It was a test of valuation principles for land compulsorily acquired under Auckland’s CBD for the city’s underground rail network; there is no general market for subterranean land. YMCA was eventually awarded $858,400, a far cry from its initial claim for $18.4 million compensation.
General principles of land law inherited from England have it that the ownership of freehold land includes all land below the surface.
That general principle has been heavily eroded by statute; the crown has rights to exploit oil, gas and mineral resources and has further rights to take subterranean land under the Public Works Act.
YMCA North Incorporated owns a substantial site on Greys Avenue in Auckland’s central business district. By proclamation under the Act, Auckland City assumed ownership of a slice of land starting about ten metres below the surface of YMCA’s land to accommodate proposed underground rail. In addition, a restrictive covenant was imposed on a further slice rising about five metres above this railway land, having the effect of limiting potential excavation by YMCA of underground carparking, part of any possible site re-development as high-rise apartments.
Compulsory acquisition triggered rights for YMCA to receive Public Works Act compensation. Auckland City offered some $262,900, primarily compensation for disturbance as work proceeded. YMCA countered seeking $18.4 million, which included $18 million for ‘injurious affection;’ the negative impact resulting from the land taken and restrictive covenant imposed.
Injurious affection is measured by a ‘before and after’ test: the highest and best value of the land before compulsory acquisition compared with after.
Their dispute over valuation went to the Land Valuation Tribunal. It fixed the level of compensation at two million dollars. Neither side was happy with this. Both appealed to the High Court. Compensation was fixed at $858,400.
YMCA’s application to further appeal this result was dismissed.
It said a ruling is needed from higher courts to clarify an irreconcilable tension in valuer’s ‘before and after’ test where there is a ready market for sale of properties generally, but not for subterranean land itself.
There is no tension, Justice Gault ruled. The evidence is that properties with tunnels under them do not suffer any reduction in market value.
The effect of the restrictive covenant was taken into account by valuers with an estimate of likely costs facing YMCA in getting pre-approval and consent for any proposed excavation penetrating the restricted zone.
YMCA North Inc v. Auckland Council – High Court (14.12.23)
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