Phil Shannon, Partner at Turner Hopkins Lawyers, discusses the challenges of achieving full compensation for clients whose land is compulsorily acquired under the Public Works Act 1981, particularly against the backdrop of the Government’s projected infrastructure spend.
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To paraphrase NZ Treasury, infrastructure is the foundation on which so much of the New Zealand economy relies. “Central and Local Government owns over $200 billion worth of infrastructure assets and in the 10 years to 2025, the forecasted infrastructure spend is over $110 billion”.[1]
These are huge sums of money and the scale of what is planned is reflected by the following projects that are planned in Auckland alone:
| Sky City International Convention Centre | $700 Million |
| City Rail Link | $2.5 Billion |
| America’s Cup Village | $114 Million |
| East West Connection | $800 Million plus |
| Light Rail Network | $6 Billion |
| Queens Wharf Redevelopment | $47 Million |
| Hunua 4 Watermain | $374 Million |
Add to the above public works planned or in progress in other parts of New Zealand and clear picture emerges that many land and business owners throughout New Zealand with be implicated by these projects.
| Wellington T.G. Motorway | $1 Billion |
| Christchurch North, West and Southern Corridors | $100 Million plus |
| Canterbury CBD rebuild/anchor projects | $20 Billion plus |
| Kaikura Rebuild | $2 Billion |
Most lawyers will be aware of the Government’s powers to compulsorily acquire land for a public benefit without the owner’s consent in return for compensation.
The Public Works Act 1981 (PWA) is the primary legislative tool for such land purchases. The PWA requires as a basic entitlement that owners should receive “full compensation”.
One would think that the use of the term “full compensation”, would mean owners are adequately paid for forfeiting their land ownership rights for worthy public works projects.
However, having assisted many land and business owners affected by motorways, railways, water supply and other projects, my experience is that many owners end up feeling short changed by the process and its outcomes. Often owners are reluctantly forced to walk away with a perception that the way the act is applied does not deliver the required “full compensation”.
The reasons are complicated but appear to be a mix of factors, including:
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- A misplaced desire by Central and Local Government agencies to save taxpayer and ratepayers funds at the expense of the landowner.
- Valuers for Crown agencies taking a valuation approach that often assesses values at the lower end of the CMV scale.
- Government agencies with deep pockets and limitless resources focusing those resources on obtaining compensatory payments at the lower end of the value range.
- Delays and push backs in paying for reasonable legal and valuation costs of owners.
- Little or no legislative recognition that owners who do not have land taken but end up with homes and businesses adjacent to major public roads, sewerage, water schemes, and railways, suffer a loss of value and amenity that should be compensated for.
A typical transaction in the current PWA space may well proceed along the following lines:
Your client will receive a letter advising them that their land is being taken or is required for a public work. The letter will sometimes be issued with little prior warning or consultation and your client will likely contract you in a considerable state of shock.
Valuers will be appointed for both sides and the requiring Authority will be reluctant to provide its full valuation report unless your client is prepared to provide their report by way of exchange. The exchange process and withholding of the report by the Crown/Council has no basis in the legislation or case law.
Almost without exception the valuers will disagree on quantum of compensation and lengthy negotiations will ensue with both valuers fighting hard for their particular assessments.
Meanwhile your client’s legal and valuation costs are accruing and there will often be delays in reimbursement of these costs which add to the stress already being endured.
If the valuers are unable to close the gap sufficiently to recommend a jointly agreed compensation figure, another valuer referee can be appointed to try and break the deadlock.
If no agreement is reached, the Crown/Council will often take your client’s property or business by compulsory acquisition, so it can commence project works. At that stage your client has not compensation (unless a lower advance payment can be agreed) and options are to recommence negotiations or take a case to the Land Valuation Tribunal (LVT).
It can take 18 months to 2 years to get a substantive hearing before the LVT. If the LVT rejects your client’s claim, costs may be awarded against the landowner.
In summary, it remains a one-sided process with the outcome dependent on the quality of the legal valuation and accountancy consultant teams assembled to fight for a “full compensation” outcome.
In my view, more lawyers need to familiarise themselves with the PWA and applicable case law in order to properly advise clients in this growing area of practise. Being deprived of property without adequate and fair compensation is a breach of basic human rights. It needs to be protected in New Zealand as an important legal principle perhaps in a written constitution, should New Zealand ever adopt one. Lawyers have a major role to play in ensuring that right is not further eroded as New Zealand seeks to develop and upgrade its already strained public infrastructure.
Phil Shannon has been a Barrister and Solicitor of the High Court of New Zealand since 1983. Phil holds both Bachelor of Law (LLB) and Master of Law (LLM) degrees. He has been a Commercial and Property Partner at Turner Hopkins since July 2016. Phil is a highly experienced general commercial and property lawyer with a background of providing top level legal advice to corporate, commercial, central local government and private clients. He advises clients on a wide range of high profile commercial projects, including business structuring, property due diligence, company law matters and asset protection. Phil also has extensive experience in construction law, environmental law, property development and leasing, national infrastructure projects and Public Works Act compensation claims. Phil states: “I characterize my legal advice and support as practical, pragmatic and commercially sound. I also enjoy the leadership and managerial aspects of being a partner in a law firm. I like the challenge of mentoring younger lawyers to enable them to deliver outstanding service to clients. I also enjoy getting involved in the business development and marketing aspects of running your own legal business and networking in the community to grow the base of clients who can benefit from the firm’s expertise.”
Contact Phil at phil@turnerhopkins.co.nz You can also connect with Turner Hopkins via LinkedIn, Facebook and Twitter
[1] The Treasury: NZ Infrastructure Plans, see also Thirty Year Infrastructure Plan 2015.
