The $4 million filing error

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The $4 million filing error

The $4 million filing error

Tuesday 11 October, 2022

A 34-year-old resource consent, improperly stored and poorly searched for, recently cost Whangarei District Council (WDC) over $4 million in damages. Failure to locate the consent led WDC to issue numerous inaccurate documents to Mr Daisley, the owner of a quarry in Northland. The Court found WDC had breached its duties to store and provide the resource consent reasonably and awarded compensation of $4,089,622 for loss of profits, in addition to a rare award of exemplary damages ($50,000) for misfeasance in a public office.

The quarry, the handshake and no paperwork

In 2004, Mr Daisley bought a property with a gentlemen’s handshake, trusting the vendor that, despite no written evidence, a quarry on the property had mining rights. When he commenced mining operations larger than any previous on the property and neighbours complained, a compliance officer from WDC issued him with an abatement notice. There commenced five years of arguments between Mr Daisley and WDC as to whether the quarry had consent.

In 2009, Mr Daisley’s lawyer found an archived hard copy resource consent from 1988 allowing mining on the property. The Council had issued an incorrect LIM along with several abatement and infringement notices, and engaged in Environment Court proceedings against Mr Daisley, because it did not know of the existence, within its own files, of the resource consent.

For two years following the finding of the consent, WDC continued enforcement proceedings against Mr Daisley on the basis that the consent might have lapsed. WDC also considered applying for limitations to be added to the consent. Negotiations began between WDC and Mr Daisley and continued until, in 2009, he sold the property to his neighbours under pressure of a mortgagee sale.Following the sale, his neighbours made an application for a variation to the consent, using Mr Daisley’s plans for the quarry as the basis for their proposal. One month after the neighbours were granted a variation to the consent, WDC withdrew the enforcement proceedings against Mr Daisley.

Breach of duty?

Justice Toogood had to determine whether WDC’s failure to locate the consent prior to 2009, and its continuing refusal to grant Mr Daisley consent post 2009, constituted a breach of duty between WDC and Mr Daisley, and if so, what kind and amount of damages that breach should be compensated with.

Decision

Justice Toogood held that WDC did breach its duty to Mr Daisley, finding that the consent had not been reasonably stored nor adequately searched for. It was negligent to archive a consent that ran with the land and not make a copy or record available in a council’s current record of the property. Someone who had undertaken a diligent search would have, or should have, located the consent.

(Note that the existence of the consent was perhaps not obvious; it was created by the Whangarei County Council which, with numerous other borough and county councils, was amalgamated into the WDC the year after the consent was issued. The consent was issued under the Town and Country Planning Act, which was later replaced by the RMA. Two different changes in document management systems occurred after the amalgamation).

The bulk of damages awarded to Mr Daisley was to compensate for his loss of profits; he was unable to realise his intended business plan and had to sell the property at a loss.

Mr Daisley was awarded $50,000 in exemplary damages, primarily on the basis of WDC’s behaviour after discovering the consent (see above).

Going forward

Councils may be surprised at the robustness of some of the Judge’s findings and comments concerning WDC’s behaviour. WDC has appealed. Nevertheless, councils should take heed of WDC’s experiences. In particular:

Property documents that run with the land should always be stored in an accessible way; they must be attached to or recorded clearly in the current property file.
Whenever a new internal computer system is implemented, councils must ensure that all documents are transferred over in accessible formats, are readily available and linked to the right subjects. Special care should be taken with older and hard copy documents.
As legislation changes (such as the proposed replacements to the RMA) and new requirements for storing and accessing records are imposed, councils must ensure that internal systems keep up to date with those changes.
Council staff should be made familiar with storage systems in place, particularly if archived boxes off site or locked away are maintained. Time and care should be encouraged when searching for documents, especially in the context of any kind of dispute.

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