Fair v Fair

[2019] NZHC 2349

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2019-454-40

[2019] NZHC 2349

BETWEEN

EILEEN ELEANOR FAIR

Applicant

AND

EILEEN ELEANOR FAIR AND ORS

First Respondents

AND

PALMERSTON NORTH CITY COUNCIL

Second Respondent

Hearing:	11 September 2019
Appearances:	P J Wright and T Nelson for the Applicant Appearance excused for Second Respondent
Judgment:	17 September 2019

JUDGMENT OF CULL J

[1]        Eileen Fair seeks orders under ss 316 and 317 of the Property Law Act 2007 (the PLA) to partially extinguish and modify a land covenant (the Covenant) applicable to land she is subdividing in Palmerston North.

[2]        The Covenant governs the number and standard, in terms of character, design specification and the like, of dwellings and fences and other aspects of the use of the new residential sections in the development. In its present form, the Covenant also applies to land that will become roads and reserves which are to be vested in the local authority, the Palmerston North City Council. It was not intended to apply in this manner, and this has arisen as a result of an oversight during the previous stage of the development.

FAIR v FAIR AND ORS [2019] NZHC 2349 [17 September 2019]

[3]        Under s 224(b) of the Resource Management Act 1991 (the RMA), the consent of every registered owner of the already-subdivided titles is required to the subdivision because of their interest in the land intended to vest as a road through their land being the dominant tenements under the Covenant.

[4]        Also as part of the subdivision, the new roads that are to vest in the Council must, under s 238 of the RMA, vest free from all interests in the land including any encumbrances.

[5]        Because the Covenant is registered against the land required for a road in the current stage of the subdivision, the effect of s 238 is to prevent the plan depositing, unless the consent of every registered owner of the dominant tenements is obtained.

[6]        Because the process would be unduly burdensome on Ms Fair, she seeks an order to extinguish the Covenant from that part of the land now needed to vest as a road and add a deemed consent provision of a kind commonly used in this context into the Covenant to prevent this problem from arising again in future stages of the development.

Factual background1

The Development: Fair Estates Subdivision

[7]        The applicant is carrying out a multistage residential development, the Fair Estates Subdivision (the Development), on a parcel of land adjacent to Fairs Road in Palmerston North (the Site). She inherited the Site for the Development in 1975.

[8]        Stages I and II of the Development have been completed. The Covenant was registered as part of Stage II.2

[9]        The problem the applicant now faces did not arise in respect of Stages I and II. This was because the land that vested in the Council as roads was excluded from the land to which the Covenant applied when it was registered.

1      I have adopted the summary of facts from the affidavit evidence which was helpfully set out in Mr Wright’s memorandum of counsel for Ms Fair.

2 Affidavit of Eileen Eleanor Fair at [41].

[10]Following Stage II of the Development, the Site was as follows (Plan A):

[11]      The land marked Lot 100 on Plan A is to be subdivided in Stage III of the Development.

[12]      The entirety of that lot is, however, subject to the Covenant. It seems that the fact that future stages of the Development would also require the vesting of roads and reserves was overlooked when the Covenant was registered.

[13]      The individual lots visible on the right-hand side of Plan A have the benefit of the Covenant. Not all these lots have been issued titles. At present, excluding the applicant, there are 21 sets of registered proprietors.

[14]      For Stage III of the Development, the applicant intends to develop the Site as follows (Plan B):

[15]      Lot 100 as depicted on Plan A will be subdivided into 15 lots visible on Plan B as follows:

(a)Lots 1 to 5 and 10 to 17 will be residential lots.

(b)Lot 50 is to vest in the Council as a road.

(c)Lot 100 is the residual balance of the land, to be developed later.

[16]      The land that is to vest in the Council as a road, Lot 50 on Plan B, is also subject to the Covenant. This is because, as explained, the entirety of Lot 100 as depicted on Plan A, and from which Lot 50 on Plan B will be carved, is subject to the Covenant.

The Obstacle: Resource Management Act 1991

[17]      Due to the operation of ss 224, 238 and 239 of the RMA, the Covenant prevents the survey plan for further subdivision pictured above as Plan B from being deposited without obtaining the consent of the registered proprietors of the benefited titles.

[18]      Section 238(1) of the RMA has the effect that land shown on the survey plan as road to be vested in the Council, vests free of all interests in the land:

238Vesting of roads

(1)When the Registrar-General of Land deposits a survey plan, or a Chief Surveyor approves a survey plan to which section 228 applies, the land shown on the survey plan as road to be vested in a local authority or the Crown vests, free from all interests in land including any encumbrances (without the necessity of any instrument of release or discharge or otherwise),–

(a)in the case of a regional road, in the territorial authority or regional council, as the case may be:

(b)in the case of a Government road declared as such under any Act, in the Crown:

(c)in the case of a State highway, in the Crown or the territorial authority, as the case may be:

(d)in the case of any other road, in the territorial authority.

[19]      Section 239 of the RMA requires the same for land to be used as a reserve. Section 239(2) does, however, provide the Council with the power to accept the vesting of reserve land subject to specified interests. Section 239 provides:

239Vesting of reserves or other land

(1)When the Registrar-General of Land deposits a survey plan, or a Chief Surveyor approves a survey plan to which section 228 applies,–

(a)any land shown on the survey plan as reserve to be vested in the territorial authority or the Crown, vests in the territorial authority or the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of any instrument of release or discharge or otherwise) for the purposes shown on the survey plan, and subject to the Reserves Act 1997; and

(b)any land shown on the survey plan as land to be vested in the territorial authority or in the Crown in lieu of reserves, shall vest in the territorial authority or in the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of an instrument of release or discharge or otherwise); and

(c)any land or any part of the bed of a river (not being part of the coastal marine area) or lake, shown on the survey plan as land to be vested in the territorial authority or the Crown, shall vest in the territorial authority or the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of an instrument of release or discharge or otherwise); and

(d)to avoid doubt, any land shown on the survey plan as land in the coastal marine area becomes part of the marine and coastal area.

(2)Notwithstanding subsection (1), the land may be vested subject to any specified interest which the territorial authority has certified, on the survey plan, shall remain with the land.

(3)Any land vested in the Crown vests under the Land Act 1948 unless this Act provides otherwise.

[20]      But, per s 224(b)(i), the survey plan cannot be deposited without obtaining the written consent of every registered owner of an interest in the land that will vest in the Council. This is because depositing the plan will effectively extinguish those interests insofar as the relevant land is concerned.

[21]Section 224(b)(i) provides:

224     Restrictions upon deposit of survey plan

No survey plan shall be deposited for the purposes of section 11(1)(a)(i) or (iii) unless–

…

(b)where land shown on the survey plan will vest in the Crown or a territorial authority, there is endorsed on the survey plan or deposited with the Registrar-General of Land, written consent to the subdivision given by–

(i)         in the case of land subject to the Land Transfer Act 2017, every registered owner of an interest, including any encumbrance, in the land; or

[22]      Land Information New Zealand (LINZ) has requisitioned the depositing of the plot in question because of the presence of the Covenant on the title.

[23]      If the Covenant is not modified and extinguished to the extent sought by Ms Fair, she submits cooperation and action would be required from 21 sets of registered proprietors and their mortgagees, which would be unduly burdensome on her, increasing expenses, delaying progress, and taking undue time.

Leave to proceed by original application

[24]      Ms Fair applied for leave to bring an originating application for orders partially extinguishing and modifying the Covenant. Under r 19.5 of the High Court Rules 2016, the Court may, in the interests of justice, permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by originating application. The rules do not include an application to modify or extinguish a covenant.

[25]      There have been a number of applications under ss 316 and 317 of the PLA that have been permitted to proceed by way of originating application.3

[26]      I accept the submissions advanced by Mr Wright for Ms Fair that this type of proceeding is well suited to the originating application procedure because the application is brought under specific statutory provisions, and the issues are clearly defined and confined. Further, the relevant issues can be adequately addressed through affidavit evidence and the orders sought will not detrimentally affect any other party. As Asher J observed in Hong Kong v Shanghai Banking Corporation v Erceg:4

… the type of proceeding suited to the originating application procedure is a straightforward application, not requiring detailed pleadings or interlocutory orders for its fair resolution. Such a type of proceeding tends to be an application under a specific statutory provision, where the issue that arises can be clearly defined, and the issues confined.

[27]      I am satisfied that this proceeding is well-suited to the originating application procedure for the reasons I have addressed above, and I grant leave to bring this originating application for the orders sought.

On notice application

[28]      In seeking leave to bring an originating application, leave was also sought to bring the application without notice to any other party on the grounds that requiring Ms Fair to proceed on notice would cause undue delay or prejudice, and the proposed partial extinguishment and modification will not substantially injure any person for

3      For recent examples, see Auckland Council v The Queen [2017] NZHC 2724 at [1]; Re Auckland Council [2018] NZHC 275 at [4]; Nelson Lakes Holdings Ltd v Seifried [2018] NZHC 521 at [9]; RCL Henley Downs Ltd v Hanson [2018] NZHC 2714 at [11]; and Law v Mayall Property Group Ltd [2018] NZHC 3389 at [13].

4      Hong Kong and Shanghai Banking Corporation Ltd v Erceg (2010) 20 PRNZ 652 (HC) at [25].

the purposes of s 317 of the PLA. This Court has already determined that this matter is not one which should proceed without notice. The Court was not prepared to assume the 21 sets of registered proprietors had no matters on which they might legitimately wish to be heard, and leave to proceed without notice was not granted.5

[29]      The proceedings were served on the 21 owners and the Palmerston North City Council. None of the owners had taken any formal steps by filing a notice of opposition, although a number of them contacted the Court to clarify what they should do. Two registered proprietors had indicated their consent to the arrangements and another sought advice as to whether there were any further development issues or whether it was for the owners to discuss any concerns or objections.

[30]      The file was referred to the Duty Judge, who noted that the interests affected would be minor, if any at all, but because the application sought to modify and extinguish existing rights protected by covenants, all the issues should be squarely before the Court.6 The matter was adjourned for a formal proof hearing of the application, with a direction that the Palmerston North City Council should either appear at the proposed formal proof hearing or provide a memorandum setting out its position, and raising any relevant issues of which the Court should be aware.

[31]      The Palmerston North City Council filed a memorandum, setting out its position. It supports Ms Fair’s application, because the relief sought will ultimately enable Lot 50 to vest in the Council as road. The road was always intended to vest in the Council, and because of the Covenant and operation of ss 224 and 238 of the RMA, the vesting in the Council has been prevented. The Council considered there were no further matters or issues of relevance in respect of Ms Fair’s application.

The substantive application

[32]      As noted above, the substantive application is made under ss 316 and 317 of the PLA to extinguish and modify the Covenant as it applies to Lot 50 on Plan B above.7 Section 316(1) provides that a person bound by a covenant may make an

5      Fair v Fair HC Palmerston North CIV-2019-454-40, 8 July 2019 (Minute of Simon France J).

6      Fair v Fair HC Palmerston North CIV-2019-454-40, 27 August 2019 (Minute of Grice J).

7      See [14] of this judgment.

application to the Court for an order under s 317 modifying or extinguishing that covenant. Thus, servient owners have standing to make an application under s 316.8

[33]      In this case, Ms Fair applies in her capacity in the servient owner of the land, the subject of the orders and clearly has standing.

Grounds for the application

[34]      The application was made under s 317 of the PLA that the Covenant ought to be modified and partially extinguished because:

(a)there has been a change since its creation in the nature and extent of the use being made of the burdened land (s 317(1)(a)(i));

(b)of     changes     since     its     creation     in     relevant     circumstances (s 317(1)(a)(iii)); and

(c)the proposed modification and partial extinguishment of the Covenant will not substantially injure any person entitled (s 317(1)(d)).

[35]      In this case, the burdened land has changed as the subdivision has begun, with subdivision works and siteworks for Stage III have been completed, including roading, street lighting, services, and power. Four of the new sections have already been sold with settlement to take place following the issue of titles.

[36]      Ms Fair is now ready to deposit the survey plan for Stage III of the Development, and under that plan, the relevant parts of the burdened land are to be vested in the Council as a road and potentially as reserves in the future.

[37]      There is no further need for the Covenant to apply to land that is to be vested in the Council as a road or reserve. It is no longer relevant to the affected part of the burdened land any more, concerned as it was with the number of dwellings and other such matters.

8      Harnden v Collins [2010] 2 NZLR 273 (HC) at [54] and [58]; confirmed by the Court of Appeal in Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776 at [58]–[70].

[38]      The last consideration is that there is no substantial injury to any person entitled. In New Zealand Industrial Park Ltd v Stonehill Trustee Ltd, the Court of Appeal described the approach to s 317(1)(d) as follows:9

The first issue is whether the proposed modification or extinguishment would cause injury to the dominant land owner. The second issue is the extent of any injury. The subsection requires that the dominant land owner not be substantially injured, thereby contemplating that there may be injury that is less than substantial. The word “substantially” has been held to mean “real, considerable, significant, as against insignificant, unreal or trifling”.

[39]      I accept from the evidence filed and the absence of opposition from any of the 21 owners that the orders, if granted, would have no practical effect. Thus, the number of dwellings or design specifications being part of the requirements of the Covenant are no longer relevant to the affected part of the burdened land because that land is to be vested as roads or reserves. It would benefit the other owners if the Covenant were extinguished in part and modified, as it would allow the Development to proceed and the land to vest as roads and reserves. The principal object of the Covenant, requiring uniformity within the Development, will still be maintained as it will still apply to parts of the burdened land that will be put to residential use.

[40]      I am satisfied that the three grounds relied upon by Ms Fair under s 317 of the PLA have been made out, and the overall justice of the case favours the orders sought. Ms Fair has provided a clear proposal for partial extinguishment and modification in her originating application and those orders are made accordingly.

Result

[41]The following orders are made:

(a)The plaintiff’s leave to bring an originating application for orders partially extinguishing and modifying the Covenant is granted.

(b)The following orders sought in the originating application are made as follows:

9      New Zealand Industrial Park Ltd v Stonehill Trustee Ltd [2019] NZCA 147 at [112] (footnote omitted).

(i)The land covenants created by Registered Easement Instrument No 8111997.1 be extinguished from that part of the land that comprises Lot 50 on DP 526248.

(ii)The Registrar-General of Land shall note against all relevant titles that the covenants created by Registered Easement Instrument No 8111997.1 have been extinguished in the terms of [41(b)(i)] by order of this Court.

(iii)Annexure Schedule 2 of the Registered Easement Instrument No 8111997.1 is modified to insert a new clause 11 in the following terms:

11.The Grantee:

a.hereby irrevocably consents to:

i.the subdivision of that part of the land in Schedule A comprising Lot 100 DP 397864.

ii.the deposit or registration of any survey plan which has the effect of vesting or dedicating all or any part of that land as a road or reserve in any local authority, territorial authority or the Crown.

b.agrees that:

i.the covenants in this instrument shall cease to apply in respect of any such land to vest or dedicate immediately prior to the deposit with Land Information New Zealand of the land transfer plan or

survey plan effecting such vesting or dedication.

ii.this clause will be deemed to be the Grantee’s written consent to any such plan which may be endorsed thereon by the Grantor including for the purposes of s 224 of the Resource Management Act 1991.

iii.without prejudice to the foregoing, the Grantee will, at the Grantor’s request and at no cost to the Grantor, immediately give any additional written consent as required by the Grantor to any such deposit or registration of any such instrument or plan deposit.

(c)Leave is granted to counsel to seek further amendment to these orders, if required.

Cull J