Queenstown Central Limited v Queenstown Lakes District Council  NZHC 815, Justice Fogarty)
an appeal against the grant of non-complying resource consent for a supermarket in Frankton Flats
The supermarket application was closely related to and heard with another non-complying consent application for a Mitre 10 Mega. The Court released two separate decisions (the other being ( NZHC 817)) and noted that both decisions should be read together. However, this casenote focuses on the supermarket decision.
Two applications were lodged for large format developments on the Frankton Flats (being undeveloped land adjacent to Queenstown Airport); one for a Pak’nSave supermarket and the other for a Mitre 10 Mega. The land subject to the applications is undeveloped, zoned General Rural, and identified for urban expansion in Objective 6 of the operative Queenstown Lakes District Plan. Objective 6 provides for the Airport’s operation in association with development (including retail and industrial development).
The land affected by the applications was also subject to Plan Change 19 (“PC 19“) which sought in part to give effect to Objective 6 by providing for a mix of activities including education, residential, visitors’ accommodation, commercial, industrial, business and recreational. More specifically, PC 19 proposed to zone the affected land as E1 and E2 (Industrial Zones). The Council’s decision on PC 19 was appealed by a number of parties and a decision (from another division of the Environment Court) was pending at the time the Pak’nSave and Mitre 10 consent applications were heard by the Environment Court.
Under the operative plan, both applications were non-complying and required to meet one of the threshold tests under s104D (ie the Court being satisfied that either the adverse effects will be minor or the proposal will not be contrary to the objectives and policies of both the relevant plan and the relevant proposed plan). In contrast, under PC 19, both proposals were either prohibited outright or prohibited until an outline development plan had been approved. However, as the rules in PC 19 were not yet operative, the applications were treated as discretionary by virtue of s87B(1)(c) of the RMA.
At the Council hearing, the Pak’nSave application was declined; however, on appeal the majority of the Environment Court granted consent, finding that the effects would be minor. The Mitre 10 Mega application was directly referred to the Environment Court and the same conclusion was reached by the majority. Environment Court Commissioner Fletcher dissented, considering that the loss of the future supply of industrially zoned land would be an adverse effect that was more than minor.
On appeal, the High Court was asked to consider whether the Environment Court erred in law in its approach to assessing whether or not the two applications would have adverse effects on the environment that would be more than minor. The High Court also considered whether the Environment Court adopted the correct approach in its consideration of the objectives and policies under s104D(1)(b); in determining not to delay the hearing of the applications until after the decision on PC 19 was released; and in determining that Queenstown Central Limited (“QCL“) was a trade competitor.
Minor effects – s104D(1)(a)
Application of Hawthorne
The majority of the Environment Court determined that the adverse effects of the applications were minor. This conclusion was reached primarily by applying Queenstown Lakes District Council v Hawthorn Estate Ltd  NZRMA 424(CA) in such a way that it was able to ignore PC 19 completely and effectively assume the Frankton Flats area was to remain undeveloped.
The Environment Court was satisfied that the effects of the Pak’nSave would be minor as:
“…By analogy with Hawthorn where the Court of Appeal held that possible applications for resource consents were not part of the reasonably foreseeable environment, we hold that a possible exclusively industrial zoning for the site under the unresolved (and challenged) PC19(DV) is not part of the reasonably foreseeable environment. …Consequently the potential effect of removing possible exclusively industrial land from use as such within the potential Frankton Flats B zone is not an effect on the “environment” within the meaning of section 104D(1) of the RMA.”
The High Court found that the Environment Court had erred in applying part of the Hawthorn decision without regard to the earlier discussion in that decision recognising the importance of context. The High Court said that the context of this case was materially different from that in Hawthorn and Justice Fogarty held that focusing on one section of the Hawthorn decision had prevented the Environment Court from taking into account the reality that there was a demand for more industrial land and that this was already recognised in the operative district plan through Objective 6 (which expressly provided for industrial activities on the Frankton Flats). Justice Fogarty confirmed that the first gateway test is forward looking and the judgement as to whether a proposal may cause adverse effects that are more than minor must be made with regard to, inter alia, competing use of the subject and surrounding land, and associated regulatory initiatives by way of proposed plan change, albeit not in a static setting.
Justice Fogarty noted that, while PC 19 was subject to appeal, there was no suggestion that the area of land would remain undeveloped as rural general land, on the contrary – it was to be intensively developed and the setting was “one of making planning decisions to accommodate all the proposed activities, including a large area of industrial land”.
Justice Fogarty found that s104D calls for a “real world” approach to analysis, without “artificial assumptions” or “creating an artificial future environment” and that the Environment Court had erred.
20% threshold for the assessment of “minor”
In case its reasoning was wrong in relation to its application of Hawthorn, the Environment Court had considered the receiving environment in the context of the planned development of Frankton Flats. The Environment Court substituted the test of “minor” for a test that “any adverse effect which changes the quantity or quality of a resource by under 20% may, depending on context, be seen as minor”. The Environment Court had determined that, as the potential loss was less than 5%, the adverse effect was minor both qualitatively and quantitatively.
Justice Fogarty commented that no authority was cited for the 20% test, rather it had been justified by the Environment Court through reference to “dictionary definitions” and “normal usage”, rather than by references to the function of s104D in the scheme of the RMA. Justice Fogarty reasoned that the Environment Court had applied the black letter method (or literal interpretation) to s104D(1)(a) and, while the black letter method can apply when the provision is a rule, it cannot apply reliably when the statutory provision is a standard: “When the statutory provision contains a term like “minor”, that is a standard, application of which requires resolution of a question of degree. There is no bright line distinction between “minor” and “not minor”.”
The majority of the Environment Court considered that, while the 20% test is an arbitrary figure, as an approximate test it was “no more arbitrary” than the words “minor” used in section 104D of the RMA. However, Justice Fogarty commented that “the Court must take statutes as they are enacted. A test cannot be dropped because it is perceived as arbitrary, and replaced by a Judge made “better” test.”
The High Court determined that there was an error of law in effectively substituting the 20% test for the “minor” test. In addition to the reasons outlined above Justice Fogarty commented that, while the Environment Court recognised the analysis of adverse effects involved both a quantitative and qualitative assessment, it was “impossible to use an arithmetical measure of quality”.
Objectives and Policies – s104D(1)(b)
The Environment Court clearly stated that it did not need to consider the second gateway test under s104D(1)(b), given its determination that the effects of the proposal were minor and it therefore met the first gateway test under s104D(1)(a). It did however consider the relevant objectives and policies “out of an abundance of caution”. This point of appeal is primarily addressed in the related Mitre 10 Mega decision where Justice Fogarty found several errors of law in the Environment Court’s interpretation of the relevant objectives and policies. While Justice Fogarty did not address the issue in great detail in the supermarket decision, he did briefly conclude that a consent authority could not be satisfied that the Pak’nSave supermarket in the E1 and E2 zones will not be contrary to the relevant objectives of PC 19. If the Environment Court’s decision had been based on a view that the application was not contrary to the relevant objectives and policies, this would have constituted a material error of law.
The High Court decision found that the errors of law were material and the consents for both the Pak’nSave and Mitre 10 Mega should be set aside. Firstly, Justice Fogarty held that it was likely that the Environment Court’s decision on s104D(1)(a) might have been different if it had not applied Hawthorn as it did and had not substituted the numerical standard test for “minor”. Secondly, in the interim, the decision of Judge Borthwick’s division on PC 19’s higher order issues had been released and altered the boundaries of the E1 and E2 zones. This meant that the proposed Pak’nSave will be located primarily within the E1 zone where retail is fully prohibited.
Two other matters were raised on appeal. Firstly, whether the Environment Court should have adjourned the hearings until the decision was released on PC 19, and in classifying QCL as a trade competitor.
On the first matter, Justice Fogarty found that there was no error of law as the scheme of the RMA requires matters to be dealt with promptly and allows applications to be processed notwithstanding that there may be unresolved plan changes.
On the second matter, the Environment Court had found that QCL was a trade competitor of Shotover Park Limited (“SPL“), the underlying owner of the Pak’nSave site. In summary the rationale was that a related company to QCL was intending to locate a Countdown supermarket in close proximity to the proposed Pak’nSave site and, therefore, QCL and SPL were trade competitors. Justice Fogarty disagreed:
“SPL and QCL were dubbed trade competitors by their association with Foodstuffs and Progressive. But they are property developers. Property developers develop property with an eye to the market for that property. That does not make them participants in the trade of the use to which the property is likely to be put. There is nothing in Part 11A of the RMA to suggest such an extended definition”.
The Court found that there was an error of law but that it did not materially affect the decision.
The appeal was allowed and the matter remitted back to the Environment Court. The judgment is clear that the applications were to be re-evaluated against the current terms of PC 19.
Note: Russell McVeagh acted for Queenstown Central Limited.