Douglas v Morgan - [2012] NZHC 3375

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2012-419-1061 [2012] NZHC 3375

UNDER Part 18 of the High Court Rules

IN THE MATTER OF an application under section 3 of the
Declaratory Judgments Act 1908

BETWEEN GRANT FREDERICK DOUGLAS, JENNIFER CAROL DOUGLAS AND JOHN LINDSAY MILLAR (AS TRUSTEES OF THE MAINLAND TRUST)
Plaintiffs

ANDHENRY JOSEPH MORGAN, BRIDGET JANE MORGAN AND BAILEY INGHAM TRUSTEES LTD (AS TRUSTEES OF THE HERACLE TRUST) First Defendants

ANDHENRY JOSEPH MORGAN, BRIDGET JANE MORGAN AND BAILEY INGHAM TRUSTEES LTD (AS TRUSTEES OF THE MORGAN FAMILY TRUST)
Second Defendants

Hearing: 15 October 2012

Counsel: C T Gudsell QC for Plaintiffs
D Shore for Defendants

Judgment: 18 December 2012

JUDGMENT OF KATZ J

In accordance with r 11.5 High Court Rules
I direct the Registrar to endorse this judgment with a delivery time of 4 p.m. on 18 December 2012.

DOUGLAS V MORGAN HC HAM CIV-2012-419-1061 [18 December 2012]

Solicitors: Dix, Koretz & Millar, Otorohanga – dkmlaw@xtra.co.nz
McCaw Lewis, Hamilton – daniel.shore@mccawlewis.co.nz

Copy to: C T Gudsell QC, Hamilton – ctgudsell@xtra.co.nz

Introduction

[1] The parties to this proceeding are the trustees of three family trusts. Each trust owns one or more lots in a rural residential subdivision near Otorohanga known as “Meadow Park Heights”:

(a) the plaintiffs own Lot 3 and Lot 4 in the subdivision; (b) the first defendants own Lot 5 in the subdivision;
(c) the second defendants own Lot 2 in the subdivision.

[2] For ease of reference I will refer to the plaintiffs as the Douglases. I will refer to the first and second defendants as the Morgans, although two separate family trusts (both associated with the Morgan family) are involved.[1]

[1] The first cause of action is against the trustees of the Heracle Trust, who own Lot 5. The second cause of action is against the trustees of the Morgan Family Trust, who own Lot 2.

[3] The properties in the Meadow Park Heights subdivision are subject to a number of restrictive covenants. A dispute has arisen between the parties as to the correct interpretation of those covenants. This has given rise to the two causes of action before the Court.

[4] Firstly, the Morgans have obtained resource consent from the Otorohanga District Council (“Council”) to subdivide Lot 5 into seven additional lots and an additional right of way lot. In their first cause of action the Douglases claim that further subdivision of the lots in the Meadow Park Heights subdivision is not permitted, as:

(a) the true meaning and effect of the restrictive covenants is to restrict the owners of each lot in the subdivision to one dwellinghouse and
one ancillary building per lot; and/or

(b) the Morgans’ proposed subdivision of Lot 5 is a “commercial activity”

prohibited by the restrictive covenants.

[5] The second cause of action relates to the operation of Henry Morgan Builders Limited (“Henry Morgan Builders”), a company associated with the Morgans, from Lot 2. The Douglases contend that Henry Morgan Builders has been operating from Lot…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2012] NZHC 3375
Decision Date: 18 December 2012

CaseChat Overview and Summary

In Douglas v Morgan, the High Court was asked to interpret restrictive covenants in relation to a rural residential subdivision. The plaintiffs sought a declaration that the covenants prohibited the defendants from subdividing their lots and conducting commercial activities on their land. The defendants argued that the covenants did not prohibit such activities. The court found that the covenants restricted the number of buildings on each lot to one dwellinghouse and one ancillary building, and that the defendants' proposed subdivision of their lot and operation of a commercial activity from their land breached the covenants. The court ordered the defendants to pay liquidated damages and the plaintiffs' costs. The court also found that the defendants had breached other covenants by accumulating rubbish on their land and storing building materials outside their ancillary building, although these breaches were likely remedied within the one-month period allowed for in the notice of breach. The court declined to make a declaration in relation to the defendants' counterclaim that the restrictive covenants did not prevent the subdivision of their lots.

Orders