Davey v Baker
[2015] NZHC 2282
•21 September 2015
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
CIV 2013-442-174 [2015] NZHC 2282
BETWEEN IAN WALTON DAVEY,
NOVA ELIZABETH DAVEY AND LAWSON NEIL DAVEY AS TRUSTEES OF THE GAP TRUST
First Plaintiffs
AND
IAN WALTON DAVEY AND NORA ELIZABETH DAVEY Second Plaintiffs
AND
NICHOLAS DE CHAIR BAKER AND HEIDI MARIE BAKER
Defendants
Hearing:
Written submissions:
29 June - 3 July 2015
7 August 2015
Counsel:
G W Allan and H Palmer for Plaintiffs
G Downing for DefendantsJudgment:
21 September 2015
JUDGMENT OF BROWN J
DAVEY v BAKER [2015] NZHC 2282 [21 September 2015]
Table of Contents
Paragraph No.
Introduction [1] Factual background [6]
Should the plaintiffs’ application for an order for rectification
be granted? [21]
Should an order be made under s 317 modifying the route
of the right of way? [54]
A restrictive covenant with reference to the extent
of use of the easement [58]
A restrictive covenant under s 243 [65]
An implied positive covenant in respect of cost of
formation and maintenance [72] Is the plaintiffs’ claim the subject of an agreement to arbitrate? [84] Disposition [101]
Introduction
[1] In 1992 a right of way easement five metres wide and approximately
120 metres in length was granted over the land now owned by the defendants in favour of land owned by Mr Ian Davey. Construction of a roadway along the right of way was deferred at that time but the plaintiffs now wish to have the roadway constructed. However they consider that the route of the roadway agreed on in 1992 with the former owner of the servient land is not accurately defined by the registered easement but instead ran along an existing farm track which followed a more
northerly route across the defendants’ land.1
[2] Consequently the plaintiffs seek either an order for rectification in respect of the easement or an order under s 317 of the Property Law Act 2007 (the Act) modifying the easement so that the course of the right of way would run on the defendants’ land some five metres north of, but roughly parallel to, that shown in the registered easement.
[3] Alternatively, if the location of the right of way remains unaltered, they seek an order requiring the defendants to remove several gum trees within the path of the right of way and to trim the southern bank of the hillside to allow a five metre roadway to be constructed along the full length of the right of way. They also claim damages including aggravated and exemplary damages.
[4] The defendants contend that the plaintiffs’ claims relating to removal of obstructions on the right of way and for damages are the subject of an agreement to arbitrate and they filed a protest to jurisdiction to those aspects of the plaintiffs’
claim.
1 Until trial Mr Baker was the sole defendant. At trial an order was made joining Mrs Baker as a defendant. However extracts quoted from the pleadings refer to the defendant in the singular.
[5] Hence the issues for determination are:
(a) Should the plaintiffs’ application for an order for rectification be granted?
(b)Should an order be made under s 317 modifying the route of the right of way across the defendants’ property?
(c) If the answers to (a) and (b) are no, is the plaintiffs’ claim for orders in relation to the right of way easement the subject of an agreement to arbitrate such that a stay of the proceeding should be granted?
(d)If the answer to (c) is no, are the plaintiffs entitled to orders requiring the removal of trees on the right of way and the trimming of the bank of the hillside?
(e) Are the plaintiffs entitled to damages for breach of a good faith obligation and/or to aggravated or exemplary damages?
Factual background
[6] Mr and Mrs Pavelka became neighbours of Mr Ian Davey when in about April 1988 they purchased the property adjacent to the Motueka Highway being Lot 1 Deposited Plan 8527. Their common boundary with the property which Mr Davey had owned since about December 1976, being Lot 1 on Deposited Plan 8528, is shown in the plan below:
[7] The water supply for the Pavelkas’ property was from a spring located on the hill on Mr Davey’s land. As they were concerned to protect the catchment for that water supply, sometime in 1989 the Pavelkas commenced discussions with Mr Davey with a view to acquiring from him a portion of his hill block including the location of the spring. A significant landslide which caused substantial damage to the Pavelkas’ home in August 1990 was the catalyst for the completion of the negotiations.
[8] A farm track which had been established several years prior to the Pavelkas’ ownership ran behind (south of) their house up a slope to Mr Davey’s hill block. Mr Davey was able to use that farm track for access to his hill block. Mr Davey proposed that, if he agreed to transfer to the Pavelkas the area of land they sought, the Pavelkas would agree to ensure that the existing track was protected by a right of way. By that means there would be a link between Mr Davey’s hill block to the east and the “leg in strip”, which was an unformed access from the Motueka Highway along the western boundary of the Pavelkas’ property.
[9] The Pavelkas acceded to that request and agreement was reached for the sale and purchase of an area of approximately 6,500 square metres with a reservation back of a right of way. The Pavelkas agreed to arrange and pay for the legal and surveying steps which were required. The area which was duly sold is that shown as Lot 1 DP 15668 in the plan above.
[10] Mr Selwyn Light of the firm Cotton & Light was instructed by Mr Pavelka to undertake the survey exercise. A handwritten note on Mr Light’s file records:
N. PAVELKA Interview 24-9-91
Boundary adjustment to add spring & straighten bdy. Ring before going to inspect.
Monday or Friday best.
[11] It was Mr Light’s practice to visit a site prior to undertaking any survey work and he did so on this occasion. He did not recall the detail of any discussions at that visit. Nor did he recall any particular stipulation with regard to the right of way to be surveyed which, he said, was something he would have expected to remember if it was considered important at the time. He observed that there was already a rough farm track on the relevant part of the land to be subdivided. The track, which appeared to him to have been there for many years, may have been suitable for use by a tractor but not by ordinary road vehicles.
[12] Mr Light prepared a scheme plan of subdivision which divided out from Lot 1 DP 8528 an area of 6350m2 with a proposed right of way marked A on the adjoining boundary with Lot 1 DP 8527.
[13] The proposed right of way was described on the plan as follows:
PROPOSED RIGHT OF WAY
LETTER
SERVIENT TENEMENT
DOMINANT TENEMENT
A
LOT 1
Pt LOT 1
DP 8528
[14] On 4 November 1991 he sent a copy of the scheme plan of subdivision to the
Tasman District Council under cover of a letter which stated:
N.M. & J.B. PAVELKA/I.W. DAVEY – POKORORO
We enclose a scheme plan of subdivision on behalf of the above owners for preliminary approval.
Mr and Mrs Pavelka wish to acquire a small area of the Davey property shown as Lot 1 on the plan and amalgamate this land with their title C.T. 4A/642. Their reason for wanting title to this land is that it contains the water supply to their house which is at present out of their control on the adjoining land.
The access to Lot 1 DP.8528 owned by Mr Davey is unformed because he owns adjoining farm land to the north and east and enters the property from that direction. To maintain frontage for the balance of Lot 1 DP.8528 the access strip has been extended along the south west boundary of Lot 1. However this is steep land and not suitable for physical access so a right of way is shown through Lot 1 along the line of an existing track. While Mr Davey continues to own the property this right of way will not be used but would be necessary if the property is sold in the future.
Four copies of the plan, copies of titles and the fee of $225.00 are enclosed.
[15] Mr Light appeared under subpoena. In a brief of evidence which he prepared himself he stated:
10.In accordance with my usual practice I would have shown a copy of the scheme plan to Pavelka before I submitted it to Council to make sure I had followed the client’s instructions. I do not recall having received any comment from Pavelka with regard to the surveyed right of way or any other feature of the plan.
11. While the scheme plan does not show the relationship of the formed track to the surveyed right of way at least two things should have been obvious from that plan to anyone familiar with the land. Firstly, the bottom part of the rough track was distinctly curved and the relevant part of the surveyed right of way was shown as a straight line. Secondly, the right of way followed the line of the boundary.
[16] On 7 January 1992 the Tasman District Council sent a letter to Mr Light advising that consent had been granted to the proposed subdivision subject to two conditions:
This consent is subject to the following conditions:
1. Amalgamation
That Lot 1 hereon be transferred to the owner of Lot 1 DP 8527 (CT 4A/642) and that one certificate of title be issued to include both parcels.
See Document No. 312417.1.
2.That the proposed right-of-way shown as “A” on your plan be duly granted or reserved in favour of Pt Lot 1 DP 8528. Reference to the right-of-way should be included in the Council resolution. Formation of the right-of-way is not a condition of scheme plan approval.
[17] Mr Light sent a copy of that letter to Mr and Mrs Pavelka on
16 January 1992. His covering letter stated:
We enclose a copy of a letter from the Tasman District Council approving the boundary adjustment with Ian Davie. (sic)
We can now complete the work if you wish and the costs are estimated as follows:
Survey $2000.00 TDC & Dept of Survey fees 500.00 $2500.00
Plus legal fees to obtain title. We look forward to hearing from you.
[18] Having received instructions Mr Light proceeded to prepare a plan (which he explained was referred to variously as a survey plan and a title plan) being Plan No. 15668 below:
The right of way is shown on the plan running from west to east within and adjacent to the northern boundary of the land to be transferred. Mr Davey’s signature is in the top right corner of the Plan.
[19] The creation of the right of way was effected by a Memorandum of Transfer
No. 321996.1:
The transfer was also signed by the Pavelkas on the following page.
[20] The covenants in Schedule B to that transfer read:
1.The rights and powers set out in the Seventh Schedule of the Land Transfer Act 1952 and in the Ninth Schedule of the Property Law Act 1952 are herein implied as to the Right of Way reserved herein except that the Transferee may erect gates or cattle stops at both ends of the said Right of Way such gates to be opened only for the purpose of ingress, egress and regress and to be closed immediately following such use.
2.In the event of any dispute or difference arising between the registered proprietors for the time being of the said dominant and servient tenements as to the use of any of the facilities for which rights are herein created as to the extent or share of liability of any person or persons towards the costs of any maintenance repair and or renewal required to the said facilities or as to any of the covenants herein contained or as to any other matter relating to the easements or the meaning or interpretation of this Memorandum of Transfer the same shall be referred to arbitration in accordance with the provisions of the Arbitration Act 1908 and its amendments.
Should the plaintiffs’ application for an order for rectification be granted?
[21] Rectification is a discretionary equitable remedy whereby the Court orders an amendment to the terms of an instrument which fails to accurately record an underlying transaction between the parties. The remedy does not extend to amending the terms of the underlying transaction but simply ensures that that transaction is correctly manifested in an instrument which erroneously purports to do so.
[22] A convenient summary of the principles governing rectification is to be found in Swainland Builders Ltd v Freehold Properties where Peter Gibson LJ stated that the party seeking rectification must show that:2
(a) the parties had a common continuing intention whether or not amounting to an agreement in respect of a particular matter and the
instrument to be rectified;
2 Swainland Builders Ltd v Freehold Properties [2002] 2 EGLR 71 at [33], a passage adopted by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC 1101 at [48].
(b) there was an outward expression of the accord;
(c) the intention continued at the time of the execution of the instrument sought to be rectified;
(d) by mistake, the instrument did not reflect that common intention.
[23] Delivering the primary judgment in the Supreme Court of Canada in Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Binnie J identified four conditions precedent or “hurdles” to be overcome by an applicant for rectification.3 The third hurdle was described in this way:4
The third hurdle is that Sylvan (Bell) must show “the precise form” in which the written instrument can be made to express the prior intention (Hart, supra, per Duff J., at p. 630). This requirement closes the “floodgates” to those who would invite the court to speculate about the parties’ unexpressed intentions, or impose what in hindsight seems to be a sensible arrangement that the parties might have made but did not. The court’s equitable jurisdiction is limited to putting into words that – and only that – which the parties had already orally agreed to.
[24] The second amended statement of claim was vague concerning the document which was sought to be rectified. The prayer for relief in the rectification cause of action stated:
The easement facility/defined area within easement 321996.1 being defined so as to include the existing track as it existed prior to the Defendant’s actions in 2010 and generally in accordance with the plan annexed to this Statement of Claim.
[25] However the plaintiffs’ closing submissions were more explicit. Having recorded that the agreement to sell the area of land concerned was a verbal agreement, the submissions stated:
The signed document in this case to be rectified is the transfer document number 321996.1 signed by both parties. This transfer incorporates the plan (15668) which is in error. Rectification of this document requires a new plan and transfer document which properly reflects the original contracting parties’ intentions and which would be incorporated in a new grant of right of way. This would also incorporate the terms of the original transfer. The consent of the Council will need to be endorsed under s 348 of the Local
3 Performance Industries Ltd v Sylvan Lake Golf & Tennis Club [2002] 1 SCR 678 (SCC).
4 At [40].
Government Act because what was approved by the Council on plan 15668 in March 1992 was not that approved by the Council officer after inspection in January 1992.
[26] To my mind, that contention involves a misconception concerning the nature and effect of the memorandum of transfer 321996.1. Mr Davey had agreed to transfer to the Pavelkas an area of land but, because the area to be sold would cease to be owned by him, Mr Davey wished to retain a right of access over the farm track on the land to be sold.
[27] Prior to 26 August 2002 the methods of creation of a legal easement were by memorandum of transfer5 or, in the case of a subdivision, also by means of an easement certificate.6 In the present case, a subdivision plan was lodged which carved off from Lot 1 DP 8528 the area to be transferred to the Pavelkas, namely Lot 1 on DP 15668. On that subdivision plan the description of the proposed right of
way7 referred to Lot 1 (on DP 15668) as the servient tenement and to Part Lot 1
DP 8528 as the dominant tenement. Those two distinct areas of land are included in
Schedule A of the Memorandum of Transfer in [19] above.
[28] As New Zealand Land Law explains with reference to the creation of legal easements:8
An express grant occurs when one landowner transfers an easement over his or her land (the servient tenement) to another person. An express reservation occurs when, in a memorandum of transfer, the transferor reserves an easement over the land transferred (the servient tenement). The reservation of the easement takes effect as a re-grant from the transfer and, accordingly, both parties must execute the transfer.
[29] The practice in New Zealand was explained by Richmond J in Sutton v
O’Kane:9
It has been the practice in New Zealand, where land is subdivided, to create easements by means of a reservation in favour of the transferor on the transfer of a subdivided lot. Appropriate precedents are to be found in Goodall and Brookfield’s Conveyancing (3rd ed) 170 and in the
5 Land Transfer Act 1952 (now repealed), s 90.
6 Land Transfer Act 1952 (now repealed), s 90A.
7 At [13] above.
8 T Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009)
at [10.5.01(1)].
9 Sutton v O’Kane [1973] 2 NZLR 304 (CA) at 338.
New Zealand Encyclopaedia of Forms and Precedents, vol 5, p 336. Both these forms are intended to follow the operative part of the memorandum of transfer transferring the estate and interest in the land to the purchaser. Both begin with the words “Reserving nevertheless to myself and my assigns”, and expressly describe the dominant tenement to which the right of way is to be appurtenant.
[30] Consistent with that approach, the right of way easement in the present case was created by the express reservation in the Memorandum of Transfer by the words:
… RESERVING A RIGHT OF WAY over the area marked “A” on Deposited Plan 15668 for the benefit of part Lot 1 Deposited Plan 8528 being the balance of land comprised in Certificate of Title 4A/650, to the intent that it shall be forever appurtenant to the balance of the land in CT 4A/650, secondly described in schedule A hereto.
[31] Had the plaintiffs sought an order for rectification of the transfer document and Deposited Plan 15668 which specified a different area of land within Deposited Plan 15668 over which the right of way was to be reserved, then, subject to the grounds being made out, there would have been no legal impediment to the granting of an order.
[32] However that is not the order which the plaintiffs seek. They wish the right of way to be over land which was always the Pavelkas’ land and which was not the subject of any transfer from Mr Davey. In my view this poses an obstacle to the granting of the rectification remedy which the plaintiffs seek.
[33] The reason is that the transfer document which the parties executed could not have been employed to create such a right of way over land which was external to the land the subject of the transfer. That transfer document could only be effective to provide for a re-grant back of a right of way over the land originally conveyed.
[34] In order for Mr Davey to have obtained a right of way easement over the land which the Pavelkas had owned from the date of their original acquisition in 1988 it would have been necessary either for the Pavelkas to transfer the easement by an express grant or for a subdivision to have taken place which included the relevant part of the Pavelkas’ land and for an easement certificate to have then been executed.
[35] In my view the Memorandum of Transfer and the Deposited Plan in this case, which involve a transfer of land and a re-grant of an easement in respect of part of the transferred land, are not susceptible of amendment in a manner which would give effect to the order which the plaintiffs seek.
[36] I recognise that there may be circumstances in which an order for rectification may require the execution of an additional instrument. In that respect I note that in The Principles of Equitable Remedies the following comment is made:10
In some instances it may be possible to order the rectification of the instrument itself: Majestic Homes Pty. Ltd. v. Wise [1978] Qd. R. 225; in other instances it may be necessary to require further instruments to be executed in order to give effect to the relevant intention.
No authorities are cited as examples of the latter form of order.
[37] In my view it would be stepping beyond the proper ambit of the power to order rectification of a document, in the present case the Memorandum of Transfer, to make an order that would require not only the redrawing of the Deposited Plan to include land then owned by the Pavelkas (and now owned by the defendants) but also the execution of a further Memorandum of Transfer providing for an express grant of a right of way easement over what was formerly the Pavelkas’ land. However that in effect is the order sought by the plaintiffs.
[38] Consequently, even if I had been satisfied that the grounds warranted consideration of an order for rectification, I hold that the true nature of the order sought in this case is not one which the Court can entertain under the guise of rectification of documents.
[39] However if I am in error in that conclusion, I turn to consider the case advanced in support of rectification. So far as the standard of proof is concerned, I
apply the approach as stated in Law of Contract in New Zealand:11
10 I C F Spry The Principles of Equitable Remedies (9th ed, Sweet & Maxwell, Sydney, 2014) at
633 (see footnote 12).
11 J Burrows, J Finn and S Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington,
2012) at [10.6.1].
The burden of proving this common and continuing intention lies upon the party who claims that the written contract should be rectified. That party must rebut the presumption that a document signed by the parties expresses their intentions, and thus must furnish “convincing proof” of the alleged common intention which is inconsistent with the document, but this requirement does not go beyond the normal standard of proof in the document, but this requirement does not go beyond the normal standard of proof in civil matters which requires proof on the balance of probabilities, …
[40] The Memorandum of Transfer refers to an agreement dated
18 September 1992, which is a date closely proximate to the date of the transfer itself.12 However there was simply no evidence of any agreement of that date, written or oral, relating to the right of way.
[41] The alleged agreement relates to the route of which was described as “an existing track”.13 In fact at least some of that existing track is within the area shown as “A” on Deposited Plan 15668, a fact reflected in the first paragraph of the pleading of the rectification cause of action:
20.By virtue of the agreement referred to in paragraph 8, the subsequent transfer of the land by the First Plaintiff to the Grantor and the surveying error referred to in paragraph 13, the First Plaintiff has an equitable proprietary interest in respect of that part of the existing track, not included in the legal survey of the Easement in 1992.
[42] Paragraph 8 of the second amended statement of claim which is referred to in the above passage states:
8.The line of the existing track and where the track was indefinite the most practicable and obvious route was agreed between I.W. Davey as Grantee and N. Pavelka, the then owner of the Servient Land as Grantor.
[43] What is apparent from paragraph 8 is that the route of the existing track was not specifically delineated on a drawing or plan and, so far as the western end was concerned, it was to follow the most practicable and obvious route. That point is made clear in paragraph 13 of the second amended statement of claim which
describes the nature of the departure from the alleged agreed route:
12 At [19] above.
13 See [14] above.
13.A review by a surveyor in July 2010 shows the Defined Area provided by the Easement does not follow the existing track, at the Eastern end nor the most “obvious” route where the track is not formed at the Western end.
[44] Mr Downing submitted that there was no clear evidence of a common intention between Mr Davey and Mr Pavelka as to the exact location of the right of way. But even if an agreement expressed in terms of “the most practicable and obvious route” was sufficiently precise, he contended that Mr Light did adopt the most practicable and obvious route by placing the right of way over a five metre width strip immediately inside the Davey side of the common boundary prior to the transfer. The submission was made that the subjective views of Mr Davey or Mr Pavelka in 2015 as to what should have been the most practicable and obvious route were irrelevant.
[45] I consider that there is force in the defendants’ submission that the alleged agreement so far as concerns the route of the western end of the right of way is too vague. I also agree with the defendants’ submission that the evidence both as to the foundation of an agreement concerning the right of way and the provision of instructions to Mr Light was vague.
[46] With reference to discussions with Mr Davey, in cross-examination
Mr Pavelka said:
Q. Mr Pavelka, I want to just focus on the – what you say was agreed between you and Ian Davey about the land, further land that you acquired and the right of way. Was anything put in writing between you and Ian Davey at that time?
A. No.
Q. No? How many discussions did you have? A. How many–
Q. How many discussions with you have?
A. Sort of pretty informal discussions and, ah, I don’t know we probably, could be anywhere from three to half a dozen times perhaps but it was, um, nothing, as I say nothing formal, we just – I expressed the wish to purchase the land and, ah, Ian was agreeable provided he had the – provided he had the right of way surveyed and to follow the farm track.
[47] Mr Pavelka had no recollection of a discussion with Mr Light. He said that if he had had any conversation with him he would have told Mr Light to survey the formed track but not to go across the toe of the hill. He acknowledged that he would have received the survey map from Mr Light. While he agreed that it would have been obvious from the survey map that the right of way was being formed along the actual boundary between the two properties, he said that unfortunately he did not examine the map.
[48] Mr Davey said that he left it to the Pavelkas and their advisors to deal with the survey and legal aspects of the transfer of the portion of his land. He recalled that one day he was asked to call at his lawyer’s offices and sign the papers for the transfer and the right of way. It would seem that it was on that occasion that he
signed the subdivision plan.14
[49] His brief of evidence stated:
The plan, relating to the ROW I signed, looked on paper, to be in order. At the eastern end it clearly followed the “goose neck” of the existing track as it turned to cross a water course at right angles before going back into the title
20B/633 and up a small steeper slope within that title to the hill paddocks. From the fence posts at the end there is a straight line down to what I believed was the post at the intersection of three properties. This would follow the existing track as Norm Pavelka and I had agreed.
[50] Having considered all the evidence I agree with Mr Downing’s submission that there was no clear evidence of any agreement having been concluded as to the precise location of the right of way. The genesis for the creation of a right of way was the transfer of the portion of Mr Davey’s land to the Pavelkas. I do not consider that the parties directly turned their minds to the proposition that a right of way should be granted over land which the Pavelkas already owned and which was not included in the land to be conveyed by Mr Davey. In the circumstances I am not satisfied as to the existence of a common intention which is inconsistent with the right of way being located in the area marked “A” on Deposited Plan 15668.
[51] However even if I had been satisfied on that issue, it would be necessary then to address the defendant’s argument that Mr Baker was a subsequent purchaser for value without knowledge of any mistake on the part of Mr Davey and Mr Pavelka.
[52] On this issue Mr Downing drew attention to the judgment of Salmon J in Doubtless Bay Water Supply Company Ltd v Robinson which includes the following observation:15
The law is stated in Gaunt & Morgan, Gale on Easements (16th ed 1997) at para 2–14:
“It appears that an agreement, which complies with the relevant statutory formalities, made for valuable consideration for the grant of an easement shall be exercisable, creates in equity a valid easement which can be exercised against the servient party and his successors in title, not being a purchaser for value without notice,
…”
[53] I accept the evidence of Mr Baker that at the time of his acquisition of the property he was not aware of the contention that the right of way should have been in a different location than that referred to as “A” in Certificate of Title 10B/632 (Nelson District). As he was clearly a purchaser for value, had I not rejected the plaintiffs’ claim for an order for rectification on the basis of the first and second grounds discussed above, I would have declined relief on this further basis.
Should an order be made under s 317 modifying the route of the right of way?
[54] The jurisdiction to modify or extinguish an easement or covenant is conferred by s 317 of the Act which relevantly states:
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
…
(d) the proposed modification or extinguishment will not substantially injure any person entitled.
[55] The entitlement to apply to the Court for an order under s 317 modifying or extinguishing an easement or covenant is provided by s 316(1) which states:
316 Application for order under section 317
(1) A person bound by an easement, a positive covenant, or a restrictive covenant (including a covenant expressed or implied in an easement) may make an application to a court for an order under section 317 modifying or extinguishing that easement or covenant.
[56] The plaintiffs seek to invoke the s 317 jurisdiction on three distinct bases:
(a) that the easement is subject to a restrictive covenant as to the limited extent of the use of the easement over the servient land;
(b)that the plaintiff is burdened by a restrictive covenant in the form of a certificate required by s 243 of the Resource Management Act 1991 (the RMA);
(c) that the plaintiff is burdened by a positive covenant in respect of the formation and maintenance of the roadway along the right of way.
[57] A single prayer for relief is pleaded as follows:
The Easement be modified by relocating the Defined Area generally to the route that existed prior to the Defendant stopping access and as more particularly shown in the plan of Selwyn Light, surveyor, dated March 2013 annexed hereto.
A restrictive covenant with reference to the extent of use of the easement
[58] The amended statement of claim addresses this contention as follows:
26.The Easement is subject to a restrictive covenant as to the extent of use of the Easement over the Servient Land. The Servient Land is the whole of the Defendant’s land in title 10B/632 but the Plaintiff is restricted to the use of that part of the Servient Land as is defined by Deposited Plan 15668.
27. The Easement was created for value and is registered against the
Servient Land title.
[59] The plaintiffs’ argument was structured as follows:
(a) the creation of the right of way was within a contract for the transfer of 6,459m2 to the Pavelkas;
(b)a condition of that contract was that the right of way encompassing the existing track was to be reserved;
(c) the easement is registered against the whole of the “servient’s title”;
(d)however the implied terms in a vehicular right of way provide the right to form a driveway and to pass over the servient tenement which right is confined to the land over which the right of way is granted, namely the area “A” on DP15668;
(e) that creates a restrictive covenant on the plaintiffs as grantee in terms of the definition of restrictive covenant in s 4 of the Act;
(f) the consequence that the grantee has the burden of and is “bound” by the easement terms to only pass over the land designated “A” is a sufficient qualification for the purpose of s 316.
[60] For the defendants Mr Downing submitted that the right of way does not give rights over the entirety of the defendants’ property because the reservation back in the Memorandum of Transfer was only over the area marked “A” on DP15668. His submission stated:
The essence of a ROW is to restrict access rights to a defined area. If one could always argue that the express terms of the ROW limit the area on which the dominant owner can pass over the servient owner’s land, therefore the grantee has a restriction or burden and can apply to vary the ROW location, that would completely undermine and frustrate the intent of sections 316 and 317. That would effectively be the end of indefeasibility of title. It is an argument which is flawed.
[61] I consider that Mr Downing’s argument must be correct. The act of specifying the particular location of a right of way cannot of itself constitute a burden which can be relied upon as the basis for seeking modification in the nature of a relocation of the right of way.
[62] In any event, I do not consider that the confinement of a right of way to a particular portion of a title qualifies as a restrictive covenant. That term is defined in s 4 as follows:
restrictive covenant means—
(a) a covenant, including a covenant expressed or implied in an easement, under which the covenantor undertakes to refrain from doing something in relation to the covenantor’s land which, if done, would detrimentally affect the value of the covenantee’s land or the enjoyment of that land by any person occupying it; or
(b) a restrictive covenant in gross expressed or implied in an easement
[63] In my view the grant of a right of way (by re-grant to a former registered proprietor) over a particular portion of land cannot fairly be analysed as a covenant by the former owner to refrain from doing something in relation to that former owner’s land. To come within the definition it would be necessary for the plaintiffs to have made a covenant in relation to their own land, that is, Part Lot 1 DP8528. A so-called covenant by the plaintiffs with reference to the covenantees’ land (that is, the defendants’ land) would not satisfy the requirements of the definition in s 4.
[64] Consequently I reject the plaintiffs’ contention that their first basis of claim satisfies the requirement of s 316 that they are persons bound by a restrictive covenant.
A restrictive covenant under s 243 of the RMA
[65] The amended statement of claim states:
32. The Easement is a compulsory easement under s 243(a) of the
Resource Management Act 1991.
[66] Section 243(a) of the RMA provides:
243Survey plan approved subject to grant or reservation of easements
Where a subdivision consent is granted or any certificate of title is issued subject to a condition that any specified easements be granted or reserved, the following provisions apply:
(a) no such easement shall—
(i) be surrendered by the owner of the dominant tenement; or
(ii) in the case of an easement in gross, be surrendered by the grantee of the easement; or
(iii) be merged by transfer to the owner of the dominant or servient tenement; or
(iv) be varied—
except with the written consent of the territorial authority:
[67] As Mr Downing submitted, the effect of s 243 is that no variation of a reserved right of way can take place without Council consent and there is nothing odd or onerous about that.
[68] However, the plaintiffs’ argument as developed was somewhat different. The proposition appeared to be that on an assumed inspection by a Council officer, the route which the officer would likely have followed would have been along the existing track as referred to in Mr Light’s letter.16 Consequently to now form a
roadway on the actual surveyed route, the subject of the easement, would in effect
16 At [14] above.
amount to a variation of what the Council must be taken to have approved on the basis of the assumed inspection.
[69] Like Mr Downing, I have some difficulty with this line of argument. In effect it amounts to the contention that the location of the right of way as shown in the subdivision plan approved by the Council was not in fact approved by the Council because, on the basis of a perusal of the terrain, the Council must have proceeded on a misapprehension or misunderstanding as to the location of the intended right of way.
[70] First, I do not consider that there is a factual foundation for the proposition. Secondly, I do not accept that the alleged misapprehension has the consequence that to proceed to form a roadway on the granted easement somehow amounts to a variation in respect of which the Council’s consent is required and has not been obtained.
[71] Thirdly, and most significantly for the purposes of an attempt to invoke the Court’s power under s 317, I am unable to identify on what basis the plaintiffs’ contention could be analysed as a restrictive covenant within the terms of the definition at [62] above. Consequently, on this second basis of claim, I find that the plaintiffs do not have standing under s 316 to apply for an order for modification of the easement.
An implied positive covenant in respect of cost of formation and maintenance
[72] On this issue the amended statement of claim contends:
28.The Easement has within it an implied positive covenant in that the cost of constructing the roadway falls on the Plaintiff as the Grantee.
29.The burden of that covenant has been increased through the error of the surveyors in not reflecting the then common intention that the easement be along an existing farm track.
30. There is an implied positive covenant the Plaintiff will maintain the
Easement Facility.
31.The burden of that is likewise likely to be increased because on the legal right of way, the costs of maintaining it are likely to be higher given the instability of that land.
[73] Schedule 9 of the now repealed Property Law Act 1952 relevantly provided:
RIGHTS IMPLIED IN EASEMENTS OF VEHICULAR RIGHT OF WAY
1.The right of the grantee, the grantee’s servants, tenants, agents, workmen, licensees, and invitees (in common with the grantor, the grantor’s tenants, and any other person lawfully entitled) at all times by day and by night to go, pass, and repass, with or without vehicles, machinery, and implements of any kind, over and along the land over which the easement is granted.
2.The following rights of the occupiers of the land for the benefit of which, and the land over which, the easement is granted:
(a) The right to establish a driveway, and to effect necessary repairs to any existing driveway, and to carry out any necessary maintenance and upkeep, where necessary altering the state of the land over which the easement is granted; and any necessary rights of entry on the land over which the easement is granted with or without machinery, plant, and equipment:
[74] It was the plaintiffs’ contention that pursuant to cl 2(a) there was an implied positive covenant that they would both establish and maintain a driveway over the right of way. They contended that the burden of the covenant had been increased through the error of the surveyor in not reflecting the then common intention that the easement be along the existing formed track and that the cost of forming and maintaining the driveway was likely to be higher given the instability of the land.
[75] The defendants responded that what was implied by cl 2(a) was a “right”, not a burden, and that the plaintiffs were not obliged to exercise the right. It was a matter of choice for the plaintiffs whether to form the driveway or not.
[76] The defendants make the further point that the plaintiffs were not, in terms of s 316(1), persons “bound by” a positive covenant because the defendants had no right to enforce against the plaintiffs an obligation to undertake the formation of a driveway.
[77] Mr Allan countered that argument in two ways. First, he said that, although sch 9 refers to a “right”, in essence Mr Davey “must” form the driveway if the grant of the right of way is to be of any use. He sought to draw an analogy with the distinction between form and substance employed in equity when only negative or restrictive covenants were recognised. He argued that a negative covenant could be worded in a positive form but be negative in substance and hence would be
potentially enforceable, citing Rental Space Ltd v March,17 Walshe v Macrae18 and
Organic Farming Ltd v Bryson.19
[78] In the plaintiffs’ written submissions in reply the argument was developed as follows:
5.1The defendant’s submission “only the person bound by the easement can bring an application under s 317” would suggest only the servient tenement holder can bring an application for modification. Given the intent of the legislation and decisions such as Rental Space Ltd v March (1999) NZ ConvC 192 it is submitted such a view is too restrictive. The phrase “bound by the easement” needs to be read as “bound by the terms in the easement”.
5.2That is not a separate meaning from “bound by the easement”. In any convenyancing or commercial transaction the phrase “bound by the agreement” would mean “bound by the terms in the agreement”.
[79] The relevant entitlement in s 316(1) is available to “a person bound by … a
positive covenant”. Positive covenant is defined in s 4(1):
positive covenant means a covenant, including an express or implied covenant in an easement, under which the covenantor undertakes to do something in relation to the covenantor’s land that would beneficially affect the value of the covenantee’s land or the enjoyment of the covenantee’s land by any person occupying it
[80] That definition is the mirror image of the definition of restrictive covenant discussed above.20 In substance, it requires a covenant by the covenantor in relation to the covenantor’s own land which would have an effect on the covenantor’s land. As with the plaintiffs’ first argument in reliance on an asserted restrictive covenant, I
am unable to identify a covenant on the part of the plaintiffs in relation to their own
17 Rental Space Ltd v March (1999) 4 NZ ConvC 192,873 (HC).
18 Walshe v Macrae [2012] NZHC 296, (2012) 14 NZCPR 71.
19 Organic Farming Ltd v Bryson (2007) 5 NZ ConvC 194,383, (2007) 7 NZCPR 939 (HC).
20 At [62] above.
land with reference to the formation and maintenance of a driveway on the land of the defendants (albeit formerly owned by the plaintiffs).
[81] That conclusion is reinforced by reference to the definition of “person bound”
in s 4(1):
person bound means, in relation to an easement, a positive covenant, or a restrictive covenant burdening land, an owner or occupier of the land against whom the easement or covenant is enforceable
[82] Assuming for the purposes of analysis that the burden of the right of way easement is properly analysed as a positive covenant, then the defendants are the owners and occupiers of the land against whom the covenant is enforceable. Hence the defendants are the persons bound. That conclusion is further supported by the definition of “person entitled”, which term appears in s 317(1)(c).
[83] Consequently with reference to the third basis on which the plaintiffs sought to invoke the Court’s jurisdiction under s 317, I find that the plaintiffs are not a qualifying person for the purposes of s 316(1). They lack standing to apply for orders under s 317.
Is the plaintiffs’ claim the subject of an agreement to arbitrate?
[84] In the third cause of action the plaintiffs allege that the defendants have limited the plaintiffs’ use of the existing track by not cutting back the bank to create a five metre wide driveway and have allowed gum trees to obstruct the plaintiffs’ ability to use the easement. Orders are sought requiring the defendants to remove all trees and stumps at their cost and to cut back the bank to the extent necessary to allow the plaintiffs a five metre width driveway along the full length of the right of way.
[85] Anticipating the defendants’ affirmative defence, the plaintiffs plead:
40.There is no arguable defence to the Defendant’s obligation to remove the trees, trim the bank and allow a 5m width Easement Facility and thereby the Court is not fettered by the arbitration provision in Easement 321996.1.
[86] The fourth cause of action contends that the easement includes as a term, implied by Schedule 4, cl 14(b) of the Land Transfer Regulations 2002, the obligation to meet and in good faith to try to resolve a dispute and that the defendants are in breach of such obligation. The fifth head of claim is not a cause of action as such but pleads matters which are said to justify an award of aggravated or exemplary damages.
[87] The defendants contend that these claims are beyond the Court’s jurisdiction by virtue of the arbitration provision in the second covenant in Schedule B of the Memorandum of Transfer.21 While recognising that that provision does not extend to the issues in the first and second causes of action, the defendants maintain that the ambit of the clause is very wide, effectively requiring every other dispute or difference to be referred to arbitration.
[88] In their reply the plaintiffs reiterate their contention that there is “no arguable defence” to the claim in the third cause of action. They further say:
3.The Court is in as good a position to deal with this as arbitration and there will be time and cost saving if dealt with by the Court.
4.The fourth claim (good faith obligation of the Land Transfer Regulations 2002) is a jurisdiction legal issue more appropriately determined by the Court than by arbitration.
5.The fifth claim aggravated damages is a claim which arises from the Defendant’s conduct relating to the dispute not the arbitration agreement.
[89] It is implicit in that pleading that the plaintiffs contend that the Court continues to have the discretion under s 5(1) of the earlier Arbitration Act 1908 to decline to refer to arbitration a matter which was the subject of a submission to arbitration. However the second covenant in Schedule B of the Memorandum of
Transfer is now to be read as referring to the Arbitration Act 1996.22 Under art 8(1)
of sch 1 to that Act, the Court does not have a discretion on the issue of stay:
21 At [20] above.
22 Arbitration Act 1996, s 19(1).
8 Arbitration agreement and substantive claim before court
(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting that party’s first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred.
[90] So far as the italicised words are concerned, the Supreme Court in Zurich Australian Insurance Ltd v Cognition Education Ltd rejected the broader interpretation of the phrase, namely “no arguable defence”.23 The Court said:
[52] In the result, then, we accept the appellant’s contention that the narrow meaning should be given to the added words. Under art 8(1), a stay must be granted unless the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed or it is immediately demonstrable either that the defendant is not acting bona fide in asserting that there is a dispute or that there is, in reality, no dispute. It follows from this that an application for summary judgment and an application for a stay to permit an arbitration to take place are not different sides of the same coin.
…
[91] Consequently it is not open to the Court to elect to retain jurisdiction over claims on the grounds that the Court is in as good a position as an arbitrator to consider the issue or because the matter in dispute is a “jurisdiction legal issue”. Only if there is in reality no dispute may the Court decline to order a stay of the proceeding.
[92] The submission to arbitration in the second covenant is indeed broadly framed. Clearly it encompasses any issue concerning the cost of construction and maintenance of a driveway along the right of way. The defendants challenge the proposition that the Land Transfer Regulations 2002 apply retrospectively to the parties in this case but, even assuming that a claim as pleaded can be brought, in my view it would be captured by the arbitration provision in the second covenant. The aggravated and exemplary damages claim is not a discrete cause of action and, if
sound in law, it also would be within the wide ambit of the covenant.
23 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR
383 at [51].
[93] By contrast, there is no dispute that the plaintiffs have a right to pass and repass over the area defined as “A” on DP15668 or that the defendants, as grantor, must not allow anything to be done on the servient land that may interfere with the plaintiffs’ rights to use the right of way. Both those propositions are admitted in the second amended statement of defence dated 2 April 2014.
[94] However both those admissions are then qualified by the statement that the admission is “subject to any estoppel that has been created by the Plaintiffs’ conduct and representations”. The nature of that estoppel is elaborated upon in the second affirmative defence in this way:
54.In seeking the boundary adjustment Subdivision Consent from the Local Authority that created the Right-of-Way Easement in 1991, the Plaintiffs represented that the right-of-way would remain unformed and would not be used while they owned their property, as they had alternative access to their land.
55.The Local Authority granted the right-of-way including a condition that formation of the right-of-way was not required.
56.After the Defendant purchased his land the Plaintiffs seldom used the Right-of-Way Easement area and the Plaintiffs consented to the Defendant planting trees along the Plaintiffs’ “leg in strip” between the Right-of-Way Easement and the public road.
[95] I do not regard any of those assertions as providing a principled basis for a contention that the grantee of an acknowledged right of way easement should be precluded from seeking to exercise the rights granted under the easement.
[96] Nor do I consider that such a defence sits comfortably with the statement in the second amended statement of defence that Mr Baker has acted at all times in the interests of achieving proper formation of the right of way in accordance with resource management and engineering requirements. Indeed, at the conclusion of his evidence, Mr Baker responded to my question as follows:
Q. … And you’ve said, or your counsel has said, that, in one of his submissions, that the Bakers want the right of way formed. Does that fairly reflect your position?
AYes, I think we would – the right of way, it would be good to have it formed once and for all, all of the risks along its lengths mitigated and addressed so that we would not have to manage with further earthworks and disturbance and we can actually get the long-term plantings in as soon as possible.
[97] Furthermore, when I asked him about his attitude to the possibility that the procuring of any necessary consents might prevent the formation of the driveway, he said:
A. Um, I think we, we gave up on that possibility a long time ago and we’ve just accepted the right of way will be formed, that certainly earlier on we might have thought that, um, well, actually when the, the realistic challenges of that route were, um, became visible other options might be a higher priority but, um, I think that, that’s, um, no longer the case really, that, um, that right of way is going to be formed. A house is going to be built on the hill behind us. Um, I’ve planted trees in positions that make that less of an issue and I’ve planted the, well, I’ve planted one hedge to, to screen the right of way. …
[98] In the context of the evidence as adduced it was my perception that the estoppel defence as pleaded was not maintained. However, if I misunderstood the defendants’ position and, contrary to my perception, the estoppel defence remained live, then in my view it would not be a bona fide defence so as to give rise to a genuine dispute which would require it to be referred to arbitration pursuant to article 8(1).
[99] Plainly any determination as to who should be required to bear the cost of the removal of trees and stumps on the right of way and the cutting back of the bank, with any associated protective measures, is a matter for an arbitrator. However, in the circumstances as explained above I consider that it is appropriate for the Court to make a declaration that the plaintiffs are entitled to form a driveway over the area of the right of way, subject to compliance with any local authority requirements under s 348 of the Local Government Act 1974.
[100] Finally, I record that in their closing submissions the defendants sought leave to amend the amended statement of defence to add a fourth positive defence of issue estoppel. The basis upon which the defendants sought to introduce the new defence was said to be the fact that Mr Davey had commenced proceedings in the District
Court seeking removal of the trees at the western end of the right of way and such proceedings had been stayed pending an arbitration. In my view it is too late to raise an issue of this kind in closing submissions. Leave to amend the defence is declined.
Disposition
[101] The plaintiffs’ claims for an order for rectification of the Memorandum of Transfer and for an order under s 317 of the Act for modification of the right of way easement are declined.
[102] I make the following orders:
(a) a declaration that the plaintiffs are entitled to form a driveway along the route of the right of way marked “A” on Certificate of Title 10B/632 (Nelson District) subject to compliance with any requirements under s 348 of the Local Government Act 1974 and to the obtaining of any necessary resource consents for the removal of trees on the right of way and the cutting back of the bank;
(b)an order staying the proceeding and referring to arbitration the balance of the plaintiffs’ claims in the third, fourth and fifth causes of action including all issues concerning the extent or share of liability of the parties for the costs of the construction and maintenance of the driveway along the route marked “A” in Certificate of Title 10B/632 (Nelson District);
(c) in the event that the parties are unable to agree upon an arbitrator within 20 working days, leave is reserved to apply to the Court for an order appointing an arbitrator;
(d)leave is reserved to apply to bring the proceeding back to the Court in the event that, because resource consents or other regulatory approvals are unobtainable, it is not possible to construct a driveway along the route of the right of way marked “A” on Certificate of Title 10B/632 (Nelson District).
[103] The parties are to file brief memoranda concerning costs in this proceeding. The defendants are to file a memorandum by 9 October 2015 and the plaintiffs are to
file a memorandum in response by 23 October 2015.
Brown J
Solicitors:
Pitt & Moore, Nelson
McFadden McMeeken Phillips, Nelson
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