Environmental / Resource Management
THE WHANGAREI DISTRICT COUNCIL V. DAISLEY DECISION: A CAUTIONARY TALE FOR COUNCILS
Introduction
After a lengthy legal battle, the Whangarei District Council (the Council) has successfully overturned most of the damages it was ordered to pay to Mr Daisley, a landowner who was forced to sell his property following years of misconceived enforcement action. The Council had incorrectly believed that a quarry on his property lacked resource consent, despite a consent having been issued in 1988. The consent was not identified by council officers because it had been archived, contrary to the Council’s obligation under s.35 of the RMA to make resource consents that are in effect in its district reasonably available.
Throughout this lengthy litigation, the Courts have considered complex issues such as Council’s statutory duties to maintain their records, misfeasance in public office, and technical issues surrounding the barring of claims under the Limitation Act 1950, including the meaning of fraudulent concealment.
While the Supreme Court’s decision gives Councils some comfort — as the bar for proving fraudulent concealment was set high — the case is a reminder that Councils could face liability for failing to maintain their records, or for failing to undertake due diligence before taking enforcement action.
Summary of Key Events
Mr Daisley purchased land containing a quarry in December 2004. The Council issued abatement notices over several years, claiming the quarrying was unconsented. Mr Daisley maintained it had operated legally for decades. During this time, Council officers visited the site as part of their enforcement actions. In 2006, after pressure from the Council in the form of an enforcement application, he applied for a new consent. The application was publicly notified, went to a hearing, and was ultimately refused. After this, the Council officers continued to issue abatement notices.
In July 2009, Mr Daisley’s solicitor requested to view historical site records and discovered a 1988 land use consent (LUC) that had authorised quarrying all along. By then, Mr Daisley had been forced by his bank to sell the property at a significant loss. In 2015, he sued the Council for negligence and misfeasance – after erroneously being advised by his solicitor that he had no claim against the Council (which, he later argued, was the reason for the delay in proceedings).
The High Court finds that the Council was negligent and fraudulent
The High Court found the Council had breached its duty of care and was guilty of misfeasance. It rejected the Council’s argument that Mr Daisley claim was time barred by the 6-year limitation period under the Limitation Act 1950 on two grounds:
- The Council’s negligent conduct had continued from September 2006 through to September 2009 (so, was not time-barred by a ‘single event’); and
- The Council had committed equitable fraud by granting the LUC in 1988, holding a record of it, and failing to make that information reasonably available as required by their statutory duties. Mr Daisley was awarded approximately $4.25 million in damages.
The Council acknowledged it had been negligent, but not fraudulent. It argued that even if it had acted illegally, Mr Daisley's claims were time-barred by the Limitation Act 1950, which limits tort claims like negligence to 6 years from when a cause of action accrues. The Council stated the date of accrual was 15 September 2006, which is when it required Mr Daisley's consent application to be publicly notified and then opposed it on the incorrect basis that no consent existed. Therefore, the Council argued, Mr. Daisley was out of time when he brought his claim in 2015.
Mr Daisley disagreed. He argued that the s 28(b) “fraudulent concealment” exemption applied. That section provides an exemption to the limitation on claims and states that in cases of “fraudulent concealment”, the clock runs from when a “fraud” is discovered. Daisley argued that the Council had been fraudulent by concealing the LUC, and as the discovery of the LUC only came to light in 2009, his 2015 proceedings were therefore within the 6-year window.
The High Court agreed with Mr Daisley and awarded him approximately $4.25 million in damages.
The decision is overturned by the Court of Appeal
The Court of Appeal overturned the misfeasance finding against Council but upheld a reduced damages award for negligence. It found there had been fraudulent concealment — though for different reasons to the High Court. The Court agreed that deliberate concealment of a fact or circumstance will amount to fraud - but it was not necessary to always prove dishonesty. Instead, the Court clarified, “it is enough that their conduct was unconscionable”. The Court found that Council officers had received credible information, including on-site visits, which suggested that a consent or existing use rights might exist – yet chose to press ahead with enforcement against Mr. Daisley regardless.
The Supreme Court finds in favour of the Council
The Supreme Court largely granted the Council’s appeal by majority (with Winkelmann CJ dissenting). The majority found there was no fraudulent concealment and that Mr. Daisley’s claims were time barred. In their view, fraudulent concealment only applies where:
- The defendant either knew the relevant facts and chose not to disclose them, or
- Deliberately avoided finding out facts it strongly suspected existed (i.e., wilful blindness).
Negligence — even if unconscionable — does not qualify. The majority found that because the Council genuinely did not know about the LUC, its conduct was negligent, not fraudulent.
The majority clarified that when limiting negligence claims, the cause of action accrues at the “first manifestation” of damage, and that any subsequent damage does not restart the clock. The majority found that the singular event which caused damage in this case was the September 2006 decision by Council to notify the consent. On that basis, Mr. Daisley’s claims were time-barred.
