inc, ADLS) (TLANZ), has recently issued a revision of its commercial lease form (Seventh Edition 2024). As a pro forma deed of lease used widely in the New Zealand commercial property market, the contents of the new version will be of interest to commercial property participants.

Although having first issued in 1984, the last time the ADLS lease was substantively reviewed was 2012 (Sixth Edition 2012). The Sixth Edition responded to changed market conditions at the time, but most notably issues resulting from the Christchurch earthquakes of 2011. Changes at that time included new provisions regarding landlords carrying out building upgrade works (such as seismic strengthening), removal of the landlord’s right to charge improvements rent and changes to make it clear that the tenant is not liable for repairs due to defects in design or construction, inherent defects in the building and renewal or replacement of building services. That version also introduced the, now famous, ‘no access in emergency’ clause (which was primarily included to achieve fairness where a tenant could not access premises such as was the situation in the Christchurch cordoned-off red zone). That provision was spotlighted during the Covid-19 pandemic.

The Seventh Edition 2024 has sought to further move with the times by introducing a variety of commercial terms which are often negotiated but not contemplated by the earlier lease version.

Although there are numerous changes to the terms of the lease, key changes are:

Rent reviews:

• The Lease now provides for set fixed rent

increases as an option.

• Parties may now specify an upper (cap) or lower (collar, or ratchet) limit for rent reviews.

Additional security options:

• Bank guarantee: The Lease now provides for the Tenant to provide a bank guarantee. Parties must ‘opt in’ to these provisions.

• Rental bond: The Lease now provides for the Tenant to provide a rental bond. Parties must ‘opt in’ to these provisions.

• Mortgagee consent : Landlords now need to expressly confirm or deny whether they are required to obtain mortgagee consent in respect the Tenant’s interest in the Lease.

Seismic

rating (item 25):

• The Lease now contains seismic provisions. The clause requires the Landlord to disclose any information that the Landlord becomes aware of that contains a ‘materially different’ assessment to the recorded NBS rating of the building. These provisions do not contain a warranty by the Landlord as to the NBS rating of the building, and parties need to ‘opt in’ to them by recording the seismic rating of the building in the First Schedule.

Outgoings:

• The list of outgoings payable by the Tenant in the First Schedule has been updated.

• A Landlord may only recover outgoings within 24 months of the outgoing being incurred. This does not apply to outgoings for body corporate management expenses where the Landlord does not control the body corporate.

Insurance excess:

• The insurance excess payable by the Tenant is now adjustable, with the default amount increasing to $5,000.

• If the Tenant causes damage, and if the cost of repair is lower than the excess, the Tenant must pay the cost of repair (subject to an upper limit).

• If the Landlord makes an insurance claim for damage that is not caused by the Tenant (or any other tenant of the building), then the amount of the excess applied to the cost of repair (not exceeding the maximum excess that the Tenant is responsible for under the Lease) will be an outgoing.

• If the Landlord’s insurance excess is increased as a result of any act or omission of the Tenant such that it exceeds the stated cap on the Tenant’s liability for insurance excess, the Tenant must pay the increased amount in respect of any future claim on the insurance policy.

• It is now a breach of lease for the Tenant to cause an increase in excess payable for any policy of insurance on the property.

Fair proportion of rent to abate:

• If the Lease provides for a rent abatement due to a ‘no access in emergency’ situation, then the parties may agree in advance what a ‘fair proportion’ of such abatement may be. This can be reviewed following an abatement scenario. By default, the ‘fair proportion’ shall be a 50% abatement of rent and outgoings.

Rights of renewal:

• Parties may specify the required notice of renewal period. The default period is 3 months.

Costs/disputes:

• The parties shall pay the other party’s legal costs of and incidental to the enforcement of the other party’s rights under the Lease. Previously this clause only applied to landlords who were required to enforce the Lease against tenants.

• The obligation to submit to arbitration arises even if a party did not first endeavour to resolve the dispute via an agreement or mediation.

Landlord’s liability:

• The limitations on the Landlord’s liability with respect to its maintenance obligations have been reduced. For example, it appears that the Landlord will now be liable for want of repair or defect in respect of building services, regardless

of whether the Landlord is maintaining a service maintenance contract covering the works to be done.

Landlord’s consent:

• If the Tenant seeks consent for alterations which would prompt a requirement to upgrade the building, then the Landlord may refuse consent unless the Tenant agrees to meet all of the associated costs of those upgrade works.

• Where the Landlord’s consent or approval is required under the Lease then, unless expressly stated to the contrary, the Landlord may grant consent or approval subject to reasonable conditions.

Health and safety:

• The parties now have specific obligations relating to health and safety,

including an obligation to comply with the Health and Safety at Work Act 2015.

Conclusion

The ADLS (now TLANZ) lease form has generally been regarded as a fairly evenly balanced set of terms from landlord’s and tenant’s perspectives. However, it should still only be treated as a starting point for negotiations as it is not a case of one size fits all. Care will be required in the negotiation, preparation, and completion of this important commercial contract. ▪

Michelle Hill and is a Partner at Dentons in Auckland. Ish Fraser is also a Partner at Dentons, in their Wellington office. This article was written with assistance from Amy Christian , a Solicitor in Dentons’ National Real Estate team. dentons.co.nz

PROPERTY LAWYER’S BRIEF

Sale of residential property Disclosure issues

BY SARAH WROE

Kia ora Sarah,

We are advising vendor clients on their disclosure obligations on the sale of their residential property. They are selling because of a problem neighbour. The neighbours on their southern boundary have always been difficult. Several years ago, when their kids were younger, the neighbours issued a trespass notice against their son after he went into their garden to collect his football. They complain to noise control whenever our clients have friends over for a barbecue if they are out on their back deck past 9pm.

The main thing that gives our clients some privacy from them is a shelterbelt of trees along the boundary. The trees provide privacy, obstruct the unattractive view across the neighbour’s property and provide some shelter from the wind. The problem is they are now 10m high and the neighbours have been asking our clients to have them topped for years now. That will be quite expensive because of access issues. The most recent confrontation on this issue was about 6 months ago. The neighbour stormed off saying he would be getting his lawyer involved. Nothing came of that, and it hasn’t been mentioned since. Do our clients need to disclose the issues with the neighbour? What could the consequences be if they choose not to?

Ngā mihi Elowyn Shea Barrister & Solicitor

Hello

Elowyn,

The extent of your clients’ disclosure obligations will be determined by the terms

of the contract. If there are no terms that require disclosure, the normal rule of caveat emptor (buyer beware) will apply.

The standard terms of the ADLS/REINZ Agreement for Sale and Purchase of Real Estate have warranties and undertakings at clause 7.0 which abrogate the normal rule. The potentially relevant ones for this scenario are 7.1 and 7.2:

7.1 The vendor warrants and undertakes that at the date of this agreement the vendor has not:

1. received any notice or demand and has no knowledge of any requisition or outstanding requirement:

(a) (from any local or government authority or other statutory body; or (b) under the Resource Management Act 1991; or

(c) from any tenant of the property; or (d) from any other party; or

2. given any consent or waiver, which directly or indirectly affects the property and which has not been disclosed in writing to the purchaser.

7.2 the vendor warrants and undertakes that at the date of this agreement the vendor has no knowledge or notice of any fact which might result in proceedings being instituted

by or against the vendor or the purchaser in respect of the property.

If these clauses are not struck out, and your clients do not tell prospective purchasers about the tree issue, they will be in breach of clause 7.2. In my view, they do not have to disclose anything about the noise complaints or the historic trespass notice. From what you have said there would not be a breach of clause 7.1 but you should get information before giving advice on that. There are just a few relevant cases on these clauses. Western Park Village Ltd v Baho [2014] NZCA 630 was a case concerning non-disclosure of a rockfall issue. When Baho sold his unit to Western Park Village Ltd he did not tell the purchaser that the body corporate had received a solicitors’ letter from the neighbouring property threatening court action if no agreement could be reached about management of rockfall from the apartments above. Mr Baho knew about the letter but did not disclose it. The Court of Appeal found that there was no breach of the equivalent of clause 7.1 as the letter did not convey a formal requirement or demand (in reliance on Kaitaia Timber Co Ltd v Alternative Enterprises Ltd (2012) 14 NZCPR 177). They found the non-disclosure was a clear breach of what is now 7.2.

For your clients, they have been told that the neighbour will be talking to a lawyer about the trees due to his concern about shading. That is enough to indicate the possibility of an application under s 333 of the Property Law Act 2007 if the new owners do not agree to remove the trees. It may be enough for there to be ongoing complaints about the trees without any mention of lawyers or legal action, but that will depend on the context and the content of any conversations. In Moxon v Cassidy CIV 2006-404-5380 [27 August 2007], a vendor

breached the similarly worded clause about the possibility of proceedings against the body corporate. She knew about two-year old weathertightness reports which detailed extensive design and construction flaws with units in the complex. She knew that less extensive remedial work had been carried out and far less money had been spent than was estimated in the report. She believed her unit would be alright and there would be no claims so she did not disclose the reports. She was liable for breach of warranty. Winkelman J (as she then was) said that the clause “places a very heavy onus of disclosure upon the vendor” as it requires no more than a possibility that there might be legal proceedings.

You will need to interrogate exactly what was said to your clients by the neighbour to understand if any formal demand was made in relation to the trees so as to fall within clause 7.1. Demands, requisitions and outstanding requirements are things that are directive – requiring some action to be taken. The wider term “notice” in clause 7.1 need not be directive, but it does need to go further than conveying information. There is a good discussion in the Kaitaia case on this wording. Associate Judge Bell’s judgment

and summary of the principles in relation to caveat emptor have been followed in other cases. Communicating an obligation to comply with a general duty would not be considered a relevant demand or notice –for example, a notice to comply with noise regulations or by-laws, not to trespass, or not to cause a nuisance by allowing trees to grow beyond a certain height.

I don’t think your clients need to worry about a breach of clause 7.1 from what you tell me, but they risk breaching 7.2 if they do not disclose the conversation with the neighbour about the trees.

Their options are to strike out clause 7.2 or disclose what the neighbour said, or risk a breach of the clause. If the latter, it would be wise to get them to sign something that records your advice that non-disclosure would be a breach of the agreement and that you have advised them to disclose it. If the worst happens and they are sued, the damages would be the difference between the value of the property as warranted (i.e. without knowledge of possible litigation in relation to the trees) compared to what it is actually worth given that possibility. Depending on the market, a registered valuer may determine that there will not

be much difference. The purchasers will be buying a property with trees that will need to be managed either way.

One other word of warning. If the predominant reason for sale is a problem neighbour, that is not something that needs to be disclosed. However, to avoid any misrepresentation care will be needed for how the real estate agent markets the property and responds to questions about why the vendors are selling. Saying it is for “personal reasons” might be the best they can do, but even that carries an inference that it is nothing to do with the property. ▪

Kind regards Sarah Wroe Barrister

Sarah Wroe is a barrister practising from Eldon Chambers in Auckland and representing clients from all over New Zealand and overseas. She is an experienced litigator. Her practice covers general civil and commercial litigation with a focus on property-related disputes. She accepts appointment for assessment of claims for compensation under clause 10 ASP. She also practises in sports law. sarahwroe.co.nz

ABOVE: Lake Taupō

Member spotlight – Claire Tyler

In our second “PLS member spotlight” column, we meet regular Property Lawyer Māori Land columnist, Claire Tyler. Claire is a partner at Rainey Collins in Wellington, and has been a regular TPL columnist since March 2020. We’re taking this opportunity to get to know her a bit better.

Where did you grow up, and why did you want to become a lawyer?

I grew up in Whanganui. I wanted to be a lawyer because I watched my father work as a lawyer and thought it looked like a fulfilling job to do. I also like solving problems, paying attention to detail and helping people, which led me to want to become a lawyer.

When/why did you decide to focus on property law as an area of practice, and what led you to have practice in the Māori land space in particular?

I knew from the outset that I was most interested in helping everyday ‘mums and dads’ with the legal things they needed to do in day-to-day life. I like to make complicated things simple. This led me to property and general practice law. The Māori land aspect came when learning from our Treaty of Waitangi team at the firm. Māori land was an area that many general practitioners were hesitant to advise on and we wanted to ensure we could offer a full suite of property law services, including Māori land, to fully service our clients.

What is a career highlight so far?

Becoming the managing partner of the firm last year.

Quick-fire questions

If you weren’t a lawyer, what would you be?

An optometrist (again, I would feel like I was solving problems and helping people).

When I’m not working I’m...

Spending as much time with my 3 daughters and husband as I can.

Go-to holiday destination in New Zealand?

Taupō, in particular Acacia Bay. ▪

The subdivision pressure

Can s 224(c) certificates be forced out of Territorial Authorities?

BY CHARLOTTE MUGGERIDGE AND ABBY IRVINE

Many of us have experienced the pressure of the s 224(c) certificate –whether in trying to get a territorial authority to sign off on a 224(c) certificate in time to enable the lawyer to lodge for titles with Toitū Te Whenua Land Information New Zealand and beat the deadline of a sunset clause; or the situation where a s 224(c) certificate shows up in your inbox, with the lawyer having very little knowledge (if any) that the client was in fact undertaking a subdivision.

Here, we explore two recent decisions issued by the Environment Court and the High Court, Hensman v Queenstown Lakes District Council ( Environment Court ) and Queenstown Lakes District Council v Hensman (Appeal – High Court), which have made clear that this is a process that calls for everyone’s time and careful thought, particularly when drafting conditions of consent.

Section 224(c) Resource Management Act 1991

For a survey plan to be deposited, a s 224(c) certificate is required. To obtain a s 224(c) certificate, the applicant needs to demonstrate that the territorial authority has approved the survey plan under s 223 of the Resource Management Act 1991 (RMA); and that all resource consent conditions have been met, though if any conditions of the resource consent have not been complied with, there is the option of:

(a) a completion certificate being issued in relation to such of the conditions to which s 222 of the RMA applies:

(b) a consent notice has been issued in relation to such of the conditions to which s 221 of the RMA applies:

(c) a bond has been entered into by the subdividing owner in compliance with any condition of a subdivision consent

imposed under s 108(2)(b) of the RMA.

It is the territorial authority that is in charge of this process. However, in 2024, in Hensman v Queenstown Lakes District Council, 1 the Environment Court granted an application made by the Hensmans, and ordered the Queenstown Lakes District Council (Council) to issue a s 224(c) certificate, despite Council not being satisfied as to compliance. The order required the Council to comply with the RMA by:2

The Chief Executive or other authorised person of the Council signing a certificate stating that it has approved the deposit survey plan for Lots 309 & 310 DP 522931 dated 9 September 2022 and that all conditions of subdivision consent RM210066 have been complied with to the satisfaction of the Council, pursuant to s 224(c) of the Act.

Six months later, the High Court found that the Environment Court erred in law in deciding that it had jurisdiction to make an enforcement order requiring the Council to issue a s 224(c) certificate.3

Environment Court

Hensman v Queenstown Lakes District Council

The Hensmans (Applicant) were subdividing two lots into three. They received their resource consent with a number of conditions that related to engineering specifications and construction. After works had started, Council inspected the vehicle crossing and accessway. The Council found that the accessway was too steep and had not been completed in accordance with the Council’s Subdivision Code of Practice. Further works were completed, and then the request for the s 224(c) certificate was made by the Applicant.4 The Council outlined further work to be completed. In the Applicant’s view, the additional works requested were not required by the resource consent conditions, nor expressly required in the Subdivision Code of Practice. Unable to resolve the dispute, the Applicant sought an enforcement order from the Environment Court for Council to issue the s 224(c) certificate.

The Environment Court was tasked with deciding (among other legal questions)5 if an enforcement order can be made to force Council to issue a s 224(c) certificate.7

Charlotte Muggeridge

Abby Irvine

The Environment Court relied on the Northlake decision which addressed similar issues related to the jurisdiction of the Environment Court in enforcing subdivision consent conditions.7 Northlake involved a consent condition which required an engineering review and acceptance process, similar to Condition 11 in this case.8 The Court in Northlake considered whether there was jurisdiction to issue enforcement orders. It focused on two provisions of the RMA: s 31 of the RMA – functions of territorial authorities; and how those functions can be exercised in accordance in s 21 of the RMA9. The Court held that enforcement orders can require a territorial authority to perform its duties related to the administration of resource consents, including issuing engineering approval under condition 11.11

Appeal – High Court

Queenstown Lakes District Council v Hensman

The decision of the Environment Court was appealed by the Council to the High Court. The High Court looked at whether the Environment Court had jurisdiction under s 314(1)(b)(i) of the RMA to issue an enforcement order against the Council due to the Council’s refusal to issue a certificate under s 224(c) of the RMA.12

The High Court held that s 224(c) of the RMA does not impose a statutory duty on

the Council that is enforceable against the Council, but rather provides councils with discretionary power that requires them to assess whether the conditions of consent have been met. In the Court’s view, the enforcement order was inappropriate as this was not an instance where the Council had failed to fulfil its evaluative duties.13

Section 21 of the RMA requires the avoidance of unreasonable delay, but the decision to not issue the s 224(c) certificate was made in a reasonable time.14

The High Court concluded that enforcement orders are not suitable for resolving disputes over s 224(c) certificates, and the appropriate mechanism in this case would be for parties to seek a declaration from the Environment Court under s 310 of the RMA.15 Further, if there were concerns as to the reasonableness of a council’s decision, then judicial review is the appropriate mechanism.16 The High Court noted that if enforcement orders were allowed for such statutory functions, it could set a precedent that might lead to misuse of enforcement orders to challenge various Council decisions under the RMA, which was not the intended purpose of these orders.17

Conclusion

The difficulties which gave rise to the proceedings were due to various actions of both the Council and the developer, as neither the developer nor Council picked up

on the non-compliance with the approved plans.18 This case serves as a reminder that errors made by the Council do not release consent holders of their responsibilities. It emphasises the value in working collaboratively when drafting consent conditions, as this will help ensure compliance with all requirements, including any applicable Code of Practice.

The High Court’s decision also usefully underlines that the Environment Court’s authority to issue enforcement orders should not be used to compel local authorities to perform administrative actions under the RMA. If there are issues relating to signing off works for subdivisions, a declaration can be sought to clarify any consent conditions, and there is the ability to judicially review the Council’s decision not to issue a s 224(c) certificate. ▪

Charlotte Muggeridge is a Partner at Harkness Henry in the Waikato, and specialises in Environmental Law. Abby Irvine is a Solicitor at Harkness Henry and provides advice on resource management issues. harknesshenry.co.nz

1. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37.

2. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37 at [1].

3. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [157]. The High Court also found that the Environment Court erred in relation to other aspects of the subdivision.

4. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37 at [34].

5. Including: (a) Whether Council can rely on Consent Condition 8 to require additional work not itemised in the resource consent conditions (conditions 11 and 19 in particular); and

6. (b) Whether Council can require the remediation actions it requested.

7. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37 at [44].

8. Northlake Investments Limited v Queenstown Lakes District Council [2022] NZEnvC.

9. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37 at [50].

10. Section 21 RMA – – Carrying out functions as promptly as is reasonable.

11. Hensman v Queenstown Lakes District Council [2024] NZEnvC 37 at [58] – [59].

12. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [39(a)]. It also looked at six other errors of law.

13. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [63].

14. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [62].

15. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [63].

16. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [64].

17. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [65].

18. Queenstown Lakes District Council v Hensman [2024] NZHC 2493 at [115].

Don’t be your client’s puppet

Thoughts on building report conditions and pre-settlement inspections

BY DUNCAN TERRIS

Changes

The observant among you will note a change in title of my regular column from ‘e-dealing consultant’ to ‘Property Practice’. There are a couple of reasons for this. The first being that Landonline and e-dealing has been with us for more than two decades, and the rebuild and ‘new Landonline’ is now in place. The new fees are in effect and Legacy Landonline is largely decommissioned. Accordingly, there is less reason to have a column dedicated solely to Changes

The observant among you will note a change in title of my regular column from e-dealing, although any pertinent matters may be addressed in this column as and when they arise.

The second reason is due to a change in my own personal direction and practice from solicitor to barrister sole. I have been involved in High Court property cases as an expert witness for a number of years and as an ‘experienced property lawyer’ under the Agreement for Sale and Purchase for dispute determinations. So going forward my column will address more general property practice matters arising from my dispute resolution work, expert witness and opinion engagement.

Building report condition

We all know the relative limitations of recourse by the vendor with the current standard condition relating to a Building Inspection Report (Report) in the Agreement for Sale and Purchase. From my observations, the majority of agreements contain a bespoke Building Report condition that often requires the purchaser to give the vendor the option to remedy prior to any cancellation of the agreement.

The issue

There seems to be a growing trend in recent years by the purchaser’s lawyer to provide a long list of items identified as ‘defects’ in the Report with the requirement to remedy them prior to settlement or compensate the purchaser.

This seems to be case even where a property is decades old and was priced accordingly. I can accept where the property is newly or recently built that there is a reasonable expectation of minimal maintenance items. However, where it was a 30- or 40-year-old property I was somewhat annoyed when presented with a list of ‘defects’ to remedy that would largely render the property ‘as new’ or ‘fully refurbished’.

In my view, the Report in relation to an older property is there to identify any substantive issues or problems that may not have been readily identifiable by the purchaser. In addition, it provides the purchaser with a likely maintenance schedule for the property during their ownership.

My typical response to unrealistic

requests has been to advise that the bulk of the items raised were readily apparent at the time the purchaser entered into the agreement. Furthermore, if all those items had been attended to, the sale price would have been higher.

As professionals, it is our role to advise and educate our clients rather than being a mere mouthpiece or puppet on their behalf. Expectation management and a degree of pragmatism is often necessary when discussing the Building Report with a client, especially a first home buyer.

Pre-settlement inspection

The same applies to the pre-settlement inspection. The last thing any of us want to deal with the day prior to settlement, or worse, settlement day, is back and forth over minor issues that existed at the date of the agreement, but were overlooked by the purchaser.

Certainly, the Agreement requires appliances and electrical fittings to be ‘in reasonable working order’ at settlement. By way of example, stains on the carpet that were there as at the date of the Agreement, but were concealed by furniture, cannot be cause for challenge.

A less common, but equally frustrating, issue is apparent confusion by agents and clients (and dare I say some lawyers) around the latest timing for conducting a pre-settlement inspection.

The standard Agreement for Sale and Purchase wording refers to:

‘…on one occasion prior to the settlement date’.

That wording is quite distinct from what some think is ‘prior to settlement’. There is also the right for a subsequent inspection where items requiring remediation have

CONTINUED FROM PAGE 21

been identified and agreed to, but the wording of the Agreement also states that must occur ‘prior to the settlement date’ .

The property does not need to have been vacated prior to the inspection and a purchaser cannot require that (unless it is a bespoke clause to that effect). My recommendation from a purely pragmatic perspective is at least two working days prior to the settlement date.

Vendor disclosure

Most auction sales have vendor-supplied LIMs and Building Reports available. There is of course the issue of ‘privity of contract’ for any claims by the purchaser for material omissions.

It may well be prudent to advise your vendor client to obtain those reports prior to marketing, to address any significant matters prior to marketing, or make them specific exclusions in the Agreement to minimise cancellation or compensation claims.

Summary

Foster realistic expectations for your clients and manage their requests of you in a professional yet pragmatic manner. Explain the need for early identification of issues and encourage vendors to do their own due diligence to avoid surprises and risk of ‘ambush’ and the cancellation of Agreements.

Let’s make life that little bit less stressful for all concerned! ▪

Duncan Terris is a barrister in Christchurch. Until recently, he was the Principal at Terris Legal. He is the convenor of the PLS Land Titles Committee, a member of the PLS Executive and the immediate past PLS Chair.

TRUSTS, WILLS AND ESTATE ADMINISTRATION

Ordered to have an adult conversation: section 145 of the Trusts Act 2019

BY KEVIN LENAHAN

One of the fundamental tenets of mediation is that the decision-making power remains entirely and strictly with the parties. Mediation does not involve an arbiter of fact or law. It is somehow incongruous to think of a party or parties to a mediation attending a mediation, against their will and by order of the court, when mediation has been described by the court as an ‘inherently consensual process.’1

However, under s 145 of the Trusts Act 2019 (the 2019 Act) the court may, at the request of a trustee or a beneficiary or on its own motion order each party to a matter, or specified parties, to participate in a mediation in person or by a representative.2 It is important to remember that while the court can order a party or parties to attend mediation it certainly cannot, in any sense, seek to influence the actions of those parties when they attend the mediation.

The comments of Lord Phillips, former Lord Chief Justice of England and Wales, suggest that any contradiction in ordering parties to mediate is more apparent than real:3

Those opposed argue that compulsion is the very antithesis of mediation. The whole point of mediation is that it is voluntary. How can you compel parties to indulge in a voluntary activity? ‘You can take a horse to water, but you cannot make it drink’. To which those in favour of compulsory mediation reply, ‘yes, but if you take a horse to water it usually does drink.’ Statistics show that settlement rates in relation to parties who have been compelled to mediate are just about as high as they are in the case of those who resort to mediation of their own volition.

The court ordered mediation of trust disputes in this jurisdiction is a relatively new departure. Sections 142 – 148 of the 2019 Act, which deal with alternative dispute resolution, have no equivalents in earlier legislation.4 Under the 2019 Act the court may enforce any provision in the terms of a trust that requires a matter to be subject to mediation or otherwise submit any matter to mediation, unless the terms of the trust indicate a

contrary intention.5 When making an order enforcing a term in a trust deed which provides for mediation or referring a matter to mediation the court may also order that the costs of the mediation, or a specified portion of them, be paid from the trust and may also appoint a particular mediator.6

Application to will trusts

From a succession law practitioner’s perspective, it is crucial to note that s 4B of the Administration Act 1969 provides that the duties incidental to the office of administrator are taken to be express trusts for the purposes of the 2019 Act, and the 2019 Act applies with any necessary modifications to the office of administrator. A mediation application was made in relation to will trusts in Gatfield v Hinton.7 It was accepted that the 2019 Act, including the mediation provisions, applied.8

Gatfield v Hinton is also interesting as the court took the opportunity to order that an arbitration should take place in the event the mediation it ordered was not successful. The court agreed with counsel that requiring a further application to be made seeking arbitration, if the mediation did not finally resolve the dispute, would cause unnecessary costs and delay.9

Gault J, when dealing with a security for costs application in a dispute between a father and son, endorsed a judicial colleague’s comments regarding the desirability of settlement of the matter and noted

the Court’s power to direct mediation.10 While such a comment may have been of assistance to the parties, or their lawyers, it remains to be seen how frequently (if at all) the court will, on its own motion, order mediation. Arguably it would represent a useful initiative in many instances.

Jurisdiction relates to internal matters

Perhaps unsurprisingly it does not appear that there has yet been a case in which the terms of the trust deed revealed an intention which was contrary to mediation. It will be interesting to see how future settlors may react to the court’s jurisdiction to refer matters to mediation. Perhaps new trust deeds will have more robust internal mechanisms which aim to ensure any disputes are referred to mediation automatically, without need for a court application. One wonders, however, whether there will be any settlors who will set out to pre-emptively relieve the court of its jurisdiction under s 145 by ensuring their trust deeds express an intention contrary to disputes being referred to mediation.

A “matter” is defined in s 142 as a legal proceeding brought by or against a trustee in relation to the trust, or a dispute between a trustee and beneficiary, or between a trustee and a third party, or between two or more trustees, that may give rise to a legal proceeding. A matter does not include a legal proceeding or a dispute about the validity of all or part of a trust.

The court can only refer “internal matters” to mediation.11 Internal matters are those to which the parties are a trustee and a beneficiary or beneficiaries, or a trustee and one or more trustees. External matters, to which the parties are a trustee and one or more third parties, (e.g. disputes between trustees and a creditor) are not capable of being referred to mediation.

This also applies where a beneficiary of the trust who happens to also be a creditor of it makes a claim in their capacity as a creditor, rather than as a beneficiary.12 While a claim made as beneficiary would be an internal matter a claim made as creditor is a third-party dispute and, therefore, an external matter.

A matter does not need to have already given rise to a court proceeding to be referred to mediation. While it does not appear that any cases have yet arisen where a court ordered parties to mediate when they were not already engaged in the litigation process, the definition of a “matter” in section 142 clearly includes a dispute which has not yet given rise to a legal proceeding.

Procedure

Where a proceeding is underway, an application for referral to mediation may be made by interlocutory application.13 A referral to mediation is not substantive relief but an order ancillary to the orders sought in the existing proceedings. Determination of whether a matter should be referred to mediation does not require a full hearing process with discovery, interrogatories and the giving of oral evidence. The court has found that would undermine the key advantages of mediation; that it is a quicker and cheaper process than conventional litigation. It is submitted that where proceedings are not already in being, and a referral to mediation is sought, the court’s permission should be sought, without notice, to commence by originating application.14

Relevant factors for the court’s consideration

Even when the threshold requirements are met, the court is not required to refer a matter to mediation. The cases regarding

mediation are relatively evenly divided in that approximately half of the applications for referral to mediation have been successful,15 and approximately half have been unsuccessful.16 Various factors will be relevant to the decision to refer a dispute to mediation, including: 17

• cost

• confidentiality

• speed

• the seriousness and complexity of the matter

• the suitability of the proposed mediator

• the wishes of the parties

• the wishes of the settlor (if known)

• finality

• enforceability.

This is not an exhaustive list. In Innes v Darlow it was noted that the merits of a case may be important, and that the court would be slow to refer a “plainly unmeritorious” claim to mediation.18 The court then traversed reasons why the case in question was considered to be unmeritorious, reasons why the mediation was unlikely to be successful (including the litigation history), and declined to order the parties to attend mediation.19

Mediation was declined in Wiggins v Wiggins for a number of reasons, including because it would not bind a critical party, and therefore was unlikely to be successful as a means of resolving the dispute.20 Mediation was declined in S v N with reference to (among other things) a history of family violence making it inappropriate to order mediation against the wishes of the party alleging prolonged physical, verbal, psychological, and economic abuse.21

Confined by relief sought?

In Terry v Terry, which was a dispute about succession to a large family farming operation structured around interrelated trusts, companies, partnerships and testamentary arrangements, the court refused to order mediation primarily because the proceedings were focused on the relatively narrow issue of the removal of trustees under s 112 of the 2019 Act, while the claimant’s real focus was on bringing forward the arrangements which would enable him to take over the bulk of the family farming

business.22 The trustees had indicated an unwillingness to engage on the broader issue.23 It was significant for the court that the trustee removal application would involve a hearing on affidavit evidence, with focused cross-examination of deponents, which the court could accommodate relatively quickly.24

However, in another case where the relief sought was limited in scope to the removal of a trustee, the court held the view that a restrictive approach should not be taken. There were detailed and extensive amended pleadings and it was clear that in fact the issues of control and sale of trust assets were in issue between the parties.25 The court referred the matter to mediation.

Mediation where a party is opposed

Mediation has been ordered against the wishes of one party in other cases; in Gatfield v Hinton there were concerns about whether mediators could be truly impartial when dealing with a High Court judge as one of the parties. The court found that those parties underestimated the abilities of an experienced mediator and ordered mediation.26

Mediation was also ordered in Addleman v Lambie Trustee Limited against the wishes of one party. However mediation had the potential to resolve disputes among numerous parties, and it was an avenue which could address disclosure issues arising in the proceeding.27 An objection to the proposed mediator was not sustained, however it does not appear that alternative mediators were proposed either.

Where disclosure is critical to a case and its potential resolution at mediation the parties may wish to consider whether, during an expanded mediation intake process, the mediator might be usefully involved in the parties’ discussion of what disclosure needs to be made.

Food for thought

The s 145 cases decided so far indicate that the court will consider numerous factors in deciding whether to refer a trust dispute to mediation. Ultimately the precise application of those factors in each case will depend on the facts of

the individual case. It will be interesting to see, over the coming years, whether the court will, on its own motion, make regular use of its jurisdiction to enforce mediation clauses in trust deeds or refer parties to mediation. Eventually sufficient mediations should be ‘ordered’ to allow practitioners to gauge for themselves whether the compulsory involvement of a party in a mediation reduces its chances of success. ▪

Kevin Lenahan is a Director at Greg Kelly Trust Law. He specialises in resolving contentious trusts and estates disputes, whether through the courts or ADR. He also mediates (AMINZ and Resolution Institute accredited) in his area of expertise. trustlaw.co.nz

1. S v N [2021] NZHC 2860 at [34] citing Beadle v M & L A Moore Ltd [1998] 3 NZLR 271 (CA) at 274; Halsey & Milton Keynes General NHS Trust v Steele [2004] EWCA 576; and see generally The Hon Sir Ian Barker QC Arbitration, Mediation and the Courts [2004] NZLJ 489

2. Section 145 refers to an ADR process which is defined in s 142 as an alternative dispute resolution process (for example, mediation or arbitration) designed to facilitate the resolution of a matter. For simplicity, this article will refer to mediation alone. For those concerned with arbitration it is notable that s 142 of the 2019 Act inserted a new section 10A into the Arbitration Act 1996 which states that where an arbitration relates to a trust matter ss 142 to 148 of the 2019 Act apply

3. Lord Phillips of Worth Matravers, Lord Chief Justice of England and Wales “Alternative Dispute Resolution: an English Viewpoint” (India, 29 March 2008) as cited in Wright v Pitfield [2022] NZHC 385 at [35]

4. Terry v Terry [2023] NZHC 884 at [21]

5. Trusts Act 2019, s 145 (1)

6. Trusts Act 2019, s 145(2)(b) and (c)

7. Gatfield v Hinton [2024] NZHC 1712

8. Gatfield v Hinton [2024] NZHC 1712 at [12] and [13]

9. Gatfield v Hinton [2024] NZHC 1712

10. Eliahu v Eliahu [2022] NZHC 3412 at [25]

11. Trusts Act 2019, s 145 (3)

12. Innes v Darlow [2024] NZHC 2614 at [24]-[39]

13. S v N [2021] NZHC 2860 [2021] NZFLR 756 at [14]; and Wright v Pitfield [2022] NZHC 385 at [14]. See also Terry v Terry [2023] NZHC 884 where the application to refer to ADR was made by interlocutory application at [19] without comment

14. High Court Rules 2016, rule 19.5

15. Wright v Pitfield [2022] NZHC 385; Addleman v Lambie Trustee Ltd [2024] NZHC 1790; Gatfield v Hinton [2024] NZHC 1712

16. S v N [2021] NZHC 2860; Wiggins v Wiggins [2024] NZHC 863; Terry v Terry [2023] NZHC 884; Innes v Darlow [2024] NZHC 2614

17. S v N [2021] NZHC 2860 at [29] citing Andrew Butler, Arbitration of Trust Disputes under the Trusts Act 2019 [2021] NZLJ 106

18. Innes v Darlow [2024] NZHC 2614 at [23]

19. Innes v Darlow [2024] NZHC 2614 at [55]-[64]

20. Wiggins v Wiggins [2024] NZHC 863 at [23]

21. S v N [2021] NZHC 2860 at [35]

22. Terry v Terry [2023] NZHC 884 at [29] and [36]

23. erry v Terry [2023] NZHC 884 at [30]

24. Terry v Terry [2023] NZHC 884 at [30]

25. Wright v Pitfield [2022] NZHC 385 at [21]

26. Gatfield v Hinton [2024] NZHC 1712 at [97] – [99]. Although the first and second plaintiff in this case did not preemptively nominate a mediator, it was accepted that this might have been viewed as a concession. The first and second plaintiffs were provided with five working days to nominate three mediators of their choice. If there was no agreement between the parties, then the court would appoint one.

27. Addleman v Lambie Trustee Ltd [2024] NZHC 1790 at [37]-[39], [60], [63]

SUSTAINABILITY | CLIMATE CHANGE Sustainability

What does it look like in 2025?

BY DEBRA DORRINGTON

Sustainability. It is a notion that I have come to view as passe. Its relevance is gone. Its possibility is dead, and around the world, including in New Zealand, nations seem to have abandoned any prospect that it might be achievable. Instead, where there is an environmental focus, it is more commonly on mitigating the impact of the changing climate on civilised humanity and considering how to adapt to the reality of what lies ahead.

Did property lawyers and property professionals have any idea what it took to be sustainable? Planting a lemon tree was never going to make it. Much more fundamental changes were needed. Changes in behaviour, changes that impacted how people lived and, consequently, what they needed in their buildings.

The Paris Agreement looks for no more than 2 degrees of warming (or better still, 1.5). Scientists now say our current path puts us on track for anything from 3 degrees warming and more. But somehow, we don’t have the ability to unilaterally or collectively do anything meaningful about that.

Perhaps it is time to admit abject failure and shift our focus to how we will adapt to the uncertainty and to the changes that are here – how we will mitigate the impact of the changes on our communities, on our homes and other buildings and on those who occupy them. I wonder if that is the thinking behind New Zealand’s latest contribution to its Paris Agreement obligations.

Second Nationally Determined Contribution

Earlier this year the New Zealand Government announced our second Nationally Determined Contribution. This sets out how New Zealand will contribute

to reducing the increase in global temperatures. It is a requirement of the Paris Agreement. We agreed when signing the agreement that we would produce these contributions every 5 years and that each one would be progressively more ambitious.

Scientists tells us we need to reduce emissions by approximately 45% compared to 2010 levels, by 2030.

New Zealand’s first NDC ultimately aimed for a “50 per cent reduction of net emissions below our gross 2005 level by 2030.”

Our second Nationally Determined Contribution is no more ambitious. It aims to reduce emissions by 51 to 55 per cent compared to 2005 levels, but by 2035. This despite advice from the Climate Change Commission that a 66% reduction in emissions was doable without adverse economic impact.

At the time of writing, not all nations had released their NDCs. They were due in February 2025. Two of our trading partners had released theirs and provide some comparison. The UK aims to reduce all greenhouse gas emissions by 81% by 2035 compared to 1990 levels. Switzerland by at least 65 percent by 2035 compared to 1990 levels.

It is not surprising that our latest NDC has stirred commentary. The Government has set a target that is about as unambitious as it thinks it can get away with under the Paris Agreement. However, whether it actually complies with Paris is highly questionable, and it’s not good enough Lawyers for Climate Action January 2025 newsletter

In the absence of regulatory requirements to change behaviour, it is difficult to see any real potential for New Zealand

to achieve the levels of emissions reduction required to contribute as an effective party to the agreement. In the property world, with no government incentive for property developers or landlords to reduce emissions, the focus is on growth, less red tape, and less consideration of environmental issues. It means any contribution to a liveable world that is made by the legal and the property sector will come down to the personal decision-making of individuals.

New Zealand’s second emissions reduction plan

New Zealand’s second emissions reduction plan was published in December 2024. It is the Government’s plan for this country’s reduction in emissions. It covers the full range of New Zealand life including the use of land and buildings.

This plan is not focused on behavioural changes. It sets the expectation that technological changes will reduce our emissions, and that people and industries will use their own initiative to adopt the technology. The impact is a plan that claims to enable emissions reduction. It does not require the reduction.

In relation to property, the emissions reduction plan explains:

The Government is already working on actions to support lower embodied emissions by: • making it easier to build small buildings,

by removing the need for a building consent for small secondary dwellings such as granny flats;

• improving access to innovative and sustainable materials by enabling the use of overseas building products and standards;

• developing a methodology for the building sector to measure embodied emissions in a consistent and credible way.

The Government will work alongside the sector to encourage lower embodied emissions by:

• supporting the Building Research Association of New Zealand (BRANZ) and Masterspec to develop and maintain a national online resource of embodied carbon data for building materials and products;

• improving the consistency and accessibility of tools currently used to measure embodied emissions;

• supporting an industry-led pilot of an online platform for sharing embodied carbon assessments of different buildings. This is aimed at improving industry understanding of what low-embodied carbon buildings look like. It will also help industry identify opportunities to improve reporting of embodied emissions.

To be effective, this approach will need a change of behaviour. One that in my view has no chance of being implemented in time.

The role of board members

The Cambridge Institute for Sustainability Leadership (CISL) is an institute within the Cambridge University. It supports action towards a sustainable future. The CEO of the Institute, Lindsay Hooper, recently

expressed her views on the effectiveness of current and past business and government decisions in addressing sustainability: “Global business is stuck in a losing game. Over three decades, companies have invested in so-called responsible actions on climate and nature that have yet to add up to anything like the changes needed or create significant commercial value.

Governments, meanwhile, have struggled to phase out damaging activities or build thriving markets for sustainable products and services.”

A recent CISL research project examines the role of boards in this respect. Earlier this year the latest paper in the series was completed in conjunction with DLA Piper. It examines the roles internationally of both the boards of public companies, and large asset management shareholders. Because of changes in investors’ expectations, public company boards it says are having to think in a way that “extend[s] well beyond the conventional remit of board oversight”.

The report is an interesting read and easily available at cam.ac.uk – search “future of boards phase 2”. Amongst other things it recognises:

• the potential for the influence of voting shareholders but says that influence is unrealised and unlikely to change at the speed and significance that sustainability requires;

• shareholder issues are generally too localised to enable meaningful addressing of climate change issues;

• regulatory frameworks are essential if sustainability objectives are to be met;

• boards are having to cope with the weaponizing of ESG factors in the pursuit of political and social objectives;

• there is a public perception that fiduciary

duties of the board extend beyond the shareholders.

We have reached a stage where, both here and internationally, we’re missing the imperative for action. Worse than that, the climate change problem is so significant and complex, the views so divergent and now politicised, that we have become incapable as a group of finding the solution. In the property world, increasingly the responsibility for action rests with us as individuals both as property professionals and as those who advise on property matters.

Sources:

• Climate Change Performance Index. (2025, February 5). Rankings. Retrieved from Climate Change Performance Index: https://ccpi.org/ranking/

• Hooper, L. (2025, January 20). How businesses can escape the sustainability trap. Retrieved from Cambridge Institute for Sustainabilty Leadership: cam.ac.uk

• Ministry for the Environment. (2025, February 5). New Zealand’s second Nationally Determined Contribution:. Retrieved from Ministry for the Environment: https://environment.govt. nz/publications/new-zealands-secondnationally-determined-contributionsubmission-under-the-paris-agreement/

• University of Cambridge Institute for Sustainability Leadership (CISL). (2024). Future of Boards The Rise and Influence of Investor Stewardship, Business Briefing.▪

Debra Dorrington practised as a property lawyer for many years and was a member of the Property Law Section’s Executive Committee. She now consults, helping lawyers understand the importance of sustainability in keeping their legal advice relevant. You can see more of what she is doing at debradorrington.co.nz.

RESOURCE MANAGEMENT

Fast-tracks, back-tracks and streamlining

The latest updates in resource management

BY HELEN ANDREWS AND ALANNAH THOMAS

In this column, we provide updates on the following key recent developments in the resource management space:

(a) Recommendations from the Environment Committee regarding the Fast-track Approvals Bill 2024 (Bill): An overview of the Select Committee recommendations that were made regarding the Bill, before it received Royal Assent and became the Fast-track Approvals Act 2024 (FAA) on 23 December 2024.

(b) Amendments and changes surrounding the Marine and Coastal Area (Takutai Moana) Act 2011 (MACA): Proposed amendments to the MACA, in response to the Court of Appeal’s decision in Whakatōhea Kotahitanga Waka (Edwards) v Te Kāhui and Whakatōhea Māori Trust Board [2023] 3 NZLR 252 (Re Edwards).

(c) Streamlining of the building consent process: Proposed amendments to the building consent process and current Government’s initiatives in this space.

Final Report of the Environment Committee on the Bill

On 18 October 2024, the Environment Select Committee released its report on the Bill. Notably, the Labour, Greens and Te Pāti Māori members of the Committee did not agree with the Bill nor support its introduction, variously describing the Bill (in the Select Committee Report) as:

• Enabling “the most radical and unbalanced consenting regime in living memory, including for projects with significant adverse environmental effects” (Labour Party);

• An “unprecedented and direct override of democratic participation, Te Tiriti o Waitangi, environmental protections, climate change obligations, and the principles of transparency and accountability that all New Zealanders deserve from their Government” (Green Party); and

• Violating “ our core values of mana motuhake, oranga whenua, and mana mokopuna” (Te Pāti Māori).

By contrast, the Coalition members of the Committee raised no significant issues with the Bill and did not recommend any substantive changes to it – other than those which had already been signalled by Chris Bishop and Shane Jones before the Select Committee Report was released. Thus, the main amendments proposed related to the Bill’s purpose, extent of Ministerial decision-making, eligibility criteria for fast-tracking (including those activities that are deemed ineligible), referral application requirements, Treaty settlement obligations, membership and process requirements for Expert Consenting Panels (ECP), and finally, New Zealand’s broader international obligations. We briefly summarise each of those amendments as follows – which have now all been included in the FAA as enacted.

Select Committee recommended amendments to the Bill

Purpose statement

The majority of the Committee recommended that the Bill’s purpose should focus on facilitating the delivery of infrastructure and development projects with significant regional or national benefits, not “providing a fast track decision making process” to

Helen Andrews

Alannah Thomas

facilitate that outcome. The Committee was concerned that as originally drafted, the Bill’s purpose could result in significant weight being placed on the fast-track decision-making process itself, rather than the delivery of projects with significant regional or national benefits. Thus, the FAA’s purpose is now “ to facilitate the delivery of infrastructure and development projects with significant regional or national benefits”.

Decision-making powers

As introduced, clause 25 of the Bill provided the joint Ministers with discretion to approve or decline consent for a project that had been referred to an ECP. Thus, the Joint Ministers had the ability to override the recommendations of the ECP. This excessive Ministerial power was raised as an issue by many individuals and groups who submitted on the Bill, who were particularly concerned regarding the potential for bias or corruption in decision making. Consistent with the directions they received from Cabinet before finalising their report, the majority of the Committee therefore recommended that the final decision on fast-track approvals should rest with the ECP, to ensure objective, informed, and independent decision-making.

Eligibility criteria

In the Bill as introduced, while the joint Ministers could consider the eligibility criteria for projects that could be referred to an ECP, there was no explicit requirement that those criteria must be met in order for a project to be referred. The Select Committee Report recommended that a clause be inserted expressly providing that a project must meet the criteria in clause 17 of the Bill before it is accepted for referral. The majority of the Committee further recommended that amendments be made, to clarify that maintenance and upgrading projects that would enable the continued functioning of existing regionally or nationally significant infrastructure were also eligible for referral.

“The Committee was concerned that as originally drafted, the Bill’s purpose could result in significant weight being placed on the fast-track decisionmaking process itself, rather than the delivery of projects with significant regional or national benefits”

Ineligible activities

The majority of the Committee recommended that clause 18 of the Bill (regarding ineligible activities) be restructured as clause 4A, to provide a definition of an ineligible activity and stipulate all those activities deemed ineligible for fast-tracking.

Referral application requirements

The majority of the Committee made several recommendations regarding the decision-making process for referral applications, including the following.

First, the majority of the Committee recommended that a clause requiring information on whether a project had previously been considered under any legislation and the outcome of that decision be inserted.

• Second, submitters raised concerns that the 10-day timeframe for doing a “completeness check” on the referral application was too short. The majority of the Committee disagreed – given that the process was only intended to be a “high-level check”. They accordingly recommended that a provision be inserted, clarifying that the completeness check

only requires confirming that the application complies with clause 14, may be capable of satisfying the criteria in clause 22B and does not appear to involve an ineligible activity.

• Third, the majority of the Committee recommended increasing the timeframe for parties to comment on a referral application from 10 working days to 20 working days.

• Fourth, the Committee acknowledged difficulties regarding public conversation land arrangements, recommending that a clause be inserted requiring the Minister to obtain and consider a report on existing formal or informal arrangements concerning conservation land.

Treaty settlement obligations

Clause 6 of the Bill required all persons exercising functions, powers, and duties under the Bill to act in a manner that is consistent with the obligations of existing Treaty settlements, and the customary rights recognised under both the MACA and the Ngā Rohe Moana o Ngā Hapū o Ngāti Porou Act 2019.

The majority of the Committee was concerned that the word “existing”, as expressed in clause 6, could be misinterpreted to refer to Treaty settlement obligations existing when the Bill was enacted. They therefore recommended that a definition of “existing Treaty settlements” be included, to clarify it covers settlements existing at the time the relevant functions, powers and duties are exercised. It was also recommended that an additional clause be inserted, clarifying that this obligation does not apply to the Courts or to any procedural or administrative matters concerning Courts.

Expert panel membership and process requirements

The majority of the Committee recommended the removal of Schedule 3, clause (3)(2)(b) of the Bill, which originally required ECPs to include one member appointed by the relevant iwi authorities. It was considered that Māori participation was already adequately provided for by

Schedule 3, clause 5 of the Bill (which requires an ECP to comply with any Treaty settlement Acts and other arrangements that require, among other things, iwi or hapū participation, notification, and consultation in relation to hearings and other procedural matters with Treaty settlements and customary rights).

The majority of the Committee further recommended that a clause be inserted in the Bill, specifically requiring:

• Members of the ECP to collectively have knowledge, skills and expertise as relevant to the approvals being sought in the application, as well as expertise in environmental matters; and

• At least one member of each ECP to be qualified in te ao Māori and Māori development.

International obligations

The majority of the Committee acknowledged concerns raised in submissions that many of the projects that could be approved under the Bill could have implications for, and result in breaches of, Aotearoa New Zealand’s international agreements. However, the majority of the Committee considered this issue could be satisfactorily addressed by the Minister of Foreign Affairs and the Minister for the Environment providing relevant guidance to each ECP, as required.

Where to now for the FAA?

As noted, the Bill received Royal Assent on 23 December 2024, meaning the FAA came into force on 24 December 2024. The Environmental Protection Authority has

been accepting substantive applications for projects listed in Schedule 2 of the FAA from 7 February 2025 – and the progress of those applications can be followed here: fasttrack.govt.nz/projects . It is now also possible to make a referral application in respect of any project not already listed in the FAA.

Proposed amendments to the MACA in response to Re Edwards

The Government introduced the Marine and Coastal Area (Takutai Moana) (Customary Marine Title) Amendment Bill (CMT Bill) on 24 September 2024 and it was then referred to the Justice Select Committee to hear submissions. The CMT Bill primarily seeks to respond to the Re Edwards decision, in which the Court of Appeal interpreted aspects of the test for obtaining a Customary Marine Title order (CMT) under section 58 of the MACA. That test has two limbs, being that the group applying for CMT must:

• First, hold the specified area in accordance with tikanga; and

• Second, have either exclusively used and occupied the area from 1840 to the present day without substantial interruption, or has received it, at any time after 1840, through a customary transfer.

The Government’s view is that in Re Edwards, the Court of Appeal materially reduced the threshold in the second limb of that test in a manner that failed to accord with Parliament’s intent when the MACA was enacted in 2011. The CMT Bill

accordingly proposes to overturn the Court of Appeal’s decision, by providing a more precise and detailed explanation of the test from section 58 of the MACA Bill, as well as defining the terms “exclusive use and occupation” and “substantial interruption” as used in section 58(1)(b)(i) of the MACA.

However, since the CMT Bill was introduced, the Supreme Court has heard and issued its first decision on an appeal from Re Edwards.1 The appeal was heard in early November 2024, with the Supreme Court issuing its first decision on 2 December 2024 – the day before the Justice Select Committee reported back on the CMT Bill. While upholding the appeal, the Supreme Court indicated it would be addressing more discrete or fact-specific issues arising under section 58 of the MACA for the specific CMT applications involved in that proceeding, in a second decision.

Progress of the CMT Bill has accordingly been put on hold, while the Government considers the implications of the Supreme Court’s first decision and awaits the release of its second decision. We will provide further updates on this developing situation, in future columns.

Significant changes to the building consent process proposed

The Government has signalled possible reforms to the building consent process, in response to property developers, investors, and experts arguing that the current system is driving high housing prices, inconsistencies in the process, and unreasonably high costs for those undertaking construction. The Government is exploring various options to provide for a more streamlined consenting process model, including allowing smaller councils to consolidate their building regulation functions, the establishment of regional building consent authorities to provide consistent application of approvals, and creating a single point of contact where work can be allocated to potential private building consent authorities.

Building and Construction Minister Chris Penk has highlighted that the

CONTINUED FROM PAGE 29

current consent process has resulted in disincentivised growth and development and has called for a self-certification scheme. This self-certification scheme is proposed to replace the current building consent regime, which requires builders to obtain consent following inspection from a Building Consent Authority (generally, local authorities). As only Building Consent Authorities can issue building consents, there are significant delays and high costs associated with this process, which developers have argued are inappropriate, especially during a housing shortage. Therefore, building professionals may be allowed to self-certify their work for lower-risk projects, bypassing the building inspection and consent process. The Government will then bolster this by incorporating additional safeguards, looking to develop stricter qualification requirements and harsher disciplinary action if work is carelessly conducted or the self-certifier is deemed incompetent. The overhaul of the current system will also mean changes to liability. Currently, local authorities (extended to ratepayers) can be considered liable for defective building work, meaning they often take a very conservative approach to consenting. Chris Penk has proposed that a shift in this liability, to place greater liability on builders and developers, would lower risk for ratepayers and provide for a more efficient consenting system. Again, we will keep you updated on the progress of these proposed reforms, in future columns. ▪

Helen Andrews is a Director at The Environmental Lawyers in Auckland. She is a member of the New Zealand Law Society’s Environmental and Resource Management Law Committee, and a certified Hearings Commissioner. Alannah Thomas is a Summer Cleark at The Environmental Lawyers. theenvironmentallawyers.co.nz

MĀORI LAND

Post-Settlement Governance Entities

Supreme Court overturns Court of Appeal decision that Māori Land Court does not have jurisdiction over Post-Settlement Governance Entities

BY CLAIRE TYLER

The Supreme Court recently released its judgment regarding the appeal of the 2023 Court of Appeal decision Kruger v Nikora. The Supreme Court decision ends a line of judgments regarding the jurisdiction of the Māori Land Court over Post-Settlement Governance Entities (PSGEs).

In 2021, an application was made to the Māori Land Court regarding the validity of the appointment of two trustees to the Tūhoe – Te Uru Taumatua Trust (TUT). TUT is a post-settlement governance entity, established to hold and receive assets from the Tūhoe Treaty settlement with the Crown.

TUT holds, among other assets, General land in trust on behalf of its discretionary beneficiaries. The discretionary beneficiaries are Tūhoe Iwi Members, specifically descendants of the ancestors Tūhoe and Pōtiki.

The Māori Land Court’s jurisdiction under Te Ture Whenua Māori Act 1993 includes trusts “constituted in respect of General land owned by Māori”.

TUT appealed the Māori Land Court’s decision that it had jurisdiction to hear Nikora’s application, but the Māori Appellate Court upheld the Māori Land Court’s decision. TUT then appealed the Māori Appellate Court’s decision to the Court of Appeal.

Court of Appeal Decision

The Court of Appeal overturned the decisions of the lower Courts, finding that the Māori Land Court did not have jurisdiction over TUT.

The Court of Appeal considered two key questions in reaching this determination:

Was the land “owned for a beneficial estate in fee simple by ... a group of persons of whom are majority Māori” as defined

under the Act?

(a) Was TUT “constituted in respect of” that land?

(b) The Court of Appeal found that the land was not “owned” by Māori because under the orthodox principles of property law, trusts which are purely discretionary, like TUT, do not vest ownership of the assets held on Trust in any person. This meant that land held by TUT could not be “owned” by Māori.

The Court of Appeal also found that it could not be established that TUT was constituted in respect of General land because it had not been set up with the purpose of holding one or more identified pieces of land. Instead, TUT was set up in anticipation of receiving some Treaty settlement land, among other monetary assets.

Ultimately, this meant that the Māori Land Court did not have jurisdiction over TUT.

Supreme Court Decision

The Supreme Court has now determined that that the Court of Appeal was incorrect in finding that the Māori Land Court did not have jurisdiction over the PSGE.

The Court found that “constituted in respect of” does not require a trust to have been established to hold a specific block of land from the outset. In this case, the PSGE held General land and doing so was a core purpose of the Trust from the outset, regardless of whether it actually held the land at that time. Therefore, TUT was constituted in respect of General land.

On the question of whether the land was owned by Māori, the Court considered the history and purpose of the Act. One of the Act’s key purposes is to “enable re-collectivised and re-tribalised management” of land owned by Māori. Accordingly, the Act specifically anticipates certain types of trusts being used as a mechanism to promote communal management.

In particular, the Court identified that whenua tōpū trusts, trusts designed to hold multiple land interests on behalf of a hapū or iwi, are fundamentally similar to PSGE trusts. The Court found that there was no good reason that the Māori Land Court should have supervisory jurisdiction over tribal trusts such as whenua tōpū trusts, while excluding other purely tribal trusts, such as the PSGE.

The Court also considered the tikanga, noting that collective ownership is fundamental to the tikanga of the Iwi. The Court found that if tikanga was the controlling legal framework, it would not be a stretch to say that the PSGE’s lands were beneficially owned by the iwi itself.

The Court found that ‘Māori’ in the context of the phrase ‘General land owned by Māori’ could refer to ancestors, whether alive or not. In this case, it could be understood that the beneficial interests in General land were vested in the common ancestors of the Iwi members.

The Court considered that these factors meant that the land was owned by Māori and the Māori Land Court did have jurisdiction over the PSGE.

Do PSGEs fall within the Māori Land Court’s jurisdiction?

Although the Court in this case found that TUT would fall under the Māori Land Court’s jurisdiction, the Court observed that this finding would create some uncertainty over whether PSGEs generally were under the Māori Land Court jurisdiction.

Some PSGEs have expressly excluded the Māori Land Court from having jurisdiction over their entities, while other expressly adopt the Māori Land Court’s jurisdiction. In addition, the Supreme Court’s decision means that it would be possible for a PSGE to move in and out of the Māori Land Court’s jurisdiction depending on whether or not it held land. The Supreme Court identified that this leaves the law on this point untidy and uncertain.

The Court held that although this was not optimal, the uncertainty in this area is best addressed through statutory reform. Until such statutory reform occurs, a case-specific approach is required for assessing whether a PSGE falls within the Māori Land Court’s jurisdiction. ▪

Claire Tyler is a Partner at Rainey Collins in Wellington. Her areas of practice include commercial contracts and transactions, residential and commercial property. Claire’s other areas of specialty and interest include trusts, asset protection, wills and estates, as well as advising iwi regarding post Treaty of Waitangi settlement entities. raineycollins.co.nz

Guarantor Liability in Lease Defaults: Lessons from Kea Forestry Ltd v Hovik

BY MICHELLE HILL AND BRIDIE WATERREUS

The recent High Court case of Kea Forestry Limited v Hovik1 , decided on summary judgment, demonstrates the potential financial exposure faced by guarantors when a tenant defaults on lease obligations. This decision provides key insights into liability for outstanding rent and outgoings as well as loss of bargain, interest payments and legal costs. It underscores the importance of advising clients, who are giving lease guarantees, on the extent of their liability under the guarantee. The case also highlights the courts’ approach to quantifying losses in commercial lease disputes.

Background

Your Healthy Gourmet Ltd (YHGL) entered into a deed of lease with a third party on 6 August 2020 for premises in Auckland to use as a food production and freezing facility. The annual rent was $90,000 plus GST and outgoings (at 100%). Kea Forestry Ltd (KFL) became the registered proprietor on 30 October 2020. Hovik was signed as guarantor of the performance of her former company.

of painting, electrical repairs, roof repairs and window repairs were also excluded from the outgoings as there was no evidence to justify them being items of repair costs. Once including the late payment fee for rates of $266.71, the total awarded for outgoings on a GST exclusive basis was $5,189.13.

Loss of bargain damages

YHGL fell into arrears for rent and outgoings in December 2022. KFL served notices on YGHL under ss 245 and 246 of the Property Law Act 2007 in January 2023. The notices went unremedied and Hovik placed YHGL into liquidation in February 2023. KFL received nothing in the liquidation. KFL then entered into a new lease with the new tenancy commencing in March 2023.

There was no opposition from YHGL as to liability. Hovik argued that the bond of $22,500.00 was enough to cover the claims. The court split up the claims by category.

Outstanding rent and outgoings

KFL produced uncontested evidence that the overdue rent as at March 2023 amounted to $22,536.29.

KFL claimed that outstanding outgoings at cancellation were $19,375.38. However, the court did not accept that body corporate levies were payable under the lease. It was also decided that the cost

KFL seeks damages for loss of rental received, the costs incurred in securing a new tenant and for repair costs and consequential damage.

KFL was seeking damages for the difference between the rent KFL was entitled to under the lease with YHGL and the rent actually received under the new lease from March to May 2023 and costs incurred securing a new tenant by way of real estate agent commission.

KFL’s new lease was less favourable than the lease with YHGL. To secure the new lease, KFL granted a commercially orthodox rental holiday to the new tenant. There was no evidence to show that negotiations with the new tenant were not at arm’s length or that the holiday was not what was required by rental market. The court referred to Epoch Chch Ltd v Cameron where the court allowed the recovery of rent from the original tenant during a rent-free period negotiated with the new tenant.

As to the real estate commission, the court outlined, with reference to CBD Motors Ltd v Concrete Properties Ltd, that the cost of re-letting has been recognised as recoverable as a consequence of breach and is necessarily awarded to restore the

Bridie Waterreus

Michelle Hill

plaintiff to the position that they would have been in but for the breach.

Hovik suggested that an award for the commission would be unfair becaue the lease was set to expire in July 2024 anyway and so a commission would have been incurred regardless. The court pointed out that the lease still had 7 months remaining at the time of cancellation so the real estate commission is appropriately claimed.

KFL further plead that as a result of the breach of the repair covenant in the lease, KFL suffered the losses of refrigeration repair costs, electrical repair costs and rent lost during the rental abatement period while the repairs were completed.

KFL submitted that the chillers had been poorly maintained and a number of dangerous modifications made, including alterations or circuits. The invoices weren’t contested even though they were substantial.

The court found it was appropriate to claim for the invoices up until July 2023 but not the invoices in August 2023. August 2023 was six months after YHGL vacated the premises and more than four months after the lease was cancelled. The total amount awarded for the chillers amounted to $27,337.56.

The court found that electrical repair costs needed to be reduced by half. While KFL said that there were issues with extension cables used as fixed wiring and conductors used as live conductors, the items listed on the electrical invoice extend signifcantly beyond those repairs. The total amount awarded for electrical repairs was therefore $16,559.85.

KFL further submitted that they suffered a consequential loss in the form of a demand from the incoming tenant for an abatement of rental when repairs were being carried out. The amount sought by the plaintiff is the difference between the rent actually paid and the rent that would have been paid by YHGL. This came to $5,893.75 which was properly awarded.

Interests

The default interest rate under the lease was 12 per cent per annum. KFL sought the payment of default interest on all amounts claimed with the date from which interest should apply for the debt amounts being March 2023 and the date for the loss of bargain damages following cancellation being the date proceedings filed in December 2023.

The judge referenced the Court of Appeal in The Gama Foundation v Fletcher Steel Ltd where it was confirmed that damages for breach of a lease are not amounts payable under the lease itself. Default interest is not therefore payable on those amounts claimed as damages. Therefore only the rent and outgoings outstanding prior to cancellation attract default interest. Default interest could also not be claimed in respect of costs as they were not monies payable under the lease.

At the hearing, KFL submitted that if default interest was not payable on loss of bargain damages or costs then an applicaqtion for interest under the Interest on Money Claims Act 2016 would be made. The statement of claim was allowed to be amended to reflect that KFL would seek

interest on loss of bargain damages from the date of filing the statement of claim (December 2023).

Bond

The bond of $22,500.00 was deducted from outstanding rent and outgoings first as contractual default interest was payable on that amount.

Costs

KFL was awarded all costs claimed for disbursements up to the entry into the new lease of $4,604.22 plus costs following that and of the proceedings of $10.685.00 plus disbursements of $1,572.69. As outlined, default interest is not payable in respect of costs. Interest on the costs under the Interest on Money Claims Act awarded were to apply from the judgment until payment.

Conclusion

Hovik as guarantor had no arguable defence to liability under the guarantee. Summary judgment was therefore entered against her. This case reinforces the significant financial repercussions for guarantors when tenants default on their lease obligations. The court’s detailed breakdown of damages illustrates the approach taken in assessing claims for unpaid rent, outgoings, loss of bargain, repair costs and consequentail losses. The judgment highlights the need for guarantors to fully understand their obligations under lease guarantees and the extent of their liability, particularly in cases of tenant insolvency and default. ▪

Michelle Hill is a Partner at Dentons in Auckland, and a member of the Property Law Section’s Executive Committee. This article was written with assistance from Bridie Waterreus , Solicitor, Dentons. dentons.co.nz

1. [2024] NZHC 2821

Westlaw case notes

OCTOBER 2024 TO FEBRUARY 2025

Full copies of judgments summarised in this service are available through Westlaw NZ.

RESTRICTIVE COVENANTS

Kaimai Properties Ltd v Queen Elizabeth

Kaimai Properties Ltd v Queen Elizabeth the Second National Trust [2024] NZCA 616, Court of Appeal, Cooke J, Peters J and Grice J, 26/11/2024

Administrative law – Judicial review – Grounds –Excess or defective use of powers

Administrative law – Judicial review – Grounds –Procedural fairness – Exclusion of rules of natural justice

Civil procedure – Appeals – Determination

Property – Real – Encumbrances – Restrictive covenants

Property – Real – Interests in land

Statutory interpretation – Principles – Context

Unsuccessful appeal by KPL against High Court (‘HC’) determination declining applications for judicial review, declarations and other relief; KPL purchased land subject to Queen Elizabeth the Second (‘QEII’) open space covenant (‘OSC’), administered by QEIINT, adjoining quarry operated by associated company Bartons Kaimai Farm Ltd (‘BKFL’) and sought to expand quarry operations into area subject to covenant; KPL previously took unsuccessful proceedings seeking declaration terms of OSC allowed them to carry out expanded quarrying activities without QEIINT’s consent; KPL now argued OSC never legally established in accordance with s 22 Queen Elizabeth the Second National Trust Act 1977 (‘QEIINTA’); KPL also challenged QEIINT’s decision not to vary covenant under its powers in s 22A of QEIINTA;

HC Judge rejected KPL’s arguments that their interests in the land at the time the covenant was created made them ‘owners’ under s 22(1) of QEIINTA.

Held, s 22(1) of QEIINTA contemplated QEIINT achieving purpose of maintaining land as open space for public benefit by either (a) acquiring ownership or leasehold interest or (b) securing agreement to OSC with owner or lessee of land; ‘owner’ not intended to include everyone with interest in land, but to be given meaning identified by use within provision, as ss 22(2) and 22(3) of QEIINTA made plain where lessor’s consent required for lessee’s agreement to OSC; s 22 of QEIINTA did not regulate thirdparty rights; QEIINT’s decisions amenable to judicial review as it exercised statutory powers of decision under ss 22 and 22A of QEIINTA, which were established to promote a public interest; KPL required to show failure by QEIINT to exercise powers in accordance with statutory requirements; KPL’s argument QEIINT erred in law based on rejected interpretation of ‘owner’; given nature of power and covenant it was clear why QEIINT not prepared to grant variation sought; QEIINT not knowingly depriving property owner of natural justice rights; HC rightly dismissed KPL’s argument covenant void for non-compliance with s 22 QEIINTA and was illegal contract under Contract and Commercial Law Act 2017; appeal dismissed.

PUBLIC WORKS ACT

Attorney-General v Auckland Council

Attorney-General v Auckland Council

[2024] NZHC 3740, High Court, Auckland, Jagose J, 10/12/2024

Local government – Land – Public works –

Compulsory acquisition

Property – Real – Reserves

Property – Real – Valuation – Encumbrances and restrictions

Remedies – Declaration

Successful application by A-G and AC for declaration as to the approach to assessment of compensation under Public Works Act 1981 (PWA) for acquisition or taking of land subject to Reserves Act 1977 (RA); under RA a ‘reserve’ was ‘land set apart for any public purpose’; such land was generally vested in the Sovereign or local authority; reserves were administered and maintained to specified ends referable to that purpose unless or until reservation of the land as a reserve was revoked; under PWA Crown and local authorities may acquire or take land required for public works; where land was acquired or taken, the owner of that land was entitled to full compensation from the Crown or local authority; compensation was predominantly assessed by reference to that amount which the land if sold on the open market by a willing seller to a willing buyer on the specified date might be expected to realise; at issue in this case was whether ‘open market value’ was determined with or without reference to limitations imposed on it by the RA and consequent land use zoning; parties disagreed as to the value on the Constellation and Rook Reserves; Crown and AC agreed on various aspects of acquisition and compensation; registered valuers agreed on compensation valuations; all agreed owners should be no better or worse off as a result of the acquisition; Crown argued when reserve

land was acquired under PWA the restrictions on use and disposal because of the RA were relevant in assessing market value; AC contended land should be valued as if it were sold on the open market, with restrictions on sale and disposal disregarded; that required land to be valued at its highest and best use, deducting any regulatory and administrative costs of revoking reserve status or rezoning.

Held, in any society in which private ownership of land was permitted, community welfare required there be power to take land for public purposes for which justice required compensation be paid; principle set out in PWA; statutory test did not require removal of any limitations to achievement of the land’s optimum value; ‘open’ meant an intention to include every possible purchaser; that included the surrendering owner; reserves could be sold as reserves; land’s reserve status might be off-putting but was not prohibitive or exclusionary; when valuing part of Constellation and Rook Reserves subject to RA acquired under PWA, the land was to be valued with all restrictions associated with it being a reserve, including those under the RA and any local planning documents; valuation must take into account the chance (if any) those restrictions may be removed and the land able to be used for its highest and best use; application granted.

TRUSTS, WILLS & ESTATE ADMINISTRATION

Legler v Formannoij

Legler v Formannoij

[2024] NZSC 173, Supreme Court of New Zealand, Winkelmann CJ, Glazebrook J, O’Regan J, Williams J, Miller J, 18/12/2024

Civil procedure – Appeals – Determination

Trusts – Trustees – Appointment – Under trust deed

Trusts – Trustees – Duties and liabilities –Impartiality between beneficiaries

Trusts – Trustees – Rights and powers –Discretionary powers – Exercise of discretionary powers – Fraud on a power

Unsuccessful appeal by Ls against Court of Appeal (‘CA’) majority decision affirming High Court (‘HC’) dismissal of challenge to F’s appointment of Kaahu Trust Ltd (‘KTL’) as sole trustee of Kaahu Trust (‘Kaahu’) in her place; F, second wife of Ls’ father Rico (‘RL’), was sole remaining trustee of Kaahu, sole director of KTL and owned all its shares; Kaahu and Horowai Family Trust (‘Horowai’) established in 2008 by RL, F and BOI Taxation Trustee Co No 2 (‘BOI’) and funded by significant inheritance from RL’s father; RL’s death left F and BOI as trustees of Kaahu; BOI sought to resign as its director Mr Tyler (‘T’) did not want to be involved in litigation with Ls, who were seeking information about RL’s estate and Kaahu; on becoming sole trustee F required by Kaahu trust deed to appoint new trustee; F incorporated KTL on receiving legal advice that she could appoint corporate trustee of which she was director; KTL excluded Ls as beneficiaries, distributed trust funds to F and appointed her as beneficiary for whom trust would be held on vesting day; Ls brought HC proceedings alleging fraud on a power by F and sought declaration KTL’s appointment void; F maintained she had exercised appointment power in good faith for proper purpose; F claimed Horowai set up to hold assets for Ls and Kaahu to provide herself and RL with home and income; HC Judge found F did not appoint KTL in order to prefer own interests but had done what Kaahu trust deed envisaged; on appeal CA majority held that, as F depended on Kaahu for her accommodation and financial support, taking steps to control Kaahu to make her living conditions more congenial not objectionable as improper purpose and F had received and accepted explicit advice that KTL’s ability to make decisions subject to overarching duty to act in beneficiaries’ best interest; minority considered F used appointment power for improper purpose to gain sole control of trust and its assets, contrary to other beneficiaries’ best interests; on appeal Ls argued power to appoint new trustees fiduciary in nature and F exercised it improperly to place herself in control of Kaahu and claimed Horowai was purpose trust, not intended to make distributions to them.

Held, Glazebrook, O’Regan, Williams, Miller JJ (majority), not proved KTL appointed as trustee to allow F to take control of assets of Kaahu for own benefit at Ls’ expense; F became sole trustee because of BOI’s resignation, attempted unsuccessfully to find replacement trustee and documentation showed her concern to fulfil legal obligations; F entitled to rely on expert advice unless clearly wrong; case to be seen against background of Kaahu being set up to provide for F’s and RL’s needs while alive, Horowai for Ls’ benefit and F’s foregoing rights in relationship property agreement re property now held by Horowai; third-party evidence on RL’s intent in settling trusts came partly from original trustee and coincided with major settlements on trusts; CA’s finding that appointment of company exclusively controlled by trustee/beneficiary within scope of power not challenged on appeal; F clearly named final beneficiary of Kaahu and evidence indicated at least part of its purpose was to support her; concept of acting for benefit of beneficiaries of discretionary trust did not mean trustees could never exercise powers to distribute to single beneficiary and not to others, bring forward vesting date or add beneficiaries; no evidence F intended KTL to act improperly.

Winkelmann CJ (dissenting), Trust Deed provided powers or discretions vested in trustees only to be exercised in favour of trustee who was also a beneficiary by other trustee or trustees; RL, F and Ls were original beneficiaries of both trusts and RL only removed himself and F from Horowai after Kaahu was settled; terms of trust deed precluded F’s appointment of company owned and controlled by her as this exercised power in her own favour and contradicted requirement for independence; F’s benefit clearly not sole purpose of Kaahu trust; while RL’s intention in settling Kaahu to see himself and F provided for, placing assets in trust meant they lost unconstrained rights to deal with assets as if they were their own; F acted to appoint body corporate as sole trustee to give herself control of Kaahu, at Ls’ expense; appeal dismissed.

UPCOMING CLE EVENTS

CAVEATS – COMMON ISSUES 2025 Online 1.5 CPD hours

When: 13 March 2025 Presenter: Mark Colthart

TRUSTS AND BLENDED FAMILIES FORUM 2025

ASSET PROTECTION UPDATE FORUM 2025

Online 3.5 CPD hours

When: 19 March 2025 – Wellington Presenters: Sharee Cavanaugh, Greg Kelly, Kevin Lenahan, Colette Mackenzie

Online 3.5 CPD hours

When: 26 March 2025 – Auckland Presenters: Stephanie Ambler, Georgia Angus, Henry Brandts-Giesen, Jennie Hawker

WARRANTIES & OBLIGATIONS –COMMERCIAL LEASES 2025 In-person Online 2 CPD hours

When: 27 March 2025 – Auckland Presenter: Stephen Price

PRA – KEEPING AHEAD OF THE PACK 2025

Online 6.5 CPD hours

When: 14 May 2025 – Auckland Chair: Isaac Hikaka

ELDER LAW CONFERENCE 2025

TRUSTS CONFERENCE 2025

Online 6.5 CPD hours

When: 28 May 2025 – Wellington Chair: Vicki Ammundsen

Online 12 CPD hours

When: 9-10 June 2025 – Wellington

When: 23-24 June 2025 – Auckland Chair: Greg Kelly