A council’s decision on resource consent notification can mean the difference between project success and failure. Few issues have therefore generated as much interest and discussion (and confusion) as the “permitted baseline” test. In this Counsel, we consider recent developments on the test.
The test is based on the theory that, by establishing certain classes of activity as “permitted” in a district plan, a council is making a statement to the world that it regards the outcomes associated with such activities as acceptable. Accordingly, when an activity is proposed which requires resource consent, the consent authority should disregard effects associated with that activity if they relate to a permitted activity on the site.
The development of the permitted baseline test can be traced back to a comment made by the Court of Appeal in Bayley v Manukau City Council  1 NZLR 658 where the Court suggested that it is not sufficient for a consent authority to assess a proposal against the environment as it exists, but that it must go further and assess the proposal against the environment “as it would exist if the land were used in a manner permitted as of right by the plan”.
The comment made in Bayley was highly controversial at the time, as it appeared to overturn what had been regarded as settled point of law since the decision of the High Court in Locke v Avon Motor Lodge Limited (1973) 5 NZTPA 17. The Court in Locke had held that discretionary activities are wholly discretionary and that all aspects of the activity must be considered and assessed, even those aspects which comply with relevant development controls. In other words, the Court in Locke rejected the type of “direct comparison” approach suggested by the Court in Bayley, holding instead that compliance with performance controls is a relevant consideration, but one which is neither “exclusive nor necessarily decisive”.
The somewhat surprising development of the law in the Bayley decision was followed by a number of High Court decisions which both developed the permitted baseline concept further from a practical perspective, and gave voice to serious doubts about the theoretical validity of the test. Those doubts have continued to generate discussion and readers interested in this “legal theory” debate might wish to look at a recent informative article on the matter written by John Milligan (“Locating the baseline” (2001) 4 Butterworths Resource Management Bulletin at 13 and 25).
Whatever the perceived failings or limitations of the permitted baseline test, the fact remains that it is very much part of our law. It is also an undeniably powerful and useful legal tool available for use by developers, both in terms of avoiding notification and actually securing consent.
The validation of the permitted baseline test has recently been confirmed by the Court of Appeal in two cases, Smith Chilcott Limited & C M Martinez v Auckland City Council CA 267/ 00 & 12/01, 24 June 2001 and Arrigato Investments Limited & Anor v Auckland Regional Council & ors CA 84/01, 25 July 2001.
Both cases clarify some aspects of the permitted baseline test and extend the test further than had previously been understood under the law.
As a starting point, both cases confirm that the permitted baseline applies not only to decisions on notification under Section 94 of the Resource Management Act (RMA), but also to substantive decisions under Sections 104 and 105. Both cases confirm that it is compulsory for a consent authority to apply the permitted baseline test when assessing the effects of a given activity.
The key issue in the Smith Chilcott decision related to the “credibility standard” that a complying development needed to meet before it could be considered an appropriate baseline. Previous cases had suggested that an applicant presenting an alternative fully-complying development had to show that the alternative development was not a “purely hypothetical” one. The High Court decision in Smith Chilcott had taken that suggestion a step further in finding that a complying development must be shown to be “likely” in order to qualify as an appropriate permitted baseline test.
The Court of Appeal in Smith Chilcott rejected the High Court’s approach, finding that any complying development that was “not fanciful” would qualify as an appropriate permitted baseline. In particular, the Court soundly rejected earlier suggestions that it might be necessary for applicants to “prove” the credibility of a complying development through evidence on its marketability and profit margins. This is excellent news for developers seeking to rely upon the permitted baseline test, as it greatly simplifies the process of establishing a permitted baseline.
The key issue in the Arrigato decision related to the relevance of existing resource consents to the permitted baseline test. In the Arrigato case, the applicant had an existing consent for a nine-lot subdivision and was seeking a new consent for a 14-lot subdivision having a different (and improved) design. In doing so, the applicant sought to argue that the environment against which the effects of the 14-lot subdivision should be assessed should be regarded as having already been altered in the manner permitted by the nine-lot subdivision consent (i.e. using the nine-lot subdivision as a permitted baseline).
In the High Court decision on Arrigato, the Court had decided that existing resource consents could not be used to establish a permitted baseline test. In doing so, the Court interpreted Bayley as limiting the permitted baseline solely to developments which were permitted as of right under a district plan.
In our last Counsel on this issue (5 October 2000) we questioned whether the reasoning of the High Court would be likely to survive an appeal, as there were a number of perceived legal flaws associated with it. Our prediction in this regard has been borne out, as the Court of Appeal has now overturned the High Court on this issue.
The Court of Appeal considered that, while the High Court had correctly applied Bayley in reaching its conclusion, there was nevertheless sufficient reason to extend the Bayley decision by considering existing resource consents relevant to the permitted baseline in some cases.
The Court did not seek to define the circumstances under which an existing resource consent will be allowed to define the permitted baseline, but suggested that it would be an issue for “the consent authority to exercise its judgment” in each case. In doing so, the Court did however give some “hints” as to what principles should guide the consent authority’s judgment in this regard, in particular:
- There is a suggestion that consents that have been granted following a notified process are more likely to qualify as an appropriate permitted baseline.
- Where an unimplemented resource consent is likely in any case to be a “stage” towards the consent under consideration, it will be more likely to be considered an appropriate permitted baseline.
- On the other hand, the Court seems to suggest it is unlikely that an existing consent, which is proposed to be completely superseded by the new proposal, would represent an appropriate permitted baseline.
Having made this point, however, the Court held that the Environment Court was correct to take into account Arrigato’s nine-lot subdivision application in considering the 14-lot subdivision application, notwithstanding the fact that the 14-lot subdivision superseded the nine-lot subdivision in that case (rather than being a stage towards it). Accordingly, the Court throws immediate doubt on the “rigidity” of its earlier suggested guidelines.
In concluding, the Court emphasised again that the application of the permitted baseline test and the consideration of the relevance of existing resource consents should be regarded as a matter for the discretion of the consent authority. Given the inherent limitation on the High Court’s jurisdiction to overturn a consent authority’s decision on issues of discretion, this comment suggests strongly that judicial review or appeals on the exercise of the discretion by a consent authority are unlikely to be given a sympathetic hearing by the High Court.
It is notable that neither the Smith Chilcott nor Arrigato decisions contains any substantive analysis of the legal theory behind the permitted baseline test. Both decisions assume that the test is a valid one and seek merely to apply it in a pragmatic manner. However, the Court in Smith Chilcott perhaps gave a hint of its lingering concern about the validity of the test at paragraphs  and  of the decision when it mentions the possibility that Bayley could be overruled.
In that regard, the Court noted the procedural requirements which must be met in advance if an appellant wishes the Court of Appeal to overturn one of its earlier decisions and the fact that those requirements had not been fulfilled. It therefore rejected the suggestion that it had any power to overturn the Bayley decision.
In summary, in our last Counsel dealing with the permitted baseline test, we suggested to all prospective applicants that future substantial applications for consents should be accompanied by an appropriate permitted baseline development for comparative purposes. Since that Counsel, the potential benefits of the permitted baseline test have become even more marked. In particular, some of the limitations of the permitted baseline test that previously existed (for example the need to show that the comparative development is a “likely” one, and the exclusion of existing resource consents from the permitted baseline equation) have now disappeared, making the utilisation of the permitted baseline test an even more attractive prospect for applicants.