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The decision of the majority in the Court of Appeal in Central Plains Water Trust v Ngai Tahu Properties Limited & Anor (CA, 19/3/2008, Hammond, Robertson and Baragwanath JJ, CA 69/07 [2008] NZCA 71) has again changed the rules in regard to priority between applicants.
Priority is an important issue for both local authorities and applicants for resource consents, as it provides a right for an applicant to have their resource consent application heard and determined before another. This may enable an applicant to obtain an economic advantage by getting priority to the use of a resource (including those that are scarce, finite, or nearing capacity).
The principles of priority are not statutory, but have been developed over time by the courts, mostly in cases relating to allocation of water and coastal space.
While the Central Plains case involved consents to take water, the principles apply to applications for all resources, not merely those that are finite (for example, wind has been held to be subject to the priority rule).1 It seems that the procedural priority principle will apply to all resources including matters such as remaining capacity in infrastructure networks such as roads and stormwater systems. Accordingly, it is an issue that consent authorities must be conscious of when processing resource consent applications. If a consent authority sets down a hearing out of order it may be subject to judicial review, or if it grants a consent ahead of an applicant with higher priority that decision could be overturned on appeal.
The position before Central Plains
Priority is determined on a first come, first served basis, regardless of the forum (consent authority or Court) in which the matter is heard.2 Before Central Plains, priority was attained at the point the applicant lost control of the process, being when an application was able to be publicly notified. The date of receipt of the application was not relevant, and applications lodged later but ready for notification first could gain priority over incomplete applications filed earlier.3 The Environment Court and High Court decisions in Central Plains4 and the High Court decision in Synlait5 were authority for the principle that when associated applications were required but had not yet been lodged, priority was not attained.
Background to Central Plains
In 2001, predecessors of Central Plains Water Trust (CPWT) made an application to the Canterbury Regional Council (Council) for resource consent to take water from both the Waimakariri and Rakaia Rivers. On 21 December 2001 the Council, applying section 91 of the Resource Management Act 1993 (RMA), told CPWT that the water take application was notifiable but the notification and hearing would be put on hold and not proceed until associated applications to use the water were filed. No use applications were filed by CPWT until November 2005.
In the meantime, in January and June-July of 2005, Ngai Tahu Properties Limited (Ngai Tahu) applied for resource consent to take and use water from the Waimakariri River for irrigation purposes. Ngai Tahu applied to the Environment Court for a declaration that its application was entitled to priority over that of CPWT as it was notifiable first. The Environment Court granted a declaration to this effect and the High Court upheld this declaration on appeal. The High Court held in Synlait that if an application is put on hold by a Council subject to the filing of associated applications under section 91 of the RMA, the "ready for notification" test cannot be passed until all associated applications have been filed by both parties to the application.
The questions for the Court of Appeal were:
a) whether the determination of priority between competing applications for resource consent should be determined by which one is first ready for notification; and
b) if the answer is yes, whether a decision under section 91 of the Resource Management Act 1991 not to proceed with notification meant that the application is not ready for notification until the additional resource consents are made.
The decision of the majority: Justices Baragwanath and Hammond
Baragwanath J concluded that there is a public interest in the law not frustrating a development undergoing statutory processes. Where a substantial amount (or potentially the whole) of the resource is being sought in an application, there should be no risk of a major development being "gazumped" or significantly interfered with by later, smaller, simpler, inconsistent proposals. Baragwanath J held that the "inclusive and democratic procedure" of the RMA accommodated priority accruing to the first applicant in time (in this case CWPT). Potential competitors can express their point of view before the decision maker by way of submission following the notification of the application that has priority (an observation which does not account for situations where an application is processed on non-notified or limited notification basis).
Introducing an entirely novel consideration to the question of priority, Baragwanath J noted that the result may have been different if Ngai Tahu had not been aware of the CPWT application. The Ngai Tahu collective had two members on the board of CPWT and if through that membership or otherwise Ngai Tahu had knowledge of the CPWT application, His Honour concluded that its application should not receive priority.
The majority decided that CPWT had priority. The reasoning for this decision was that there was no undue delay on the part of CPWT, deferral under section 91 of the RMA does not cause an applicant to lose priority, and CPWT's application was not so insubstantial or insufficient so as to be regarded as a nullity. The majority refused to expressly overrule Geotherm which had held that an application gains priority when it is "ready for notification", but the inference that can be drawn from the conclusion of the majority is that an application gains priority at the point it is filed, provided that it is not insubstantial or incomplete in terms of section 88(3) of the RMA. This test is a higher standard than that which may trigger a request for further information, so in terms of the majority's decision, it appears that an application may gain priority even if further information is required before the application is ready for notification. Accordingly, priority appears to now be determined at the point an application is filed regardless of whether the associated applications are required to consider the application, or further information is required by the consent authority.
The essential finding of the majority was recorded at paragraph 80 as follows:
"An application for resource consent to take water which is not disqualified by unreasonable delay and which, although recognising the need for subsequent use applications could not as filed be rejected as a nullity, takes priority over an application which relates to the same resource and which, although complete in itself, was filed later by a party with knowledge of the earlier application."
The dissent of Justice Robertson
While Robertson J expressed dissatisfaction that Parliament had not legislated to make the question of priority clear, His Honour adopted a similar approach to the Environment Court and High Court and found that until all information was available and all necessary applications made, the matter was, in law, not ready for notification and priority could not be attained.
His conclusions were set out at paragraph 137 as follows:
"Priority is determined by the application which is first ready for notification. The second question is also answered in the affirmative as I find that, when there was a decision to defer notification under section 91, the application was not ready for notification."
The implications of the decision
Priority is still determined on the first come, first served basis that was developed in Fleetwing. However, it appears that an application now gains priority when it is filed, provided it cannot be regarded as insubstantial or incomplete under section 88(3) of the RMA. This development could pose problems for Councils as they may could now receive barely adequate "placeholder" applications that are solely intended to gain economic or competitive advantage through priority to the resource. This may require Councils to consider more rigorous application of section 88(3) of the RMA, which allows Councils to return inadequate applications (albeit within 5 working days of receipt), in order to discourage such "placeholder" applications.
Another notable feature of the case is the introduction of a knowledge aspect in that, if an applicant has knowledge of a prior application for the same resource, they cannot gain priority, at least in a water take situation.
As the majority expressly refused to overrule the Geotherm decision which states that priority is established when an application is "ready for notification", it remains to be seen if this case is applicable to situations other than water take applications. The key effect of the decision is that one obtains a place in the queue for the use of a certain resource, in this case water, by filing the take application provided it is adequate in terms of section 88(3) even if there is no associated use application. It also remains to be seen whether the previous law will remain intact for subsequent applicants who have no knowledge of a previous application.
If the state of an applicant's knowledge concerning a competing (and prior) application is a material factor, this would place an onus on a consent authority to somehow assess the applicant's state of knowledge. The level of investigation that would be required to be undertaken by the Council is far from clear and there is the potential for consent processing costs to increase to cover the costs of councils undertaking such investigations. Alternatively, it may be an option for a local authority to inform prospective applicants of prior applications that are competing for the same resource in order to avoid later difficulties in determining priority.
With respect to the decision of the majority, the minority decision of Robertson J is more practical for consent authorities to apply and avoids applicants attaining priority on the basis of incomplete applications. Also, the minority decision is more consistent with an integrated resource management approach and with case law such as AFFCO New Zealand Ltd v Far North District Court (No 2)6 emphasising the need for all necessary and related applications to be filed so that all of the effects of a proposal can be considered. Leave to appeal the decision has been sought and, given the significance of the issue, is likely to be granted. As it appears unlikely that legislative amendment to clarify this issue will be pursued this year, it may be that we will need to rely on a clear ruling from the Supreme Court to clear up the confusion that has been created around the question of priority.
1 Unison Networks Limited v Hawkes Bay Wind Farms [2007] NZRMA340
2 Fleetwing Farms v Marlborough District Council & Aqua King Limited [1997] 3 NZLR 257
3 Geotherm Group Ltd v Waikato District Council [2004] NZRMA 1
4 Ngai Tahu Property Limited (re an application) C104/06 Judge RJ Bollard; Environment Court, Christchurch 21/08/2006; Central Plains Water Trust v Ngai Tahu Properties Limited (2007) 13 ELRNZ 63
5 Central Plains Water Trust Limited v Synlait Investments Limited [2007] NZRMA 383
6 [2004] NZRMA 224
This newsletter is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.
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