The ‘Quake Outcasts’ and the ‘third source’ of government power
By Natalie Jones
First published in Once in a Lifetime: City-building after Disaster in Christchurch. Freerange Press. 2014. [here for details and purchase]
Natalie graduated from the University of Canterbury with an LLB (Hons) and a BSc in physics. She is an admitted barrister and solicitor of the High Court of New Zealand. In 2013 she co-founded the Canterbury branch of Law For Change, an organisation aiming to enable students and recent graduates to use their legal skills to benefit the community.
What can the government do, beyond what the law expressly allows it to? It’s a vexed question, even at the best of times. Like individuals, the government can’t act contrary to law — law contained both in statutes passed by Parliament, and in the decisions made by the courts. But when the law is silent, what then? For individuals, there is an assumption of freedom of action unless there is an express legal prohibition. But what about the government?
This question becomes especially significant in the aftermath of a major disaster. How far do the limits of executive power extend? Following the Canterbury earthquakes, the Canterbury Earthquake Recovery Act 2011 vastly expanded the limits of the government’s express legal authority: it conferred wide powers and obligations on the executive branch of government to make decisions to ensure the expeditious recovery of Christchurch, including powers to purchase or compulsorily acquire land, override a range of planning documents and disseminate information and advice. But leaving that aside, the issue of what the government can do outside that Act was considered in the Quake Outcasts litigation. The answers were surprising and controversial, with potential implications for the wider recovery.
The ‘third source’ of power
To answer the question posed at the beginning: New Zealand has inherited the English concept of the ‘third source’ of power — essentially, a residual governmental freedom to do anything that is not prohibited by law.[1] This is the same freedom that any ordinary person has to do anything that isn’t illegal. It’s known as the ‘third’ source to distinguish it from the ‘first’ (the authority given to the government by statutes made by Parliament) and the ‘second’ (the common law powers unique to the government, such as summoning Parliament or exercising the prerogative of mercy).
The government can therefore carry out everyday actions like entering into contracts and distributing written information without needing to pass a law. This is practical — it means that the government can carry out its day-to-day functions and respond quickly, flexibly and relatively unhindered with the action it considers appropriate to meet the sometimes unexpected societal needs. There would be huge logistical difficulties if all government power had to be codified.
Conversely, unchecked governmental power opens up huge potential for abuse and arbitrary decision making. Unchecked power is also antithetical to the rule of law, that is, the idea that all government action should be subject to law, which is a foundational concept of any democracy. In short, it’s a nightmare for any kind of democratic accountability or transparency, since it is through Parliament that the decisions of the government are opened up for public scrutiny.
Clearly, then, this third power — the power to do anything not prohibited by law — needs checks and balances. One established safeguard is that the government can’t use this residual freedom to do anything that affects the legal rights and liberties of individuals. (Taxes or search and seizure, which can affect our private property rights, or arrest and detention, which can contravene our fundamental rights to life and liberty, must all be executed via other powers.) In addition, the third source only exists to the extent that there is no other positive law that deals with the circumstances in question.[2] There is still considerable academic debate about the third source, however.[3]
The residential red zone
How, then, does the esoteric concept of the ‘third source’ relate to the Canterbury recovery? There’s a story to it. In June 2011, roughly four months after the February 22 earthquake, the Minister for Canterbury Earthquake Recovery announced the division of Christchurch into four coloured ‘zones’: red (land and infrastructure damage meant rebuilding would likely not occur any time soon), green (no significant land damage; rebuilding could start), orange (further work required to determine if rebuilding could occur), and white (area where further damage assessment was required). Simultaneously, the Minister announced that the government would offer to purchase insured residential properties in the red zone at 100 per cent of the 2007 government valuation, in order to create the confidence and certainty necessary to allow those affected people to move on with their lives. Due to the combined effect of the red zoning and the 100 per cent offers, most residents left the area.
However, owners of uninsured property or vacant sections of land in the red zone were left in the dark until August 2012, when the Chief Executive of the Canterbury Earthquake Recovery Authority (CERA) offered them only 50 per cent of the 2007 government valuation.
The Quake Outcasts go to the High Court
A group of 46 of this latter group, styling themselves the ‘Quake Outcasts’, were understandably less than happy. They were left in a very precarious position by the 50 per cent offers, because of the significant shortfall between the amount derived from the offer and the cost of acquiring a home elsewhere; in many cases they were retired, and not in a position to take on any significant debt. They felt that they had been forgotten for over a year already. In the back of their minds, too, were the warnings given to red zone owners in June 2011 that the Christchurch City Council would ‘not be installing new services in the residential red zone’ and ‘may reach the view that it is no longer feasible or practical to continue to maintain services to the existing properties’, and that CERA had the power to compulsorily acquire their property.[4]
The Quake Outcasts took their concerns to the High Court, together with the company Fowler Developments Limited, which owned uninsured residential sections. They sought a declaration that the red zoning and offers, being unlawful, could not affect their existing rights as residential property owners. They also wanted the offer decisions to be set aside and made again by the Minister and the Chief Executive in accordance with law.[5]
In the High Court, Justice Panckhurst took a broad approach to the issues, finding it necessary to look at the legality of the red zoning decision itself. The fundamental question in the case was this: from where did the government get the authority to declare the red zone and to offer to purchase properties in it?
This question was particularly interesting because there are several powers under the Act that could conceivably have been used to make these red zoning decisions.[6] For instance, the Minister has the power to suspend, amend or revoke any planning document pertaining to greater Christchurch, which effectively provides the power to change land zoning. The Chief Executive, similarly, has powers to disseminate information and acquire property. There was also a statutory obligation to create a Recovery Strategy, which contemplated this kind of zoning decision being made. But notably, the government didn’t even try to argue that it used these statutory powers; the Act confers obligations on decision-makers in addition to powers and also puts safeguards on those powers. The evidence was that the government hadn’t complied with these corresponding obligations and safeguards when making the red zone decisions.[7] For instance, in order to exercise any of the statutory powers, the government must show that the use of the powers is objectively ‘necessary’ for the purposes of the Act, rather than merely desirable or expedient. This means that when the same result could be achieved in another way, that alternative must be taken into account.[8] In addition, many of the powers in the act come with consultation obligations — for example, the Recovery Strategy option would have required a public notification and comments procedure.[9] But from the government’s perspective, it wanted to act practically and quickly to secure certainty for badly affected residents, and so it was more convenient to go around the Act.
The government argued, therefore, that the authority came from the third source of power. The decisions could be, and were, made outside of the Act — no statutory authority was needed, since all they did was publish information, rather than anything that affected legal rights. Although the Act conferred extraordinary powers upon the Minister, it did not exclude or limit powers that existed independently of the Act. On the other hand, the Quake Outcasts said that the authority should have come from the Act (and therefore should have come with obligations as above), since the Act offered sufficient power to make the decisions and the decisions affected legal rights.
The Court’s decision
The Court sided with the Quake Outcasts. It said that that the red zoning and offer decisions overrode the existing residential zoning designations of the land in planning documents — the planning documents were still operative in theory, but in reality the decisions meant that over time the red zone would cease to be residential, and would become open space. This was to remove a fundamental human right by ‘declaration’, as the red zoning decisions arbitrarily and unlawfully interfered with the fundamental right to the use and enjoyment of one’s home.[10]
This led to the conclusion that the Minister was required to use his powers under the Act to make the red zone decisions; he could not make them using the third source alone. The government could create and define the red zone using the powers in the Act; yet the Minister had failed to use those powers. The Minister could not simply step outside the Act. Therefore, the Court declared that the decision to create the red zone was unlawful and therefore could have no legal effects on the property rights of the Quake Outcasts.
As a further consequence, the 50 per cent offer was also unlawful, since it was not made in compliance with the requirements of the Act, nor with the Act’s recovery purposes. It was set aside, and the Court directed that the government reconsider and make a new offer in accordance with law and with regard to the reasons given in the judgment — in effect, to ‘re-do’ the decision under the Act.
The Court also took the opportunity to criticise the reasons that the government had put forward for the reduced size of the offer compared with that given to insured property owners fourteen months earlier, and in doing so laid down guidelines for an acceptable approach to decision making under the Act. The recovery purposes of the Act demanded societally equitable decision making; the government had cited certainty and confidence as key reasons for the 100 per cent offers, which equally applied to these land owners. It was apparent that payments of only 50 per cent of the land value would not enable many of these owners to make a fresh start. Justice Panckhurst was satisfied that the plight of this group was not adequately considered in light of the purposes of the Act.
The Court of Appeal ups the ante
As could be imagined, the Minister and the Chief Executive were unhappy with this decision, and appealed.[11] Unfortunately for them, the Court of Appeal confirmed the High Court’s ultimate conclusion that the 50 per cent offer was unlawful.
However, the Court reversed the High Court’s decision about the third source of power. The government could, in fact, declare the coloured zones using its residual freedom. This was nothing more than the distribution of information to the public about the state of the land, and a recognition of the severe damage caused by the earthquakes — it did not create that damage. Further, legal rights weren’t affected: the red zone didn’t prohibit building or the granting of building consents, it didn’t stop residents from continuing to live in the red zone, nor did it require residents to demolish or repair their homes. Although the practical effect of the creation of the red zone and the 100 per cent offers was the exit of most residents from the area, there was in fact no legal step to change the relevant planning documents. In addition, none of the existing statutory provisions in the Act provided quite the right kind of power for the government to achieve the same objectives. The Court found that earthquake recovery objectives necessitated this decision-making.
Significance for recovery
The Court of Appeal judgment is, to say the least, concerning. Surely, it must be stretching the third source of power to its limits, at the very least. Even if the decisions didn’t affect rights, they had an extraordinary practical effect — they were certainly not the day-to-day, routine activities that the third source of power usually encompasses. Moreover, can it really be said that legal rights weren’t affected? Even though no planning documents were altered, in practice the planning documents didn’t matter anymore. Thousands of people moved out of the red zone. Land values of red-zoned properties dropped dramatically, even compared with neighbouring green-zoned land.[12] In July 2013, New Zealand Post announced it would no longer be delivering mail to red-zoned properties.[13] At the time of writing there are ongoing disputes about payment for maintaining essential infrastructure services in the red zone, and there is talk of compulsory acquisition of the remaining properties.[14] Even though the government’s actions were allegedly founded in the third source, they had effective control or influence over a section of the community. In 1992, Professor B. V. Harris wrote, ‘an information and advice pamphlet issued to the public by the government may not directly override the legal rights of any citizens, yet it still may have a decisive influence on the decision-making of many individual people. People may feel compelled by the pamphlet to take action in a particular way because of the respect they have for government advice.’[15]
Both the government and the Court of Appeal took a pragmatic attitude: they argued that the government took the steps it needed to ‘get things done’, and since this couldn’t occur under express statutory authority, even with the vastly increased powers in the Act, the government had to use the third source of power. But it is exactly in situations like this that administrative law should play its role to ensure that such decisions are made with caution. The limits of executive power exist for a reason, namely to ensure that the rights and privileges of individuals are not trod on by an overzealous executive. The third source of power to an extent defies statutory and judicial means of government accountability, and so significantly expanding its limits is not to be taken lightly, especially in the name of expediency. Although, perhaps, in a post-disaster context, the public is more likely to accept the third source of power — leading public lawyer Mai Chen says that in times of crisis, the populace looks to the government for certainty[16] — this increased acceptance by no means justifies the government’s actions.
Further implications for recovery
The third source aside, this case has other implications for recovery. It firmly reinforces that the government must act within its powers when making decisions under the Act — which will be crucial in the wider recovery given the wide scope of power granted under the Act and the sweeping nature of the Recovery Plan. Before this case, the government had already been pulled up by the courts once for acting outside its powers.[17] This shows a ‘somewhat cavalier attitude at the highest levels of government to the exercise of executive power’, which is ‘at best, bad practice and at worst a dangerous disregard for the basic principles of the constitution’.[18]
Also, the government’s reaction to the court decisions has been very telling, showing a marked lack of compassion and dismissive attitude towards people facing genuine hardship. In the aftermath of the High Court judgment, the Prime Minister John Key threatened to simply ‘walk away’ without making another offer, although he later apologised.[19] The Minister for Canterbury Earthquake Recovery, Gerry Brownlee, went further and publicly criticised Justice Panckhurst, implying that he ought not to be a judge.[20]
Where to from here?
The Court of Appeal expanded the limits of the third source of power in a significant way. In terms of the red zone decision, the same effects could have been achieved using a variety of undoubtedly lawful procedures, but the government chose to ignore these in favour of expediency in what it saw as a state of emergency. The Court of Appeal legitimised this, in an unsettling relaxation of constitutional safeguards at precisely the moment when those safeguards are most needed. Legal academic Andrew Geddis writes that he suspects that ‘if you were so inclined, you could probably rewrite this judgment to reach the exact opposite conclusion.’[21] At the time of writing, the Quake Outcasts have applied for leave to appeal to the Supreme Court, and while a substantive decision is likely still months away, it will be interesting to observe how Geddis’s suspicion plays out. In the meantime, three years after the creation of the red zone, the Quake Outcasts are still waiting.
Footnotes:
[1] Ngan v R [2007] NZSC 105.
[2] Ngan v R [2007] NZCS 105 at [97].
[3] Compare R v Somerset County Council ex p Fewings [1995] 1 All ER 513; Malone v Metropolitan Police Commissioner [1979] 2 Ch 344; R (on application of Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681. Also see the famous statement of Lord Camden in Entick v Carrington (1765) 95 ER 807.
[4] Canterbury Earthquake Recovery Authority, “Purchase Offer Supporting Information for Residential Red Zone,” March 2013, accessed June 2, 2014, http://cera.govt.nz/sites/cera.govt.nz/files/common/residential-red-zone-purchase-offer-supporting-information-booklet-20130327.pdf.
[5] Fowler Developments Limited v The Chief Executive of the Canterbury Earthquake Recovery Authority [2013] NZHC 2173.
[6] Canterbury Earthquake Recovery Act 2011, sections 11, 27, 30, 53.
[7] Canterbury Earthquake Recovery Act 2011, section 10.
[8] Canterbury Earthquake Recovery Act 2011, section 10; Canterbury Regional Council v Independent Fisheries [2012] NZCA 601.
[9] Canterbury Earthquake Recovery Act 2011, section 13.
[10] International Covenant on Civil and Political Rights (opened for signature 16 December 1966, entered into force 23 March 1976), Article 17.
[11] The Minister for Canterbury Earthquake Recovery v Fowler Developments Limited [2013] NZCA 588.
[12] Marc Greenhill, “Residents Find New Land Values Perplexing,” The Press, March 13, 2014, accessed June 2, 2014, http://www.stuff.co.nz/the-press/business/your-property/9821626/Residents-find-new-land-values-perplexing.
[13] Marc Greenhill, “No More Mail for Red-Zone Homes,” The Press, July 4, 2013, accessed June 2, 2014, http://www.stuff.co.nz/the-press/news/8878477/No-more-mail-for-red-zone-homes.
[14] Georgina Stylianou and Lois Cairns, “Public to Have Say on Red-Zone Future,” The Press, January 31, 2014, accessed June 2, 2014, http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/9669348/Public-to-have-say-on-red-zone-future.
[15] Bruce V , The “Third Source” of Authority for Government Action. Law Quarterly Review 108 (1992): 626–651.
[16] Mai Chen, “Mai Chen: Quakes a True Test of Government,” The New Zealand Herald, June 23, 2011, accessed June 2, 2014, http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10733869.
[17] Canterbury Regional Council v Independent Fisheries Ltd [2012] NZCA 601, [2013] 2 NZLR 57.
[18] John Hopkins, “Fowler Developments Ltd v Minister for Canterbury Earthquake Recovery,” New Zealand Law Journal (2013): 337.
[19] Marc Greenhill and Michael Fox, “Prime Minister Sorry for Threat that Angered Outcasts,” The Press, August 28, 2013, accessed June 2, 2014, http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/9094360/Prime-Minister-sorry-for-threat-that-angered-Outcasts.
[20] Blair Ensor and Ashleigh Stewart “Brownlee Takes Swipe at Judge,” The Press, November 18, 2013, accessed June 2, 2014, http://www.stuff.co.nz/national/politics/9410640/Brownlee-takes-swipe-at-judge.
[21] Andrew Geddis, “Next year’s Public Law Exam Question is Here Somewhere …” Pundit, December 3 2013, accessed June 2, 2014, http://pundit.co.nz/content/next-years-public-law-exam-question-is-here-somewhere.
