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On notice – discount brands in the Supreme Court

12 May 2005

The issue of notification has been controversial ever since the enactment of the Resource Management Act. In Westfield (New Zealand) Limited & Northcote Mainstreet Inc v North Shore City Council & Discount Brands Limited, the Supreme Court has ruled that a non-notified resource consent for a discount shopping centre was invalidly issued.

Trevor Gould, Vernon Rive and Asher Davidson, counsel for Northcote Mainstreet in the case, consider what guidance it offers to those seeking resource consents and would-be objectors, as well as pointing out some questions that have been left open.

The facts

The case concerned an application by Discount Brands for consent to operate a discount outlet shopping centre on Auckland’s North Shore. The centre would offer tenancies to retailers who would be required to offer goods at discounted prices.

Discount Brands’ application was supported by a brief retail assessment report, which concluded that the proposed centre would operate in a different market to shops in existing North Shore retail centres, so would not adversely impact those centres.

Commissioners appointed by the Council, relying on the retail report and other brief statements presented at a Committee hearing on behalf of the applicant, assessed the proposal as generating less than minor adverse social or economic effects. As they concluded there were no other relevant effects more than minor, and no affected parties (other than one which had given its approval), the commissioners decided not to require notification. They later went on to grant consent.

That decision was challenged, by way of an application for judicial review, by Westfield (which operated shopping centres within several kilometres of the proposed new centre) and Northcote Mainstreet (a body set up to protect and enhance Northcote shopping centre, located approximately 1.5km from the Discount Brands centre). In the High Court, Westfield and Northcote Mainstreet successfully argued that the information available to Council on economic and social effects was inadequate to enable it to reach a properly informed and sound conclusion on whether the effects of the activity would be minor. The High Court declared the Council’s decisions to proceed on a non-notified basis, and therefore to grant the consent, invalid.

The Court of Appeal reversed that decision, and in September 2004, Northcote Mainstreet and Westfield were granted leave to appeal to the Supreme Court.

The law

In a previous edition of Counsel (9 December 2004), it was noted that in the two first cases addressed by the Supreme Court, its focus had been squarely on the words used by Parliament in the context of the legislation as a whole.

That approach continues to be evident in the Discount Brands case, where much hinged on the wording of the RMA provisions that allowed councils to dispense with notification. The key section of the Act considered in the decision was section 94(2) which provided:

(2) An application for a resource consent need not be notified in accordance with section 93, if the application relates to a discretionary activity or a non-complying activity and –(a) The consent authority is satisfied that the adverse effect on the environment of the activity for which consent is sought will be minor; and  (b) Written approval has been obtained from every person whom the consent authority is satisfied may be adversely affected by the granting of the resource consent unless the authority considers it is unreasonable in the circumstances to require the obtaining of every such approval.   Both limbs of this test came under scrutiny in the Discount Brands case. The Council’s decision was challenged on the basis that the information available to it was insufficient for the Council to properly be satisfied that the adverse effects of the Discount Brands shopping centre on existing shopping centres would be minor. Secondly, it was argued that Northcote Mainstreet was a person who may be adversely affected by the Discount Brands consent and that its written approval should have been, but was not, obtained.

Since Discount Brands lodged its application, the notification provisions of the Act have changed. However, while the Supreme Court’s decision analyses the provisions as they existed prior to 1 August 2003, the substance of the analysis is, we think, likely to apply equally to the new wording. The amended provisions retain key wording of the Council needing to be “satisfied” that effects will be minor and needing to obtain written approval from all persons who may be adversely affected.

Issues before the Supreme Court

By the time the case reached the Supreme Court, there were five issues for determination. Paraphrasing from Blanchard J’s summary, those issues were: 

  • Did the Council’s decision not to notify the application comply with the requirements of the Act?
  • Was Northcote (as an unincorporated body) “a person”?
  • If Northcote was a person, was it a person who might be “adversely affected” so that its written consent should have been obtained?
  • Was the discount requirement void for uncertainty?
  • Should discretion be exercised not to set aside the consent? 

The Supreme Court reached its decision to reverse the Court of Appeal’s judgment, and hold that the non-notification and grant decisions were invalid, on the first issue alone. The unanimous decision was that the Council’s decision not to notify was not made according to law, having been based on information that was not “adequate”. However, in the five separate decisions, there are interesting comments on all of the questions of law as well as some more general observations which will no doubt influence resource management practice. We highlight below some of issues that are likely to prove significant.

How much is enough? The need for “adequate” information

Hammond J in the Court of Appeal had held that the Council need have only “some material of probative value” to support its decision that the statutory test for non-notification was met. The retail assessment report was sufficient to satisfy that test.

All five of the Supreme Court judges disagreed with that approach, emphasising that the RMA was intended to provide for full public participation, with non-notification being an exception to the rule. Justice Keith summarised the purposes of public participation as being two-fold – “first, to recognise and protect … particular rights and interests of those affected and, second, to enhance the quality of the decisionmaking”. He considered a decision not to notify involved questions of natural justice, protected under the New Zealand Bill of Rights Act. As such, the Court should “carefully scrutinise” the material that was before the Council to assess whether the Council’s decision was reasonable.

So how much material is the Council required to have before it can make a reasonable decision? Section 93 of the Act required Council to be satisfied it had “adequate” information before notifying an application or deciding it did not need to be notified. (The term “adequate” has been removed following the Resource Management Amendment Act 2003 – see implications of the Amendment Act in boxed text on “The Law”, page 2).

As to what constituted “adequate” information, Tipping J and Elias CJ adopted an approach that required the Council to have enough information that notification would not elicit any more detail that would cause it to view effects as more than minor.

Justice Blanchard, in a judgment with which the other judges largely concurred, held that the information before the Council must be adequate for it:

  • to understand the nature and scope of the proposed activity as it relates to the district plan
  • to assess the magnitude of any adverse effect on the environment
  • to identify the persons who may be more directly affected.

The Council’s decision not to notify was held to falter on the second of these criteria, as it related to the extent of adverse amenity effects on existing shopping centres.

The finding that there would be no such effects revolved around the conclusion that the Discount Brands outlet would be in a “different market” from other centres. The Court considered that the question of whether the centres would operate in different markets was “a difficult one requiring economic analysis”. However the only evidence available to the Council on the issue was a “superficial” report and further evidence from a director of the applicant company and the company’s leasing agent. That information fell short of being adequate in terms of sufficiency and reliability and the Council’s decision could not stand.

Role of groups in the notification process

While the Court based its decision on the adequacy of information issue, its comments about the ability for Northcote Mainstreet to be an affected party may prove of equal, if not greater, influence in the resource management field.

As noted in the boxed text, before dispensing with notification, councils must obtain the written approval of every person who may be adversely affected by the proposed activity. Northcote Mainstreet argued that it was such a “person” and that the Council’s decision was flawed because it had not obtained Northcote Mainstreet’s written consent. The Supreme Court accepted that Northcote Mainstreet was a “person” as that word is defined in the RMA. However when considering whether Northcote Mainstreet could have been adversely affected, three different and inconsistent answers emerged.

Justice Blanchard, with whom Keith and Richardson JJ agreed without further analysis, considered that Northcote Mainstreet could not have been a person adversely affected for the purposes of notification. He considered that the section 94(2)(b) requirement for written approval “seems to have been intended to protect land owners and occupiers who might particularly suffer from the proposed activity”. He considered that a proprietary right was essential in order for the obligation for written approval to be triggered. As an organisation representing individual retailers, Northcote Mainstreet was itself neither a property owner nor a tenant at the Northcote Shopping Centre and could not suffer adverse effects on the amenities of the centre. On that analysis, Northcote Mainstreet’s written approval could not have been required.

Justice Tipping agreed that there needs to be a property right involved before a person could be adversely affected for the purposes of section 94(2)(b). However he considered that “a body of persons should be regarded as being capable of being adversely affected for para (b) purposes if at least one of its members has a proprietary interest”. Because at least one of Northcote Mainstreet’s members (which included retailers in the centre) had such an interest, the Council should have considered whether it was adversely affected by the granting of consent to Discount Brands. Because the Council failed to consider this, its decision was flawed.

In her decision, the Chief Justice disagreed with the majority approach that a person needed to be an owner or occupier of land before section 94(2)(b) could be invoked. She stated that she was unable to discern any basis in the Act for that interpretation, that it was, indeed, inconsistent with and contrary to several aspects of the legislation, including a “general interest in the observance of the district plan”. She found as a general principle that a community organisation set up to promote amenity values of a shopping centre was capable of being adversely affected by loss of those values, regardless of whether the organisation had proprietary rights that were affected.

There are some potentially significant implications of all of these analyses, particularly, in our view, of the Blanchard J approach. His approach would appear to preclude any type of community group that does not have rights of ownership or occupation from being captured by the section 94(2)(b) limb. Arguably, groups, such as a club regularly using the coastal marine or Maori groups who have a cultural, but not necessarily legal, association with land, might have been treated as “affected persons” in the past but under Blanchard J’s approach would not be caught. This is an issue which will no doubt be the subject of further judicial consideration.

When irrelevant trade competition effects become relevant amenity effects

Section 104(3)(a) of the RMA (previously section 104(8)) provides that a consent authority cannot have regard to trade competition effects when considering a resource consent application. However, the definition of “environment” in the Act specifically includes social and economic considerations affecting people and communities. So when do trade competition effects, which are irrelevant under the Act, become relevant social, economic or amenity effects?

The principle that the courts have generally applied is that while they may not have regard to the direct effects of trade competition, it is legitimate to take into account flow-on effects that may be consequent on a down-turn in business in a particular centre. It is the consequential social and economic effects on people and communities served by the existing shopping centres that are relevant.

However in the Discount Brands case, the Court of Appeal considered that there would only be a relevant environmental impact which was more than minor if there was a “ruinous” or “major commercial and economic impact on existing centres”.

The Supreme Court did not accept that such a high threshold was necessary or appropriate. Justice Blanchard considered that:

“... in equating major effects with those which were “ruinous” the Court went too far. A better balance would seem to be achieved in the statement of the Environment Court, … that social or economic effects must be “significant” before they can properly be regarded as beyond the effects ordinarily associated with trade competition on trade competitors.”

Chief Justice Elias provided further comment, stating:

“The effects on the environment in issue were adverse effects on the amenities provided by the existing centres. There is no basis in the plan for suggesting that any such adverse effect, which could be social as well as economic, must threaten the viability of the existing centres in order to be more than minor.”

The Supreme Court also gave a useful reminder that even the “significant” effects test is not necessary for amenity effects to be established. Justice Blanchard noted that it would be “necessary for a consent authority first to consider how trading patterns may be affected by a proposed activity in order that it can make an informed prediction about whether amenity values may consequentially be affected”.

The Supreme Court’s decision clarifies the position under the Act as to when trade competition effects will be considered relevant economic, social or amenity effects.

Importance of district plans

The Council’s decision to grant consent to Discount Brands was made in the face of district plan recognition that retail centres were important community focal points and should be protected. The plan contained strong directives that proposed retail centres outside of existing centres should be subject to a “thorough evaluation”.

In considering that context, a further important point in the Supreme Court’s decision is the centrality of district plans when assessing resource consent applications. The Chief Justice stated:

“the district plan is key to the Act’s purpose of enabling “people and communities to provide for their social, economic and cultural well-being” … The plan has legislative status. People and communities can order their lives under it with some assurance … A district plan is a frame within which resource consent has to be assessed.”

This reaffirmation of the importance of district plans is an important directive to all lower courts, as well as applicants for consent, to have proper regard to the provisions of the plan.

Discretion

All of the judges considered the consents should be quashed, despite Discount Brands having already opened its retail centre in reliance on the consent. Justice Blanchard gave two primary reasons for his decision in that regard. The first was that Westfield’s opposition to the application and its intention to seek review of the Council’s decision had been clearly and publicly signalled early on in the process. Discount Brands and probably most of the tenants would have known of the challenge to the consent when they commenced operating so it could not be said that they had been taken by surprise by the decision.

The second element relevant to the decision on discretion was that, following the High Court’s decision to quash consents, Discount Brands had sought another resource consent to authorise their activities. The Council had granted that consent on a non-notified basis. The Supreme Court understood that Discount Brands would rely on this second resource consent so the implication of quashing the first consent would not be immediate closure of the retail centre.

The second resource consent has also been the subject of judicial review proceedings, so the final outcome of whether Discount Brands’ centre will be able to continue remains to be determined.

Does this mean that all applications will now be notified?

The short answer to this question is “no”. Many applications will continue to be processed on a non-notified basis (or with limited notification as now provided for following the 2003 Amendment to the Act).

However, particularly for large developments, or proposals where there is uncertainty as to the precise nature and extent of effects that may result, there may be an increasing trend for Councils to publicly notify applications. This will particularly be the case where:

  • the application is inconsistent with district plan objectives and policies, such as, in this case, a retail centre being established outside existing centres which are protected by the district plan
  • the information provided by the applicant is considered to be insufficient as to effects that might be created or who might be adversely affected
  • Council officers recommend the proposal be notified.

Our suggestions for applicants

For applicants wanting to avoid both public notification and the uncertainty created by the prospect of judicial review of a Council’s non-notification decision, we recommend:

  • make sure the information that goes to the Council is “sufficient” – it needs to fully identify all actual and potential effects so that Council can understand the application properly. This includes responding to requests from Council for further information
  • make sure the information is reliable – get independent experts if the effects warrant them, particularly where a third party has shown an interest in the application
  • identify all potentially affected persons. Given the differing views handed down by the Supreme Court, this might still include community groups.

It is also worth noting that applications can only be processed non-notified if the effects of the development are minor. If expert advice is that some of the effects will not meet this threshold, applicants should consider either providing better mitigation or simply proceeding with notification. While a public hearing can considerably lengthen the consent process, review proceedings, with the prospect of needing to start over, can be of greater concern.

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