Beechnest (2014) Limited v Marshall
[2023] NZHC 3226
•16 November 2023
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2022-442-30
[2023] NZHC 3226
BETWEEN BEECHNEST (2014) LIMITED
Appellant
AND
LEIGHTON WATSON MARSHALL and ALEXANDRA UNTERBERGER and NELSON TRUSTEES NO. 8 LIMITED as
trustees of the Portixol Family Trust First Respondents
GISELA BARBARA PURCELL and WAYNE CALVIN POOL
Second RespondentsRUSSELL MAURICE McGUIGAN and FRANCESCA FIONA DEBORAH McGUIGAN
Third RespondentsERIN LESLEY McLEOD and JARRON STEWART McLEOD
Fourth Respondents
Hearing: 16 August 2023 (AVL) Appearances:
D M O’Neill for Appellant
B F McDonald for Respondents
Judgment:
16 November 2023
JUDGMENT OF GRICE J
(Leave to appeal)
BEECHNEST (2014) LIMITED v MARSHALL & ORS [2023] NZHC 3226 [16 November 2023]
Introduction
[1] Beechnest (2014) Ltd (Beechnest) applies for leave to appeal to the Court of Appeal against a judgment dated 15 March 2023.1 The appeal would be a second appeal, as the High Court decision dismissed an appeal from a District Court judgment.2
[2] The substantive issue involved relates to an application under s 317 of the Property Law Act 2007 (the Act) to modify or extinguish a covenant registered on two large lots, numbered Lots 55 and 20, in a residential subdivision at St Arnaud, near Nelson. The area boasts spectacular alpine wetland views. The proposal drew strong opposition from owners of other lots in the established subdivision. They refused to grant their consent to the proposal by Beechnest to modify the covenants to enable a subdivision of those two lots into a total of 10 lots.
[3] In submissions on appeal, Mr O’Neill, for Beechnest, noted the matter was significant for the appellant as it would enable it to develop 10 sections instead of two. It stood to make a substantial amount more out of selling 10 lots than it did out of the present two lots. The appellant also had obtained subdivision approval under the Resource Management Act 1991 before applying for the modification of the covenants. It said that at the time it obtained resource consent from the Tasman District Council, it did not realise that it was prohibited from subdividing by the terms of the covenants.3 Mr O’Neill also noted that Beechnest had invested approximately $600,000 to establish building platforms on the lots. Beechnest was unsuccessful in both the District Court and on appeal to the High Court in obtaining the modifications that it sought to the covenants.
1 Beechnest (2014) Ltd v Marshall [2023] NZHC 519 [High Court decision].
2 Beechnest (2014) Ltd v Marshall [2021] NZDC 16591 [District Court decision].
3 In oral argument in support of this leave application, Mr O’Neill for Beechnest conceded that the covenant prevented subdivision and was not limited to building or construction on the sites. He had taken the position that subdivision was not prevented in his earlier submissions. However, the covenant on its face prohibits subdivision as well as construction, contrary to the terms of the covenant.
Proposed grounds of appeal
[4] The memorandum in support of the application for leave to appeal to the Court of Appeal outlines five grounds the applicant seeks to pursue on the second appeal.
[5] The first relates to the findings upheld on appeal as to the likely use of the two lots unsubdivided compared to the likely use of the 10 lots. The findings were based on a factual and counterfactual analysis as to the most likely nature of the residential dwellings erected on two sites (7,000m2 in the case of Lot 55 and 2,000m2 in the case of Lot 20) as opposed to on the proposed 10 sites, each being a minimum lot size of 1,000m². The sites are presently vacant but with building platforms built in anticipation of the proposed subdivision and some formation of curbs and channelling required if the subdivision proceeded.
[6] The District Court Judge made determinations as to the likely factual (what was likely to be built on the present two lots) as opposed to the counterfactual. The latter was an assessment of the most the most likely house placement and coverage on each of the proposed 10 lots (if the covenant was modified as sought). The District Court Judge made these assessments based on the evidence before him and some assumptions. This was upheld on appeal. The appellant says the District Court was in error in that analysis because it was not based on the evidence. Therefore, the High Court was also in error. The error is said to be both factual and legal.
[7] The second ground of appeal as outlined in the memorandum is related to the District Court finding that the appellant could not take advantage of its own actions in breach of the covenant. The appellant says it was not in breach of the covenant because nothing has been built on the site. In addition, the appellant says the error was not one made by the appellant but of its predecessor in title from whom it bought the balance of the original subdivision. The appellant had bought a number of lots in the subdivision including the Lots 55 and 20. The appellant said its predecessor had accidentally brought the non-subdivision covenant down on the two large lots. It says it was always intended that there were meant to be 10 lots in total to be developed in
a further subdivision of the two lots. The development of Lots 55 and 20 was to be a second stage. This is said to be an error of law.
[8] The third and fourth grounds of appeal are related to the second ground. The third and fourth grounds argue that the Court had rejected an argument that it was not reasonably foreseeable that when the covenant was created that further subdivision of the two lots would be restricted. This is because such a subdivision was the intention of the predecessor from the outset. There was no intention to use the two large lots as large residential lots.
[9] The fifth ground of appeal is related to the exercise of the Court’s discretion to dismiss the application.
[10] In conclusion Mr O’Neill said that the cumulative result of the errors was sufficient to provide grounds to grant leave to appeal.
Legal principles for leave to appeal
[11] The leave application is under s 60 of the Senior Courts Act 2016. The legal principles applicable were common ground. Mr O’Neill accepted that for leave to be granted for a second appeal the appellant must demonstrate sufficiently compelling reasons, and that requirement presented a high hurdle when the appeal was based on issues of fact.
[12]The Court of Appeal recently summarised the relevant principles in
Parkins v Parkins as follows:4
[5] The principles governing applications for leave to bring a second appeal to this Court were explained in Waller v Hider.5 Those principles continue to apply in respect of applications under s 60(2) of the Senior Courts Act. This Court explained in Butch Pet Foods Ltd v Mac Motors Ltd:6
[4] The test for leave to bring a second appeal to this Court is well-established. The proposed appeal must raise some question of law or fact capable of bona fide and serious argument, in a case involving some interest, public or private, of sufficient importance to
4 Parkins v Parkins [2023] NZCA 41.
5 Waller v Hider [1998] 1 NZLR 412 (CA) at 413.
6 Butch Pet Foods Ltd v Mac Motors Ltd [2018] NZCA 276, (2018) 24 PRNZ 500.
outweigh the cost and delay of the further appeal. On a second appeal this Court is not engaged in the general correction of error. Its primary function is to clarify the law and to determine whether it has been properly construed and applied by the Court below. It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a court.
[13] Mr O’Neill also pointed out that the Court of Appeal in Waller v Hider had noted that where an “amount at stake is very substantial” this could be a basis to justify the cost and resources required for second appeal.7
[14]I now turn to the grounds of appeal.
The first ground of appeal — the factual and counterfactual
[15]The relevant provision of the Act reads as follows:8
317 Court may modify or extinguish easement or covenant
(1)On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish (wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that—
(a)the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii)the character of the neighbourhood:
(iii)any other circumstance the court considers relevant; or
(b)the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
(c)every person entitled who is of full age and capacity—
7 Waller v Hider, above n 5, at 413.
8 Emphasis added.
(i)has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or
(ii)may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or
(d)the proposed modification or extinguishment will not substantially injure any person entitled; or
(e)in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or
(f)in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
(2)An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
[16] The appellant spent most of the time in oral argument in this application on the first ground of appeal. It relates to the assessment by the District Court Judge upheld by the High Court of the factual and counterfactual. This assessment would determine the extent of the likely “injury” that the respondents (other lot owners) might suffer because of the proposed modification of the covenants. The existing covenant allowed only one house to be built on each large lot. The nature and placement of those dwellings would be subject to the existing covenants as well as the planning restrictions in the area and requirements imposed on building arising from geotechnical issues due to proximate wetlands.
[17] If the covenant was modified as proposed, 10 lots would be available for building. They would be subject to all remaining restrictions on the covenant as well as any planning restrictions in the area and requirements for geotechnical reasons in laying down foundations. The resource consent had already been obtained for the subdivision into 10 sites but there would need to be further approvals concerning the nature of the dwellings as well as engineering certificates in relation to foundations in particular.
[18] The requirements of s 317 of the Act which set out the relevant grounds for modification of a covenant required the Court to be satisfied that the proposed
modification or extinguishment would not “substantially injure any person entitled”.9 In the absence of their consent, the persons entitled to enforce the covenant included the other owners and occupiers of dwellings in the existing subdivision. They did not consent.
[19] A finding that a person so entitled was substantially injured by the modification/extinguishment of the covenant meant the application, even if the other qualifying grounds were satisfied, would be unsuccessful. Mr O’Neill focused on this aspect, that is whether they would be substantially injured as a proposed ground of appeal.
[20] There was no dispute as to the correct approach to be taken to the substantial injury assessment, following the Supreme Court decision in Synlait Milk Ltd v New Zealand Industrial Park Ltd.10 It was put in the judgment the subject of this application as follows:11
[21] The parties agreed in general terms upon the legal principles applying in relation to an application under s 317. The Judge set out the principles based on Chand v Auckland Council, a decision given with the benefit of the Supreme Court’s earlier decision in Synlait Milk Ltd v New Zealand Industrial Park Ltd.12 The Judge noted the points which he found particularly relevant to the present case as follows:13
·‘Substantially injure’ means that the modification must detrimentally affect any one of the respondents’ properties [in] a real and significant manner.
·The injury may be of an economic kind, a physical kind or an intangible kind.
·Covenants of this nature are property rights.
·Such property rights may be sold by the owner, enforced by the courts and, apart from statutory provisions like s 317, may not be alienated without the owner’s consent
·Loss of such rights by modification by the court forms part of the injury done by that modification
9 Property Law Act 2007, s 317(1)(d).
10 High Court decision, above n 1.
11 At [21].
12 Chand v Auckland Council [2021] NZCA 282; and Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657.
13 District Court decision, above n 2, at [61] (footnotes omitted).
·Although if the modification is made, the court may grant compensation for the corresponding loss of property rights over the burdened land, the ability to order compensation must be ignored when deciding whether absence of substantial injury has been established.
[21] Mr O’Neill submitted that the District Court had erred in reaching a conclusion that the respondents were substantially injured because the Judge had wrongly assessed the factual and counterfactual.
[22] Lot 55 was fronting Beechnest Drive and the appellant proposed that this would be subdivided into seven lots. The Judge assumed that the proposed lots would be built close to the front boundary with Beechnest Drive and closely spaced.14 He reached this conclusion based on evidence before him, which included the placement of the constructed building pads. It was not contested that these pads had been placed on the proposed lots following the subdivision at considerable expense. The placement was because of the geotechnical issues in parts of the proposed lots which backed onto wetlands. The foundations would need to be constructed to the required engineering standard. This was a practical imperative the Judge recognised as the land was increasingly soft and wet toward the rear boundaries with the wetland behind it.15 The proposed new lots would be a little over 1,000m2 in size and the Judge concluded their long narrow shapes combined with the position of the building platforms meant there was no practical option other than to build each residential unit close up to the front boundary and across a large part of its width. The Judge concluded that would increase the density of housing on the lower side of Beechnest Drive compared to the density on the other side of the road16 where the dwellings of the two respondents, Mr Pool and Ms Purcell, and the McGuigans were located. These respondents were the most affected by increasing the number of lots.17 For them, the houses would have an appearance of a row of houses compared with the collection of widely spaced houses that already existed in the original subdivision.18 It was also relevant that the
14 High Court decision, above n 1, at [26], citing District Court decision, above n 2, at [47].
15 At [28(h)].
16 At [28(b)].
17 At [25].
18 At [28(b)], quoting District Court decision, above n 2, at [54].
resource consent for Lots 55 and 20 waived the setback requirements from the boundary so enabled them to be set closer to the road.19
[23] Mr O’Neill said no one could know how the houses would be placed on the site and the Judge made assumptions which led to a conclusion not open to the Judge. He said the Judge had incorrectly supposed that the frontage would look similar to “a row of Coronation Street houses”. This argument was also relied upon by Mr O’Neill in the appeal in the High Court.20
[24] As I said in the substantive judgment, there was “ample evidence” in support of the Judge’s assessment as to the likely placement of dwellings if the covenant were modified. The evidence included a 2017 geotechnical report, and an earlier engineering report which indicated the difficulties encountered on those two large lots to establish a building platform while avoiding undue interference with the wetlands. For the new lots, to build a dwelling would require the owner to obtain a separate resource consent with engineering certificates a mandatory requirement for the foundations.21
[25] In addition to the evidence produced, the Judge had undertaken the site visit with counsel. According to counsel, the Judge had made a thorough inspection of the subdivision. He observed the building pads which had been constructed for the proposed subdivisions in the course of that inspection.
[26] The Judge acknowledged that a proposal for reducing the allowed height which the appellant offered as mitigation for modification of the covenant would remove the possibility of two storey dwellings on eight of the lots involved. However, he considered it was hard to assess whether that reduction would have any actual effect on the counterfactual because of factors including the size of the subject lots, the shape and position of the building platforms.22
19 At [29].
20 At [27].
21 At [30].
22 At [28(c)].
[27] A further factor in the placement of dwellings on the proposed new lots was the requirement that would have to be met under recently introduced regulations concerning interference with wetlands.23
[28] The District Court Judge had considered what was likely to be built on the two lots. The comparison between the likely placement of dwellings on the subdivided lots and the placement on the subject lots required due consideration of the relevant factors, such as the geotechnical issues on the site.
[29] The covenant only permitted one residential unit on each of Lots 55 and 20. Existing zoning requirements dictated that building height not exceed 7.5 metre and site coverage not exceed 20 per cent of the area of each lot.24 The Judge took the view that it was likely with the restrictions on Lot 55 at present that any residential unit would extend along the frontage with Beechnest Drive across the width of two or more of the smaller proposed subdivided lots. However, he said there was no evidence which enabled the Court to safely predict exactly where on each of the subject lots one residential unit might be constructed except that would have to be somewhere on the existing building platforms.
[30] Mr O’Neill also suggested that at present, if the covenant was not modified, a large 7.5 metre dwelling-house could be built across a substantial part of the boundary with Beechnest Drive on Lot 55. He said this would be much worse for the respondents than seven smaller dwellings spaced apart in non-aligned positions with viewing spaces between the houses, five of which would be less than six metres high.25
[31] Mr O’Neill said if only one dwelling was built on the large lot there would be a loss of views due to the fact a dwelling could be constructed spanning the width of the two lots at 7.5 metres high. The Judge recognised this, but he concluded that even if the placement on Lot 55 of one dwelling might impede to a greater degree than the counterfactual some views, other views including that the “majestic views of Mount Robert and the St Arnaud range would remain open.” He concluded that
23 At [30].
24 At [32], quoting District Court decision, above n 2, at [51].
25 At [31].
permitting the modifications sought would result in a reduction in the aesthetic value of the views which was more than minor or trivial.26
[32] The Judge also concluded that associated with the impairment of views over the wetland and its “potential replacement by a line of closely spaced houses” would, in the case of Mr Poole and Ms Purcell put up to three houses immediately in front of their homes and would, to a degree, alter the character of the immediate neighbourhood. It would change to one which was more built up that at present. In his view:27
… given the nature of the subdivision and of the area in which it is situated, that intensification will also create a diminution in the amenity value to the opposing respondents of their property.
[33] Mr O’Neill argues that the District Court Judge was wrong in his assessment of the counterfactual and factual. Mr O’Neill’s argument is based on the premise that the Judge should have concluded that the siting and building of dwellings on the lots as presently covenanted would provide the respondents with the worst outcome for their views and enjoyment of their properties. He said such a worst outcome was possible by the positioning, configuration and size of a single dwelling on each site. On the other hand, he said that the multiple houses to be placed on the existing lots of the covenant where modified could be placed on the 1,000m2 proposed lots and would be less detrimental than the factual opposed.
[34] I concluded in the appeal judgment that the Judge had made reasonable assumptions as to the likely nature of the counterfactual and factual. I noted that because the Judge made a site visit and walked round the lots, he was in a particularly good position to assess the options available for building: either a single residential dwelling on each of the two existing sites, or multiple dwellings on the new lots with the more restrictive height covenants in some of those new lots.28
[35] Related to the assessment of the likely factual and counterfactual, Mr O’Neill submitted that the appellant had not taken advantage of its own wrong in obtaining
26 At [32], quoting District Court decision, above n 2, at [59].
27 At [32], quoting District Court decision, above n 2, at [60].
28 At [36].
subdivision consent and in doing preliminary building pad and curbing and channelling on the two large lots property. It had incurred significant costs in doing so as well as spending significant sums on engineering and geotechnical reports, the construction of building platforms for the proposed subdivided lots.
[36] There is an express prohibition in the existing covenants registered against the two large lots not only for the construction of multiple dwellings but also in obtaining subdivision consents. Mr O’Neill appropriately accepted this during oral submissions when the wording of the provisions of the covenant were brought to his attention. Exactly when the directors or management of the appellant became aware of the prohibitions in the covenant is unclear. However, there is no dispute but that the work was carried out and the sums expended when the covenant was in place. Indeed he the fact of the covenant prohibiting further subdivision of the two large lots had been a selling point emphasised by the appellant’s agent in sales of other lots in the subdivision that it owned.
[37] While the District Court Judge did not find there was a blatant disregard of the covenant, as was the situation in Synlait, the subdivision and the work done by the appellant in subdividing the two large lots including constructing building platforms, was in clear breach of the prohibition in the covenant.
Loss of property rights
[38] Mr O’Neill said there was no evidence of loss of property rights. He points to the evidence of the valuer, Mr Bennison, who was called by the appellant. Mr Bennison’s evidence was that there would be no reduction in the value of properties in the subdivision. He said this evidence was uncontested.
[39] This was also argued on the appeal. It overlooks that the loss of property rights is a separate consideration to loss of value of the properties. The latter was the issue which Mr Bennison had been instructed to consider. The differences were recognised in Synlait.29 The value loss related to the fact that the appellant could expect to make a substantial amount on the sale of the subdivided lots. For instance, a figure in the
29 See [20] above.
range of $3 million might be achieved by the sales of those lots. On the other hand, the respondents received no compensation reflecting the resultant increase in the value of the appellant’s land as a result of the extinguishment of the right to enforce the covenants to prevent subdivision presently available to the respondents.30 The economic loss related to the loss of property rights was almost impossible to quantify and the Judge recognised this but he was entitled to take it into account as adding weight to other factors sufficient to reach the threshold of substantial injury.31 The Judge had evidence from Mr Bennison of the likely monetary benefit to the appellant of having the two lots further subdivided. That came at the expense of extinguishing the covenants which benefited the respondents by limiting the number of dwellings on those two lots. His Honour was not in error in reaching that factual conclusion and noting that it provided some weight (although not a factor on its own) supporting his finding that the respondents would suffer substantial injury.
[40] Mr Bennison had also made assumptions which were questionable about the houses on the proposed 10 lots being of the same style and character as the balance of the subdivision which was well-established. The existing subdivision featured houses built at different places on each existing 1,000m2 site. The restrictions on where the dwellings could be built on the proposed subdivision indicated that the houses on those lots due to the geotechnical issue on the site would likely not be placed at various different places on the site. Mr Bennison did not factor in the geotechnical evidence, nor did he consider that there might be concerns by the Tasman District Council which might complicate for instance house placement given new regulations concerning interference with the wetlands.
[41] The Judge accepted Mr Bennison’s valuation evidence but noted his valuation was generic. He had reached his valuations by looking at all sales in the area, including many at higher levels of the subdivision from which views across the wetlands were more distant and “relatively less important than those of the respondents which are at lower levels close to the level of Lot 55 and much closer to it.”32 Mr Bennison had made it clear that views had a positive effect on house values
30 High Court decision, above n 1, at [68], citing District Court decision, above n 2, at [75].
31 At [69], citing District Court decision, above n 2, at [76].
32 At [62], quoting District Court decision, above n 2, at [65].
and people took into account a range of factors when buying a property. Different people value various factors differently. The Judge noted that people who had purchased in the Beechnest subdivision were likely to put a high value on views because that was its most outstanding feature.
[42] The Judge indicated that a true valuation comparison would be very difficult or impossible to confidently assess in relation to the respondents’ with the benefit of existing covenants compared to what a person might pay if the covenant was modified.33
[43] The Judge made no error in taking all those factors into account when he came to the conclusion that the particular properties of the respondents in question were likely to be diminished in value.
[44] The factors of loss of property rights and value were only two of the factors which led to the Judge’s conclusion that the proposed modification would “substantially injure” the respondents. He also pointed to the loss of ambience and amenities due to the intensification of residential building, particularly along the lower side of Beechnest Drive and the likely placement of the new dwellings should the covenant be lifted, as well as physical effects such as disruption caused by the construction of 10 houses (as opposed to two) over a longer period than would be required to build two houses and other physical effects flowing from having more people on the subdivision. He summarised the intangible effects as “impairment of views, unsightliness, loss of privacy and alteration to the character and ambience of the neighbourhood.”34 The Judge also noted the “degree of intrinsic subjectivity involved in assessing the significance of aspects of this nature.”35
[45] The Judge noted the Court of Appeal’s comments in Chand v Auckland Council that “the subjective tastes, preferences or beliefs of particular individuals” could be taken into account “within the limits of reasonableness” to give rise to injury in the relevant sense to individuals involved.36
33 At [62], citing District Court decision, above n 2, at [64]–[67].
34 District Court decision, above n 2, at [70].
35 At [70].
36 High Court decision, above n 1, at [51], citing District Court decision, above n 2, at [70].
[46] The Judge was required to make an assessment of whether or not the respondents would be substantially injured. He was not satisfied that the proposed modification/extinguishment would not substantially injure the respondents and in fact came to the conclusion that it likely would substantially injure them and some of them in particular. He was required to undertake a wide-ranging assessment and did so based on the evidence before him. This was a factual analysis, and he correctly applied the law to that analysis. I found that the Judge had made no error in his analysis and conclusions.
[47] The proposed appeal must raise some question of law or fact capable of bona fide and serious argument. None is raised under this heading.
Proposed second ground of appeal
[48] The second ground of appeal goes to the District Court finding that there had been no change in circumstances warranting a modification of the easement.
[49] To be relevant, the change must be to the nature or extent of the use being made of the benefited land, the burdened land or both or the character of the neighbourhood.37
[50] Mr O’Neill said the error had been made by the original developer in bringing down the covenants on those two lots. Any argument about whether there was liability for the error by the original developer was a matter between the appellant and the original developer.
[51] The relevance of this submission in support of the leave to appeal in relation is unclear. The Judge concluded that there was no reason the respondents should have been aware of the error in the registered covenant. The evidence indicated that some of them had relied on the “no subdivision” covenants on Lots 50 and 20 when they purchased their sections and built their houses. There was evidence that a land agent who was selling the lots in the subdivision on behalf of the appellant emphasised the prohibition on subdivision of those lots when he was promoting sales of other lots
37 Property Law Act, s 317(1)(a)(i) or (ii).
owned by the appellants in the subdivision.38 These were factors which were also relevant to the exercise of the discretion against the appellants.
[52] In relation to the argument on change of circumstances, the land was at all material times residential land with single dwellings in a scenic alpine setting. I noted in my judgment on appeal upholding the findings of the District Court Judge on this point:39
[77] The respondents hold the benefited land and nothing has changed concerning the use of that. The burdened land is contained in Lots 20 and 55. Nothing has changed relation to the use of those lots. The covenants have at all time[s] only allowed for a single residential unit to be built on each of those lots.
…
[79] Apart from its discovery of its error, Beechnest cannot point to any change which would be relevant in terms of s 317(1)(a)(iii).
[53] The fact that Beechnest had obtained subdivision consent and spent money to progress the subdivision of the two large lots was in breach of the covenants and could add no weight to its arguments there had been a change of circumstances.
[54] No question of law or fact capable of bona fide and serious argument nor a point of interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal is raised under this ground.
Proposed third and fourth grounds of appeal
[55]These are related to the second ground and may be dealt with together.
[56] The third ground is that the District Court made an error concerning the proposed use of the two large lots. The appellant argues that it was always contemplated that there would be a second stage in the subdivision and the two large lots would be further subdivided.
38 High Court decision, above n 1, at [43]–[49].
39 High Court decision, above n 1.
[57] This appears to be another way of advancing the arguments in the proposed second ground of appeal. While the predecessor in title to the appellant might have contemplated that the land might be subdivided in the second stage, that had little if any relevance to the assessment of whether there had been relevant change in circumstances for the purposes of s 317 of the Act.
[58] The fourth ground of appeal is that the Court was incorrect to find that there was “impediment of the reasonable use in a different way”.40 The argument advanced is that the predecessor in title (who was the original covenantor) could not have reasonably foreseen that the covenant on Lots 55 and 20 would prevent further subdivision. This also appears to be another way of advancing proposed grounds two and three. Again, there is an allegation that the Judge made an error in a finding of fact.
[59] No question of law or fact capable of bona fide and serious argument nor a point of interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal is raised under this ground.
Proposed fifth ground of appeal
[60] The fifth ground of appeal is related to the exercise of the Court’s discretion to dismiss the application. The appellant said the primary reason for the Court exercising its discretion in dismissing the application was that there would be a view available to the two respondents, who were primary objectors and owners of lots which would be affected by the proposed subdivision, when they were never theoretically entitled to view at all because the covenant allowed the building of large dwellings on the sites that was 7.5 metres high. The appellant argued the same point which was rejected on appeal.41
[61] This ground mischaracterises the findings in the District Court which were upheld in the High Court. The reasons for the exercise of the discretion by the Judge was multifactorial and the primary reason was not the interference with the two
40 At [20].
41 See at [100].
respondents’ views. In the High Court, I noted that the exercise of the discretion was based on a number of factors as follows:42
[96] The Judge then summarised his reasons for indicating that he would have exercised his discretion against the appellant as follows:
(a) The appellant is the successor in title to BVL, which created the covenants. Beechnest should have been aware of the terms of the covenants burdening the land when it purchased the land. They were intrinsic to the value of that land.
(b) The opposing respondents were “fully aware” of the effect of the terms of the registered covenants which benefited their land when they purchased the land. They decided on the position and orientation of the homes they built in reliance on the covenants. According to the evidence of Mr Marshall and Ms Unterberger, without the protection of the covenants over Lot 55, they would not have purchased their property.
(c) Financial compensation was never likely to adequately compensate the respondents’ intangible losses. This was not a purely commercial matter as was the situation in Synlait. The respondents had emotional connections with their homes which could not be replaced with money.
(d) The appellant was the vendor of two sections purchased by two of the respondents, the McGuigans, and Mr Pool and Ms Purcell. The appellant therefore contracted to sell land which “included the property rights constituted by the restrictive covenants.” The covenants were an important factor in the purchase decision and the effect of the modification was to remove the rights which came with the land that the appellant sold to them.
[62] No question of law or fact capable of bona fide and serious argument nor a point of interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal is raised under this ground.
[63] I also mention that according to the respondents’ submissions, this matter has had a long history. It was the subject of an unsuccessful interlocutory application by the appellant for recusal of respondent’s counsel heard in 2020 leading to a full judgment.43 The evidence of one of the respondents who has since passed away and did not participate in the appeal, was taken by way of deposition in April 2021. A hearing lasting two days in the District Court took place in August 2021. A further three days of hearing took place in February 2022 involving a site visit and evidence
42 Footnotes omitted.
43 Beechnest (2014) Ltd v Marshall [2020] NZDC 27022.
from 19 witnesses, including three expert witnesses called by the appellants. The hearing of the appeal in the High Court in November 2022 took one day, involved six grounds of appeal and a bundle of documents in excess of 2,300 pages. The further cost and delay attendant on a second appeal in this matter would be significant.
Conclusion
[64] The application for leave to appeal is dismissed. The grounds proposed by the appellant in essence challenge the factual findings of the District Court, upheld on appeal.
[65] There are no proposed grounds of appeal which raise any question of law or fact capable of bona fide and serious argument nor a point of interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal.
Costs on substantive appeal — extension of timetable
[66] Mr McDonald indicated that costs had not been agreed between the parties in relation to the substantive appeal. Accordingly, he sought an extension of time to file a memorandum in support of an application for costs as the timetable set out in my judgment of 15 March 2023 had elapsed.44 Leave was granted by consent. A timetable for the filing and serving of submissions was set as follows:
(a)Leave was granted by consent for the respondents to file a memorandum in support of costs on or before 18 August 2023.
(b)Any response is to be filed on or before 25 August 2023.
[67] Those submissions have now been filed and the costs application in the substantive appeal will be dealt with in a separate minute.
44 High Court decision, above n 1, at [113].
Costs on leave application
[68] Counsel agreed that costs should follow the event based on a 2B calculation in relation to the leave application. Costs are granted accordingly to the respondents.
Grice J
Solicitors:
Hamish Fletcher Lawyers, Nelson
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