Feng Family Investments Limited v Whitelaw

[2017] NZHC 2297

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-254 [2017] NZHC 2297

IN THE MATTER

of the Property Law Act 2001, s 316 and

s 317

BETWEEN

FENG FAMILY INVESTMENTS LIMITED

Plaintiff

AND

PETER MAX WHITELAW, SALLY MAREE WHITELAW AND TRUST ADVISORY SERVICES LIMITED First Defendants

Continued over page

Hearing:	6 September 2017
Appearances:	D K Wilson for the Plaintiff
Judgment:	22 September 2017

JUDGMENT OF MUIR J

This judgment was delivered by me on Friday 22 September 2017 at 3.00 pm

Pursuant to Rule 11.5 of the High court Rules.

Registrar/Deputy Registrar

Date:…………………………

Counsel/Solicitors:

D K Wilson, Barrister, Auckland

FENG FAMILY INVESTMENTS LIMITED v WHITELAW & ORS [2017] NZHC 2297 [22 September 2017]

SUKHDEEP SINGH JUDGE, NAVDEEP KAUR JUDGE, SURJIT SINGH JUDGE AND KULWINDER KAUR JUDGE Second Defendants

CATHERINE LOUSIE MCLACHLAN, CRAIG DUTHIE, JOHN FOSTER WHITE, AND CRAIG CLEMENT MACLACHLAN

Third Defendants

STEPHEN DAVID HOLLARD, ROSELLE JOYE HOLLARD AND PROFESSIONAL TRUSTEE SERVICES LIMITED

Fourth Defendants

STEPHEN HING CHONG AND WUJUAN CHONG

Fifth Defendants

MAHESH PARSOT Sixth Defendant

VERNON JAMES STANNERS AND RACHEL STANNERS

Seventh Defendants

JOHN DAVID COCKS AND LEANNE SHERYL COCKS

Eighth Defendants

GLENN ANTHONY HASZARD, HKARYN JOCELYNNE HASZARD AND SHEVAUN FRITH

Ninth Defenddants

KELVIN NELSON PIESSE Tenth Defendant

STEVEN FREDERICK FIFIELD AND EDITH TERESA MORRIS

Eleventh Defendants

ANNETTE SHERYL SZASZY AND PHILIP ALEX SZASZY

Twelfth Defendants

DONALD WILLIAM THOMSON AND GILLIAN CONSTANCE THOMSON Thirteenth Defendants

Introduction

[1]      The plaintiff seeks orders, by way of formal proof, under ss 316 and 317 of the Property Law Act 2007 (the Act) modifying a land covenant to which its property was made subject at the time of subdivision.

[2]      The defendants are the owners of the other 13 properties in the subdivision, each of which is a dominant tenement in terms of the covenant.

[3]      All defendants were advised in writing of the plaintiff’s intention to seek modification of the relevant covenant and all have been served with the subsequent application.  No party opposes the order sought.

Background

[4]      The  plaintiff  is  the  owner  of  Lot  11  on  Deposited  Plan  405422.    The property’s street address is 8 Judith Anne Drive, Pukekohe.  It is one of 14 lots in a subdivision which occurred in approximately 2005.  Annexed to this judgment is a copy of the relevant plan of subdivision.

[5]      The title to the plaintiff’s property is subject to the land covenants found in Easement  Instrument  8091882.6  (the Easement).   The annexure schedule to  the Easement contains Land Covenants A and B.

[6]      Land Covenant A makes provision for general covenants applicable to the subdivision and binds Lots 1 – 5 and 7 – 13 in DP 405422.  It is not directly relevant to the plaintiff’s claim.

[7]      Land Covenant B binds Lots 7 and 11 only.  The former fronts the street with Lot 11 being a rear lot accessed by right-of-way. To the east of Lots 7 and 11 are two similar lots, again with one fronting the street and the other a right-of-way section. To the west is a large corner lot of 2500 sq/m which has a boundary to both Lots 7 and 11.  The subdivision is north-facing on the slopes of Pukekohe Hill.  Further up the  Hill  and  behind  the  plaintiff’s  rear  lot  is  land  which  at  this  stage  is  less intensively developed.

[8]      Land Covenant B provides that:

The grantor will not erect, place, or permit to be erected or placed on the property a dwelling house of more than one single storey.

[9]      The background to imposition of this covenant is that the area which now comprises the subdivision was formerly owned by a Mr Mahesh Parsot.  In 2004 he sold the land to Greig Developments Limited (GDL).  The terms of sale included a provision that, on completion of the subdivision, GDL would re-transfer to Mr Parsot a land area of not less than 2,500 sq/m and that it would register a Land Covenant restricting any homes on the adjoining sites to a single-storey dwelling.

[10]     The subsequent plan of subdivision provided for the creation of Lot 6 which was ultimately re-transferred to Mr Parsot.  The adjoining sites for the purposes of the relevant restrictive covenant were Lots 7 and 11. Mr Parsot remains the owner of Lot 6 on which he has subsequently constructed a substantial two storey dwelling. A single-storey high-quality dwelling has also been subsequently constructed on Lot 7, consistent with the terms of the covenant.

[11]     The plaintiff is a family company of which Mr Yufeng Wang is the sole director.  It purchased Lot 11 on 5 June 2015.  Mr Wang deposes that he inspected the property over the two weeks prior to signing the agreement.  He says that he and his wife were looking for a site on which to build a home for their expanding family. He was looking to build a two-storey home.  Having identified the site he instructed his lawyer to, in his words, “investigate the title and matters which may affect building”.  On 3 June 2005 his lawyer emailed a copy of the relevant land covenants to him.   There was no commentary in the email.   The relevant documents were simply provided “for you to discuss with your architect”.

[12]     Mr Wang advises that, having printed out the relevant documents he went to see his architect Mr Rui Li.   He had worked previously with Mr Li in relation to design work on a retail premise.

[13]     On 4 June 2015 Mr Wang spent approximately an hour with Mr Li.  He told him that he wished to build a two-storey home and discussed generally the materials

that he would like to use and the basic configuration of the home.  Mr Wang says that Mr Li looked at the Easement Certificate during the course of the meeting and made no mention of the restriction contained in Covenant B.  He says he did not read the document himself because, although reasonably fluent in English, he would not attempt to read or understand a document of that complexity.  Following the meeting and on the same day Mr Wang received two texts from his architect, the first stating that there were a number of documents to look through and the second confirming the sort of house that he intended would be “okay”.

[14]     The following day Mr Wang signed an agreement for sale and purchase of the property.   The plaintiff was subsequently nominated as purchaser under that agreement.   Mr Li then proceeded to develop plans for a spacious two-storey residence in quality materials and a building permit was obtained from Council.

[15]     Construction of the home took place during 2016.   At no time during the construction process did any other resident in the subdivision raise a query or objection in relation to the non-compliant development.   This included Mr Parsot whose home had at that stage been built, slightly forward of the plaintiff’s dwelling and with its garaging facing towards Lot 11.   In due course a Code Compliance Certificate was issued for the building.

[16]     Late in 2016 Mr Wang and his wife decided that they would not in fact live in the property and would therefore sell it.  Shortly after they entered into a conditional sale contract.  However, the lawyer for the purchaser identified that the house which had been constructed was in breach of Covenant B.  Mr Wang’s lawyer explained the position to him.  He says that this was the first time he appreciated there was any restriction  on  the  construction  of  a  two-storey  home.     Predictably,  the  sales agreement came to an end.   Equally predictably, Mr Wang’s legal advice was that unless Covenant B was modified the plaintiff would be unlikely to be able to sell the property.

[17]     The plaintiff says that it would be impracticable to remove the second floor of the dwelling as it contains all of the bedrooms and that demolition of the home would cause a substantial loss to it and therefore to Mr Wang’s family.

[18]     On 9 February 2017 the solicitors for the plaintiff wrote to each of the other owners in the subdivision pointing out the error which had occurred and advising that it was the plaintiff’s intention to commence a proceeding under the Act for orders modifying Covenant B to permit a two-storey home.

[19]     Subsequently, each of the owners and their mortgagees were served.  I note that Mr Parsot was personally served on 16 March 2017 at his residence and that he confirmed his identity and acceptance of service of the documents.

[20]     No notice of opposition has been filed by any party.  There have been two only informal communications from neighbours, one of whom (at number 10 Judith Anne Drive) inquired if costs would be imposed against him in the event he took no steps on the application (to which the response was that that would not be the case) and the other from the owner of number 20 who said that he had no objection to the application,  liked  the  plaintiff’s  home  and  that  he  also  spoke  on  behalf  of  his daughter and son-in-law who lived at number 6 (that is the property directly in front of the plaintiff’s).

Analysis

[21]     Section 316 of the Act relevantly provides that a person bound by a restrictive covenant may make an application to a Court for an order under s 317 modifying or extinguishing that covenant.

[22]     Section 317 in turn 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.

[23]     The applicant relies on s 317(1)(a) and, to a greater extent, on s 317(1)(d).

[24]     In support of the argument under 317(1)(a) Mr Wilson says there has been a change to the burdened land to the extent that it is now the site of a two storey dwelling.  He says that under subs (a)(iii) the Court is able to take into account any other circumstance it considers relevant and that, whereas it could be expected to have limited sympathy for a plaintiff who had knowingly constructed a home in breach of covenant, this was a case of honest mistake compounded by inadequate professional advice.

[25]     I accept Mr Wang’s explanation of how the error occurred and the very significant consequences to his family were Covenant B to remain unmodified.  The case in this respect differs from decisions such as  Purdie  v Truckell  where the applicant bought with actual knowledge of a restriction from which he subsequently

sought to be relieved.1    However, the deemed knowledge which the applicant must

be taken as having as a result of the registration of the Easement and associated

1      Purdie v Truckell [2016] NZHC 1231, (2016) 17 NZCPR 499..

Covenant B and the fact that it is the applicant’s own actions which have changed the

nature and use of the burdened land, in my view preclude reliance on s 317(1)(a).

[26]     I am, however, satisfied that the proposed modification, which would limit construction of any dwelling house on the site to no more than two stories, will not substantially injure any person entitled and that an order may accordingly be made under s 317(1)(d).

[27]     The persons entitled are the defendants who are the owners of the relevant dominant tenements.  None have chosen to oppose the application and such limited responses as have been received from the plaintiff’s neighbours support it. Particularly relevant is the fact that Mr Parsot,  for whose particular benefit the restrictive covenant was registered, neither opposes the application nor seeks compensation for modification of the covenant under s 317(2).  Indeed the plaintiff’s builder deposes to two discussions with him during the course of construction, in one of which he said he was “happy with the house we were building” and in neither of which did he say anything about the height restriction.  This sanguine response to the application by the owners of the dominant tenements of itself provides significant support for the proposition that none regard modification of the Easement as substantially injuring them.

[28]     That conclusion is reinforced by a review of the photographs provided in support of the application.  The plaintiff’s home is of quality construction in plaster, stone and weatherboard.  Because it is located on a rear lot at the southern boundary of a subdivision which slopes to the north, none of the other dominant tenements overlook it and to the extent any home further up Pukekohe Hill may have had its views interrupted by the home which has been built, such properties are not entitled

to the benefit of Covenant B.2

[29]     I accept that some modest restriction of outlook may occur to the west from the rear Lot 12 and to the east from Mr Parsot’s adjoining property.  However, as I

have indicated, Mr Parsot’s home is located slightly further down the slope and its

2      The  photographs  depict  that  the  nearest  house  to  the  plaintiff ’s  southern  boundary  is  a considerable distance from it and on land that is further elevated meaning any such interruption is likely to be modest in any event.

principal orientation is to the north and west with garaging adjacent to the plaintiff’s

property.

[30]     For the foregoing reasons I am satisfied that modification of the Easement will not substantially injure any person entitled.  The absence of objection by any party features prominently in that conclusion.

Result

[31]     I order that insofar as it applies to Lot 11 DP 405422 Land Covenant B contained  in  Easement  Instrument  8091882.6  be  modified  so  as  to  provide  as follows:

The grantor will not erect, place, or permit to be erected or placed on the property a dwelling house of more than two stories.

[32]     I reserve to the plaintiff leave to apply for any further order necessary to give effect to my judgment.

[33]     No issue as to costs arises in the proceedings.

Muir J

Annexure

Identifier       418819