The government's second offer to owners of uninsured property and bare land in Christchurch's 'red zone' was also unlawful, the Court of Appeal has ruled, although it wants to chew over more information before determining how to remedy the situation.

Justices Christine French, Forrest Miller, and Helen Winkelmann today ruled in favour of the 16 Christchurch property owners known as the Quake Outcasts, setting aside former Earthquake Recovery Minister Gerry Brownlee's second offer after the original was deemed to be unlawful in the Supreme Court.

The Quake Outcasts, originally 46 property owners, and developer Fowler Developments challenged the lawfulness of the Crown's offers, saying they weren't in accordance with the act and breached their human rights. At the heart of the dispute was that insured property owners were offered 100 per cent of the 2007 value, something not open to bare land owners which can't be insured, or the uninsured property owners who fell outside the net for various reasons.

After the Supreme Court ruling in 2015, the Outcasts landowners all accepted the newer offer "saying they had no other option after all this time and seeking to reserve rights," the judgment said.

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The appeal court bench deemed the second offer to be unreasonable in that "the insistence on making an area-wide offer limited the government's ability to discriminate among owners". That meant the minister couldn't rely on the moral hazard of creating an incentive not to insure by removing individual circumstances of each property owner, and was therefore unfair.

The judges ruled that relying on the cost to the Crown would overestimate the cost of discriminating, and that the extraordinary delays "may well have adversely affected owners' ability to re-establish themselves".

"The government decisions to approve the recovery plan and make offers pursuant to it were unreasonable and so unlawful," the judgment said. "The majority of the Supreme Court established clear parameters for how a lawful decision to discriminate between landowners in the red zone could be made, and the minister has not stayed within those parameters when approving the recovery plan."

The Crown argued that because the legislation has been repealed the recovery plan can't be revisited. The judges invited further submissions on whether the court can and should make orders to reopen and reconsider the plan "with renewed offers being made to affected landowners should the reconsideration result in a decision that some payment should be offered for uninsured improvements".