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Determining priority of competing applications for resources - International Law Office

International Law Office

Energy & Natural Resources - New Zealand

Determining priority of competing applications for resources

April 12 2010

Background
Central Plains Water Trust v Ngai Tahu Properties Limited
Central Plains Water Trust v Synlait Limited


Background

The date on which a resource consent application obtains priority of hearing over other competing applications has been the topic of much debate and a series of court decisions. The recent Court of Appeal decision in Central Plains Water Trust v Synlait Limited(1)confirms that priority for a full hearing is determined by the date of lodgement of a complete consent application, not the date on which the application is ready for notification, on which an earlier test was based. A number of the issues involved had already been considered in Central Plains Water Trust v Ngai Tahu Properties Limited,(2) which involved a different, competing application.

Priority is a significant issue for both local authorities and applicants for resource consents, as it gives an applicant the right to have its resource consent application heard and determined before another party's application. This may enable an applicant to obtain an economic advantage by acquiring priority use of a resource, including one which is scarce, finite or nearing capacity.

The principles of priority are not statutory, but have been developed by the courts, mostly in cases relating to the allocation of water and coastal space. They 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.(3) Accordingly, all consent authorities must consider the issue of priority when processing resource consent applications. If a consent authority sets down a hearing out of order, this may be subject to judicial review. If it grants a resource consent ahead of an applicant with higher priority, its decision to do so may be overturned on appeal.

Central Plains Water Trust v Ngai Tahu Properties Limited

Facts
In 2001 the predecessors of Central Plains Water Trust made an application - termed a 'water take' application - to Canterbury Regional Council for resource consent to take water from the Waimakariri and Rakaia Rivers. On December 21 2001 the council, applying Section 91 of the Resource Management Act 1991, told Central Plains that the application was ready for notification, but that the notification and hearing would be put on hold until associated applications to use the water were filed. Central Plains did not file applications to use the water until November 2005.

In January 2005 and between June and July of the same year Ngai Tahu Properties Limited applied for resource consents 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 Central Plains, as it was ready for notification in advance of Central Plains' application. The court granted a declaration to this effect and the High Court upheld the declaration on appeal.

There were two questions for the Court of Appeal. Should priority between competing applications for resource consent be determined according to which is first ready for notification? If so, does a decision under Section 91 not to proceed with notification mean that an application is not ready for notification until the additional resource consent applications are made?

Decision
Justice Baragwanath concluded that there is a public interest in the law not frustrating a development that is undergoing statutory processes. Where all or a substantial amount of a resource is being sought in an application, there should be no risk of a major development being disrupted or significantly interfered with by later, smaller, simpler proposals that are inconsistent with it. Baragwanath held that the "inclusive and democratic procedure" of the Resource Management Act accommodated the accrual of priority to the first applicant (ie, Central Plains in this case). Potential competitors can express their point of view before the decision maker in a submission following the notification of the priority application, although this analysis takes no account of situations in which an application is processed on a non-notified or limited notification basis.

Introducing a novel consideration into the question of priority, Baragwanath noted that the result might have been different if Ngai Tahu had been unaware of the Central Plains application. The Ngai Tahu collective had two members on the board of Central Plains and the judge ruled that if Ngai Tahu had knowledge of the Central Plains application - whether as a consequence of that membership or otherwise - its application should not receive priority.

The majority decided that Central Plains had priority, reasoning that:

  • there had been no undue delay on the part of Central Plains;
  • deferral under Section 91 of the Resource Management Act does not cause an applicant to lose priority; and
  • Central Plains' application was not so insubstantial or insufficient as to be regarded as null.

The majority expressly refused to overrule the decision in Geotherm,(4) in which it was held that an application gains priority when it is ready for notification. However, it can be inferred from the majority conclusion that an application gains priority from the point at which it is filed, provided that it is not insubstantial or incomplete in terms of Section 88(3) of the Resource Management Act. This test sets a higher standard than that which may trigger a request for further information; thus, 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 be determined by the point at which an application is filed, regardless of whether the associated applications are required to consider the application or whether the consent authority needs further information.

The majority held that:

"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."

Justice Robertson dissented. He adopted a similar approach to the Environment Court and High Court and found that until all information is available and all necessary applications are made, a matter is not ready for notification and priority cannot be attained.

Central Plains Water Trust v Synlait Limited

In Central Plains Water Trust v Synlait Limited the Court of Appeal provided further clarification of the rules regarding priority.

Facts
Whereas the litigation involving Ngai Tahu Properties Limited involved a competing application for that part of Central Plains' application to take water from the Waimakariri River, this application involved a competing application for water takes from the Rakaia River (the other aspect of Central Plains' water-take application).

There were three questions for the Court of Appeal. The first two were the same questions as were posed to the court in Ngai Tahu. The third question was whether it was correct to disregard the decision of the consent authority to notify the application when determining whether the decision to defer an application under Section 91 of the Resource Management Act was at an end and the application was ready for notification.

Decision
The court unanimously held that:

  • the first complete application received is entitled to be heard first;
  • priority is not lost by a request for further information under Section 92 of the Resource Management Act or a deferral for additional consents under Section 91, unless the applicant breaches Section 21 by unreasonably delaying the provision of the further information or applications for additional resource consents; and
  • in its submission opposing a first application, a later applicant may challenge the merits of the first application and may present what the court termed 'competing concepts', but may not present its own competing application and contend that such application is preferable on its merits.

The court confirmed that priority is gained when a complete application is lodged, rather than when it is ready for notification. It commented that it is more practical to base priority on the date of receipt of an application than on the judgement of a consents officer as to whether further information or further consent applications are required.

The court held that priority may be lost if an applicant unreasonably delays the provision of further information or otherwise unreasonably delays the hearing of its application.

Just before this decision was issued, the High Court in New Zealand Maori Council (Re an Application)(5) struck out an application for declaratory judgment in which the applicant sought to argue that priority should be determined at the consent authority's discretion. The court commented that the proposition was incapable of serious argument and that there were difficulties in satisfactorily articulating the boundaries of the proposed new council discretion in the form of a declaration.

Priority of hearing versus priority of merits
Filing a complete application first only gives a presumption of priority of hearing - it does not mean that the application is more likely to be granted than another application. However, priority of hearing gives a significant advantage in practice because if a first proposal meets the tests of the Resource Management Act, it must be granted even if a later proposal might be more sustainable or efficient.

A later applicant may submit objections to a first application (subject to the same constraints as other submitters). The later applicant may present competing concepts in the hope that the consent authority will decline or adjourn the first application. For example, competing submitters may provide information about their own proposal to put doubt in the consent authority's mind about whether the first application is a responsible use of the resource. However, case law has established that a consent authority cannot embark on a comparison of competing proposals.

Implications and issues
An approach based on the first complete application has the advantage of allowing consent authorities to prioritize the hearing of applications without concerning themselves with the question of when each application is ready for notification. It also means that applicants do not risk losing their place in the priority queue based on the vagaries of a consent authority's requirements for further information or further applications. Section 88(3) still requires an element of judgement and consent authorities must take care when accepting or rejecting an application. However, the Court of Appeal's decision may have traded the uncertainty about requests under Sections 91 and 92 for uncertainty about what amounts to unreasonable delay, as the use of Section 21 raises the question of when a delay becomes unreasonable. If there is competition for the resource in question, a consent authority's view that priority has been lost as a result of unreasonable delay will almost certainly be challenged.

It seems implicit in the court's decision that later applications should not be heard until the first applicant is heard. The difficulty with this approach is that complex applications may delay simpler, more efficient or more urgent applications, which may have equal or greater merit. The court did not comment on the approach that Canterbury Regional Council adopted of hearing and determining the later (and simpler) Ngai Tahu application first, but granting it with conditions that protected the priority of the first applicant (ie, Central Plains) in the event that the latter ultimately obtained consent. It is debatable whether the latest Court of Appeal decision precludes such an approach. Synlait has recently been granted leave to appeal the Court of Appeal decision to the Supreme Court.

For further information on this topic please contact Heather Ash or Philip Milne at Simpson Grierson by telephone (+64 9 358 2222), fax (+64 9 307 0331) or email (heather.ash@simpsongrierson.com or philip.milne@simpsongrierson.com).

Endnotes

(1) December 18 2009; Hammond, Ellen France, and Baragwanath JJ; CA544/2008 and CA588/2008 [2009] NZCA 609.

(2) Court of Appeal, March 19 2008; Hammond, Robertson and Baragwanath JJ; CA 69/07 [2008] NZCA 71.

(3) Unison Networks Limited v Hawkes Bay Wind Farms [2007] NZRMA340.

(4) It was held in Geotherm Group Ltd v Waikato District Council ([2004] NZRMA 1) that priority is attained at the point at which the applicant loses control of the process (ie, when an application can be publicly notified). It was held that the date of receipt of the application is irrelevant and applications lodged later but ready for notification first can gain priority over incomplete applications filed earlier.

(5) High Court, Wellington; August 21 2009; Simon France J; CIV-2009-485-1048.


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