5  New Zealand application of the takings concept

The differences in constitutional structure from the US, where much of the takings literature has developed, will complicate application of its lessons to the New Zealand situation. These differences include the lack of a written constitution in New Zealand and the limited judicial constraints on legislative action in New Zealand compared to the US.

The same issues of conflicting property rights and the balance between public and private interest arise in New Zealand, however, as elsewhere, as does a focus on physical occupation of land as the primary arena for the takings debate.[36]

New Zealand’s legal framework is based on a common law heritage. For example, fundamental common law principles require that property will not be expropriated without full compensation (Legislation Advisory Committee, 2001). The checklist in the Legislation Advisory Committee Guidelines, under the heading of “basic principles of New Zealand's legal and constitutional system”, asks whether the legislation complies with fundamental common law principles, whether vested rights have been altered (if so, is that essential, and if so, have compensation mechanisms been included), and whether pre-existing legal situations have been affected, particularly by retroactivity (if so, is that essential, and what mechanisms have been adopted to deal with them).[37]

The guidelines also state “if legislation would implement a taking of property, consideration should be given to whether compensation should be paid to those affected. Where legislation would constitute a taking of property and it is not intended that compensation will be paid, the legislation should make this quite clear.”

While there are these broad constitutional principles in effect, New Zealand does not have a generalised takings regime at the operational level; ie, there is no standard process for assessing or challenging a government action that affects property rights to determine whether the action is essential to the public interest, and if so whether compensation should apply.

There are some specific regimes where takings or compensation issues are identified and regimes put in place, but it is unlikely that these cover all the areas where the benefits of such a regime might exceed the costs. This does not suggest that all government regulation should be so treated, but there may well be scope for wider adoption of such a regime than is the case present.

5.1  Physical takings

The Public Works Act (PWA) 1981 provides for the compulsory acquisition of land for public works.[38] This reflects very longstanding practice in previous legislation. It is implicitly based on the risk of hold out impeding the completion of essential public works, either physically or by inflating the cost. Compensation is set at current market value. There are also provisions in other legislation for redress for landowners through compensation and or acquisition. These include the Historic Places Act 1980 or the heritage provisions of the Resource Management Act 1991 (RMA).

Public works have previously been defined by reference to an extensive list, based on essentiality, but are currently simply those works which central and local government are empowered to carry out. This approach does not involve any criteria such as hold-out, essentiality or site-specificity. A consequence is that all acquisitions can be seen as carried out under a shadow of compulsion with the accompanying obligations with regard to compensation and possible rights of offer-back when land is no longer required. The acquisition is compensated for at current market value plus certain minor adjustments, such as where a private residence is involved.[39] Access to these powers is currently available to central and local government, and to certain network utility operators.

Private access to such powers can be a contentious issue. As discussed above, however, existing utilities, however, have used these powers to establish their networks and may depend on them for continued access and there may be a public interest in continued operations of such powers to maintain network stability and to allow new entry to the market (Wilkinson, 2001).

5.2  Regulatory takings

Regulatory takings are likely to be as widespread in New Zealand as anywhere. At the broadest interpretation, every form of regulation of the use of land, labour or capital could be interpreted as a taking through altering vested rights.

Response to biosecurity incursions is an interesting example. The Government takes property when it destroys plants or animals to eradicate or delay the spread of a pest or disease. New Zealand focuses far more on biosecurity than most nations because isolation has protected its territory from such threats and makes continued protection more viable than would otherwise be the case.

By statute the Government compensates for losses suffered as part of eradicating an incursion, but not for any losses suffered prior to detection or as a result of failure to eradicate. Compensation is paid in the first case because it creates an incentive to report infestations. This helps limit total losses to national welfare. It is not equitable, however, for taxpayers to pay for damage they did not cause or have the opportunity to prevent, and the lack of compensation creates an incentive for early detection. Compensation for delays would act as an incentive for the Government to eradicate quickly, but is not equitable to taxpayers who could be liable for a task that was not feasible or which depended on information not obtainable without undue violation of private property rights, and would reduce incentives on property owners to introduce management techniques to minimise their costs.

Taxpayers in turn fund compensation in the first instance due to the public interest in acting rapidly or due to the scope of impact. For narrowly focused incursions, or where funding arrangements are established in advance to allow monitoring, it is possible to charge only those directly benefiting from the response.

Focusing on what lies closest to the accepted boundary of takings for which compensation is payable brings up the RMA. Planning restrictions on land use are the closest non-compensated parallel in New Zealand to the compensated compulsory acquisition of land that occurs under the PWA. The RMA explicitly states that plan provisions are deemed not to have taken or injuriously affected interests in land unless the Act explicitly says so (Ryan, 1998). This is effectively parliament contracting out, through statute, from the application of a takings approach to land use regulation.

Ryan (1998) noted that a compensation provision could be “as bureaucratic and costly to administer as the problems that such legislation would seek to remedy”, but suggested that a “significant” threshold for compensable takings would define tolerable vs intolerable burdens on individuals and encourage regulators to ensure benefits exceeded costs and to spread costs widely.

The earlier discussion in the US context illustrated, however, the complexities of determining when a taking has occurred with regard to this type of property right, where rights continually overlap and community perceptions of the extent of those rights evolve over time. This makes determining and protecting vested rights difficult.

5.3  New property rights

There are situations in New Zealand where the government has defined new property rights that mean future government action in the area would constitute a compensable taking. A particular example is fisheries, where defined tradable rights have been created.[40] A variation on such arrangements is being considered for aquaculture in New Zealand. This would involve creating involving defined areas within which aquaculture could take place, with the rights to space within those areas to then be subject to tender. This would allow aquaculture to be balanced versus other uses of coastal space, and then ensure that the aquaculture rights go to the most efficient users.

Similar rights have been suggested, and implemented overseas, for controlling pollution as an alternative to common and control (CAC) regulation. In this case, trading of rights allows emission reductions to be made by those able to do so most efficiently, and allows those unable to achieve reductions to buy emission rights from others, to mutual benefit.

In these cases, it could be argued that the government had to restrict its own future behaviour (through creating rights in a form that requires compensation for changes) in order to give property right holders the perception of sufficient security to undertake investment in development and protection of the resource. This is presumably based on an analysis that the benefits of creating those rights, in terms of incentives for management and investment, outweigh the costs.

The primary costs in fiscal terms are (1) future compensation requirements which limit government discretion (waiving the compensation would presumably affect expectations of government treatment of other property rights), and (2) in economic/social/environmental terms any preference which the holders of those defined rights are thereby given over other interested parties with less explicit rights (eg, fisheries quota holders[41] vs recreational fishers or other users of the marine environment).