Bream Tail Residents Association Incorporated v Wong
[2016] NZHC 537
•30 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-002339 [2016] NZHC 537
UNDER The Declaratory Judgments Act 1908 IN THE MATTER OF
An application for declaratory and other relief in respect of the Rules of the Bream Tail Residents Association Incorporated dated 8 July 2005
BETWEEN
BREAM TAIL RESIDENTS ASSOCIATION INCORPORATED Plaintiff
AND
TIMOTHY CHUN HAI WONG Defendant
Hearing: 14 and 15 March 2016 Appearances:
L J Turner for Plaintiff
A G Stuart for DefendantJudgment:
30 March 2016
JUDGMENT OF GILBERT J
This judgment is delivered by me on 30 March 2016 at 1:00 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
BREAM TAIL RESIDENTS ASSOC INC v WONG [2016] NZHC 537 [30 March 2016]
Introduction
[1] In December 2009, the defendant, Mr Wong, purchased a 19 hectare block of land, lot 41, in a rural subdivision of Bream Tail Farm, north of Mangawhai Heads. He now wishes to subdivide lot 41 into two similar sized lots and he has obtained consent from Kaipara District Council to do so. The plaintiff, Bream Tail Residents Association Incorporated (the Residents Association), considers that any subdivision of lot 41 would breach the Residents Association Rules (Association Rules) to which all owners of lots in the Bream Tail Farm subdivision are bound. The Residents Association accordingly seeks a declaration that the Association Rules prohibit any owner of lot 41 from subdividing it and a permanent injunction restraining Mr Wong from doing so.
[2] The Association Rules prohibit the erection of any structure outside designated house sites without the prior written approval of the Residents Association. The Residents Association was concerned that Mr Wong intended to breach this rule and it therefore sought a declaration and an injunction to resolve that issue. However, Mr Stuart advised at the commencement of the hearing that Mr Wong accepts the Residents Association’s position in relation to this rule and does not intend to breach it. In these circumstances, Mr Turner confirmed that the Residents Association does not pursue this aspect of its claim.
Bream Tail Farm Subdivision
[3] The rule restricting subdivision in the Association Rules must be interpreted in context and in light of its purpose. It is therefore helpful, before examining the rule, to understand the context in which the rules were prepared. The relevant context includes the objectives of the original subdivision and development and the terms of Kaipara District Council’s consent to it.
[4] Bream Tail Farm comprises approximately 459 hectares, incorporating
273 hectares of farm land, 186 hectares of native bush and five kilometres of coastline including a surf beach. The concept of the subdivision was to create a premium residential enclave on a working farm for a limited number of owners who
would enjoy a private house site in a rural environment with the benefit of common facilities including a beach house, swimming pool, tennis courts and pavilion, riding trails and walkways. The rural environment would be maintained for the benefit of all owners by way of a lease to enable the farming operation to continue.
[5] The subdivision involved the creation of up to 42 lots, including two common facility lots and 40 lots upon which houses could be built. Purchasers would acquire freehold title to their lot; the right to build a house on a designated site; the lessor’s interest in the farm lease over their lot (excluding the house site, the extended house site area and designated conservation areas); and the right, in common with all other owners, to the use of the common facilities.
[6] Final consent for the subdivision was granted by Kaipara District Council in April 2005 subject to various conditions set out in a Consent Notice. Importantly for present purposes, one of the consent conditions was as follows:
In relation to Lots 2, 11, 18 to 21 (inclusive), 32 and 41 of the subdivision
18 The Owner agrees that
18.1One further lot may be created (in the case of lots 2 and 41 and 11 and 32, a maximum of three lots may be created from those two lots);
18.2 The creation of a further lot may require resource consent(s).
[7] The reason why lots 2 and 41 (and lots 11 and 32) were treated separately was because they were in common ownership and were to be amalgamated and incorporated in the same certificate of title at the time of the original subdivision. The Consent Notice was registered against the title to all relevant lots, including the title to lots 2 and 41, when new titles were issued in May 2005 following completion of the subdivision.
[8] Subsequently, in February 2007, resource consent was granted enabling cancellation of the amalgamation of lots 2 and 41. When granting this consent, Kaipara District Council agreed to cancel or vary four of the conditions in the Consent Notice affecting lot 41 “to allow for the future development of that lot”. Council advised the plaintiff’s solicitors on 16 July 2015 that clause 18 of the
Consent Notice, referred to above, was cancelled at that time although this is not referred to in the decision or in the formal variation of Consent Notice dated
18 August 2008 which was registered against the title to lot 41 on 12 March 2009.1
In any event, Kaipara District Council has now granted consent for the subdivision of lot 41. The only issue is whether this is prohibited by the Association Rules.
Association Rules
[9] The Association Rules were drafted by Chapman Tripp, a leading New Zealand law firm engaged by the developer, and came into force when the Residents Association was incorporated in July 2005. The rules are comprehensive and are divided into 24 sections and six schedules.
[10] Section 3 sets out general objects and details the particular objects of the Residents Association. The Residents Association is described as having a “key role in preserving the financial and lifestyle interests of all owners … and regulating the common access and other cooperative features of Bream Tail”. The owners appoint the Residents Association to manage their collective interests as co-owners of the common facilities and as owners of individual lots. The owners agree to be bound by the Association Rules.
[11] The second of the general objects listed in the Association Rules concerns the restriction on the total number of lots that may be created at Bream Tail:
3.2 Each Owner of a Lot will be a Member of the Association. The total membership of the Association will be no greater than 42 being the maximum number of Lots permitted at Bream Tail.
[12] Sole responsibility for enforcement of owners’ obligations under the rules
rests with the Residents Association:
3.4 The Association through its Rules provides the mechanism for the regulation of Owners’ rights in relation to each of their co-owners in respect of Bream Tail and, as such, the Association will, on the Owners’ behalf, comply with and enforce the Rules of the Association and the Land Covenants. No Owner shall be entitled to take any action in law or otherwise against any other Owner in respect of any matter or thing done or omitted to be done pursuant to these Rules or the Land Covenants and the
1 These refer only to the cancellation of clauses 5, 6 and 7 and the variation of clause 12.4 of the
Consent Notice from the title to lot 41.
Owners explicitly waive their rights to take any such action against their co-
owners for any alleged breach of the Rules or the Land Covenants…
[13] The particular objects of the Residents Association are set out in clause 3.5 and emphasise the preservation and enhancement of the unique characteristics and natural beauty of Bream Tail for the benefit of all owners. These include:
3.5 The objects (Objects) of the Association are:
(a) To maintain, preserve and enhance the unique character, size and recreational capabilities of Bream Tail as a premium international standard residential lifestyle community;
(b) To enable the Owners to enjoy the assets and facilities of
Bream Tail and its surrounds;
...
(d) To protect and enhance the resources, wildlife, beauty,
history and presence of Bream Tail …
...
(h) To promulgate and enforce the Rules of the Association;
(i) To do all things as may appear necessary to achieve the
Objects of the Association.
[14] Section 4 contains the requirement for every owner to be a member of the Residents Association and to comply with the Association Rules which constitute a binding agreement between the owners. Mr Wong accepts that he is bound by these rules.
[15] Section 7 is headed “Covenants and Bylaws”. Clause 7.1 confirms the agreement of each owner to comply with the rules and bylaws which are to be promulgated by the Residents Association in terms of clause 10.1. The first bylaws are detailed in schedule 2 and regulate a wide range of activities including land dealing, the use of house sites, building, landscaping, planting, earthworks and excavations.
[16] The Residents Association relies on clause 1.2 as preventing the subdivision of lot 41. This bylaw is contained in section 1 of schedule 2 which relevantly reads:
1. DEALING WITH THE LAND
1.1Subject to clause 1.2 of this Schedule 2, the Lots shall not be further divided or subdivided (and “subdivide” shall have the meaning ascribed to subdivision of land in section 218(1) of the Resource Management Act 1991).
1.2Notwithstanding the provisions of clause 1.1 of this Schedule 2, the Owners of Lots 1, 2 and 41, 3, 7, 11 and 32, 18, 19, 20 and 21 are permitted to subdivide each of those units into no more than two units (provided that in respect of lots 2 and 41 and 11 and 32, a maximum of three lots may be created from those two lots). Upon the completion of a subdivision of any of the above Lots, the registered proprietor of each newly created Lot shall immediately become a Member of the Association.
[17] “Lot” is a defined term in the Association Rules:
Lot means each of the separate certificates of title held to or to be held by
Owners and Lots shall have a corresponding meaning.
[18] Section 218(1) of the Resource Management Act 1991 relevantly provides:
218 Meaning of subdivision of land
(1) In this Act, the term subdivision of land means –
(a) the division of an allotment –
(i) by an application to the Registrar-General of Land for the issue of a separate certificate of title for any part of the allotment; or
[19] The term “allotment” is defined in subsection 2 to include:
(2) In this Act, the term allotment means –
(a) any parcel of land under the Land Transfer Act 1952 that is a continuous area and whose boundaries are shown
separately on a survey plan, whether or not –
(i) the subdivision shown on the survey plan has been allowed, or subdivision approval has been granted,
under another Act; or
(ii) a subdivision consent for the subdivision shown on the survey plan has been granted under this Act; or
...
(3) For the purposes of subsection (2), an allotment that is –
(a) subject to the Land Transfer Act 1952 and is comprised in 1
certificate of title …
...
shall be deemed to be a continuous area of land notwithstanding that part of it is physically separated from any other part by a road or in
any other manner whatsoever, unless the division of the allotment
into such parts has been allowed by a subdivision consent granted under this Act or by a subdivisional approval under any former enactment relating to the subdivision of land.
[20] Mr Stuart submits that the resource consent permitting cancellation of the amalgamation of lots 2 and 41 did not constitute a subdivision as defined in the Resource Management Act and the Association Rules because lots 2 and 41 were originally allowed by a subdivision consent granted under the Act and therefore the deeming provision in subsection 3 does not apply. However, the proposed division of lot 41 into two lots would be a subdivision for the purposes of the Association Rules. The critical issue is whether this is prohibited by bylaw 1.2.
Summary of submissions
[21] Mr Stuart submits that it is clear from the context that bylaw 1.2 in the Association Rules was only ever intended to secure compliance with the conditions imposed by Kaipara District Council when it granted consent to the subdivision, specifically clause 18 of the Consent Notice. He notes that the rule is in substantially the same terms as clause 18. He submits that there has as yet been no subdivision of lots 2 and 41 and the rule specifically permits the creation of a third lot from those two lots. Because the owner of lot 2 has not applied to subdivide that lot, Mr Stuart contends that there is nothing to prevent Mr Wong from creating the third lot by subdividing lot 41. He argues that this is consistent with Council’s interpretation of clause 18 of the Consent Notice.
[22] Mr Turner responds that there is no justification for ignoring the clear wording of the rule which he says has been carefully drafted. Bylaw 1.2 allows the owner of Lot 2 and 41 to create a maximum of three lots from those two lots. “Lot” is defined to mean “each of the separate certificates of title held or to be held by Owners”. The bylaw therefore applied while Lot 2 and 41 was held in common ownership and amalgamated on the same Certificate of Title. Those owners would have been entitled to create three lots from Lot 2 and 41 had they wished to do so. However, Mr Wong is not, and never has been, the owner of Lot 2 and 41. He therefore does not come within the ambit of bylaw 1.2 and Mr Turner submits that he is bound by bylaw 1.1.
Analysis
[23] The general prohibition on subdivision is contained in bylaw 1.1. This applies to all “Lots” subject only to the exception set out in bylaw 1.2. The exception applies to “Owners” of the listed “Lots”. These are the only Owners who are permitted to carry out further subdivision. When defining these “Owners” the draftsperson has specified each Lot separately, including Lot 2 and 41 and Lot 11 and 32. The Owners of Lot 2 and 41 (and the Owners of Lot 11 and 32) were therefore permitted to create a maximum of three lots from those two lots.
[24] Applying the natural and ordinary meaning of the bylaws, Mr Wong is not an Owner coming within the exception provided for in bylaw 1.2. He is not the Owner of Lot 2 and 41; that Lot no longer exists. Mr Wong is the Owner of Lot 41 and is therefore bound by bylaw 1.1.
[25] However, as Mr Stuart says, the plain meaning of the bylaws may, in certain circumstances, have to yield to another interpretation if it is clear from the context that the parties must have intended some other meaning. As Lord Hoffman explained in Investors Compensation Scheme Ltd v West Brunswick Building Society:2
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
...
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax…
2 Investors Compensation Scheme Ltd v West Brunswick Building Society [1998] 1 WLR 896 at
912-913.
(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.
...
[26] In my view, the bylaws are clear and unambiguous and, for the reasons that follow, should be given their natural and ordinary meaning.
[27] First, the bylaws were drafted in a formal document by experienced commercial property lawyers knowing that they would bind all present and future Owners of Lots in the Bream Tail Farm subdivision.
[28] Second, the draftsperson has deliberately differentiated between “Lots” (including Lot 2 and 41 and Lot 11 and 32) and “lots” or “units”. I should not readily accept that linguistic mistakes were made in what appears to be careful drafting of such an important provision.
[29] Third, the exception as drafted makes commercial sense. It was practicable and appropriate to confine the exception to the Owners of the relevant Lots so that these Owners could avail themselves of the right to create further lots if they chose. By contrast, Mr Wong’s interpretation could lead to difficulty and conflict. On his interpretation, the right of further subdivision now vests severally in the Owner of Lot 2 and himself as the Owner of Lot 41 even though neither is the Owner of Lot 2 and 41. The consequence would be that the Owner of Lot 2 would have to compete in a race with Mr Wong if he or she wished to take advantage of the opportunity to create the third lot. Mr Wong says that the Owner of Lot 2 has expressed no interest in subdividing but that is no answer to the potential difficulty that his interpretation poses.
[30] Fourth, there is no basis on which to conclude that the draftsperson made errors in the drafting and only intended to mirror the condition as drafted in clause 18 of the Consent Notice. The Association Rules make no reference to the Consent Notice or the need to comply with the conditions of it. It would have been
unnecessary to do so to secure compliance with those conditions. Further, the Association Rules do not attempt to replicate any of the other clauses in the Consent Notice, as might have been expected had that been one of the purposes of the rules. The evident purpose of the bylaws, as with all other Association Rules, is to protect the collective interests of the owners in accordance with the objects detailed in the rules, not to secure compliance with Council requirements which may vary from time to time and may not be adequate to meet those objects. It is reasonable to assume that the draftsperson included bylaws 1.1 and 1.2 because these were of benefit to all Owners and would continue to apply irrespective of whether Kaipara District Council agreed to relax its conditions relating to further subdivision.
[31] Fifth, even if bylaw 1.2 was intended to do no more than replicate the restriction imposed by clause 18 of the Consent Notice, that is not a reason for ignoring the careful drafting of bylaw 1.2 and reading it as if it had been crafted in exactly the same form as clause 18. I received no evidence as to whether the restriction captured in clause 18 was proposed by the developer or imposed by Council. Nor did I receive any evidence as to whether the precise wording of clause 18 emanated from Council or the developer. Whatever its provenance, the language of clause 18 appears to be sufficient to meet Council’s purposes but, for the reason already given, was not adequate for the purposes of a binding agreement between Owners.
[32] I conclude that Mr Wong is prohibited by bylaw 1.1 from subdividing Lot 41.
Result
[33] I make a declaration that bylaw 1.1 of the Association Rules prohibits the
Owner of Lot 41 from subdividing it.
[34] I grant a permanent injunction restraining Mr Wong from taking any further steps to subdivide Lot 41.
[35] Any application for costs should be made by memorandum to be filed and served within 14 days of the date of delivery of this judgment. Any memorandum in
opposition is to be filed and served within 14 days thereafter.
M A Gilbert J
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