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Compulsory acquisition notices and unregistered interests

August 25, 2015

Contacts

Partners Michael Wood, Nick Wilson
Special Counsel Duncan Laing
Consultants Phillip Merfield
Senior Associates Donna Hurley

“A person with an unregistered interest in land is not entitled by s23 PWA to a Notice of Intention.”

The recent High Court summary judgment in The Minister for Canterbury Earthquake Recovery v Ace Developments Limited [2015] NZHC 1027, while specifically relating to compulsory acquisition under the Canterbury Earthquake Recovery Act 2011 (CER Act), provides useful guidance on one key aspect of the compulsory acquisition process under the Public Works Act 1981 (PWA). In particular, it would appear that it is not a requirement to serve compulsory acquisition notices on persons who have only an unregistered interest in the land.

Facts

This case concerned a property in central Christchurch that the Crown wished to take compulsorily under the CER Act. The property was being used as a car sales yard and had been earmarked to be part of the planned Metro Sports Facility under the Christchurch Central Recovery Plan.

The freehold interest in the property was owned by Ace Developments Limited (Ace Developments). Ace Developments leased the property to Orix New Zealand Limited (Orix). The Crown negotiated settlement with Orix which required Orix to vacate the property once the property was vested in the Crown. Under the terms of the lease Orix had granted back a licence to Ace Developments to occupy two sheds at the rear of the property which it was permitted to assign. Under a further deed produced in evidence Ace Developments had purportedly leased the rear sheds to Ace Sales Limited (Ace Sales), a licensed motor vehicle dealer (Ace Developments and Ace Sales shared a common sole director).

The Crown served a “notice of intention to take land” prescribed by the CER Act on Ace Developments and followed the necessary formalities prescribed by that Act in relation to that notice, including public notification and registration against the title. Negotiations to acquire the land from Ace Developments by agreement were unsuccessful. Finally the Governor-General declared the property to be taken in the name of the Crown pursuant to s55(4) the CER Act fourteen days following the publication of the Proclamation in the New Zealand Gazette. No notices had been served on Orix or Ace Sales.

Nature of proceedings

The Minister sought, by summary judgment, an order that Ace Developments and Ace Sales give vacant possession of the property to the Crown.

Ace Developments and Ace Sales contended that they were entitled to remain in occupation of the property, and were not obliged to vacate it, on the grounds that the Minister had failed to follow the statutory process for compulsory acquisition correctly. Of particular interest for the purpose of this article was the contention of Ace Sales that the Minister should be compelled to give Ace Sales a notice of intention to take the property under the CER Act and follow the other steps required under the CER Act prior to Ace Sales being required to give vacant possession.

The Minister asserted that the property had been vested absolutely in the Crown, so that the Crown was entitled to vacant possession.

Service of notice of intention

Section 54(2) of the CER Act states:

The Minister must serve on the owner of, and persons with a registered interest in, the land a notice of intention to take the land in the form set out in Schedule 1, unless it is impracticable to do so (emphasis added) Ace Sales asserted that it should have been served with a notice of intention to take the land by virtue of the deed of lease it had from Ace Developments. It accepted that it did not come within the concept of “persons with a registered interest in the land”. However it argued that the lease brought it within the class of an “owner of the land” in s54(2) of the CER Act, due to the special definition in s4 of the CER Act “land includes an interest in land”. Its argument was that the CER Act required a notice of intention to be served on any owner of any unregistered interest in the property where the Crown was aware of such interest.

The Judge recognised that the wording of s54(2) the CER Act is derived directly from s 23(1) of the PWA which relates to the serving of notice of intention to take land under the PWA. He therefore examined the interpretation of the term “owner” in s23(1) on the basis that it should be interpreted in the same way in both provisions.

In s23(1) of the PWA the phrase “owners of the land” or “owner of the land” appears twice (subsections 23(1)(c) and 23(1)(a)). The Court
found that the clear focus is “on the ownership of land in its most usual sense, and not upon the ownership of other interests in land”. It drew a distinction between the definition of “owner” in Part 2 of the PWA (which deals with compulsory acquisition, and includes s23) which the Court found to have the limited meaning of “registered proprietor”, and the extended definition of “owner” in Part 5 of the PWA (which deals with compensation). Applying common law principles of interpretation, the Judge said:

Parliament’s apparently deliberate qualification [in s23(1)] of the expression “persons with an interest in the land” by the addition of the word “registered” strongly implies exclusion of unregistered interests. And the implied exclusion appears to make sense in terms of the scheme of the Act. Those with unregistered interests who wish to pursue compensation upon the taking of land will still have their rights to pursue
compensation by reason of the extended definition of “owner”. But the Crown in the meantime will have been able to proceed with the taking of the land under Part 2 of the Act. There will have been direct notification to the registered proprietor and others with registered interests coupled with public notification (thereby protecting the compensation interests of those with unregistered interests in the land).

and concluded that:

a person with an unregistered interest in land is not entitled by s23 PWA to a Notice of Intention.

Obtaining vacant possession

Under s57 of the CER Act the Minister has the right to seek an order from the High Court directing the owner or occupier to give vacant possession if the owner or occupier fails to give vacant possession 1 month after the publication of the Proclamation in the Gazette. There are also provisions in the PWA for the Minister or local authority to apply for vacant possession after publication of the Proclamation.

Decision

The Minister was not required to serve a notice of intention to take land on a person who had only an unregistered interest in the land. Ace Sales’ interest, whether characterised as a licence or a lease, did not make it an “owner” and therefore the Minister was not required to serve a notice of intention on Ace Sales in terms of s54(2) of the CER Act.

The Crown was entitled to possession of land once the taking of land by Proclamation was complete whether or not compensation had been finalised or paid. The land was vested in the Minister fourteen days after the publication of the Proclamation, at which point the land was freed from all interests of whatever kind. All that was left was a personal claim of the owner and /or occupier for compensation, which was unaffected by the exercise of the Minister’s power to take the land.

The Minister was entitled to orders for possession against both the owner and occupier.

What does this mean for the interpretation of the PWA?

It should be noted that the compulsory acquisition process in the CER Act is truncated by comparison with the process in the PWA, and in particular the PWA (unlike the CER Act) requires two notices to be served, being both a “notice of desire” under s 18 and a “notice of intention” under s23. Nevertheless, like s23, s18 also refers to the “owner” being invited to sell the land and requires notice to be served on “every person having a registered interest in the land”. It therefore appears likely that the terms would be
treated as having the same meaning in both s18 and s23.

Therefore, following this authority it would appear it is not a requirement, in order to secure possession, that the Crown or local authorities serve notice under either s18 or s23 of the PWA on a party that has only an unregistered interest in the land.

This does not seem to preclude the ability to use the compulsory acquisition process to acquire an unregistered land interest should that be desired, as appears to be allowed for by s28(b) of the PWA.