AAL Holdings Limited v Dai
[2020] NZHC 211
•20 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2019-404-807
[2020] NZHC 211
BETWEEN AAL HOLDINGS LIMITED
Plaintiff
AND
XIAOLI DAI
First Defendant
121 LIMITED
Second Defendant
JUSTITIAE TRUSTEE COMPANY LIMITED
Third Defendant
PETER JOHN AITKEN & PETER LOUISE FELSTED
Fourth Defendants
Hearing: 24 September 2019 Appearances:
MJ Fisher & TJ Yoon for the Plaintiff
RB Hucker & R Selby for Third Defendant
No appearance for First, Second or Fourth DefendantsJudgment:
20 February 2020
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 20 February 2020 at 4pm pursuant to r 11.5 of the High Court Rules
Counsel / Solicitors:
Registrar/Deputy Registrar
MJ Fisher & TJ Yoon, Erskine Chambers, Auckland.
J Brown and G Chan, Brown & Partners, Auckland
RB Hucker & R Selby, Hucker & Associates, Auckland.
Case Officer: Kevin Yu
AAL Holdings Ltd v Dai [2020] NZHC 211 [20 February 2020]
[1] This case is concerned with a cross-lease property at 121 Shelly Beach Road, Auckland (the land). The plaintiff (AAL) is the registered proprietor of an undivided 3/5ths share in the fee simple estate in the land. The four defendants each own 10% of the fee simple estate.
[2] In addition to their 1/10th shares in the freehold of the land, each of the defendants is the lessee of a designated area on the land on which a dwelling has been erected, under a cross-lease registered on the title to the land.1
[3] In the usual way with cross-lease developments, the cross-leases for the four flats are in materially identical terms. The lessors are the (collective) owners of the fee simple of the land, and the lessee is the owner of the relevant flat. The leases are each for a term of 999 years.
[4] AAL does not hold any leasehold interest in the land. While four flats have been built on the land, part of the land (“the Relevant Area”) has never been developed, and no lease has been registered in respect of it. AAL claims that it is entitled to construct additional flats on the Relevant Area, and to require the defendants to join with it in executing (as co-lessors) leases of the additional flats, pursuant to certain provisions of the cross-leases.
[5] None of the parties were original lessors or lessees – they have all acquired their interests in the land from earlier owners. The original lessors were a company called Art & Architecture Ltd and Mr Norman Aitken, and the original lessee named in all of the four cross-leases was Art & Architecture Ltd.
[6] AAL says there is uncertainty over the meaning of the relevant clauses in the cross-lease which it says permit it to construct and lease the additional flats. In May 2019, it commenced this proceeding. It asks for declarations as to the meaning and effect of clauses 33, 34 and 35 of the cross-lease. AAL contends that there can be no
1 The first defendant is the lessee under a memorandum of lease relating to Flat 4 on the land, in respect of which composite Certificate of Title NA 88D/245 has been issued. The second, third and fourth defendants respectively hold leasehold interests in Flat 2 (composite Certificate of Title NA 88A/520), Flat 3 (composite Certificate of Title NA 84A/521), and Flat 1 (composite Certificate of Title NA 79D/452).
defence to its claims for the declarations sought, so it has asked that the declarations be made by way of summary judgment.
[7] An affidavit of service has been filed showing that the proceeding has been properly served on each of the defendants. The first and second defendants have elected to take no steps, and at the first call of the summary judgment application before Gault J on 18 June 2019 counsel for the fourth defendants advised that, although he held a watching brief in relation to one aspect of the proceeding, his clients largely support AAL’s position in relation to the core issue of interpretation of the cross-lease. The fourth defendants have not subsequently taken any step in the proceeding.
[8] AAL’s summary judgment application is opposed by the third defendant (Justitiae). Justitiae has also filed its own application for summary judgment, or for an order striking out AAL’s claims.
[9] I now give judgment on AAL’s application for summary judgment, and on the application by Justitiae for summary judgment or an order striking out AAL’s claims.
Relevant provisions of the cross-lease
…
11. USE OF EXCLUSIVE AND COMMON AREAS
The Lessee shall not without the written consent of the Lessors in any way use or enjoy any part of the said land except: (a) The Flat (b) That part of the said land relating to the Flat marked or shown ‘G’, ‘H’, ‘T’, ‘L’, common area and ‘J’ on Deposited Plan No. 141791 :
(c) That part of the said land marked or shown on Deposited Plan 141791 but only for the purposes of reasonable ingress and egress by vehicle or on foot.
…
14. LESSEES OWNERSHIP OF SHARE IN FEE SIMPLE
The Lessee shall remain the owner of the Land share in the fee simple of the land while he continues to be a Lessee hereunder. If the Lessee (unless by these presents expressly authorised so to do) shall deal with either his interest hereunder or his interest in the fee simple in such a manner that both leasehold and freehold interests are not owned by the same person then this Lease shall immediately determine without however discharging the Lessee from payment of any moneys owing hereunder or releasing him from liability arising from any other
breach previously committed provided always that this Clause shall not apply to the first Lessee hereof.
…
16. QUIET ENJOYMENT
The Lessee performing and observing all and singular the covenants and conditions on his part herein contained and implied shall quietly hold and enjoy the Flat without any interruption by the Lessors or any person claiming under them.
…
32.IN the following clauses of this lease:
(a)the expression “the relevant area” shall mean that part of the said land as is shown marked “E” and “K” on the Deposited Plan referred to on the front page hereof in the definition of “description of flat”; and
(b)the expression “the Lessors” shall mean (to the exclusion of any other person or persons) such of the registered proprietors of an estate in fee simple in the said land as are not the registered proprietors of an estate in leasehold in any flat or dwellings erected on the said land.
33. THAT the Lessors shall be entitled at any time or times hereafter to develop further the relevant area by erecting thereon dwellings and if desired a garage and/or other buildings normally appurtenant to or associated with a dwellings (hereinafter called “the dwelling units”) conforming in all respects to:
(a)the requirements of the Local Authority and any other Authority having jurisdiction; and
(b)the requirements set forth in any Agreement for the time being in force between the Lessors and the Lessee relating to the erection of the dwelling units.
and in order to give effect to the foregoing the Lessors and their representatives, agents, workmen, contractors and their servants and other persons authorised in that behalf by the Lessors may enter onto and remain on the relevant area at all reasonable times with or without motor vehicles machinery and equipment necessary or desirable to erect the dwelling units provided that the Lessors shall take all reasonable steps to minimise any inconvenience to the Lessee occasioned by such work.
34. THAT on substantial completion by the Lessors of the dwelling units the Lessee shall at the cost in all things of the Lessors and when so requested by the Lessors join in and execute as a Co-Lessor a Lease of the dwelling units for a term corresponding with the unexpired period of this Lease, which Lease shall contain a restrictive covenant in the same form as Clause 31 hereof in respect of the relevant area exclusive of the dwelling units and shall otherwise contain the same terms and conditions as are contained in this Lease (excluding however Clauses 32 to 37 hereof) and the Lessee shall do all such
things as shall be necessary or desirable in order to enable registration of such lease (including co-operating in the deposit of a new Flat Plan) and to obtain the consent thereto of any mortgagee of the Lessee’s estate and interest in the said land, and the Lessors shall at the Lessor’s expense with all due speed register such Lease.
35. THAT in consideration of the granting to the Lessee of this Memorandum of Lease the Lessee doth hereby irrevocably nominate constitute and appoint the Lessors and any nominee of the Lessors to be the true and lawful attorneys and attorney of the Lessee both as Lessee and as registered proprietor of any interest in the fee simple of the said land and on behalf of the Lessee as Lessee and/or such registered proprietor and as fully and effectively as the Lessee either as a Lessee and/or such registered proprietor could do if personally present to execute for the Lessee in any capacity the Lease referred to in Clause 34 hereof and to sign and use the name of the Lessee in any capacity to such Lease and to do all such other acts and things (including signing any new Flats Plan) as shall be necessary or desirable to effect registration of such Lease.
36. THAT in the event of the Lessee or the Lessors transferring or otherwise disposing of the whole or any part of their respective share in the fee simple estate in the said land, then on the occasion of such transfer or other disposition:
(a)A Power of Attorney shall be executed whereby the Lessee or the Lessee’s transferee or disposee, as the case may be, appoints the Lessors or the Lessors’ transferee or disposee, as the case may be, the Attorney of the Lessee or the Lessee’s transferee or dispose, on the same basis and with the same powers as are set forth in Clause 35 hereof.
(b)The Power of Attorney shall be prepared by the solicitors for the Lessors and shall be given and executed prior to the registration of the transfer or other disposition hereinbefore in this Clause referred to. A copy of the Power of Attorney shall forthwith thereafter be deposited in the Land Transfer Office.
(c)The costs of preparation, stamping and registration of the Power of Attorney shall be borne by the person transferring his interest in the fee simple estate in the said land.
The reference in this Clause to a transfer or other disposition by the Lessee or the Lessors of the whole or any part of their respective share in the fee simple estate in the said land shall extend to and include the exercise by any mortgagee or other person of a power of sale in respect of a share in the fee simple estate in the said land.
Nothing contained in this Clause shall prejudice or affect in any manner, the generality, operation or subsistence of Clause 35 of this Lease.
37. THAT once erection of the dwelling units have been completed and the Lease thereof referred to in Clause 34 hereof has been registered Clauses 32 to 36 inclusive hereof shall have no further force or effect.
The relief sought by AAL
[10]In its statement of claim, AAL asks for the following declarations:
(1)A declaration that the meaning and effect of clause 33 of each cross- lease is that:
(i) there is an area of [the land] on which the registered proprietor of [AAL’s] share in the fee simple estate is entitled to erect dwellings and garages and/or other buildings appurtenant to or in association with dwellings (“the dwelling units”), being the area marked as “K” on DP 141791 (CT NA 88A/520) and as “C” on DP 135313 (CT 79D/452) (“the Relevant Area”).
(ii) there are no restrictions under any cross-lease as to how many dwellings may be erected, where the dwelling units may be erected within Areas “K” and “C” or as to the dimensions of the dwellings apart from the requirements that the dwellings be erected within the Relevant Area and conform in all respects to the requirements of Auckland Council and any other “Authority” having jurisdiction for dwelling units on [the land] and also to any requirements of any agreement between the Lessors and the Lessee relating to the erection of the dwellings.
(2)A declaration that the meaning and effect of clause 34 of each cross- lease is that:
(i) on substantial completion of each of the dwellings within the Relevant Area the Lessee shall at the cost in all things of the Lessors (being for the purposes of clauses 32 to 36 of [each cross- lease] the registered proprietor of [AAL’s] share in [the land] and when requested execute as a Co-Lessor a Lease of each of the dwellings for a term corresponding with the unexpired period of the Lessee’s Lease which Lease shall otherwise contain the same terms and conditions as are contained in the Lessee’s lease (excluding clause 32 to 36 of the lease);
(ii) the Lessee shall do all things necessary or desirable in order to enable registration of each new lease; and
(iii) the Lessors shall, at the Lessor’s expense, with all due speed register each such lease.
(3)[A declaration that] the meaning and effect of clause 35 of each cross- lease is that the Lessee irrevocably appoints the Lessors (being for the purposes of clauses 32 to 36 the registered proprietor of [AAL’s] share in [the land] to be the true and lawful attorneys and attorney of the Lessee, both as Lessee and as registered proprietor of any interest in the fee simple of the land and on behalf of the Lessee as Lessee and/or such registered proprietor and as fully and effectively as the Lessee either as a Lessee and/or such registered proprietor could do if personally present, to execute for the Lessee in any capacity each new Lease referred to in clause 34.
Justitiae’s opposition
[11] In its notice of opposition to AAL’s summary judgment application, Justitiae asserts that AAL cannot build on the Relevant Area without the consent of its co- owners of the freehold, and cannot without such consent grant a lease of any part of the Relevant Area. No such consents have been given by Justitiae.
[12] Justitiae then says that even if the cross-lease executed by its predecessor in title to Flat 3 created privity of estate between it as lessee and the current owners of the freehold in the land, the cross-lease could not create privity of estate between the present co-owners of the land. Nor could the cross-lease constitute a grant by the lessee of a leasehold estate in the undeveloped land or purport to create a leasehold interest without the consent of all of the co-owners of the freehold estate. Without the consent of its co-owners, the consent of any holder of a leasehold estate is insufficient to permit AAL to build on the land or to grant or create a further leasehold interest in respect of non-leased areas of the land.
[13] Justitiae says that the covenants in the cross-lease relied upon by AAL are covenants in gross, which do not run with the land. As none of the parties presently before the Court were original parties to the relevant transactions, there is no privity of contract between AAL and Justitia, and a covenant in gross cannot create any privity of estate.
[14] Section 12 of the Contract and Commercial Law Act 2017 (the CCLA) cannot assist AAL, given AAL’s failure to obtain consent from its co-owners to build on the Relevant Area. Section 12 only relevantly applies where a promisor can be sued, and Justitiae was not a promisor.
[15] Justitiae next pleads that there is in fact no uncertainty as to the meaning of the relevant provisions of the cross-lease, nor any existing “lis” between the parties that could form the basis for a grant of declaratory relief. No development plans have been submitted to Justitiae, and no consent has been sought from it (or from the other defendants) to any specific or particular development proposal AAL may have. Nor does the basis on which any power of attorney could arise (on substantial completion of any consented building) exist.
[16] Justitiae says that the remedy for disagreement between co-owners of freehold titles is to make an application to the High Court under s 339 of the Property Law Act 2007 (the PLA) for partition, or for one or more of the other remedies provided under that section. Any application under s 339 would not be appropriate for the summary judgment jurisdiction.
[17] In addition to its notice of opposition, Justitiae has filed a statement of defence. In it, it admits that AAL is entitled to exclusive use as lessee of the Relevant Area. Beyond that, the material allegations in the statement of claim are generally denied. Justitiae says that the only relevant privity of estate existing is that between it in its capacity as lessee of Flat 3 and the remaining defendants (and presumably also AAL) as the freehold owners/lessors.
[18] Justitiae denies that there is any uncertainty as to the meaning of clauses 11 and 32-36 of the cross-lease, and it denies that it has granted a power of attorney to AAL exercisable otherwise than in its capacity as lessee – and not as co-owner. (Even then, any power of attorney would only be exercisable on substantial completion of a building on the Relevant Area, and that has not occurred).
[19] In an affirmative pleading, Justitiae contends that there is no legal relationship between it and AAL, other than as co-owners. In those circumstances, it says that AAL has no cause of action.
[20] Justitiae repeats the pleadings in its notice of opposition that any relevant remedy should have been sought by AAL under s 339 of the PLA, and that AAL has presented no specific development proposal to the defendants. It pleads that AAL has not obtained the consent of all of the defendants (together constituting the lessors under the relevant provisions of the cross-lease) to the development of the Relevant Area, either in their capacities as co-owners of the fee simple estate or as lessors under the relevant cross-leases.
Legal principles applicable to summary judgment applications and applications by a defendant to strike out a plaintiff’s statement of claim
Summary judgment
[21]Rule 12.2 of the High Court Rules 2016 provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[22] The proper approach to be taken to an application by a plaintiff for summary judgment was considered by the Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:2
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Young v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[23] The Supreme Court has confirmed that the fact that the Court may be required to determine questions of law does not preclude summary judgment. In Zurich Australian Insurance Ltd v Cognition Education Ltd, the Court said:3
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
3 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383.
… in other situations falling within the broad test (that is, the "no arguable defence" test applied on summary judgment), there will be what can properly be described as "disputes" even though they are ultimately capable of being determined by a summary process.
[37] To explain, it has been well established in New Zealand since Pemberton v Chappell that a court can properly determine questions of law on a summary judgment application, and that this includes issues of contractual interpretation. The Court of Appeal has accepted that such a determination may be made even though the question of law is difficult and requires argument (including reference to authority). In International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd, a case under the old bill writ procedure, Cooke P, by analogy with the summary judgment procedure which had just been introduced in New Zealand, said that where the facts were adequately ascertained and the Court could be confident that the point at issue turned on pure questions of law or interpretation, it should be prepared "to determine, on adequate argument, even difficult legal questions". Similarly, in Jowada Holdings Ltd v Cullen Investments Ltd, McGrath J, delivering the judgment of the Court of Appeal, said that a court should be prepared to grant summary judgment "even if legal arguments must be ruled on to reach the decision".
(footnotes omitted)
[24] The main point to be noted about a defendant’s application for summary judgment under r 12.2(2) of the High Court Rules, is that the Court may only give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[25] The decision of the Court of Appeal in Westpac Banking Corporation v MM Kembla New Zealand Limited is authority for the following propositions relating to a defendant’s application for summary judgment:4
(1)A defendant applying for summary judgment has the onus of proving the plaintiff cannot succeed. Usually, summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(2)The Court must be satisfied that none of the claims can succeed: it is not enough that they are shown to have weaknesses.
4 Westpac Banking Corporation v MM Kembla New Zealand Limited (CA) [2001] 2 NZLR 298 at 631.
(3)Summary judgment will only be suitable where all the material facts are not in dispute and can be put before the Court efficiently in affidavit form.
(4)The procedure may be inappropriate if the case is likely to turn on a judgment which can only be reached properly after hearing all the evidence at trial.
(5)Developing points of law may require the added context and perspective provided by a full trial.
Defendants’ strike-out applications
[26] The following principles applicable to strike-out applications are taken from the decision of the Court of Appeal in Attorney-General v Prince,5 and were endorsed by the Supreme Court in Couch v Attorney-General:6
(1)Pleaded facts, whether or not admitted, are assumed to be true.
(2)The cause of action must be clearly untenable: the Court must be certain that it cannot succeed.
(3)The jurisdiction is to be exercised sparingly, and only in clear cases.
(4)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(5)The Court should be particularly slow to strike out a claim in a developing area of the law.
5 Attorney-General v Prince [1998] 1 NZLR 262 (CA).
6 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.
[27] In an appropriate case, the Court may receive affidavit evidence on a strike-out application, but it will not attempt to resolve genuinely disputed issues of fact. Generally, affidavit evidence admitted on a strike-out application will be limited to matter which is undisputed.7
[28] Each cause of action is to be considered separately, and if the Court concludes that it clearly cannot succeed, it may be struck out.
AAL’s application for summary judgment - the issues
[29] The following issues fall to be determined on AAL’s application for summary judgment:
(1)Is there a sufficiently identified “lis”, or dispute between the parties, that it is clear that jurisdiction exists to grant the declaratory relief sought?
(2)If the answer to Issue (1) is “yes”, is it clear that there is privity of estate between the plaintiff and each of the defendants, so that AAL may enforce the covenants in clauses 32-36 of the cross-lease against the defendants?
(3)If the answer to Issue (1) is “yes” but the answer to Issue (2) is “no”, is it clear that AAL is entitled to enforce the covenants in clauses 32-36 of the cross-lease against the defendants:
(i) as covenants running with the land, under s 303 of the PLA; and/or
(ii) under ss 12 and 17 of the CCLA (as covenants containing promises that confer benefits on AAL, it being a person designated in the cross-lease by description or reference to a class)?
(4)Is it reasonably arguable for Justitiae that AAL’s only proper recourse is to seek relief under s 339 of the PLA?
7 Attorney-General v McVeagh [1995] 1 NZLR 558 at 566 (CA).
(5)If AAL has shown that the defendants have no defence to its claims:
(i)should the Court exercise its discretion to grant declaratory relief; and if so
(ii)what should be the form of that relief?
[30]I address each of the Issues in turn.
Issue (1) – Is there a sufficiently identified “lis”, or dispute between the parties, that it is clear that jurisdiction exists to grant the declaratory relief sought?
Submissions for Justitiae
[31] For Justitiae, Mr Hucker submitted that the future legal position is speculative while AAL is not bound to build on the Relevant Area, and has not yet built. Justitiae reserves its position. He submitted that when there is some finality to AAL’s claim (or that of any developer to whom AAL might sell its interest in the land), which will only occur when a caveat registered on the title to the land has been released and final building plans and specifications are advised, Justitiae will determine whether these comply with relevant consents, and whether or not the plans affect the views from, and value of, Flat 3. In the meantime, and unless AAL can rely on the Declaratory Judgments Act 1908 (the DJA),8 the Court will not give the parties legal advice on speculative (conditional) rights.
[32] The DJA will not assist AAL. Even after substantial completion of the building, any lis, if one then exists, will not turn on the construction of the cross-lease, but on the application of basic principles of land law and the law of contract which prevent the relevant provisions of the cross-lease operating against Justitiae. Mr Hucker
8 Section 3 of the Declaratory Judgments Act 1908 provides: Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any statute, or any regulation made by the Governor-General in Council under statutory authority, or any bylaw made by a local authority, or any deed, will, or document of title, or any agreement made or evidenced by writing, or any memorandum or articles of association of any company or body corporate, or any instrument prescribing the powers of any company or body corporate; or where any person claims to have acquired any right under any such statute, regulation, bylaw, deed, will, document of title, agreement, memorandum, articles, or instrument, or to be in any other manner interested in the construction or validity thereof –
Such person may apply to the [High Court] by originating summons … for a declaratory order determining any question as to the construction or validity of such statute, regulation, bylaw, deed, will, document of title, agreement, memorandum, articles, or instrument, or of any part thereof.
submitted that those principles, considered on the facts of this case, are likely to “expose the systemic shortcomings” of ‘‘cross-lease’’ conveyancing, especially in circumstances where the entire freehold was not cross-leased at the same time.
Submissions for AAL
[33] For AAL, Mr Fisher submitted that the following propositions are essential to an understanding of AAL’s claim:
(1)Clauses 33-35 of the cross-lease create agreements to lease;
(2)The leasehold estate for the purposes of clauses 33-35 is an estate in the Relevant Area (defined in clause 32(a)) until dwelling units are erected, and then it is an estate in the dwelling units themselves;
(3)The lessors of that leasehold estate are the co-owners of the fee simple estate in that capacity (including AAL), and the lessee is the person defined in clause 32(b) (i.e. AAL);
(4)Alternatively, the estate of the co-owners in the fee simple estate is land “burdened” by the agreement to lease just referred to. The lessors’ covenants in the agreement to lease were intended to benefit the person described in cl 32(b) of the cross-lease, as owner for the time being of the lessee’s interest under the agreement to lease. That person is presently AAL, and the effect of s 303 of the Property Law Act (referred to below) is that AAL is entitled as lessee under the agreement to lease to enforce cls 33-35 against the defendants (as co-lessors).
(5)Further in the alternative, the covenants in cls 33-35 are enforceable by AAL under ss 12 and 17 of the CCLA.
[34] Mr Fisher submitted that Justitiae has misconceived AAL’s position, wrongly arguing that the relevant leasehold estates for the purposes of clauses 33-35 are estates created by the cross-leases of the Flats to which each registered cross-lease relates, and that AAL is seeking to enforce covenants given by the lessee of each Flat in their
capacities as lessees. On AAL’s argument under s 303 of the PLA, Justitiae wrongly argues that the burdened land is the Flat under each cross-lease.
[35] Mr Fisher submitted that the basis for AAL’s argument does turn on the proper construction of clauses 33-35. He submitted that express or implied references to the Lessors or the Lessee in cls 33-35 are for identification purposes only, and do not necessarily define the capacity in which the party is bound by any covenant in those clauses.
[36] Mr Fisher submitted that the arguments between the parties relate to the nature and extent of the rights and interests of a registered owner of AAL’s share in the fee simple estate. The nature and extent of those rights and interests involves the proper construction of clauses 33-35. There is uncertainty as to the meaning of clauses 33-35, and that uncertainty is adversely affecting the realisable value of AAL’s interest in the land - it is unclear what the owner of that interest is entitled to do in connection with the development of the Relevant Area, particularly in relation to its rights to erect dwelling units thereon. Removal of the uncertainty as to what a registered proprietor of the interest presently held by AAL is entitled to do is not a speculative or conditional exercise, as Justitiae suggests.
[37] Mr Fisher submitted that there is no relevant difference between the statutory jurisdiction of this Court to make a declaratory order under the DJA, and the Court’s inherent jurisdiction to grant declaratory relief. The DJA merely provides a special procedure by which declaratory orders can be sought other than by commencing ordinary civil proceedings.9 AAL relies in this case on the Court’s inherent jurisdiction, which is co-extensive with the statutory jurisdiction under the DJA.
Discussion and conclusions on Issue 1
[38] The claim made by AAL is for declaratory relief to be granted in the exercise of the Court’s inherent jurisdiction. AAL does not rely on the statutory jurisdiction under s 3 of the DJA.
9 Johnston v Johnston [1991] 2 NZLR 608, at 616.
[39] Section 2 of the DJA provides that no proceeding in this Court shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby. The Court may make binding declarations of right whether or not any consequential relief is or could be claimed.
[40] In Johnston v Johnston, Neazor J noted that s 2 of the DJA does not refer only to the statutory jurisdiction conferred by s 3 – it has the wider effect of removing any objection which might have been offered in the past if a declaration had been sought in circumstances where no other relief was sought or available. Binding declarations may be made in the Court’s discretion, in appropriate cases.10
[41]In Gouriet v Union of Postal Workers Lord Diplock said:11
The only kinds of rights with which courts of justice are concerned are legal rights; and a court of civil jurisdiction is concerned with legal rights only when the aid of the court is invoked by one party claiming a right against another party, to protect or enforce the right or provide a remedy against that other party for infringement of it, or is invoked by either party to settle a dispute between them as to the existence or nature of the right to a claim. So for the court to have jurisdiction to declare any legal right it must be one which is claimed by one of the parties as enforceable against an adverse party to the litigation, either as a subsisting right or as one which may come into existence in the future conditionally on the happening of an event.
The early controversies as to whether a party applying for declaratory relief must have a subsisting cause of action or a right to some relief as well can now be forgotten. It is clearly established that he need not. Relief in the form of a declaration of right is generally superfluous for a plaintiff who has a subsisting cause of action. It is when an infringement of the plaintiff’s rights in the future is threatened or when, unaccompanied by threats, there is a dispute between parties as to what the respective rights will be if something happens in the future, that the jurisdiction to make declarations of right can be mostly usefully invoked. But the jurisdiction of the court is not to declare the law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else.
[42] In this case, AAL is the proprietor of a substantial interest in the land which it wishes to realise, whether by way of immediate sale to a developer or by way of completing the development of the Relevant Area itself, and then selling its interest in the land. AAL contends that the relevant provisions of the cross-lease entitle it, without
10 Johnston v Johnston, above n 9, at 616.
11 Gouriet v Union of Postal Workers [1978] AC 435 (HL) at 501.
further ado, to start building additional dwellings and related buildings on the Relevant Area. Justitiae contends that AAL has no such right without the removal of an existing caveat, and without AAL obtaining the consents of the co-owners of the fee simple prior to the commencement of any construction work on the Relevant Area, and subsequent leasing of additional dwellings.
[43] The caveat Mr Hucker refers to is one under which the fourth defendant has asserted an equitable interest under an alleged agreement with MDL, from whom AAL acquired its interest in the land.
[44] There has been some contention as to the legitimacy of this alleged equitable interest, and AAL has sought an order to lapse the caveat. However, in a judgment delivered by Associate Judge Sargisson on 2 July 2019, the Court declined to remove the caveat.12
[45] Whether or not the alleged agreement underpinning the caveat exists does not affect rights as between AAL and Justitiae, and the fourth defendants have elected not to oppose AAL’s summary judgment application. In those circumstances, I am of the view that the existence of the caveat does not prevent there being a sufficient controversy or dispute between the parties (relating to the interpretation of the relevant provisions of the cross-lease) that is amenable to being determined on an application for declaratory relief.
[46] AAL’s right to commence construction on the Relevant Area, and thereafter to compel the defendants to join with it in issuing leases of additional dwellings to third party purchasers, is in my view a substantial matter directly affecting a legal right in respect of the land which is asserted by AAL and contested by Justitiae. As such, there is in my view nothing speculative, or conditional, about the issue between the parties. There is a direct dispute as to what AAL can and cannot do now with its interest in the land (build on the Relevant Area or not), and as to whether it will be able to compel the defendants to join with it in executing (as co-lessors) a lease of the additional dwellings when they are erected on the Relevant Area.
12 Aitken and Felstead v AAL Holdings Limited [2019] NZHC 1510 at [30].
[47] I also accept Mr Fisher’s submission that a determination of AAL’s rights and interests under the cross-lease does require a decision on the proper construction of clauses 33-35, and in particular on AAL’s argument that those clauses had the effect of creating an agreement to lease the Relevant Area (and then the additional dwellings to be erected on the Relevant Area), under which the owners of the fee simple estate in the land would be the lessors and the owner of the interest in the fee simple estate presently held by AAL would be the lessee. Whether the clauses had that effect will be dependent, at least in part, on whether the expressions “the Lessors” and “the Lessee” as used in cl 33-36 were used to refer to the Lessors and the Lessee acting in those capacities, or whether the expressions were used simply to identify the respective parties (so that, for example, a particular covenant in one of the clauses given by the Lessee should be construed as having been given by the Lessee in his or her capacity as a co-owner). Interpretation arguments of that sort are in my view eminently suitable for determination on an application for declaratory relief.
[48] For all of those reasons, I find for AAL on Issue 1. It is not reasonably arguable for the defendants that there is no sufficiently identified lis, or dispute between the parties, for the Court to exercise its jurisdiction to grant the declaratory relief sought (if it is otherwise appropriate to do so).
Issue (2) – If the answer to Issue (1) is “yes”, is it clear that there is privity of estate between the plaintiff and each of the defendants, so that AAL may enforce the covenants in clauses 32-36 of the cross-lease against the defendants?
Submissions for AAL
[49] I have already set out the principal submissions made by Mr Fisher, under Issue 1 above. Briefly, Mr Fisher submitted that clauses 33-35 of the cross-lease give AAL the immediate right to exclusive possession of the Relevant Area (that is, a lease of the Relevant Area for the purpose of erecting dwelling units thereon). He submitted that the clauses then give AAL the right to require the defendants as co-owners to execute a lease of the additional dwellings on the Relevant Area once they have been built, on the same terms as the existing cross-lease. The clauses are also said to give AAL the right to execute, as attorney for the defendants, registerable cross-leases and related development documents in respect of the buildings to be erected on the Relevant Area.
[50] Mr Fisher noted that the definition of “lease” in s 4 of the PLA expressly includes an agreement to lease. He submitted that the agreement to lease must be enforceable by AAL as lessee against the present co-owners of the fee simple estate as lessors, under s 231(1)(b) of the PLA. Under that section, the person who is from time to time entitled to the relevant leasehold estate or interest (in this case, AAL), is entitled to enforce the burden of relevant lessors’ covenants that refer to the subject matter of the agreement to lease against the person who is from time to time entitled to the relevant reversionary interests (in this case, AAL and the defendants together).
Submissions for Justitiae
[51] For Justitiae, Mr Hucker submitted that the only relevant covenants given by Justitiae’s predecessor in title were given by it qua lessee, and not as lessor. He submitted that is the appropriate interpretation of the cross-lease, including in particular clause 32.
[52] As privity of estate depends on the respective parties’ status, and not on any agreement between them, Mr Hucker submitted that Justitiae’s predecessor in title could only have given any covenant running with the land, as lessee. And to the extent promises made by Justitiae’s predecessor in title were made as lessee, the promises were illusory, because the owners of the Relevant Area had the right to develop the Relevant Area if they unanimously agreed to do so, regardless of what views they may have expressed in their capacities as lessees. Any promises relating to the development of the land could only have been promises between the co-owners in personam; such promises do not have effect in rem. They do not run with the land.
[53] Mr Hucker noted that the right to build on the Relevant Area conferred by clause 33 would be irrelevant if there were no concomitant right to lease after building. That must be so, because without a lease no building would ever occur: the builder would have to establish before commencing the work that each co-owner was bound to grant a lease of the buildings erected on the Relevant Area.
[54] Mr Hucker submitted that, at best for AAL, the provisions of clauses 33 and 34 only amounted to a promise by Justitiae’s predecessor in title, in its capacity as lessee, to procure its own signature in its different capacity as a co-owner of the fee
simple estate. Any promise by a lessee to procure the signature of a lessor, even if the lessor and the lessee coincidentally happened to be the same person, is not a promise touching and concerning the leased land. It is a promise touching and concerning contiguous unleased land. Further, a conditional promise to procure a co-owner to sign is a promise made in personam, and the limits of the doctrine of privity of estate prevent it being enforceable against an assignee of the (promisor) leasehold estate.
[55] The reality of what occurred when the forms of cross-lease were executed and the composite Certificates of Title were issued, is that the former co-owners of the fee simple made promises between themselves, as co-owners, to grant Art & Architecture Limited and Mr Aitken a lease of any buildings they might erect on a piece of land the original parties owned together (the Relevant Area), as and when those buildings were completed.
[56] Mr Hucker submitted that, as a matter of contract law, the bare burdens of a contract are not transferable. A promise between co-owners to grant a lease of their land to one of them without consideration, is a burden, not a benefit.
Discussion and conclusions on Issue 2
[57] First, it is common ground that there is no privity of contract between the plaintiffs and the defendants – none of them were original parties when the flat plans were deposited and the four forms of cross-lease were signed, and there is no direct contractual relationship between them. AAL says that does not matter, as the defendants are each bound by the covenants in cls 33-35 under the doctrine of privity of estate.
[58] Under that doctrine, the holder for the time being of a leasehold interest in land owes certain duties to the current owner/lessor of the land (for example, to pay the rent payable under the lease), notwithstanding that neither of them may have been a party to the lease when it was originally signed. Similarly, a transferee of the reversion will owe certain duties under the lease to whoever may be the current lessee. But not all covenants in the original lease will be binding on an assignee of the leasehold interest or a transferee of the reversion – some may be regarded as personal covenants, binding only the original lessor and lessee.
[59] The principal statutory provisions that address the question of which of the lease covenants will “run with the land”, and so bind a transferee of the reversion or assignee of the leasehold interest, are ss 231-233 of the PLA. Those sections provide:
231 Burden of lessor’s covenants to run with reversion
(1)If the reversion expectant on a lease ceases to be held by the lessor (whether by transfer, assignment, grant, operation of law, or otherwise), the obligations imposed by every covenant of the lessor—
(a)run with the reversion; and
(b)may be enforced by the person who is from time to time entitled to the leasehold estate or interest against the person who is from time to time entitled to the reversion.
(2)Subsection (1) applies unless a contrary intention appears from the lease or from another circumstance.
(3)In subsection (1), the reference to every covenant of the lessor is,—
(a)for a lease that comes into operation before 1 January 2008, a reference to every covenant of the lessor that refers to the subject matter of the lease; and
(b)for a lease that comes into operation on or after that date, a reference to every covenant of the lessor, whether it refers to the subject matter of the lease or not.
232 Rights under lease to which section 233 applies
(1)Section 233 applies to all or any of the following rights under a lease:
(a)the right to receive the rent payable:
(b)the right to enforce every covenant of the lessee, including a covenant relating to a subject matter that was not in existence when the covenant was made:
(c)the right to enforce any guarantee of the performance of all or any covenants of the lessee:
(d)all rights and remedies of the lessor.
(2)In subsection (1)(b), the reference to every covenant of the lessee is,—
(a)for a lease that comes into operation before 1 January 2008, a reference to every covenant of the lessee that refers to the subject matter of the lease; and
(b)for a lease that comes into operation on or after that date, a reference to every covenant of the lessee, whether it refers to the subject matter of the lease or not.
(3)In subsection (1)(d), the reference to the rights and remedies of the lessor under a lease includes a reference to—
(a)the right to give any notice under the lease; and
(b)the right to take advantage of any condition of the lease; and
(c)the right to re-enter or apply for an order of possession of the land; and
(d)the right to cancel the lease.
233 Benefit of lessee’s covenants to run with reversion
(1)If the reversion expectant on the lease ceases to be held by the lessor (whether by transfer, assignment, grant, operation of law, or otherwise), the rights to which this section applies—
(a)run with the reversion; and
(b)may be exercised by the person who is from time to time entitled to the income of the land, whether or not the lessee has acknowledged that person as lessor (that is, with or without attornment by the lessee).
(2)Subsection (1) applies unless a contrary intention appears from the lease or from another circumstance.
[60] In this case, the cross-lease was entered into before 1 January 2008, so ss 231(3)(a) and 232(2)(a) apply.
[61] The references in s 231(3)(a) and 232(2)(a) to a covenant that “refers to the subject matter of the lease”, reflect the common law concept that an assignee of a lease or a transferee of the reversion is only bound (subject to any express agreement by the assignee or transferee to the contrary) by covenants in the lease that “touch and concern” the relevant leasehold estate.13
[62] A covenant in a lease will normally be regarded as touching and concerning the land if:14
(i)The covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee;
13 P & A Swift Investments (a firm) v Combined English Stores Group plc [1989] 1 A.C. 632 (HL) at 636.
14 P & A Swift Investments (a firm) v Combined English Stores Group plc, above n 13, at 642, per Oliver LJ. Applied in New Zealand in Mayhew v Robert Jones Investments (1993) 2 NZ ConvC 191, 719 (CA), at 5.
(ii)The covenant affects the nature, quality, mode of user or value of the land of the reversioner;
(iii)The covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); and
(iv)The fact that a covenant is to pay a sum of money will not prevent it from touching or concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land.
[63] P & A Swift Investments was a case which concerned a lessee’s covenant. In Specialist Diagnostic Services Pty Ltd v Healthscope Ltd, the covenant in issue was a lessor’s covenant. Adapting the P & A Swift Investments test to apply to a lessor’s covenant, the Court in Specialist Diagnostic Services said:15
A lessor’s covenant touches and concerns the land if:
(1)the covenant benefits only the lessee for the time being, and if separated from the term ceases to be of benefit to the covenantee (lessee);
(2)the covenant affects the nature, quality, mode of user or value of the demised premises; and
(3)the covenant is not expressed to be personal.
[64] I think all of the requirements of the Specialist Diagnostic Services test would be met if there were an agreement to lease of the kind alleged by AAL.
[65] First, the alleged covenants in this case, being covenants of the co-owners as the Lessors, could only benefit the person defined in cl 32(b) of the cross-lease. If that person ceased to be a registered proprietor of the land, he or she would no longer come within the definition “the Lessors” for the purposes of cls 33-36, and would no longer have any interest in the alleged agreement to lease. The covenants would thus benefit only the person who is the lessee for the time being under the alleged agreement to lease.
[66] Secondly, the covenants would clearly affect the mode of user of the demised premises (being the Relevant Area), as they provide specifically for the use of the Relevant Area (by construction of additional dwellings and related buildings thereon,
15 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd, [2010] VSC 443 at [59].
and the subsequent leasing of the additional dwellings and related buildings). The second of the Specialist Diagnostic Services criteria would be satisfied.
[67] Thirdly, I think it is clear that the covenants in cls 33-35 were not intended to be personal covenants. The promises made by “the Lessee” in the clauses were made to whoever might qualify from time to time as “the Lessors” under cl 32(b); they were not intended to be made only to the named lessors in the Justitiae cross-lease, Art & Architecture Ltd and Norman Aitken.
[68] So I think that if cls 32-35, read with the other provisions of the cross-lease, are properly construed as creating the agreement to lease for which AAL contends, any covenants in these clauses which on their proper construction are covenants to be performed by the co-owners of the freehold must be covenants that “touch and concern” the land (being the Relevant Area). Such covenants are therefore covenants that “refer to the subject matter of the [agreement to] lease”. If that is right, Mr Fisher will be correct in submitting that AAL is entitled to enforce the covenants under s 231(1)(b) of the PLA.
[69] Mr Hucker submitted that the covenants given by “the Lessee” in cls 33-35 were given by the Lessee only in its capacity as lessee, but I do not think that can be right. The first point is that while the expression “the Lessors” is defined for the purposes of cls 33-37 in cl 32(b), no similar definition of the expression “the Lessee” is provided for use in reading those clauses. The meaning of “the Lessee” in cls 33-37 therefore has to be ascertained from the clauses themselves, read in the context of the cross-lease as a whole.
[70] Secondly, I think cls 33-35 have to be read together to understand their full meaning and intent. For example, I think Mr Hucker was clearly correct when he submitted that no question of erection of buildings (cl 33) would arise unless and until it was clear that the co-owners would join with “the lessors” in executing and registering an appropriate cross-lease of the additional dwellings and related buildings. There would be no new cross-lease (cl 34) unless and until the additional dwellings and related buildings had been erected (cl 33).
[71] The next step is that cl 34 quite clearly imposed on the Lessee the obligation to join in and execute the new lease, as an obligation qua co-lessor, or co-owner of the freehold. Mr Hucker correctly pointed out that the Lessee could not do this as lessee of its own Flat, but I do not think this obligation could possibly be read as some sort of obligation on the Lessee, qua lessee of its own Flat, to somehow “procure” the execution of the new lease by itself in its separate capacity as a co-owner of the fee simple estate in the land. That would be an unnecessarily strained and improbable meaning to take from cl 34 in circumstances where the clause quite clearly requires the Lessee to do certain things “as a co-lessor”.
[72] I think the better interpretation is that advanced by Mr Fisher, namely that the use of the expression “the Lessee” in cls 33-35 was intended only to identify the party concerned, and not to specify the capacity (lessee or co-owner) in which the person referred to as “the Lessee” was required to act.
[73] I think that interpretation is consistent with the wording of the powers of attorney given by the Lessee to the Lessors in cl 35. The Lessee appoints the Lessors to be its attorney not only to take steps the Lessee might have taken qua lessee of its own Flat, but also “as requested proprietor of any interest in the fee simple” of the land. Clause 35 goes on to empower the Lessors to execute for the Lessee “in any capacity” the lease referred to in cl 34, and to sign and use the name of the Lessee “in any capacity to such lease”.
[74] In my view, the Lessee was clearly making promises in cls 33-34 both as lessee of its own Flat, and as a co-owner of the fee simple estate in the land. If those promises effectively created the agreement to lease for which AAL contends, I do not consider it arguable for the defendants that the covenants in the agreement to lease did not run with the land (the Relevant Area), so as to bind the defendants.
[75] I have not overlooked cl 36, which required a Lessee transferring his or her interest in the fee simple estate to obtain from the transferee a power of attorney in favour of the Lessors, conferring on the Lessors the same powers as those contained in cl 35 of the cross-lease. At first sight this provision would appear to be unnecessary if the Lessee’s promises in fact ran with the land. But the last paragraph of cl 36 states:
Nothing contained in this Clause shall prejudice or affect in any manner, the generality, operation or subsistence of cl 35 of this lease.
[76] Mr Fisher submitted that cl 36 was a “belt and braces” clause, included by the draftsperson out of an abundance of caution, and not intended to reflect any intention that the Lessee’s obligations were not intended to run with the land. I accept that submission. The last paragraph of cl 35 makes it clear that the clause was not to affect the “operation or subsistence” of cl 35, in circumstances where either the Lessors or the Lessee had transferred or disposed of their respective interests in the fee simple of the land.
[77] The next question on this issue is whether it is arguable for the defendants that clauses 33-35 of the cross-lease, properly construed, did not create an agreement to lease, under which the owners of the fee simple of the land would be the lessors and the person identified in clause 32(b) of the cross-lease would be the lessee. I do not think it is.
[78] First, I accept Mr Fisher’s submission, based on the decision of Paterson J in U-Needa Laundry v Hill, that a single co-owner can grant a leasehold estate in land.16 Thus, the lessee under each original cross-lease was able to grant a lease, in its capacity as a co-owner of the fee simple estate, of its interest in the fee simple estate. It is clear too that the intention of the cross-leases was that the person described in clause 32(b) was intended to have exclusive possession of the Relevant Area; that is in my view the combined effect of clauses 11, 33 and 34 of the cross-lease, and it is not denied by Justitiae. Indeed, Justitiae has admitted in its statement of defence that AAL is “entitled to the exclusive use as lessee” of the Relevant Area.
[79] Secondly, I also accept Mr Fisher’s submission that the essential elements of a valid lease (of the kind contended for by AAL) are present in clauses 33-35. Those principles are described in Principles of Real Property Law as follows:17
(i)The lessee must be given the legal right to exclusive possession of the premises; and
16 U-Needa Laundry v Hill [2000] 2 NZLR 308 at [25].
17 GW Hinde, Principles of Real Property Law (2nd Ed.), at [11.004].
(ii)The term must be for a definite period in the sense that it must have a certain time for commencement and a certain time of ending; and
(iii)The lease must be created in the appropriate form.
[80] As noted above, the requirement of exclusive possession is satisfied. So also are the requirements relating to the term of the agreement to lease. The term clearly commenced on the execution of each cross-lease, when the person occupying the position of “the Lessors” under clause 32(b) was granted exclusive possession of the Relevant Area for the purpose of building additional dwellings and related buildings thereon. Thereafter, the owners of the fee simple each agreed that “the Lessors” would be granted a lease of each such new dwelling. The term granted by each Lessee was the term of his or her cross-lease (999 years).
[81] I did not understand Justitiae to argue that the cross-lease was not created in the proper form, and I consider that would not have been reasonably arguable in any event. The relevant agreement to lease was made in writing with each Lessee, and there was sufficient consideration given by all parties (in the form of the burdens of the various covenants each made in the cross-leases).
[82] I conclude accordingly that AAL has sufficiently shown that the defendants have no defence to its claims that clauses 33-35 had the effect of creating the agreement to lease for which it contends, and that that agreement to lease is enforceable against the defendants under s 231(1)(b) of the PLA. The answer to Issue
(2) is “yes”.
Issue (3) – If the answer to Issue (1) is “yes” but the answer to Issue (2) is “no”, it is clear that AAL is entitled to enforce the covenants in clauses 32-36 of the cross- lease against the defendants:
(i)as covenants running with the land, under s 303 of the PLA; and/or
(ii)under ss 12 and 17 of the CCLA (as covenants containing promises that confer benefits on AAL, it being a person designated in the cross-lease by description or reference to a class)?
[83] In light of the views to which I have come on Issues (1) and (2), no answer is required on this Issue.
Issue (4) – Is it reasonably arguable for Justitiae that AAL’s only proper recourse is to seek relief under s 339 of the PLA?
[84]I do not consider this is reasonably arguable for the defendants.
[85]Section 339, 342 and 343 of the PLA materially provide:
339 Court may order division of property
(1) A court may make, in respect of property owned by co-owners, an order—
(a) for the sale of the property and the division of the proceeds among the co-owners; or
(b) for the division of the property in kind among the co-owners; or
(c) requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.
(2) An order under subsection (1) (and any related order under subsection (4)) may be made—
(a) despite anything to the contrary in the Land Transfer Act 2017; but
(b) only if it does not contravene section 340(1); and
(c) only on an application made and served in the manner required by or under section 341; and
(d) only after having regard to the matters specified in section 342.
…
(4) A court making an order under subsection (1) may, in addition, make a further order specified in section 343.
(5) Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).
…
342 Relevant considerations
A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:
(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:
(b) the nature and location of the property:
(c) the number of other co-owners and the extent of their shares:
(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:
(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:
(f) any other matters the court considers relevant.
343 Further powers of court
A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:
(a) requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
(b) fixes a reserve price on any sale of the property:
(c) directs how the expenses of any sale or division of the property are to be borne:
(d) directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:
(e) allows a co-owner, on a sale of the property, to make an offer for it, on any terms the court considers reasonable concerning—
(i) the non-payment of a deposit; or
(ii) the setting-off or accounting for all or part of the purchase price instead of paying it in cash:
(f) requires the payment by any person of a fair occupation rent for all or any part of the property:
(g) provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).
[86] Section 339 is an empowering section, under which this Court may make an order for the sale of a property and the division of the proceeds of sale among the co- owners. Alternatively, the Court may order division of the property in kind among the co-owners, or that one or more co-owners must purchase the others’ shares. That is not the kind of situation with which this case is concerned. AAL is not seeking to have the land sold, or to affect the status of any owner of the land as owner – it is only seeking to enforce promises (made by a predecessor in title of each owner, and binding on each owner) to grant a lease of part of the land, on particular terms. I see nothing in s 339 which would preclude a proceeding of that sort. The answer to Issue (4) is “no”.
Issue 5
If AAL has shown that the defendants have no defence to its claims:
(i)should the Court exercise its discretion to grant declaratory relief; and if so
(ii)what should be the form of that relief?
[87] AAL did not advance any compelling reason for the Court to exercise its discretion against the making of the declarations sought, and for the reasons set out in
my discussion and conclusions on Issue (1) I am satisfied that declarations substantially in the form sought, reflecting the relevant wording of the cross-lease and this judgment, are both necessary and appropriate. AAL is to submit a draft order setting out the declarations sought in the light of this judgment, within 10 working days. Justitiae may file any memorandum in reply within 5 working days of service on it of the draft orders.
Justitiae’s application for summary judgment or a striking out order
[88] It follows from my findings on AAL’s application for summary judgment that these applications cannot succeed. I mention, however, that Justitiae did also raise a limitation issue in their summary judgment and/or strike-out application. Justitiae contended that, as co-owner, it has made no promise to AAL, and it is not bound by any promise that may have been made by any of its predecessors-in-title. Justitiae contended that the enforcement of any promise, if one did exist (denied), would be statute-barred under the Limitation Act 1950.
[89] Mr Hucker did not appear to put any weight on a limitation argument in his submissions, and it was not referred to in Justitiae’s statement of defence.
[90] I have already held that Justitiae is bound by the relevant provisions of the cross-lease, and no sufficient factual basis has been put forward to make it arguable that the proceeding was not commenced within any applicable limitation period.
[91] For the reasons I have mentioned, Justitiae’s summary judgment and strike-out applications are dismissed.
Result
(1)AAL’s application for summary judgment succeeds. AAL is to submit a draft order setting out the declarations sought in the light of this judgment, within 10 working days. Justitiae may file any memorandum in reply within 5 working days of service on it of the draft orders.
(2)Justitiae’s application for summary judgment or an order striking out AAL’s claim is dismissed.
(3)AAL is entitled to costs on a 2B basis against Justitiae, together with disbursements as fixed by the Registrar. I make orders accordingly. The other defendants did not oppose the summary judgment application and, in those circumstances, I do not consider it appropriate to award costs against them.
Associate Judge Smith
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