ABCDE Investments Limited v Van Cog - [2013] NZCA 351

IN THE COURT OF APPEAL OF NEW ZEALAND

CA345/2012
[2013] NZCA 351

BETWEEN	ABCDE INVESTMENTS LIMITED & ORS Appellants
AND	JOHN BERNARD VAN GOG AND KIM MARGARET VAN GOG First Respondents
AND	BODY CORPORATE S89906 Second Respondent

Hearing:	22 May 2013
Court:	Arnold, Harrison and Rodney Hansen JJ
Counsel:	T J Rainey and J P Wood for Appellants M D Branch and K I Bond for Respondents No appearance for Second Respondent
Judgment:	6 August 2013 at 2.30 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants must pay the first respondents costs on a standard band A basis together with usual and reasonable disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

The Terraces is a 23 unit residential complex at Mount Maunganui which has been subdivided into units under the Unit Titles legislation.[1] The relevant planning instruments prohibit owners from residing permanently in their units or retaining permanent tenants and limit the units to being used for short stay accommodation of not more than three months (that is, essentially as holiday accommodation). Owners have used their units in this way since the development was completed in 2000.
[1]Created by the Unit Titles Act 1972 but now governed by the Unit Titles Act 2010.
While the units are self-contained residences, the complex is operated in a way similar to a motel. Building managers who own one of the units, unit 23 (the management unit), offer accommodation services on behalf of owners who wish to let their units for short terms. The relationship between the managers and the owners is governed by a series of contractual instruments including a memorandum of encumbrance. Seven of the unit owners (collectively ABCDE) challenge the validity of the encumbrance, and appeal against the judgment of Collins J in the High Court dismissing an application for a declaration that the encumbrance is unenforceable.[2]

Facts

[2]ABCDE Investments Ltd v Van Gog [2012] NZHC 1131, (2012) 13 NZCPR 539. The second respondent abides the decision of the Court.

The relevant facts are not in dispute and can be summarised briefly as follows:
(a)On 8 November 2000 the directors of Ocean Beach Custodians Ltd (OBCL), the developer of the Terraces, signed a notice of change of the amended rules to be lodged for the proposed body corporate.
(b)On 27 November 2000 the directors of OBCL signed the memorandum of encumbrance in the capacities of both encumbrancor (as registered proprietor of units 1–22) and encumbrancee (as registered proprietor of unit 23). By virtue of this encumbrance, OBCL (as proprietor of unit 23) agreed to pay itself (as proprietor of units 1–22) a rent charge of $1 per year for 999 years and abide by the relevant covenants.
(c)On 6 December 2000 the unit plan of the Terraces was deposited. Body Corporate S89906 came into existence under the Unit Titles Act 1972. OBCL was the original owner of all the units. On the same day the memorandum of encumbrance was entered onto the titles…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NZCA 351
Decision Date: 6 August 2013 at 2.30 pm

CaseChat Overview and Summary

ABCDE Investments Limited and others, the appellants, challenged the validity of an encumbrance that was executed by the original developer of The Terraces, Ocean Beach Custodians Ltd (OBCL). OBCL, as the proprietor of unit 23, agreed to pay itself, as proprietor of units 1–22, a rent charge of $1 per year for 999 years and abide by the relevant covenants. The encumbrance granted the building managers the exclusive right to let the units for short stay accommodation of not more than three months. The building managers, the first respondents John and Kim Van Gog, were the current managers of The Terraces. ABCDE sought a declaration that the encumbrance was unenforceable. The Court of Appeal considered whether the encumbrance conferred on the building managers the exclusive right to exercise the letting service and whether the encumbrance contained all the essential terms necessary to give rise to an enforceable contract between the managers and owners. The Court of Appeal held that the encumbrance did confer on the building managers an exclusive right to exercise a letting service and that the encumbrance contained all the essential terms necessary to give rise to an enforceable contract between the managers and owners. The appeal was dismissed, and ABCDE must pay the Van Gogs costs on a standard band A basis together with usual and reasonable disbursements.

Orders