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Section 40 Public Works Act 1981
August 2013
Section 40 Public Works Act 1981
(1) Where any land held under this or any other Act or in any other manner
for any public work –
(a)
(b)
(c)
is no longer required for that public work
is no longer required for any other public work
is not required for any exchange under section 105 of this Act -
the chief executive of the department within the meaning of section 2 of
the Survey Act 1986 or local authority as the case may be, shall
endeavour to sell the land in accordance with subsection 2 of this
section, if that subsection is applicable to that land.
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Section 2 Public Works Act 1981

Public work:
(a) Every government work or local work that the Crown or any local
authority is authorised to construct, undertake, manage, operate,
or maintain, and every use of land for any government Work or
local work which the Crown or any local authority is authorised to
construct, undertake, establish manage, operate, or maintain by
or under this or any other Act; and include anything required
directly or indirectly for any such government work or local work
or use.
(b) …
(c)…

Local work:
Means a work constructed or intended to be constructed by or
under the control of a local authority, or for the time being under
the control of a local authority.
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Definition of public work, cont.d
Examples:
Public Works Act 1928, in addition to the usual:

Land required for forest plantation purposes, recreation grounds,
agricultural show grounds, (section 15(1)).

Land required for the purpose of paddocking driven cattle (section
15(2)).

Land required for public swimming baths (section 16).
Resource Management Act 1991:

Public work has the same meaning as in the Public Works Act 1981
and includes any existing or proposed public reserve within the
meaning of the Reserves Act 1977 and any National Park Purposes
under the National Parks Act 1980.
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Definition of public work, cont.d
Case Analysis:

There must be some positive activity in relation to the land – Port Gisborne v
Smiler [1999] 2 NZLR 695.

Land acquired and held in general landbank without particular purpose not
held for public work – Smiler.

Reserves not automatically public works - Dunbar v Hurunui District Council
HC Christchurch CIV 2004-409-171.

Don’t have to be able to point to a specific project especially when public
work is broadly defined but a degree of commitment is necessary Edmonds.

In McElroy v Auckland International Airport [2008] 3 NZLR 262 the holding of
land for an aerodrome was interpreted as encompassing the more modern
usages of airports that could include activities of a business nature found in
“airport cities”, (e.g. conference centres, commercial shopping centres) and
not just runways, hangars and passenger terminals, etc.
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Definition of public work cont’d

Te Ruananga o Ngati Awa v A-G [2004] 2 NZLR 695 found that land
confiscated from Maori was taken for a public work purpose
(reclamation) and land continued to be held for a public work purpose
when leased as the funds generated from leasing supported the public
work of harbour works (indirectly required for a public work).

Tasman DC v Proprietors of Wakatu 2/11/09, Dobson J, HC Nelson
CIV-2008-442-442; CIV-2008-442-548, the Court found foreshore and
seabed taken in 1905 for port works, and later reclaimed to establish
six leasehold residential properties was land still held for a public work.
Section 40 applied to the disposal of the freehold of the properties.
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Section 40(1)(a) Public Works Act 1981
Whether land is no longer required for a public work (Section 40(1)(a)):

Determining whether land is no longer required for public work is deciding a
question of fact, and in making the decision there is an obligation to act in
good faith(objective test) - motive and purpose are irrelevant - Manukau
City v AG [1973] 1 NZLR 25.

Courts will take decision of official having authority to make decision as best
evidence – A-G v Morrison [2002] 3 NZLR 373 (CA).

Where land is no longer required for the original public work it may still be
retained where likely to be used for another public work and a time of
indecision will not prevent the retention of the property - Mark v A-G
27/10/09, HC Wellington CIV-2002-485-799, land acquired for a motorway
but no longer to be developed as a motorway, was still required for a
proposed arterial road. It was not necessary for the new work to be the
subject of a gazette notice changing the purpose of the original acquisition.
Further, land outside the council designation could still be needed for the
work where no certainty of the construction area was established.
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Section 40(1)(a) Public Works Act 1981
Required for another public work:

Hall v. A-G [2012] NZHC 3615 – considered the delay in transfer of land for
another public work because of funding and price issues unacceptable.
“Therefore I consider that when the facts are looked at objectively, Hall West,
excluding the RAP 21 area was surplus to the Crown’s requirements by July
2002 in relation to its use for the ALPURT. I consider that a reasonable
allowance for determining if the land was needed for another public work would
be at the outside limit, six months from when DOC learned the land was no
longer required for the ALPURT and expressed its interest in having the RAP 21
part of Hall West protected as a reserve which was on 22 October 2002. Six
months from this date would be 22 April 2003. I have decided on this period of
time because the land was already owned by the Crown there was no legal need
to find funding to acquire the land. All that was required to allow the Crown to
retain this land was for a decision to be made under section 40(1)(b) of the Public
Works Act 1981 that it was required for another public work”.
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Section 40(1)(a) Public Works Act 1981

Evidential burden is on the landholding agency to show that land is
required for another public work (area occupied by a substation) A-G
v Edmonds CA 97/05.

A decision must be made within a reasonable time of the land not
being required for the work for it to be used for another specific workland can not be transferred for an indeterminate purpose - Te Runanga
O Ngati Awa – AG HC Wellington CIV-2006-485-1025.
Section 105 Exchanges:
Land to be used “personally for a purpose”, and has to be “reasonably
equivalent”.
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Section 40(1)(a) Public Works Act 1981

Once conditions of Section 40(1)(a) met, process has to be followed –
A-G v Horton [1999] 2 NZLR 257. A later change of mind or purpose
may be too late to prevent the discontinuation of the offerback duty.

The section is remedial “The background to the offerback concept is
that land being acquired from a private person for a public works
purpose, possibly under the threat of contemplation or compulsion.
The rationale must be that it is only fair, if that purpose disappears, the
land should so far as practicable revert to the previous or equivalent
ownership”. (Smiler).
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Section 52 PWA: setting apart of land for
another public work

Process for Change in purpose of land:
Section 52 PWA:
(4) Subject to subsections 6 to 8 of this section, if the whole or any
part of any land held by a local authority (other than a road, access
way, or service lane) is required for another local work to be
undertaken by that local authority, the Minister, on receiving a written
request by the local authority signed by its chief executive, may by
notice in the Gazette declare the land to be set apart for that other
local work.
(5) The whole or any part of a public reserve held by a local authority
shall not be set apart under this Act for a public work to be undertaken
by the same local authority unless the land is designated for the work
in the district plan of the territorial authority.
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Section 52 PWA: setting apart of land for
another public work
(6) Every request by a local authority under subsection (4) of this section
shall contain particulars of the land affected, of the work for which it is
held, and of the work for which it is proposed to set the land apart.
(7) A statutory declaration by the chairperson or mayor or the chief
executive of the local authority to the effect that the local authority is
authorised by law to undertake the work for which it is proposed to set the
land apart may be accepted by the Minister as sufficient evidence of that
fact.
(8) Where the provisions of section 32 of this Act are not applicable, the
local authority shall attach to the request to the Minister a plan in triplicate
of the survey of the land, approved by the Chief Surveyor, showing
accurately the position and extent of the land proposed to be set apart.
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Exemptions – Impracticability (s40(2)(a))

“Impracticable” means unable to be done.

Most common examples are:


The former owner is a company that no longer exists.

The former owner and successors are all deceased .

Where the legal interest no longer exists.
Note definition of “successor” in Section 40(5):

Is limited to persons entitled under the will or intestacy, and so to
direct beneficiaries only.

Companies generally only have successors through amalgamation.

In order - Former owner, successor to former owner; successor in
title applies where only part of the land in a title was acquired and
the former owner is deceased.
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Exemptions – Unreasonableness and
unfairness s40(2)(a)

Examples are:

No compulsion at the time of acquisition (open market
transactions) but note “Bowler” – prospect of public work affecting
sale.

Non-compliant with district plan*.

Costs and likely return of completing offer will financially
disadvantage the Council*.

Land acquired at the request of the former owner as severances*.
* Not necessarily accepted by the Crown anymore (for the benefit of
the former owner).
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Exemption s40(2)(b) Significant change

The significant change must be to the character of the land.
15
Section 40(4) Size, Shape or Situation

Not an exemption from offerback.

Practical way of dealing with particular land holdings that are of no use
or value to anyone other than an adjoining owner.

May otherwise be exempt from offerback.
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Bowler Investments Ltd v Attorney-General

Land acquired by Crown when not designated, but was public
knowledge of a planned public road work. Owner approached Crown
to purchase.

Crown relied on Circular Instruction that stated “It is considered
unreasonable to offer back where there has been no element of
compulsion in the original acquisition”.

Court stated “The prospect of the public work, making as it did, sale on
the open market difficult if not impossible, effectively compelled Bowler
Investment to look to the Crown …”

“The person who anticipates the probability of an ultimate taking, and
helpfully negotiates with the Crown, should be on no worse a position
than the person who forces the Crown’s hand and requires formal
steps for compulsory acquisition”.
17
Rowan v Attorney-General

Crown officers formed a view it was impractical to offer land to Rowans
because it had no road frontage and was believed the DLR would not
issue a title. No legal advice was sought on those matters and no
regard was had to Section 129B of the Property Law Act.

In court, DLR advised he would have issued title. Access under PLA
was also available.

Crown officers also believed Section 40 PWA gave an option to sell to
either former owner or successor in title.

Court determined former owner has priority to an offer to a successor
(in title or probate).

Crown was negligent and in breach of statutory duty of care damages awarded.
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Attorney-General v Horton

Crown transferred previous coal mining operation to new SOE Coal Corp.
Ex-Horton land was noted as being “surplus” when asset transfer
agreement with CC was made. CC was appointed agent to dispose of
land and given an option to buy surplus properties.

CC originally regarded land as surplus, but later changed its mind as land
may be potentially required for a new, smaller scale operation.

“The obligation to sell arises whenever the conditions of Section 40(1) are
satisfied”.

“The question of whether the land was needed for coal mining depended
entirely upon the intentions of Coal Corp”.

“There was no existing enterprise to which Coal Corp's needs could be
objectively related”.

“The finding of the Judge was not merely that certain officers of Coal Corp
had considered the land superfluous but that the decision was attributable
to the company”.
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McLennan v Attorney-General

A number of different decisions were made. Dispute as to date of
offers, and whether the statutory duty was discharged.

McLennan v Attorney-General [1999] 2 NZLR 469, Smellie J, HC
Auckland.
“For the purpose of a valid offer to sell land under Section 40(2)(c) of
the Public Works Act 1981 the date on which the current market value
is to be determined is the date on which the land is validly offered
back or the date on which the valid offer back should have been
made, if it is established that there has been a failure to act timeously
and with due expedition in all the circumstances of the particular
case, in determining to make an endeavour to sell the land in terms of
Section 40(1) and in determining to offer to sell the land in terms of
Section 40(2).”
20
McLennan v Attorney-General

McLennan v Attorney-General 1/12/99, Patterson J, HC Auckland M267/98.
“There can be no objection to the chief executive negotiating terms with the
successor. Nor, in my view, can there be an objection to the chief executive
offering to sell the land on normal and usual terms of sale. If in the
circumstances of any particular case, this causes problems to an offeree, the
chief executive, in accordance with the policy of the Act, should endeavour to
agree terms which facilitate rather than frustrate the purchase by the
successor, provided that the purchase is at current market value. No form of
contract is specified for such private contract. In such circumstances I see no
reason why normal and reasonable terms for a sale of property may not be
included in the offer, which upon acceptance of the offer become terms of the
subsequent contract providing that in the circumstances of each individual
case, such reasonable terms do not frustrate or hinder the sale.”

Subsequent Court of Appeal and Privy Council decisions effectively upheld this
view, and decided as a matter of fact statutory offers were made but not
accepted (by virtue of counter offers).
21
Attorney-General v Hull

Crown acquired for “state housing purposes”. Was required for purposes of
establishing a new urban area in Albany. Land was put to industrial
purposes, but Court found this was consistent with use of the land under
definition of “state housing”.

Also considered objective test of surplus.

“… the evidence may establish that … the landholding agency remained in a
state of genuine indecision. But if any reasonable person would undoubtedly
have concluded that in all the circumstances the land was no longer required
for the relevant public work, the agency may well have difficulty asserting that
it has not so concluded, and therefore had not come under any obligation to
proceed in terms of the section.”

So, accordingly, land may be held for future expansion or for needs that have
not been specifically identified, but it must be possible to establish a degree
of commitment as to the purpose for which the land is held.

The Attorney-General v Edmonds decisions support this too.
22
Attorney-General v Morrison

A duty exists to properly consider whether there are other public works
requirements for the land, and whether exemptions exist.

“If, after inquiry, the land is not required for the purposes set out in
Section 40(1)(b) or (c) the Chief Executive must, as set out in
paragraph [44] of Hull, give bona fide and fair consideration to whether
the statutory course of offer back would be impracticable,
unreasonable, or unfair under subs (2) or whether in terms of subs (4)
the land is instead to be sold to an adjacent owner. Unless one of
those exceptions applies, the Chief Executive must offer the land back
to the original owner.”
23
Kerr-Taylor v Attorney-General (“The
HortResearch Case”)

Dispute as to offer back date. HortResearch delayed making offer
seeking subdivision and rezoning of land to increase value.

Court followed Horton reasoning a decision as surplus could be
objectively determined.

“Required … does indeed have its primary meaning of need or
necessity”.

On the facts a decision to dispose was made but HortResearch
thereafter continued to use the land for its operational purposes as a
matter of convenience only.

Once surplus offer should be made at values at the time the offer
would have been made if properly pursued (but taking into account
realistic time frames to complete the process). On the facts 12 months
from date the land was fond surplus was decided as the date for
valuation for Section 40 offer.
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Dunbar v Hurunui District Council

Public reserve is not necessarily a public work.

Land vested as reserve on subdivision was not “acquired” for a public
work. In 1948, when the land was vested, it did not constitute a public
work.

Refers to Port Gisborne Ltd v Smiler - [1999] 2 NZLR 695, “in order to
fall within the definition [of a public work] there must be some positive
activity in relation to the land”.

Note issues with local authority reserves - passive holding not
expressly permitted under definition at Section 2 PWA, but is for
government reserves.
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