Duckie Investment Company Limited v Formosa Auckland Country Club Limited (in liquidation)

[2016] NZHC 177

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-001638 [2016] NZHC 177

IN THE MATTER

of the Property Law Act 2007

BETWEEN

DUCKIE INVESTMENT COMPANY LIMITED

Plaintiff

AND

FORMOSA AUCKLAND COUNTRY CLUB LIMITED (IN LIQUIDATION) First Defendant

110 FORMOSA (NZ) LTD Second Defendent

Hearing:	3 February 2016
Appearances:	D K Wilson for Plaintiff No appearance for First or Second Defendants
Judgment:	16 February 2016

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 16 February 2016 at 3.30pm

pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:……………………………….

Solicitors/counsel:

Raymond S Walker, Auckland for Plaintiff Forest Harrison, Auckland for First Defendant D Bigio, Auckland for Second Defendant

DUCKIE INVESTMENT CO LTD v FORMOSA AUCKLAND COUNTRY CLUB LTD (IN LIQUIDATION) & ANOR [2016] NZHC 177 [16 February 2016]

Introduction

[1]      The plaintiff seeks an  order under s 317 of the  Property Law Act 2007 extinguishing a water supply easement which is registered against the title to its land.

[2]      Initially the application was opposed by the first defendant.  That company previously owned the dominant tenement which enjoys the benefit of the easement. It was the owner of the dominant tenement at the time the proceedings were filed and it filed a statement of defence.   Before the matter could proceed to trial, its mortgagees intervened and exercised the power of sale vested in them.  They entered into an unconditional contract with the second defendant to sell the land to that company.  Settlement took place and the second defendant was joined and served.  It has taken no steps and consents to the easement being extinguished.  Moreover, the liquidator of the first defendant no longer opposes the plaintiff’s claim.  As a result, this matter proceeded by way of formal proof.

[3]      Costs were not in issue between the plaintiff and the second defendant.  The first defendant did however seek costs against the plaintiff.

[4]      Mr  Wilson  for  the  plaintiff  appeared  in  support  of  the  formal  proof application.  Both he and Mr Lim for the first defendant filed memoranda as to costs, and consented to the Court resolving the issue of costs on the papers.

Background

[5]      The plaintiff owns a block of land comprising some 19.3 hectares on the northern side of Jack Lachlan Drive in Beachlands.  It purchased this land from the first defendant in 2013.

[6]      The first defendant also previously owned an area of land to the south of Jack Lachlan Drive comprising approximately 170.5 hectares.  As noted, its mortgagees, in exercise of their power of role, transferred that land to the second defendant on 1

October 2015.

[7]      The plaintiff’s land is subject to an easement registered no. 8283945.2, North Auckland Land Registry.  The easement creates a water supply right in favour of the land now owned  by the second  defendant.    It  requires  the  grantor  –  being the

registered proprietor of the land now owned by the plaintiff – to maintain a dam on its land in accordance with a resource consent issued for the dam, so that the registered proprietor of the land now owned by the second defendant can take water from it.

[8]      In 1996, the first defendant was granted three resource consents by Auckland Regional Council permitting it to construct dams, and to discharge water into unnamed tributaries running across the properties now owned by the plaintiff and by the second defendant.

[9]      The resource consents expired in May 2012.

[10]     For some reason, the easement refers to a resource consent which was given permit no. 95 10509.  However the resource consent which actually authorised the dam on the plaintiff’s land was allocated permit no. 9510507.   This aside, in the event the dam was built and it initially operated satisfactorily.  It seems however, that at some stage the dam became unsafe.

[11]     When the plaintiff (and another company) purchased its land from the first defendant in 2013, the first defendant was in receipt of an abatement notice from Auckland Council, requiring the dewatering of the dam.   In October 2013, after it had completed the purchase of its land from the first defendant, the plaintiff received a further abatement notice from Auckland Council, which asserted that the dam was in contravention of the Resource Management Act 1991.   It  again  required the dewatering of the dam.

[12]     In compliance with the abatement notice, the plaintiff proceeded to remove the dam.  The removal was completed by early 2014.  The works to decommission the dam have fully removed the dam structure and left a stream which now flows through the plaintiff’s property.   The plaintiff has no resource consent to build a replacement dam and the easement does not require that it do so.

[13]     The plaintiff wishes to develop and subdivide its property.   To this end it seeks to have the easement extinguished.

Relevant statutory provisions

[14]     The relevant law is found in s 317 of the Property Law Act.  Relevantly, it provides as follows:

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

…

Analysis

[15]     I am satisfied that the water supply easement ought to be extinguished. There has been a change of relevant circumstances since the easement was put in place.  In particular:

(a)      The water supply easement, the dam for the supply of water and the operation of both the dam and the supply of water were all based on a resource consent which was granted in 1996, but which expired on 31

May 2012.

(b)After 31 May 2012, the existence of a dam on the plaintiff’s property and the operation of any dam to supply water to the land now owned by the second defendant became unlawful.

(c)      Without further consents, the use of the water right easement by the owner of the dominant tenement cannot now occur, and any such use would be unlawful.

(d)There will be no substantial detriment to any person if the easement is extinguished.  The first defendant has been aware since 1996 that the resource  consent  on  which  the  water  supply  easement  was  based ended on 31 May 2012.  It no longer has any interest in the land.  The second defendant consents to the extinguishment of the easement and to an order being made in the following terms.

[16]     Pursuant to s 317 of the Property Law Act 2007, I order as follows:

(a)      Water supply right over part marked A on DP 420017 created by Easement Instrument 8283945.2, is extinguished from the title owned by the plaintiff being Identifier 476188, North Auckland Land Registration District, and

(b)Water supply right created by Easement Instrument 8283945.2 is extinguished  from  the  title  owned  by the  second  defendant  being Identifier 476189 North Auckland Land Registration District.

Costs

[17]     I have read the submissions filed by both Mr Lim and Mr Wilson.  Mr Lim sought costs on a 2B basis, and argued that the plaintiff’s action had required the first defendant to spend unnecessary funds.

[18]     I am satisfied that the first defendant is not entitled to an award of costs.  I do not consider that the plaintiff’s actions in commencing the proceedings were either unnecessary,  or inappropriate.    It  wished  to  extinguish  the easement.   The first defendant owned the land with the benefit of the easement.  The first defendant was approached by the plaintiff, but it would not consent to the easement being extinguished. The first defendant was in liquidation, and the plaintiff was required to seek leave to commence a proceeding against the company in liquidation.  The first defendant opposed that application.  Whata J granted leave in a judgment dated 18

June 2015.  The present proceeding was filed in July 2015.  At that time the first defendant was the owner of the dominant tenement.  While the plaintiff was aware that the first defendant had entered into a contract to sell the land, the contract had not settled at that time.  Rather the second defendant had lodged a caveat on the title

protecting its agreement.  Ultimately, the second defendant became the owner of the dominant tenement, and it was served with the proceedings.  At the time the proceedings were issued the plaintiff could not have been certain that the sale by the first defendant to the second defendant would proceed, and the plaintiff was obliged to name the first defendant as a party.

[19]     In the circumstances, I do not consider that the first defendant can properly argue that the plaintiff has failed against it.  The plaintiff has succeeded in its action. It has not obtained an order affecting the first defendant but that is simply because the  first  defendant  no  longer  has  an  interest  in  the  property the  subject  of  the proceedings.

[20]     The first defendant’s claim for costs is declined.

[21]     There is no issue as to costs between the plaintiff and the second defendant.

Wylie J