High Court determines property arrangement is not a "subdivision"
High Court determines property arrangement is not a "subdivision"
Wednesday 17 May, 2017
Environment Court decision
Clearspan Property Assets Ltd v Spark New Zealand Trading Ltd [2017] NZHC 277 is a recent decision of the High Court which deals with the nexus between the law of property rights and the law regulating the use of land. The High Court overturned the unanimous decision of two Judges of the Environment Court in Spark New Zealand Trading Ltd [2016] NZEnvC 115. The Environment Court held that a property arrangement between Clearspan Property Assets Ltd ("Clearspan") and landowners constitutes a ‘subdivision’ in accordance with section 218 of the Resource Management Act 1991 ("RMA") and is subject to the regulatory provisions of the RMA.
Clearspan's arrangement involved its purchase of an undivided share of a landowner’s land, under cell towers leased by telecommunication companies (“the Telcos”), as tenants in common with the landowner. In the Environment Court’s words, the intention was that Clearspan would “obtain the rights to control, set and receive rentals, and otherwise deal with the Telco site and the landowner would continue to have full rights over the balance of the land” at [13]. In other words, Clearspan was given exclusive use of the land under the towers which put Clearspan in a stronger negotiating position than an individual landowner. The Telcos argued that the arrangement comprised a ‘division of allotment’ under either section 218(1)(a)(ii) (disposition by way of sale or offer for sale of the fee simple part of the allotment) or section 218(1)(a)(iii) (concerning leases for more than 35 years). The Environment Court determined that there was a division of the allotment, and the arrangement consisted of elements which together, had the purpose of effecting a subdivision in all but the legal sense.
High Court decision
Clearspan appealed the decision to the High Court, arguing that the intent of section 218 was to capture only the types of land division specifically defined in that section and that its arrangement did not fall within those definitions. The Court determined that the Clearspan arrangement was an artificial contrivance to achieve the substance and effect of a subdivision of fee simple ownership without falling within section 218. The Court found that the RMA was intended to be a code to regulate subdivisions because they affect the use of land - the core focus of the RMA. It considered that Clearspan’s arrangement did not alter the use of land, nor result in the intensification of land use that accompanies residential subdivision.
The Court considered that the definition of subdivision in section 218 is relatively tight. Subdivision is defined exclusively to “mean”, rather than to “include”, the six specified means of subdivision in section 218(1)(a) and (b). The Court held that it would strain the words of the statute too much to interpret Parliament’s specific and exhaustive definition (which refers to well-known and certain property law concepts), as extending to Clearspan’s arrangement. The Court stated that the Telcos cannot rely on the RMA as a means of countering the commercial challenge posed by Clearspan’s aggregation of responsibility for the land under cell towers. The appeal was allowed and costs were awarded to Clearspan.
Comment
This decision could give rise to further attempts to contract around section 218 in marginal cases, as Clearspan has done. However, if Parliament wishes to prevent that from occurring, it will need to amend the law to extend its definition of what may be regulated as a "subdivision" under the RMA.
It is also worthy to note that this was the first decision to provide an in-depth analysis of the definition of “subdivision”, despite it being more than 25 years since the RMA was introduced.