The Court of Appeal has upheld a decision by Auckland’s water and wastewater services provider, Watercare, to refuse to accept the vesting of a water main that did not comply with its code of practice. It also confirmed that a water services provider’s power to refuse to accept infrastructure assets does not depend on bylaws made under the Local Government Act 2002 (LGA), despite such bylaws often referring to infrastructure to vest needing to comply with codes of practice or other standards.

In a decision released last week, Thirty Eight Moffat Limited v Auckland Council and Watercare Services Limited, the Court of Appeal dismissed an appeal by Thirty Eight Moffat Limited against a High Court decision which had upheld Watercare’s right to refuse the vesting of the water main, and dismissed various challenges to the validity of Auckland Council’s Water Supply and Wastewater Network Bylaw 2015 (Bylaw).

Padraig McNamara and Chris Ryan, who represented Auckland Council and Watercare in the High Court and Court of Appeal, summarise the decision.

Thirty Eight Moffat Limited, a property developer, had carried out a 22 lot residential subdivision in Red Beach, in which the lots were served by a jointly owned access lot (private lane) rather than a legal road. Water supply to those lots was via a newly constructed main in the private lane, which joined Watercare’s existing main in the road adjacent to the subdivision. The developer, through the engineering plan approval (EPA) process, sought that Watercare accept the water main in the private lane as part of the public network. This was despite Watercare’s 2015 Code of Practice for Land Development (Code of Practice) stating that water mains located in private roads would not be accepted as public assets, although the Code of Practice also contained a general dispensation power. EPA for the water main was granted, subject to Watercare and Auckland Council clarifying that the water main in the private lane would not vest in the council and then Watercare, and therefore remain a private asset. That decision was not disputed at the time, and the developer proceeded to construct the water main, before later challenging the position that it was to be a private rather than public asset.

Watercare’s position in its Code of Practice reflected difficulties it had experienced in accessing and maintaining water mains located in private land, even where it had been granted an easement allowing access to the water main.

Rather than challenging the EPA decision directly through judicial review proceedings, the developer brought proceedings under the Declaratory Judgments Act claiming that the Bylaw, which it claimed underpinned Watercare's decision to refuse vesting of the water main, was invalid. The High Court and the Court of Appeal both held that the claim was misconceived: Watercare’s decision not to accept the water main as a public asset was not made under the Bylaw, despite the Bylaw referencing Watercare’s Code of Practice. It was just a normal decision of a utility operator, which can decide whether or not to accept the vesting of someone else’s property as its own. This meant that even if the Bylaw was invalid, which the Court did not accept, this did not call into question Watercare’ s ability to refuse to accept ownership of the water main. 

In any event, the Court dismissed the various challenges made to the Bylaw, including that it conferred an unreasonable discretion on Watercare contrary to section 13 of the Bylaws Act 1910 by requiring compliance with "relevant codes of practice".

The case confirms that owners of the public water networks (Watercare, or elsewhere in New Zealand, local authorities), despite exercising their powers within a public law framework, are free to decide what assets will vest in them. It is a welcome decision given the scarcity of case law in this important area for local authorities and other water services providers.

For further information about the case, get in touch with one of our experts.

Special thanks to Chris Ryan for his assistance on this work.