A local authority was liable to a landowner for taking enforcement action against them under the Resource Management Act 1991 without checking their records as to whether the use of the land was consented.
Mr Daisley purchased a quarry near Whangarei in 2004 and intended to extract metal to use in his earthworks contracting business and for commercial sales. The seller of the land told Mr Daisley, correctly, that the quarry operations had not been challenged or prohibited at any time.
In November 2004, the Whangarei District Council (“Council”) advised Mr Daisley that he did not have the correct resource consent to quarry. Mr Daisley maintained that the quarrying activity was consented.
The Council commenced enforcement proceedings against Mr Daisley to stop him quarrying the land. The enforcement proceedings progressed through the courts between 2005 and 2009. Throughout this period, the Council remained steadfast in its position that no consents existed for the quarry.
In September 2009, a search of Council records revealed the quarrying activity was subject to an existing use consent. This was the first time Mr Daisley knew the consent existed. That consent was not limited by time or in the volume of removed materials.
Unfortunately, the inability to quarry the land had led Mr Daisley to financial ruin and, in December 2009, he was forced to sell the land at a fire sale price to avoid a mortgagee sale. Notwithstanding this, the Council failed to apologise to Mr Daisley for the mistake and maintained its enforcement proceedings until 2011 for apparent tactical advantage.
Mr Daisley issued proceedings for negligence against the Council in 2015 for lost earnings, the loss in value of the business operation and the land, and costs associated with defending against enforcement proceedings. He also claimed exemplary damages against the Council for the tort of misfeasance in public office.
The Council defended the claims primarily on the basis that the claims were made more than six years after the causes of action had accrued and were therefore barred by the Limitation Act 1950.
The High Court rejected the Council’s limitation defence, and found the Council liable both for negligence and misfeasance in public office. The Council was ordered to pay Mr Daisley approximately $4 million in compensatory damages, and an additional $50,000 in exemplary damages.
The Council appealed.
The Court of Appeal upheld the High Court’s decision on negligence but overturned the misfeasance finding.
Negligence
As the Council had admitted it had breached its duty of care to Mr Daisley, the primary issue on appeal was whether the claim was barred by the Limitation Act.
The High Court held that Council’s ongoing failure to search their records constituted a continuing breach of duty. This meant the negligence cause of action accrued repeatedly on a daily basis for limitation purposes.
The Court of Appeal disagreed with this reasoning. The notion of a continuing breach of duty undermined the policy of certainty and finality that underlay the Limitation Act, which contemplated that even meritorious claims were not available if too much time had elapsed.
However, the Court of Appeal went on to hold that the ‘fraudulent concealment’ exception in the Limitation Act meant the limitation period did not begin until September 2009 (when the consent was disclosed to Mr Daisley).
While the Council had not deliberately intended to deceive Mr Daisley about the consent, this was not a requirement for the exception to apply. It was enough that the Council had been reckless about the existence of the consent.
In this regard, the court noted Council officers were aware the site had been used as a quarry for a number of decades. Despite this, the officers had repeatedly insisted that Mr Daisley prove the consent existed when they could have easily verified this themselves by searching internal databases. On this basis, the court inferred that the officers had been aware that a consent could exist. They had no reasonable excuse for failing to search the Council’s records, a search which would have readily revealed the consent. This awareness and failure to act established recklessness sufficient to engage the Limitation Act’s fraudulent concealment exception.
Accordingly, the High Court’s finding of negligence was upheld, albeit on an altered basis.
Misfeasance in public office
The High Court found the Council liable for the tort of misfeasance of public office on the basis that the Council officers were reckless as to the existence of the consent, even though they had not acted in bad faith.
The Court of Appeal rejected the High Court’s finding on misfeasance. While the Council had been reckless as to the existence of the consent, it did not automatically follow that the officers involved had been reckless about whether they had legal power to bring enforcement proceedings. There was no suggestion that the officers had acted while having subjective doubts about their legal authority – they genuinely believed they were entitled to act as they had.
The Council was liable to pay Mr Daisley over $4 million in damages for lost opportunity to quarry the land, loss of property value, and the costs of dealing with the Council’s enforcement proceedings. However, because the Court of Appeal did not find the Council liable for misfeasance in public office, the High Court’s award of $50,000 in exemplary damages was reversed.
The High Court and Court of Appeal decisions both affirm the important point that in some cases, local authorities can be liable to pay damage for failure to perform record-keeping duties under s 35 of the Resource Management Act 1991.
For further information of this or similar cases, contact Director, , Brigitte Morten.
Photo by Jonny Caspari on Unsplash
