Public Works Act Disturbance Claims and Reasonable Costs

Works Act
Act Claims & Reasonable
CostWendy O’Neill Michael Wood
Wendy O’Neill
Michael Wood
Section 66
Disturbance Claims
• We will be looking at the issues regarding claims for
disturbance, and specifically legal costs, under section
66(1) of the Act:
“…the owner of any land taken or acquired under this Act for a
public work shall be entitled to recover compensation for any
disturbance to his land and in particular to recover, where
(ii) The reasonable valuation and legal fees or costs incurred in
respect of the land taken or acquired”
Section 66 Cost
– A more detailed analysis of the relevant law
– New Zealand and overseas case law
– The difficulties that can arise in dealing with such
– The ways in which those difficulties can be addressed
in practice
Section 66 Cost
• The reimbursement of landowners costs historically have
not been significant, however, over the last 5 years
owners’ negotiators/advocates have surfaced
• Acquisitions have become more complicated
• Solicitors have taken a more active role in negotiations
whereas previously landowners had largely carried them
out themselves
• Some advocates have claimed that their services will be
cost neutral
Section 66 cost claims
• The question of what is “reasonable” in any particular
case is often not easy to determine
• There is very little guidance in NZ case law
• The acquiring authority can be placed in the situation of
having to determine questions of reasonableness
• For Crown acquisitions a LINZ accredited agent makes a
recommendation so that the decision is taken
independently of the Crown entity
• For Territorial Authorities that decision must be made
Legal Issues
• The meaning of “disturbance to land”
• The meaning of “reasonable…legal fees or costs
incurred in respect of the land taken or acquired”
• Recovery of legal costs (as an element of disturbance)
was formerly considered as part of the entitlement to full
• Now treated as a separate claim in section 66 PWA
Karl Marx
Reasonable: definitions
• Oxford Dictionary definition includes
– fair
– moderate
– appropriate
– average
• Merriam-Webster definition includes
– in accordance with reason
– not extreme or excessive
– moderate
– inexpensive
Reasonable: definitions
• Black’s Law Dictionary:
Fair, proper, just, moderate, suitable under the
circumstances. Fit and proper to the end in view.
Having the faculty of reason; rational; governed by
reason; under the influence of reason; agreeable to
reason. Not immoderate or excessive, being
synonymous with rational, honest, equitable, fair,
suitable, moderate, tolerable
Disturbance: English law
• In England the statute does not deal with disturbance
claims separately as the PWA does
• Disturbance payments are made to owners to
compensate for any loss that flows from the taking of the
land and is not too remote and is the natural and
reasonable consequence of the taking
• The cases therefore do not focus on the question of what
is reasonable
• The cases are however instructive in understanding
disturbance generally
Disturbance : English
case law
• Horn v Sunderland Corporation (1941)
– The dispossessed owner is entitled “to be put so far as money
can do it, in the same position as if his land had not been taken
from him. In other words, he gains the right to receive a money
payment not less than the loss imposed on him in the public
interest, but on the other hand not greater”
• Harvey v Crawley Development Corporation (1957)
– “any loss sustained by the dispossessed owner…which flows
from a compulsory acquisition may properly be regarded as the
subject of compensation for disturbance, provided first that it is
not too remote and , second, that it is the natural and reasonable
consequence of the dispossession of the owner”
Disturbance : English
case law
• Director of Buildings and Lands v Shun Fung Ironworks
(1995) (HKPC)
• Three conditions must be satisfied
(a) “There must be a causal connection between the resumption or
acquisition and the loss in question”
(b) “The adverse consequences to a claimant whose land is taken
may extend outwards and onwards a very long way, but
fairness does not require that the acquiring authority shall be
responsible ad infinitum. …The law describes losses which are
irrecoverable as too remote”
Disturbance : English
case law
• Shun Fung (continued)
(c) “The law expects those who claim recompense to behave
reasonably. …if a reasonable person in the position of the
claimant would not have incurred, or would not incur, the
expenditure being claimed, fairness does not require that the
authority should be responsible for the expenditure”
• This is commonly referred to as the duty on the part of
the claimant to mitigate his or her loss
• The onus is on the acquiring authority to prove that the
landowner has acted unreasonably or has failed to
mitigate his or her loss, and the standard of what is
“reasonable” should not be set too high
Disturbance : Canadian
case law
• Canadian case law in cases of disturbance is of interest
where the statutory provisions refer to “reasonable” costs
• These cases are not authoritative in New Zealand but
may be persuasive: there are few NZ decisions in this
These are examples only
Disturbance: Canadian
case law
• Amdue Holdings Ltd v City of Calgary (1980) suggested
the following general principles:
– full costs of and incidental to an application properly
made…should be paid by the expropriating authority. The costs
should however reflect such reasonable, economical and
straightforward preparation and presentation as is necessary to
properly present the owner’s case to the Board.
– The owner should not be allowed the cost of unnecessary work
or other expenses or costs incurred through over-caution or
– The owner should not be allowed costs which are the result of
misconduct, omission or neglect by the owner.
Disturbance : Canadian
case law
• Nygard v Corporation of District of Surrey (1989)
– Considered the meaning of “reasonable”, and referred to
definition in Black’s Law Dictionary
– “The quantum of costs, and particularly of fees, must be
reasonable, having regard to amount of the award, the number
and complexity of the issues involved, the time expended by the
claimants’ solicitors and expert advisers, the degree of skill and
competence demonstrated by them and the degree of success
realized in the proceedings”
– Reduced legal costs by 20%
Disturbance : Canadian
case law
• Examples of factors that may be relevant, as discussed
in Nygard:
Inexperience of counsel meant time was needed to research the
relevant law
Unnecessary duplication of effort between counsel and junior
Over-caution or over-preparation
Doing necessary work in a time-consuming manner
Work carried out at an inappropriate rate
The solicitors may be entitled to be paid for some of these items,
but by their client not by the authority
Disturbance : NZ case
• Gold Star Insurance Company ltd v Minister for Land
Information (2013)
– Adopted the principles in Shun Fung decision as to three conditions
for disturbance claims
– Must be causally connected by the taking
– Must not be too remote
– Must not be a loss which a reasonable person would have
– The word “disturbance”, while not defined in the Act, should be given
its natural meaning in the light of its context among other provisions,
in particular the examples listed in s 66(1)
– Those examples are not exclusive but provide a basis for
interpretation, such that any claim should be analogous to the
NZ case law
• Stringer v Minister of Lands (2014)
• HC decision on costs, appeal from LVT
• LVT considered the amount of the claim unreasonably
high having regard to the amount of the compensation
actually awarded (almost 3 times the figure awarded,
although more than Crown’s offer)
• LVT had awarded costs of $20,000 in total
• HC awarded full pre-LVT s66 costs claim of $40,000
• But also said there were “special reasons” so claimant
not entitled to full recovery of costs under s90
• Awarded interest on costs
Time of
• Historically, reimbursement tended to occurred at the
end of the acquisition process
• Now it often occurs during the negotiations as not all
landowners are in a position to pay the costs of their
valuer, solicitor or negotiator until the final settlement.
• It is now common practice for both the Crown and
territorial authorities to reimburse as the negotiation
progresses to reduce the financial burden on
landowners, especially if negotiations are continuing but
Types of Costs
The most common fees are legal and valuation costs.
Other types of fees are:
• Negotiation consultants
• Accountants
• Engineers and technical experts: planning, geotechnical,
noise, traffic modelling
Landowners cannot charge for their own personal
• The complexity and difficulty or novelty of the issues
• The value of the property interests being acquired
• The level of understanding or sophistication of the
• Specific issues such as the age of the owner and
• Possibly, the extent to which the owner engages in
negotiations, or whether a purely adversarial approach is
• It should not be influenced by factors such as the
knowledge, skill or experience of the legal advisor
• It is to be expected that legal advisors should have the
necessary knowledge, skill and experience to undertake
the work
• However in practice the level of claims is often
influenced by such factors
Obligation to Minimise
Landowners responsibilities: s71(4) PWA
• The courts have ruled that there is an obligation on landowners to take all
reasonable steps to ensure that their losses are kept to a minimum. This
is expressed as a duty to mitigate losses, which also applies to damages
in civil claims
• It is important that they keep records of all communications, expenses
incurred and losses sustained
• They can only receive compensation for expenses and losses incurred as
a direct result of the acquisition of their land
If their losses increase as a result of their own actions (or lack of them) they
will not received compensation
Obligation to Minimise
• Always explain the project, the area to be acquired, who the contact
for the TA will be.
• Valuations – inform them of their right to obtain their own valuation,
ensuring valuer is aware of PWA requirements and how costs will
be dealt with.
• Make it clear that only reasonable fees will be reimbursed.
• Explain the process around recovery of costs, when they will be
paid, what documentation is required and request they obtain your
prior approval to engaging additional consultants beyond solicitors
and valuers.
• Clear communication on costs is essential.
Avoiding Pitfalls
• Effective upfront communication from the outset of
negotiations is essential to mitigate difficulties with cost
claims which may result from a lack of understanding by
landowners of their rights and requirements
• The initial contact letter must be carefully worded to ensure
landowners are fully aware of their rights and
responsibilities relating to negotiations under the Act and
there is clarity around the fee reimbursement requirements
and process
• They should be made aware that the obligation is not to
indemnify for all costs incurred, but only reasonable costs
Costs Claim Process
• Have a consistent process for dealing with costs claims,
dealing with:
– How the costs claims should be presented
– What information should be provided with each claim
– Who will review the claims
• Make sure communications on costs are consistent and
• Explain that if they are not satisfied with decision on the
costs claim, they may have the matter determined by the
Avoiding Pitfalls
• Keep details of all relevant previous claims and spread
sheet them to provide baseline data for future claims
• This will provide you with an on-going overview of costs
incurred for different types and values of acquisitions
• You can derive important information from this, for example
the average costs to apply to any future claims for
• In a litigation situation this information becomes invaluable
as strong evidence of “standard” costs involved in similar
types of acquisitions
Why This Approach?
• To ensure landowners are fully aware of rights and
• To allow landowner fee claims to be agreed if possible
and dealt with expeditiously.
• To minimise disputes and rejection of claims
• To pre-empt the arguments that might be raised at the
Land Valuation Tribunal.
End Result
• Uniformity and standardisation of practice by both Crown
and Local Authorities.
• Local Authorities can claim use of “ Best Practice” in
assessing and dealing with costs claims.

similar documents