Legal challenges expose hasty process

00:07, Nov 03 2013
Gerry Brownlee
EMBATTLED: Earthquake Recovery Minister Gerry Brownlee has been forced to walk a legal tightrope.

The Government has been pinged three times over its handling of the Canterbury earthquake recovery now. Is it getting serious? JOHN McCRONE reports.

The courts have ruled the Government's residential red-zone land clearance offers in Christchurch unlawful. A well- intentioned policy perhaps, but outside the bounds of proper process. Is that merely a bad look or evidence of something more serious?

Is the judiciary now striking back at what many have criticised - an approach to the recovery by Earthquake Recovery Minister Gerry Brownlee and his Canterbury Earthquake Recovery Authority (Cera) that has been too hasty, too broadbrush, too directive and lacking in community consultation?

Brownlee was first pinged by the courts when he rubber- stamped city boundary changes to free up greenfield sections in Christchurch. In October 2011, he overrode a running Environment Court hearing to put the dotted lines where local authorities wanted them.

A judicial review found Brownlee had the necessary powers, but said there should have been a more formal planning process that at least gave the semblance of a public consultation.

Then in August came a more damaging finding against Brownlee from Justice Graham Panckhurst who was hearing the case of the Quake Outcasts - red- zoners with either bare sections or uninsured properties who had been offered only 50 per cent of the value of their land.


Panckhurst surprised by going beyond what the Quake Outcasts had even claimed in ruling the entire red-zone process unlawful. In his view, said Panckhurst, Cera and the minister had been given extraordinary powers to deal with the earthquake recovery but were guilty of then trying to achieve their ends without making proper use of those powers.

The red zone had been sold to the Christchurch public as a planning change in which land had been legally deemed unfit for habitation. Homeowners were left with the impression their properties were condemned, they had no real choice except to move.

Yet in fact the Government was only making an area-wide offer to buy people out of their insurance settlements and acquire their land - an offer backed up by comments about services being cut off, houses becoming uninsurable, and other vague threats calculated to make sure the majority complied.

The ruling caught the Government on the hop and last week it went back to the Court of Appeal in Wellington to seek to have it overturned. The answer might take weeks if not months to emerge, and after that, there is always the possibility of a further Supreme Court challenge.

But coming on top of the Phillipstown School case - the High Court finding that Education Minister Hekia Parata's consultation over its closure was unlawful - the courts appear to be identifying a pattern of flimsy and high-handed process when it comes to the recovery.

However again, the question is whether this is small stuff easy to excuse, the offences only technical? Given the need to make policy fast, it is understandable some corners were cut. Or whether instead the judiciary is now having its say on a general attitude and the fallout from that could be significant?

Otago University law professor Andrew Geddis, a specialist on constitutional issues, was one of those highly critical of the Canterbury Earthquake Recovery (CER) Act, rushed through Parliament under urgency the night before Civil Defence emergency powers expired in April 2011.

Geddis says the act did indeed give the Government unprecedented ability to take control of Canterbury, rewrite laws and local planning documents as it found necessary. So there was genuine fear of the potential for abuse - the backroom deals and advancing of political agendas.

But Geddis says instead what the Government seems to have fallen foul of is its political eagerness to provide Cantabrians with swift solutions.

"With the red zone, the Government saw all these people whose properties had been rendered basically worthless and asked how it could fix this as quickly and with as little grief as possible. So it thought it would step in and take the property off people's hands, pay them out, and then fight their insurance battles for them.

"Now there was nothing in law that said they had to do that. If you look internationally, that's actually a pretty generous thing for a Government to do."

But then a voluntary deal became dressed up as something else.

The red-zone package was offered where the finances seemed to stack up best from the Government's point of view. A broad rule of thumb was used. If there was enough land damage in a neighbourhood to require some area-wide remediation solution - piling, compacting, raising above flood heights - then the quickest way out was to move people off and worry about the land later.

The Government would act as an intermediary, buying home- owners out in exchange for taking over their house insurance and Earthquake Commission (EQC) payments. This would de-risk the insurance process for residents and simplify life for insurers, giving them just one big owner to deal with in the red-zoned suburbs.

Pegging the bailouts to 2007 government valuations (GVs) seemed a fair general benchmark - although a promise to also consider post-2007 alterations and improvements got lost somewhere along the way.

And citing moral hazard, Brownlee said the uninsured - those who had either neglected to insure their homes, or owned bare sections which can't be insured - would only get half the GV. That seemed just given their blighted land probably only retained 10 per cent of its original value Brownlee remarked.

Geddis says the Government must have thought it had gone above and beyond to help people. "I don't know that they even contemplated anyone challenging it because it seemed like such a generous thing to do, right?"

But then the rough and ready nature of the calculations began to show. Duncan Webb, partner at lawyer Lane Neave, says the majority of residents got a fair price for their properties and a number even quietly pocketed a windfall profit. Some run-down homes got quite a bit more based on their GVs than they could ever have got in an actual sale.

However that also left a matching percentage who lost out. "I had people come to me with cases like where the GV for three hectares of land was something like $160,000 - clearly inadequate, clearly erroneous, but that was it."

Webb says the Government should have recognised there would be these inequities - the original process had been too blunt a tool - and set up a second-tier system where people could challenge their valuations on an individual basis. Instead the word was the offers were not negotiable and deadlines set to crank up the pressure to sign.

Webb says many accepted the red-zone settlements under duress, even though they believed they were losing $100,000 or $200,000 on the deal. They could have tried legal action, but the cost both in terms of lawyers' fees and their mental health generally made the fight seem not worth it.

But then led by property developer John Fowler, who owns 11 vacant sections in red-zoned Brooklands, 46 uninsured property owners managed to establish enough common ground to mount a class action as the Quake Outcasts - which they won.

Now the question is if Panckhurst's ruling sticks, what exactly are the consequences? Is it a passing embarrassment for the Government or something worse?

Canterbury University assistant law professor John Hopkins says within the New Zealand constitutional context, the judiciary has limited powers. It is not like other countries where supreme court judges can have a large say in political decisions.

So when a judicial review case is brought, the courts are only ruling on the legality of the decision-making process, not the quality of the decision itself. "Largely governments can get away with doing anything so long as they follow the correct procedure," Hopkins remarks.

Panckhurst's ruling came in two parts, Hopkins adds. It addressed separately the lawfulness of the decision process and then the scope of any remedies.

The decision was deemed technically unlawful because Brownlee and Cera had been given specific powers by the CER Act to change city plans and make compulsory property purchases, and so Panckhurst took this to imply they also had to use them where possible. Attempting to achieve the same ends by more off- the-cuff methods was the minister's prime mistake.

However Hopkins says all this now means is that Brownlee might have to go back and retrospectively regularise the situation in the same way he is doing with the city boundary issue - fixing that one by rushing through a formally consulted Land User Recovery Plan (Lurp).

And in practice, Brownlee will probably not even be expected to do that because with the red zone, too much water has passed under the bridge. Most of the residents are long gone. Consulting with them would be pointless as the decision cannot be unwound.

Panckhurst also acknowledged the red-zone offers fitted the broad recovery goals of the CER Act and that the deals were generally pitched at an attractive level.

Then on the remedy side, Hopkins says Panckhurst limited the potential fallout to the Government by restricting his judgment to the Quake Outcasts, those who brought the action.

So the pressure is on to meet their demands for 100 per cent payouts, but the many more who might be feeling the GV mechanism treated them unfairly cannot use the ruling as a lever, Hopkins says. They would still have to mount their own individual judicial reviews.

Morally, there are some strong feelings about what the Quake Outcast judgment ought to mean.

Those like Reverend Mike Coleman of the Wider Earthquake Communities Action Network (WeCan) and Labour Party earthquake recovery spokesperson Ruth Dyson believe the Government has been found to have skimped proper community consultation in its rush to get things done. Now, as Webb suggests, it should be prepared to go back and revisit individual cases where the injustices seem clear.

For residents, the red zoning was a lottery, Coleman says. "In Avonside, houses next to each other were built by the same builder but nearly every one had a different GV."

Discrepancies of $30,000 were common. "The Government now has the ethical obligation to sit down and talk with people who felt they were coerced and handled incredibly poorly."

Yet Coleman agrees this is looking unlikely. So on the face of it, the Quake Outcast decision does not change much. Even if the Government fails to overturn the judgment and is forced to top-up offers to the non-insured, it can mostly shrug the court finding off.

However by laying itself open to judicial challenge, there have been some damaging knock-on effects. The most visible is Brownlee's halting of a review of more than 100 Port Hills zoning decisions.

Here Cera accepted that its original analysis of the rockfall and cliff collapse hazard was too broadbrush. Some homeowners zoned red believe their properties can be protected by bunds or rockfall nets, while others zoned green have been red sticked by Christchurch City Council because Cera did not pick up the particular risk of some local outcrop.

A full review of these complex cases was promised and after much delay was due to be released in August. But now Brownlee is saying that with the whole red- zone offer process being considered outside the law, the Port Hills cases will have to go on ice until the appeal clarifies the situation.

Then behind the scenes at Cera, there are reports of a more widespread hold-up in recovery decision making.

Leanne Curtis of the Canterbury Communities' Earthquake Recovery Network (CanCern) says everything connected to the next step for red- zoned areas is being disrupted.

Curtis says with the widespread land subsidence following the quakes, flood risk has emerged as a top priority in Christchurch. In TC3 category areas especially, lives are on hold because insurance and rebuild decisions depend on what the authorities do to make neighbourhoods safe.

"There are urgent flood management meetings taking place. But we can't really move ahead until we know what the future use of the red zones will be, because a lot of them are obvious places for stormwater schemes and stop banks. There is so much being held up while there is this question about the process being lawful that it is turning out to have massive implications," Curtis says.


Public consultation was again the nub of it when the courts ruled against Earthquake Recovery Minister Gerry Brownlee over rubber-stamping city boundary changes.

To free up new sections for displaced red-zoned residents, Brownlee used his powers to end a long-running Environment Court battle largely in favour of local councils.

At a stroke, Brownlee confirmed the general urban development limits being called for in a Canterbury Regional Policy Statement (RPS) and so identified where nearly 50,000 homes could be built over the next 35 years.

There were winners and losers. Some who had worked to get their rural blocks into the RPS, including Ngai Tahu with its 2500 section Prestons development in Marshland, made it safely in.

Others, particularly a group of owners of flood-prone land in Casebrook and the Cranford Basin who had been grudgingly permitted development of the land with proper treatment, but who were in the middle of having that right appealed by Christchurch City Council and other local authorities, were ruled out.

These landowners, led by Independent Fisheries which owns 22 hectares near Willowbank and developer Richard Peebles who has 12ha in the Cranford Basin, called for a judicial review of Brownlee's actions, which they duly won. They also staved off Brownlee's subsequent appeal. Yet still they look like emerging the losers says Peebles.

The courts found that Brownlee had wrongly used powers granted for the immediate purposes of the recovery to settle a messy and long-running debate over the future shape of Christchurch.

However the criticism was only of the method. So there was nothing to stop Brownlee rerunning the same decision as a formal plan change process - which he could then step in and ratify, thus ending any further Environment Court challenge. So this year has seen the Land User Recovery Plan (Lurp) being hurried through with fast- tracked public consultation.

Peebles says there might have been a faint chance of the landowners still getting something out of the Lurp, but now the other shoe has dropped.

Plans have been announced for the Northern Arterial motorway extension across the farmland of the Cranford Basin, as well as new stormwater ponding areas to either side.

Again the recovery is allowing for some wished-for changes to be accelerated. "We won, but we're just going to get beaten another way, basically, " he says.

Peebles adds he does not blame Brownlee personally. He feels the Minister stepped into the middle of a wrangle between planners and owners and went with the advice he was hearing.

"Gerry has had to make some tough old calls."

But says Peebles of an investment made five years ago when there seemed a good chance of development: "I wish I'd never seen that piece of land now."

The Press