Editor: I. Mallikarjuna Sharma Volume 11: 15-31 March 2015 No. 5-6

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F-158 Quake Outcasts v. Minister for Canterbury Earthquake Recovery [NZ-SC: Court Opinion] (2015) 1 LAW reasonably well. 76 However, it was considered that, “without a full area-wide land remediation solution, the largely undamaged properties may be at risk from the works involved” in the land remediation for neighbouring properties. 77 [54] In addition, it was considered that the social impacts of widespread remediation options had to be considered. It was estimated that large-scale remediation programmes were likely to take from three to five years (if not longer). 78 This would require all of the residents of the affected areas to be relocated while remediation took place. It was also uncertain whether private insurers would offer insurance to properties on land that required such a high level of remediation. 79 These considerations added further weight to any decision not to commit to remediation where it appeared not to be cost-effective. 80 [55] The Brownlee paper recorded that the “the government could allow the various insurance schemes and policies in place in the Red Zones to play out without any intervention”. 81 However, it was considered that this could result “in protracted individual settlements for the affected occupants given the great uncertainty regarding when, or if, or on what terms, repairs or rebuilds could take place in these areas given the ongoing uncertainty of and risk management with respect to the underlying geotechnical state of the land”. 82 [56] However, that approach was not adopted as the paper stated it would not meet the objectives of certainty, confidence for landowners or a simplified process. 83 Therefore the making of offers to purchase insured residential properties on the terms set out above at [4] was 76 At [38]. 77 At [38]. 78 At [39] and [40]. 79 At [39]. 80 At [40]. 81 At [50]. 82 At [50]. 83 At [50]. recommended. It was noted that these offers would ensure that insured residential landowners’ equity in their homes would be preserved. 84 [57] The paper recorded the financial implications of these purchase decisions. The gross cost of purchases of insured properties in the red zones would be up to $1.7 billion, although insurance recoveries would mean that the net costs would be between $485 and $635 million. 85 It was proposed that the properties purchased be expensed immediately as they “currently have a minimal value”. 86 [58] The paper made the following comments about the implications of the purchase offers on infrastructure and services in the red zones: 87 As a result of these offers there is unlikely to be any justification in the near to medium term for the infrastructure and services in these areas to receive any more than temporary repairs. The relevant Councils will be asked to discuss any proposed maintenance and repair plans, for the infrastructure in these areas, or any proposed regulatory interventions for the areas. [59] As to uninsured residential properties and vacant lots, the paper said that “consideration will need to be given over time to the position of these people”. 88 It said: 89 Neither uninsured residential properties nor vacant lots are covered by EQC land or improvements insurance. For residential owners, the risks of not having insurance were risks that ought to have been considered when making the decision to invest in the property. Residential 84 At [58]. 85 At [87]. There was no indication how these figures was calculated by the Treasury. As the Crown submitted, the figures show that insurance recoveries were anticipated to exceed 50 per cent of the gross cost of purchase. However, it was still anticipated that insurance recoveries would not cover the whole of the purchase cost and that there would be a net cost, at least of $485 million. 86 At [89]. 87 At [52]. 88 At [63]. 89 At [62]. Law Animated World, 15-31 March 2015 100
(2015) 1 LAW Quake Outcasts v. Minister for Canterbury Earthquake Recovery [NZ-SC: Court Opinion] F-159 owners should have been aware of the risks when choosing not to purchase insurance. Vacant lot owners were not eligible for EQC or private insurance cover. Purchase offers [60] In due course those insured property owners within the red zone, who returned a consent form (allowing the government to share information with EQC and the owner’s private insurers to develop the offers) to CERA, received an offer to purchase from the then chief executive. The owners of such properties had the two choices that are set out above at [4]. The offer documents provided that, under Option 1 (selling the land and assigning EQC and private insurer claims to the Crown), the purchase price paid by the Crown would be adjusted if an insured property owner was underinsured by more than 20 per cent. The fact sheet accompanying the offers said: 90 If your property is underinsured by more than 20 per cent (for example, because it is insured for a fixed sum which is less than the rating valuation or its size is under-declared on the policy), the Crown’s offer to pay the most recent rating valuation will be reduced by the percentage that you are underinsured. [61] The supporting information to the purchase offered answered a number of generic questions, including: 91 What will happen to my property if I decide that I do not want to accept the Crown’s offer? If you decide that you do not want to accept the Crown’s offer, you should be aware that: ♠ The Council may 92 not be installing new services in the residential red zone. 90 We quote the current version of the document, which is: CERA “Purchase offer supporting information for Residential Red Zone” (March 2013) www.cera.govt.nz. An older version appears to have been quoted in both the High Court and Court of Appeal judgment: Quake Outcasts (HC), above n 6, at [30] and Quake Outcasts (CA), above n 6, at [31] but that version was not contained in the Case on Appeal to this Court. 91 Mr Brownlee and the then chief executive of CERA made similar remarks to these in media interviews. ♠ The Council and other utility providers may reach the view that it is no longer feasible or practical to continue to maintain services to the remaining properties. ♠ Insurers may cancel or refuse to renew insurance policies for properties in the residential red zones. ♠ While no decisions have been made on the ultimate future of the land in the residential red zones, CERA does have powers under the Canterbury Earthquake Recovery Act 2011 to require you to sell your property to CERA for its market value at that time. If a decision is made in the future to use these powers to acquire your property, the market value could be substantially lower than the amount that you would receive under the Crown’s offer. Consultation [62] In carrying out the zoning decisions and offers, the Crown did not engage in public consultation and did not consult with either the Community Forum or the cross-party parliamentary forum on this approach. 93 This lack of consultation was noted by the Report of the Finance and Expenditure Committee in their “2010/11 financial review of the Canterbury 92 The older version, quoted in the Court of Appeal and the High Court, used more unequivocal wording. It said that the “Council will not be installing new services”. It went on to say: “If only a few people remain in a street and/or area, the Council and other utility providers may reach the view that it is no longer feasible or practical to continue to maintain services to the remaining properties.” See Quake Outcasts (HC), above n 6, at [30]; Quake Outcasts (CA), above n 6, at [31]. 93 The first community forum was not held until 7 July 2011 (after the red zone decisions). It appears that the first cross-party parliamentary forum was held on 3 May 2011 but that it seems to have been accepted by the Crown there was no consultation on these measures. Mr Brownlee’s affidavit of 1 July 2013 at [41] acknowledged that “[t]here was no information or advice from the community forum which was relevant to the decisions Cabinet was making about the [residential red zone] in June 2011”. 101 Law Animated World, 15-31 March 2015
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Editor: I. Mallikarjuna Sharma Volume 11: 15-31 March 2015 No. 5-6

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