IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE	
CIV-2018-454-47
[2018] NZHC 2985	

UNDER	Section 290 of the Companies Act 1993	
IN THE MATTER	of an application to set aside statutory demand issued pursuant to s 289 of the Companies Act 1993	
BETWEEN	PALMERSTON NORTH INDUSTRAL & RESIDENTIAL DEVELOPMENTS
LIMITED
Applicant	
AND	PALMERSTON NORTH CITY COUNCIL
Respondent	

Hearing:	1 November 2018	
Appearances:	D Sheppard for the Applicant N J Jessen for the Respondent	
Judgment:	19 November 2018	

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]	On or about 14 May 2018 the respondent, the Palmerston North City Council, served a statutory demand pursuant to s 289 of the Companies Act 1993 on the applicant, Palmerston North Industrial & Residential Developments Ltd. The demand was for payment of $415,493.45 in respect of a development contribution levy for which the Council says the applicant is liable. The applicant denies any liability and applies pursuant to s 290 of the Companies Act for an order setting the demand aside.

[2]	The important aspects of the background can be summarised relatively briefly:

PALMERSTON NORTH INDUSTRAL & RESIDENTIAL DEVELOPMENTS LIMITED v PALMERSTON NORTH CITY COUNCIL [2018] NZHC 2985 [19 November 2018]

(a)	The Council is the territorial authority with responsibility for the administration of the Local Government Act 2002 within its geographical jurisdiction. Part 8, sub-pt 5 of the Local Government Act empowers territorial authorities to impose development contribution levies on developers effectively to ensure that they contribute to the costs of the increased demands that developments impose on infrastructure. Within pt 8, sub-pt 5 there are different categories of development contribution levies. The calculation of these is not straight forward. But it is unnecessary to go into details as it is not part of the applicant’s case that the Council has erred in the way in which it has calculated levies.

(b)	Mr Brian Green is the founder of what I will refer to the Brian Green group. The Brian Green group consists of a number of interrelated entities. It is a well established Manawatu developer. The applicant is a member. Although it does not appear to have shareholders or directors in common with other members, the applicant is clearly a member of the wider Brian Green group. Mr Green controls it as is evident from correspondence before the Court, and the applicant assumed responsibility for challenging Council determinations made in relation to other members of the group as referred to in more detail below. The other entities to which I refer below and also members of the group.

(c)	In or about November 2014 “Brian Green Property Ltd”1 applied for a land use consent to develop a warehouse and distribution centre on a property owned by Brian Green Properties (Palmerston North) Ltd at 279 Railway Road in Palmerston North. On 21 November 2014, the Council granted a consent subject to the payment of a development contribution levy of $513,507.34.

1	Apparently, there never was a company called Brian Green Property Ltd, although there was once a Brian Green Properties Ltd, which has been struck from the register.

(d)	In December 2014, Brian Green Properties (Palmerston North) Ltd applied for a building consent for the construction of the warehouse and distribution centre at 279 Railway Road. On 31 January 2015, the Council granted a consent subject to the payment of the development contribution levy of $513,507.34 set earlier.

(e)	On 27 February 2015, Brian Green Properties (Palmerston North) transferred 279 Railway Road to the applicant.

(f)	In or around March 2015, the applicant applied for consent to sub-divide 279 Railway Road into two lots. On 26 March 2015, the Council granted a consent subject to payment of a further development contribution levy of $185,685.85 with respect to the new lot. The subdivision consent clarifies that no further levy was imposed in relation to the original lot, as that was already covered by the levy imposed in relation to the land use and building consents.

(g)	On 15 September 2015, Mr Green asked the Council to recalculate the
$513,507.34 development contribution levy. He had apparently realised that, because the applications for a land use and building consent had preceded the application for a subdivisional consent, the development contribution levy that had been imposed for the two former consents was higher than it would have been had the application for a subdivisional consent preceded them. This involved calculating the levy for the original lot containing the warehouse and distribution centre development at the land subdivision rate. The Council was receptive to this request. On 28 September 2015, the Council recalculated the $513,507.34 development contribution levy and arrived at a figure of $445,330.60. The Council advised the applicant of this recalculation, referring to it as “informal”. I am not sure what the expression of informality means, but nothing turns on this.

(h)	The applicant challenged this recalculation. Under the Local Government Act, objections to development contribution levies are

heard by Development Contribution Commissioners.2 The matter was referred to Commissioners.

(i)	In the meantime, the construction of the warehouse and distribution centre proceeded and on 2 February 2016 the Council issued a code compliance certificate.

(j)	On 26 April 2016, the Council issued a land use performance certificate confirming that the land use consent had been implemented.

(k)	On 15 November 2016, the applicant’s challenge to the (recalculated)
$445,330.60 development contribution levy reached a conclusion with the Commissioners reducing the amount of the levy to $415,493.45.

(l)	On 16 February 2017, the applicant sold 279  Railway  Road  to  Brian Green Commercial Properties (PN) Ltd without going ahead with the proposed sub-division.

(m)	As already indicated, on 14 May 2018, the Council served its statutory demand and on 28 May 2018 the applicant commenced this proceeding seeking an order setting it aside.

[3]	The essential submission advanced on the applicant’s behalf by Mr Sheppard is that the applicant is not liable for the $415,493.45 (as it became) development contribution levy, and he advanced three arguments in support of the company’s application to set the demand aside.

[4]	His first submission was that a territorial authority, such as the Council, is not able to recover development contribution levies as debts.

[5]	In relation to this Mr Sheppard referred to s 198 of the Local Government Act which provides that a territorial authority “may” impose development contribution levies. He contrasted this with other legislation where Parliament had, he submitted,

2	Local Government Act 2002, ss 199C–199P.

expressly provided that sums were to be recoverable as debts. He referred, as an example of this, to s 23 of the Construction Contracts Act 2002, which expressly says that payment claims pursuant to that Act may be recovered “as a debt due to the payee”. He also referred to s 208 of the Local Government Act, which sets out the actions that a territorial authority may take for non-payment, including for example withholding the grant of a code compliance certificate.

[6]	The argument that development contribution levies lawfully imposed by a territorial authority on a developer cannot be recovered as a debt is plainly wrong. For a start, Mr Sheppard’s submissions overlook s 252 of the Local Government Act, which expressly says “money payable by a person to the local authority as a development contribution, is recoverable by the local authority as a debt”.

[7]	Nor is there anything in the points Mr Sheppard sought to make related to the other provisions of the Act. Section 198 says that a territorial local authority “may require” a development contribution levy. This simply confirms that the territorial authority is not compelled to do so. It says nothing about the character of any impost and whether or not it is recoverable as a debt. As I read it, s 208 is intended simply to make it clear that a territorial authority is entitled to withhold such things as code compliance certificates pending the payment of development contribution levies. It does not purport to be an exhaustive list of a territorial authority’s rights and certainly does not imply that development contribution levies are not recoverable as debts. It is, in short, irrelevant.

[8]	I reject the submission made on the applicant’s behalf that territorial authorities are not entitled to recover lawfully imposed development contribution levies as debts.

[9]	In this context, Mr Sheppard also raised the issue of when such levies become payable. It may well be arguable that they are not payable as a debt upon their imposition, and only if and when the development to which they relate proceeds. As he submits, that seems to be the implication that arises out of s 204 of the Local Government Act. However, the issue does not arise in this case because, for reasons to which I will come, the relevant development contribution levy relates, as I see it, to

the development that involved the building of the warehouse and distribution centre and that has been completed.

[10]	The second submission made on behalf of the applicant by Mr Sheppard was that the particular development contribution levy that is the subject matter of the Council’s statutory demand related to the sub-divisional consent, which has not gone ahead.

[11]	Essentially this contention is based on the form of the levy rather than its substance. The calculation sheet issued by the Council contains a question whether the development is a “Subdivision” or a “Building Consent/Service Connection”. Presumably because the Council agreed to recalculate on the subdivision rate, this question is answered “SUB” on the calculation sheet.

[12]	It is at this point that the history of the dealings between the parties becomes important, and, in my view, dispositive. It will be recalled that the Brian Green group applied first for a land use consent and then for a building consent. Only later did it apply for a subdivisional consent. After all three had been granted, Mr Green asked the Council to reconsider the matter as if it were all a subdivisional consent. The evidence is that the Council recalculated the levy on the basis it would have done had the subdivisional consent been applied for first. The outcome was favourable from the perspective of the Brian Green group because whilst the amount for the subdivisional consent remained unchanged at $185,685.85, the amount for the land use and building consents was reduced. This reduced figure was then challenged through the processes available to the Brian Green group under the Local Government Act and the amount was further reduced by the Commissioners to $415,493.45.

[13]	Following the process through, it is entirely clear that although the calculation sheet records on its face that the amount was for a subdivisional consent, in fact the development upon which the development contribution levy was imposed was the construction of the warehouse and distribution centre arising out of the land use and building consents.

[14]	The form indicated a subdivisional consent precisely because Mr Green asked the Council to reconsider matters on a different basis that would be more favourable for the Brian Green group. It is perhaps clearer to think about the development contributions in relation to the developments they were imposed for. It is apparent from the definition of “development” in s 197(1) of the Local Government Act that the consent (be it for subdivision or land use) is related to the demand for infrastructure that it generates. So while the new lot never came into existence and so never generated a demand for infrastructure, the warehouse and distribution centre on the original (and still only) lot did come into existence and is generating a demand for infrastructure. Accordingly, the $185,685.85 is not payable, while the $415,493.45 is.

[15]	Mr Sheppard’s final submission on behalf of the applicant was that the Council had issued its statutory demand against the incorrect entity because it was not the company that originally applied for the land use and building consents.

[16]	Again, this contention seeks to elevate form over substance.

[17]	The evidence demonstrates convincingly that Mr Green has effective control of all of the entities within the Brian Green group and there is a considerable amount of correspondence in which he engages with the Council on behalf of the group without identifying which particular entity he is speaking for.

[18]	The Court must of course acknowledge that there are different corporate entities involved. But, in my view, it would be an injustice if the Council and the Manawatu ratepayers were precluded from recovering an otherwise legitimately payable development contribution levy because of steps taken wholly within the Brian Green group.

[19]	In the end, it is unnecessary to unravel every minute step taken in relation to this matter in order to resolve this issue. In my view, the fact that it was the applicant that raised the formal objection pursuant to the statutory process for challenging the

levy, and prosecuted that objection in its own name, creates an estoppel preventing it from now denying that it is the party responsible for paying the levy.3

[20]	On those bases, I dismiss the application to set aside the statutory demand.

[21]	The parties did not address me on costs. I reserve them. I expect that counsel will be able to resolve costs without further reference to the Court. If it assists, I can indicate that, my preliminary view is that the applicant is entitled to its costs on a 2B basis but I see no obvious call for increased or reduced costs in this case. If counsel are unable to resolve costs then they may refer the matter back to me by memorandum for determination on the papers.

Associate Judge Johnston

Solicitors:
Fitzherbert Rowe, Palmerston North for the applicant Cooper Rapley, Palmerston North for the respondent

3	Earthquake and War Damage Commission v Waitaki International Ltd (1992) 7 ANZ Insurances Cases 77, 657.