OPINION: The case of the Quake Outcasts shows the risks of dealing with the Crown, MAI CHEN and NICK RUSSELL write.
The High Court decision in the Quake Outcasts case - now under appeal - concerns the rights of uninsured property owners in the residential red zone.
But its implications should concern anyone who contracts or otherwise interacts with the Crown, and other public entities such as Cera, and who has to rely on them making decisions that are correct and will not be stalled or set aside by the courts.
As readers will be well aware, the Crown's initial offer to purchase red zone properties did not extend to owners of uninsured properties or bare land.
The Crown initially refused to make any offer to purchase these uninsured red zone properties due to concerns about "moral hazard" - the concern that people should not be rewarded for failing or refusing to insure their property.
Ultimately, however, that concern was overridden by the Crown's desire to clear the red zone completely, rather than leaving isolated pockets of privately owned land or properties still standing after most of the others had been cleared.
Moreover, the moral hazard argument never applied to owners of bare land because that land could not be insured anyway.
At any event, in September 2012 the Crown offered to purchase these uninsured red zone properties for 50 per cent of the rateable value of the land.
The property owners objected on (amongst other things) the grounds that the offers were "oppressive, disproportionate, contrary to human rights and an abuse of power".
The court has declared that the offers to the uninsured red zone landowners were not made in accordance with the law.
In short, Justice Panckhurst concluded that since the offers could have been made under the Canterbury Earthquake Recovery Act 2011, the Crown was required to comply with the requirements of that Act, and that it was therefore required to consider the interests of the red zone property owners.
The court was concerned that the offer of 50 per cent of the land rating value "will not enable many property owners to make a fresh start".
The court found that the interests of these property owners had not been properly considered and that the decision was therefore illegal.
The Government has now confirmed that it will take the Quake Outcasts case to the Court of Appeal. A final outcome is not likely until next year and may take longer if the case goes to the Supreme Court.
In the meantime, owners of uninsured red zone properties are effectively in limbo.
But for the wider public and business community in Canterbury, the key lesson to be drawn is that contracting with the Crown carries unique risks.
Put simply, this decision (like the earlier decisions concerning Christ Church Cathedral and the Christchurch City Council's plans to install a new pressurised waste water system in Richmond) demonstrates the need for businesses and the public to be aware of the public law context when they engage with the Crown, local government and other entities such as Cera.
Each of these cases turns on its own particular facts and legislation. But what all of them have in common is the clear lesson that the process of rebuilding has to comply with public law obligations.
That can be a problem for business and property owners if the Crown has contracted to undertake reconstruction work that is subsequently held to be illegal.
There is always a risk that a decision to undertake such works will be challenged by someone whose rights are affected, or who otherwise opposes the decision.
If that happens, third parties such as property owners or building contractors have to rely on the decision-maker to act lawfully.
The fact that works are important or even essential to the rebuilding of Christchurch does not excuse acting unlawfully.
If the Crown or other public entities such as Cera or the Christchurch City Council do not act lawfully, the consequences can be serious and widespread: contracts may be stalled or even revoked, and the validity of payments may be put in doubt.
This means that businesses and property owners need to undertake a new level of due diligence when dealing with authorities.
It may not always be enough to consider the nature of the job to be undertaken, the resources required and the costs and risks associated with the work.
Contractors will also need to consider whether the Crown agency commissioning the work is acting within its statutory authority and whether there is any risk of the project being delayed or reversed by the courts.
This problem will not just go away.
There are likely to be more such cases as the Canterbury rebuild continues, because it is inevitable that the plans of the Government, Cera and the council will come into conflict with the needs and rights of individual members of the community.
This means that ultimately, ensuring compliance with public law obligations becomes everyone's problem.
This will invariably add a level of complexity to the contracting process.
But the alternative - simply trusting the Crown to get it right - may not be enough.
Mai Chen is the founding partner and Nick Russell is a principal (litigation) at Chen Palmer New Zealand Public and Employment Law Specialists.
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