Davis

[2025] NZHC 2081

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2025-441-37

[2025] NZHC 2081

UNDER	Part 19 of the High Court Rules and ss 316 and 317 of the Property Law Act 2007
IN THE MATTER OF	an application to modify a land covenant
BETWEEN	MARGARET ANNE DAVIS
Applicant

On the papers:
Counsel:	J D O’Connor for Applicant
Judgment:	28 July 2025

JUDGMENT OF GRAU J

Introduction and summary

[1]    The applicant, Margaret Davis, has applied for an order under s 317 of the Property Law Act 2007 (PLA) to modify a covenant to correct a mistake when her Hastings property was subdivided into eight lots in 2021.

[2]    By minute dated 13 May 2025, I granted leave for the application to proceed by way of originating application and made orders for service of the application on the other five owners of the lots in the subdivision and the territorial authority.

[3]    By minute dated 11 June 2025, Boldt J directed counsel for Mrs Davis to file submissions in support of the application, along with evidence confirming consent of the other owners, after which the application could be determined on the papers.

[4]All of the other owners have consented now.

MARGARET ANNE DAVIS [2025] NZHC 2081 [28 July 2025]

[5]    I grant the application to correct what was an obvious error made when the covenant was drafted. Three of the grounds to modify a covenant under s 317(1) are satisfied and it is appropriate for the Court to exercise its discretion to order modification. My reasons follow.

Background

[6]    Mrs Davis and her late husband lived on a property in Fernhill, Hastings, that they purchased from her husband’s parents. Mrs Davis has deposed that when their children were adults, she and her husband decided to subdivide the property. She reports they were advised to have a covenant registered against the titles, which was duly prepared by the lawyers they had engaged at the time. Clause 4.3 of the covenant provided that the covenantor “will not erect or permit to remain on the Lot any building other than a new residential house designed for and occupied exclusively as one household and for residential purposes only”.

[7]    The property was subdivided in 2021 before the passing of Mrs Davis’s husband. The property was divided into eight Lots. Five Lots were sold (namely  Lots 1, 2, 3, 6 and 7). Three Lots are still owned by Mrs Davis (Lots 4, 5 and 8). Lot 5 contains a house, in which Mrs Davis’s daughter and her family have lived since 1990.

[8]    Mrs Davis and her husband never intended to impose an obligation on themselves to remove their own house on Lot 5 and so the wording in the covenant is an obvious mistake. It is also contrary to a deed that she and her husband signed with her daughter and son-in-law whereby they could purchase Lots 4 and 5.

[9]    As noted, all of the owners of the other lots in the subdivision have now consented to modification of the covenant to allow the house to remain on Lot 5.

[10]   A slightly different order is sought to the order proposed in the originating application. When the application was filed it was understood that the house on Lot 5 was the only existing building in the subdivision. However, there is another building on Lot 3 and all of the owners of the other lots have not consented to that building remaining. Accordingly, the modification of the covenant is sought to be restricted to Lot 5.

Law

[11]   The Court has a discretion to modify or extinguish easements wholly or in part under s 317 of the PLA where certain conditions are met. Section 317 provides:

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—

(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.

[12]   The owner of the burdened land (here, the applicant) has the onus of showing that reasons exist for the orders sought and that the order is accordingly appropriate.1

[13]   The leading authority on the modification or extinguishment of easements pursuant to s 317 is Synlait Milk Ltd v New Zealand Industrial Park Ltd (Synlait).2 From that case, six principles emerge:

(a)The Court is to apply a two-step approach. First, the Court should determine whether one or more of the grounds in s 317(1) are made out. If so, the Court should then determine whether to exercise its discretion to extinguish or modify the easement. Some of the considerations at the second step are also relevant to the first step.3

(b)The exercise of the discretion requires consideration of all relevant factors, including the power to award compensation, and no one factor should be disqualifying.4

(c)Over time the legislature has gradually increased the Court’s power to modify or extinguish an easement. There is a parliamentary intention that the section should be applied less restrictively than it was in the past.5

(d)A degree of caution is required but the power to modify should not be applied so restrictively that s 317 does not have the remedial effect intended.6

1      New Zealand Industrial Park Ltd v Stonehill Trustee [2019] NZCA 147, (2019) 20 NZCPR 119 at [72].

2      Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657 [Synlait].

3 At [67].

4 At [90].

5      At [76]–[79] citing Harnden v Collins [2010] 2 NZLR 273 (HC); and Okey v Kingsbeer [2017] NZCA 625, (2017) 19 NZCPR 25.

6      At [77] citing with approval Harden v Collins, above n 5, at [44].

(e)The statutory wording of s 317 is clear and should not be overlaid with requirements that cases be exceptional, or that contractual or property rights supersede the discretion.7

(f)Contractual and property rights cannot be ignored but must be considered in the factual context before the Court, rather than as “generic fetters” on the Court’s discretion. Each application should be considered on its own merits.8 The Court must balance policy considerations about the importance of property rights and the sanctity of contract against efficient use of land resources and, in some cases, issues of fairness.9

[14]   Generally speaking, a finding of fact that one or more of the statutory grounds in s 317 exists is “likely, of itself and without more, to provide a good reason or reasons” for extinguishing or modifying the relevant easement.10

Discussion

[15]   As the submissions for Mrs Davis point out, three of the grounds in s 317(1) are made out in this case.

(a)The other owners of the lots in the subdivision all consent.11

(b)It is just and equitable to modify the covenant.12 In this case there was an obvious drafting error. Mr and Mrs Davis never intended to impose an obligation on themselves to remove their own house which was already on the property at the time of the subdivision. Their daughter and her family have been living in the house since 1990. Mrs Davis and her husband had promised them, via a deed, that they could purchase the property.

7      At [84]–[85].

8 At [88].

9      At [89]; citing with approval Cooke J’s observations in Pollard v Williams [2019] NZHC 2029, (2019) NZCPR 371 at [18].

10     At [168]; citing Re University of Westminster [1998] 3 All ER 1014 (CA) at 1024.

11     Property Law Act 2007, s 317(1)(c)(i).

12     Section 317(1)(f).

(c)There is no substantial injury to other owners.13 All were aware of the existing house on Lot 5 when they purchased their lots. Nor did they raise any objection to it, either before or after purchase.

[16]   When three of the grounds to modify the covenant are made out, that of itself provides a good reason for making an order for modification, particularly when there do not appear to be any factors militating against the Court exercising its discretion. Without modification, the house in which Mrs Davis’s daughter and her family live would have to be demolished and replaced with a new residential building. I am therefore satisfied that the Court should exercise its discretion to modify the covenant to allow the building on Lot 5 to remain. In the absence of owner agreement for the other building on Lot 3 to remain, I also consider it is appropriate to restrict the modification to Lot 5.

Orders

[17]Accordingly, I grant the following orders:

(a)Modifying the covenant registered under Easement Instrument Number 11990811.9 against Record of Title 986799, 986800, 986801, 986802, 986803, 986804, 986805 and 986806 (Hawkes Bay Land District) by adding the wording “except that the existing house on Lot 5 is permitted to remain on Lot 5” after the word “only” in clause 4.3 of the covenant.

(b)Leave is granted to the applicant to seek any further or ancillary orders that may be necessary to implement the orders made.

Grau J

Solicitors:
Bramwell Bate Lawyers, Hastings for Applicant

13     Section 317(1)(d).