Fonterra Limited v Longburn Holding Co Limited
[2024] NZHC 1077
•3 May 2024
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2023-454-66
[2024] NZHC 1077
BETWEEN FONTERRA LIMITED
Plaintiff
AND
LONGBURN HOLDING CO LIMITED
Defendant
Hearing: 17 April 2024 Appearances:
M D Branch and K F Shaw for the Plaintiff J Long and L Hebden for the Defendant
Judgment:
3 May 2024
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] The plaintiff applies for summary judgment against the defendant in respect of it’s purported right to use a pipe that runs from the plaintiff’s dairy factory at Longburn, near Palmerston North, through land, including land owned by the defendant (subject land), into the Manawatū River (Wastewater Pipe 2).
[2] The plaintiff applies for summary judgment in respect of the first, third and fourth causes of action in its amended statement of claim dated 30 October 2023. In its first cause of action the plaintiff seeks a declaration that Wastewater Pipe 2 is a private drain in terms of s 461 of Local Government Act 1974.
[3] The plaintiff, by its third and alternative cause of action seeks a declaration that the defendant is bound by the “drainage right” granted by the Crown to the plaintiff which is protected by the agreement for sale and purchase of the subject land from the
FONTERRA LIMITED v LONGBURN HOLDING CO LIMITED [2024] NZHC 1077 [3 May 2024]
Crown to the defendant, enforceable by the plaintiff pursuant to s 12 of the Contract and Commercial Law Act 2017.
[4] The plaintiff, by its fourth and alternative cause of action seeks a declaration that the plaintiff has, notwithstanding the defendant’s purchase of the subject land, an equitable easement over that land arising from “equitable fraud”, and consequential orders for the registration of that equitable easement.
[5] The plaintiff also seeks damages as a remedy for its first, third and fourth causes of action in its amended statement of claim. However, Mr Branch confirmed at the hearing that the plaintiff is not seeking damages as relief by way of summary judgment.
Background
[6] In 1926, a predecessor company of the plaintiff was granted an easement over land adjacent to the subject land to convey wastewater from its dairy factory to the Manawatū River using a wastewater pipe. The plaintiff claims that wastewater was discharged to the Manawatū River through a pipe constructed under that land (Wastewater Pipe 1). However, the defendant disputes that Wastewater Pipe 1 ever existed.
[7] Around 1980-1983, part of the land the easement was on was acquired under the Public Works Act 1981 for the construction of wastewater treatment ponds.
[8] Around that time, Wastewater Pipe 2 was constructed. This ran from the dairy factory through several properties to the Manawatū River, including under the subject land then owned by the New Zealand Railways Corporation (Crown).
[9] Since the introduction of the Resource Management Act 1991, the plaintiff says it has obtained the right to discharge wastewater from Wastewater Pipe 2 to the Manawatū River.
[10] In about 2011, the Crown commenced a process of selling the subject land. The process took approximately seven years. The subject land was ultimately sold to the defendant, as the existing lessee, in March 2018.
[11] There is now an issue between the plaintiff and the defendant as to whether the defendant has a right to have Wastewater Pipe 2 passing under the subject land to the Manawatū River.
Leave to apply for summary judgment
[12]Rule 12.4(2) of the High Court Rules 2016 provides:
An application by a plaintiff may be made either at the time the statement of claim is served on the defendant, or later with the leave of the court.
[13] No guidelines are laid down in the High Court Rules for the granting of leave. The question is a discretionary one and it is up to the party applying for leave to show why it should be granted.1
[14] It is recognised that there are three factors that should be considered in relation to the issue of leave:2
(a)The explanation for the delay;
(b)Are the merits of the applicant’s case for the relief sought particularly strong and therefore deserving of determination at a later time by the Court than is prescribed by the rules?
(c)The risk of miscarriage of justice in determining the application for summary judgment at a later point in time.
[15] The Court of Appeal has emphasised that leave should not be treated as a mere formality and should be addressed as a prior step to the consideration of the summary judgment application itself:3
We add that it is important that leave be dealt with as a prior step to the merits of an application for which leave is required. The criteria for granting leave
1 Tip Top Icecream Ltd v Polarland Ltd (2002) 7 NZBLC 103, 564 at [27].
2 Fowler v Selwyn District Council [2021] NZHC 2218 at [12] citing Tip Top Icecream Ltd v Polarland Ltd, above n 1 at [28].
3 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [13].
need to be addressed, even if the merits of the substantive application are, themselves, an important aspect of the leave decision.
[16] In Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd, Andrews J held that the Court should not grant leave to apply for summary judgment out of time unless doing so will have the effect of avoiding prolonged proceedings.4
[17] The statement of claim was originally filed on or around 16 August 2023. The application for summary judgment was filed on or around 30 October 2023.
[18] The plaintiff submits that leave is not required in this case. It submits that, at the time it advised the defendant of an intention to apply for summary judgment, the statement of claim and notice of proceeding had not been formally served on the defendant. The plaintiff says that the defendant invited the plaintiff to wait until the defence was filed before considering summary judgment; the defendant then refused to consent to leave being granted when the plaintiff was unconvinced as to the defence.
[19] If leave is required, the plaintiff has put forward a satisfactory explanation for the delay in making the application. The defendant has not suggested that there is a risk of miscarriage of justice in determining the application for summary judgment at this stage. The merits of the plaintiff’s case are bound up with consideration of the defendants’ substantive application for summary judgment below. Although I have ultimately dismissed the defendants’ substantive application, I consider that the application had sufficient merit to warrant leave being granted.
[20]Overall, if leave is required in this case, it is granted.
Legal principles — summary judgment
[21]Rule 12.2 of the High Court Rules provides that:
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
4 Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd [2015] NZHC 592, (2015) 22 PRNZ 724 at [34]–[35].
[22] The principles that govern summary judgment applications by plaintiffs are well settled. In Krukziener v Hanover Finance Ltd, the Court of Appeal summarised the principles as follows:5
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.
First cause of action — s 461 of the Local Government Act 1974
[23]Section 461 of the Local Government Act provides:
461 Further provisions with respect to private drains
(1)Where any private drain constructed with the consent of the owners of all the lands affected or constructed by the council pursuant to section 460 passes through or serves separately-owned premises, there shall be attached to each and all of the lands served by that private drain the following rights, namely:
(a)a right to the free and uninterrupted use of that private drain; and
(b)a right for the occupiers or any of them to enter upon all lands served by that drain, or through which it passes, for the purpose of relaying or effecting necessary repairs to the drain; and
…
[24] The plaintiff acknowledges that it does not have evidence of any express agreement between its predecessor company and the Crown regarding the construction
5 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26]–[27].
of Wastewater Pipe 2. Instead, the plaintiff contends that consent by the Crown can be inferred from a number of facts which the plaintiff contends are not in dispute, including acquiescence by the Crown.
[25]Alleged undisputed facts which the plaintiff relies on are that:
(a)the construction of Wastewater Pipe 2 was major infrastructural work;
(b)the pipe was critical to the dairy factory;
(c)the Public Works Act acquisition of the adjacent land over which the plaintiff’s predecessor had an easement meant that it lost the benefit of that easement and could not drain wastewater into the Manawatū River; and
(d)Wastewater Pipe 2 was constructed at around the same time as the Public Works Act acquisition.
[26] The plaintiff contends that the Crown’s acquiescence to Wastewater Pipe 2 is evidenced by the following:
(a)it did not object to construction of Wastewater Pipe 2 in the 1980s;
(b)the relocation of the pipe would have been a necessary corollary of the Public Works Act acquisition of the adjacent land as this resulted in the plaintiff’s predecessor losing its easement right;
(c)the Crown received a benefit in that a right of way was granted to its land at that time;
(d)it had more than 30 years to state any objection to Wastewater Pipe 2 and it never did so;
(e)it, through its ownership and management of the marginal strip along the Manawatū River must have been aware of the outlet from
Wastewater Pipe 2 to the Manawatū River, and it never objected to the plaintiff’s use of the outlet; and
(f)over the years the plaintiff obtained water rights to discharge wastewater from the drain to the Manawatū River and these rights were granted following consultation with Crown entities, and the Crown never raised any objection to the plaintiff’s use of Wastewater Pipe 2 on its land throughout any of those consenting processes.
[27] Mr Branch, for the plaintiff, submits that the undisputed facts give rise to an inference of knowledge, and that, in combination with acquiescence is sufficient to infer consent by the Crown.
[28] Mr Branch relies on the decision of the Court of Appeal in Langham v Seed.6 That case involved a drain running over adjoining properties. Four properties were affected. Three landowners gave affirmative consent. The High Court was satisfied the fourth landowners had also consented to the creation if the drain. On appeal, the Court of Appeal held:7
… the Judge accepted that no formal consents were obtained, and no easements were created, but he said it was plain that the owners of all four properties and both local authorities had allowed the works to proceed and had accepted the drainage systems subject to proper maintenance. Neither local authority had taken any action to prevent the drain from being installed and for being used thereafter. He considered that all these parties consented to the works and accepted what was done, even if they may not have been satisfied with the subsequent maintenance by the respondents. In the absence of any evidence of objection or protest from any of these parties over the period of 12 years between the grant of the variation to the water right and the hearing in the High Court, we think the Judge was amply justified in making the finding which he did. There are passages in the evidence of Mr Christopher and his successor, Mr Jones, which negative any express consent, but they do not negative acquiescence.
[29] However, I agree with Mr Long, for the defendant, that Langham v Seed can be distinguished from the present case. In Langham v Seed:8
6 Langham v Seed CA 47/93, 23 September 1994.
7 At 11.
8 See Seed v Langham HC Wellington CP699/91, 18 December 1992 at 19.
(a)the party requiring consent was “vitally concerned to obtain the consents”;
(b)a letter was sent to the owners of each affected property requesting their consent to construction of the drain;
(c)there was evidence that while the landowners did not “immediately agree” in response to the letter, they gave affirmative consent after work started;
(d)there was evidence of multiple phone conversations with one of the landowners, and receiving a reasonable response;
(e)there was evidence of a meeting with two of the landowners on site, and that they had signed a copy of the letter that the other affected landowners had signed, albeit the letter had been lost by the time of the hearing; and
(f)the landowners themselves gave evidence to the effect that they knew of the work and the approaches, but thought that nothing formal was ever concluded, and they were not sure who was doing the work.
[30]In the present case:
(a)there is no evidence that the plaintiff’s predecessor company was “vitally concerned” with obtaining consent for the construction of Wastewater Pipe 2;
(b)there is no letter or other documentary evidence from which to infer that consent was ever sought for the construction of Wastewater Pipe 2;
(c)there is no evidence from the plaintiff to the effect that the Crown did in fact give its consent after work started (or at any point in time);
(d)there is no evidence of any phone conversations between the parties, meetings, or signed documentation evidencing consent;
(e)there is no evidence from anyone at the plaintiff’s predecessor, the local authority or the Crown as to their understanding of the circumstances surrounding the Public Works Act acquisition and construction of Wastewater Pipe 2.
[31] The only direct contemporary evidence presently before the Court is the evidence of Robin Ware who was a director and shareholder of a local company, J B Ware & Sons Ltd, between about 1968 and 1999. The company was a civil contracting business which undertook work for local authorities and the plaintiff’s predecessor and some track refurbishment for the Crown. Mr Ware and his brother also formed Longburn Shingle Company Limited (an aggregate supply business) which operated on the subject land leased from the Crown.
[32] With regard to Wastewater Pipe 1, Mr Ware states he was the person who operated the excavator during the digging of the wastewater treatment ponds in the 1980s on the land that had been acquired under the Public Works Act. He states there was no pipe in the area that was dug out during the excavation. He states that he has no recollection of a pipe or any discharge. Mr Ware states that:
…To the best of my memory, there was no continuous discharge from the dairy factory into the Manawatū River into the 1980’s as stated by Fonterra.
The factory during that period discharged into a drain on the opposite side of the factory to the river, and the waste made its way into the Main Drain and Burkes Drain before entering the Manawatū River at Rangiotu….
[33]With regard to Wastewater Pipe 2, Mr Ware states:
I operated the excavator that dug the trench and oversaw the laying of the pipe, which was most likely a fibrous (asbestos) pipe with a collar as it did not need machines to lift. Drivers from the dairy factory’s milk tankers assisted as unskilled labour on the pipe laying. …
There were never any documents presented to show agreement from the Railways Corporation and the dairy company did not ask for our approval to dig through the land we leased. They simply instructed us to dig the pipeline to the river and install the pipe through the Railway Land.
There was never a representative of the Railways Corporation on site during the laying of the pipe. The Railways Corporation had no interest in the land we leased other than to have access to the bridge if they needed to work on it. We never had any visits from anyone from the Railways Corporation in relation to our lease in all our years of leasing the land.
[34] Mr Ware also states that there was an existing access arrangement to the subject land over land owned by the Seventh Day Adventist College, and this arrangement was formalised in the 1980s at around the time the wastewater treatment ponds were constructed.
[35] Mr Ware’s evidence indicates that the Crown was essentially an absentee landlord and had no apparent or visible involvement with the construction of Wastewater Pipe 2. Mr Ware’s evidence also raises doubt and uncertainty with regard to the facts on which the plaintiff relies as the basis for inferring consent by the Crown to construction of Wastewater Pipe 2. Mr Ware’s evidence raises an issue as to whether the construction of Wastewater Pipe 2 was “major infrastructure work”. His evidence raises doubt that Wastewater Pipe 1 ever existed and indicates that the dairy factory was discharging wastewater into a drain on the opposite side of the factory from the river. This raises doubt as to whether the construction of Wastewater Pipe 2 was “critical” to the factory and “relocation” of the pipe was a “necessary corollary” of the Public Works Act acquisition of the adjacent land (resulting in loss of the easement right). Mr Ware’s evidence also indicates that the right of way benefit obtained by the Crown around that time was arguably simply a formalisation of an existing access arrangement and not necessarily related to the plaintiff’s predecessor’s drainage rights.
[36] Mr Branch submits that it is “unattractive” for Mr Ware to now suggest that consent could have been an issue. He submits that, at the time, Mr Ware must have believed that consent to lay the pipe had been obtained, or Mr Ware’s company would not have agreed to lay the pipe because that would have been a breach of the lease. However, Mr Ware’s evidence in this regard is not inconsistent with undisputed contemporary documents or other statements he had made, and nor is it inherently improbable given his evidence that the Crown had “no interest in the land we leased”. The issues raised by Mr Branch require Mr Ware’s evidence to be tested by cross examination.
[37] The plaintiff also contends that the Crown’s acquiescence to Wastewater Pipe 2 is evidenced by it never raising any objection to the use of the drain for over 30 years. However, s 461 only applies to a drain “constructed with the consent of the owners of all the lands affected” (italics added). I agree with Mr Long’s submission that acquiescence can only be relevant insofar as it informs the Court’s assessment under s 461 as to whether the owner of the affected land gave consent at the time of the drain’s construction. The wording in s 461 cannot support an argument that, should affected owners become aware of an unlawful drain years later, and fail to object, then at that time, rights capable of registration would arise under s 461.
[38] Another relevant factor is that Wastewater Pipe 2 was not included in the list of “unregistered interests” (shown on attached plans) in the Sale and Purchase Agreement (ASP) when the property was sold by the Crown to the defendant in 2018. The list included reference to a gas pipeline that traverses the subject land. This raises doubt and uncertainty about the Crown’s consent to, and knowledge of, Wastewater Pipe 2 even as late as 2018. If the Crown was aware of Wastewater Pipe 2 as the plaintiff contends it must have been, then why was the pipe not referred to in the ASP?
[39] There may be additional information that could be put before the Court in terms of relevant historical evidence. Phillip Gordon, one of the two directors of the defendant states in his affidavit evidence that he is not satisfied that all the relevant historical evidence is currently before the Court. He does not think that the requests that the plaintiff has made under the Official Information Act 1982 have got to the bottom of all outstanding information from the relevant authorities. He says that the defendant will be looking to apply for non-party discovery orders from all the relevant parties that have given Official Information Act disclosure in order to ensure that all relevant archives have been thoroughly searched by those parties.
[40] Overall, I am not satisfied that the defendant has no defence to the plaintiff’s cause of action under s 461 of the Local Government Act. In my view, on the evidence currently before the Court, there is real doubt and uncertainty as to whether the drain was constructed with the consent of the Crown. The issue of consent under s 461 is fundamentally a question of fact. In the circumstances it seems to me that this question can only properly be determined at trial with the benefit of all the related processes
including discovery, and any relevant non-party discovery, and oral examination and cross-examination of all available relevant witnesses.
[41] A subsidiary issue raised by the defendant is that, if it was established that there was consent under s 461, then any rights which could have arisen under s 461 did not survive the transfer of the subject land to the defendant in 2018. The plaintiff contends that the defendant is incorrect in this regard, relying on the decision in Seed v Langham.9 However, as I am not satisfied that the defendant has no defence to the plaintiff’s first cause of action because there is doubt and uncertainty with regard to consent, I do not need to determine this subsidiary issue.
Third (alternative) cause of action – s 12 of the Contract and Commercial Law Act 2017 (Privity)
[42] Alternatively, the plaintiff contends that it has a “drainage right” with associated implied terms which is enforceable under s 12 of the Contract and Commercial Law Act 2017 (CCLA)
[43]Section 12 provides that:
12Deed or contract for benefit of person who is not party to deed or contract
(1)This section applies to a promise contained in a deed or contract that confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract.
(2)The promisor is under an obligation, enforceable by the beneficiary, to perform the promise.
(3)This section applies whether or not the person referred to in subsection
(1) is in existence when the deed or contract is made.
[44]Also relevant in this regard is s 13 of the CCLA which provides:
13Section 12 does not apply if no intention to create obligation enforceable by beneficiary
Section 12 does not apply to a promise that, on the proper construction of the deed or contract, is not intended to create, in respect of the benefit, an obligation enforceable by the beneficiary.
9 Seed v Langham, above n 8.
[45] The plaintiff relies on cl 23.0 and cl 27.0 of the ASP between the Crown and the defendant which provide:
23.0 The property is sold subject to all existing encumbrances, restrictions, easements and drainage rights and the purchaser agrees to purchase the property and take title subject to all such existing encumbrances, restrictions, easements and drainage rights.
…
27.0The purchaser acknowledge that the property being purchased is subject to the following unregistered interests as shown approximately on the attached plans:
(a)A Right of Way and Right to lay drain by way of Grant 11810 (Kiwi Rail).
(b)A gas Pipeline traverses the property.
[46] Mr Branch submits that, on the proper interpretation of the ASP, cl 23 must be referring to known registered rights and unknown unregistered rights, whether they be easements, drainage rights or any other type of encumbrance. Mr Branch submits that the clear intention of the clause was to protect rights that would otherwise have been lost by the transfer, and therefore the clause is conferring a benefit on holders of unknown unregistered rights. He submits that if only the mentioned unregistered interests in cl 27 were to be protected, then cl 23 would not be required.
[47] The defendant submits that the plaintiff has not shown that it was the true construction of cl 23 to confer a drainage right on the plaintiff, nor that the promise was sufficiently express, nor that the plaintiff was itself the designated recipient of such a right. The defendant submits that the proper interpretation is that cl 23 is referring to known registered rights and cl 27 is referring to known unregistered rights. The defendant also submits, by reference to s 13 of the CCLA, that even if such a promise was established, which is denied, it was not on the proper construction of the ASP intended to create an obligation enforceable by the plaintiff.
[48] However, as submitted by Mr Long, the main difficulty for the plaintiff is that it is clear that cl 23 only preserves “existing” rights. It does not create new rights. Even if the plaintiff’s interpretation of the relevant provisions of the ASP is correct (and I make no determination in that regard), there is an issue as to whether there was
an existing right, albeit an unknown unregistered right, at the time of the transfer in 2018.
[49] Mr Branch confirmed that this is an alternative cause of action, and the plaintiff is not relying on any drainage right pursuant to s 461 of the Local Government Act. What then is the source of the “existing” drainage right? The plaintiff’s case appears to be that there has been drainage through Wastewater Pipe 2 for more than 40 years, and in addition the plaintiff had, prior to the ASP, a right or permit from the Crown to discharge wastewater into the Manawatū River.
[50] It seems to me that the plaintiff is largely relying on the discharge rights or permits that it has obtained under the Resource Management Act since 1991. However, the discharge permits do not give rise to an existing drainage right as referred to in cl 23 of the ASP. In Langham v Seed, the Court of Appeal identified the distinction between a right to drain over land of other owners and a discharge right:10
Mr Corry submitted that even if there was some valid drainage right, such as that conferred by s 461, the right could not be exercised unless the respondents were also the holders of a valid water right under the Water and Soil Conservation Act. That is correct. The respondents needed a right to drain over the lands of other owners, and they also required a water right to enable them to do what would otherwise be prohibited by the Water and Soil Conservation Act. For the reasons given earlier, however, we are satisfied that they did have a valid water right.
[51] The plaintiff’s contention may be that the Crown became aware of the drain at some stage after construction and has not raised any objections, and this acquiescence has somehow given rise to a “drainage right” under cl 23 of the ASP. However, as discussed above, and as indicated by the ASP, the evidence raises doubt and uncertainty as to whether the Crown was aware of the unregistered pipe running under its land even as late as 2018.
[52] Overall, I am not satisfied that the defendant has no defence to the plaintiff’s third cause of action in that I am left without any real doubt or uncertainty. As with the first cause of action, it seems to me that the third cause of action can only properly be determined at trial with the benefit of all the related processes including discovery,
10 At 18.
and any relevant non-party discovery, and oral examination and cross-examination of all available relevant witnesses.
Fourth (alternative) cause of action — equitable fraud
[53] This cause of action seems to be raising the issue of Land Transfer Act (LTA) fraud, in that there was an intention on the part of the defendant when purchasing the subject land to defeat an unregistered interest of the plaintiff. The plaintiff refers to the decision of the Court of Appeal in Infinity Enterprises NZ Ltd v Kinara Trustee Ltd.11 In that case, the Court of Appeal referred to the basis for LTA fraud:12
[38] In his subsequent review of the authorities, McMullin J cited the following passage from the Privy Counsel’s decision in Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd, as to the meaning of LTA fraud:
If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by deliberate and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear. It is not, however, necessary or wise to give abstract illustrations of what may constitute fraud in hypothetical conditions, for each case must depend upon its own circumstances. The Act must be dishonest, and dishonesty must not be assumed solely by reason of knowledge of an unregistered interest.
[54]In Thornley v Ford, the High Court stated that:13
There is no dispute that, absent fraud, a registered proprietor takes title free of any unregistered interest, in this case the equitable easement that I have found existed. Fraud in this context equates to actual knowledge of, or wilful blindness to, the existence of the unregistered interest, coupled with an intention that registration will defeat that interest. Such intention must be present at the time of registration, as opposed to subsequently. These matters are now provided for in ss 6, 51 and 52 of the Land Transfer Act 2017, but nothing turns on those provisions themselves or their predecessors. The principle is well established.
[55] The plaintiff contends that the defendant, through one of its directors, Richard Gordon, had actual knowledge of the existence of Wastewater Pipe 2 in that:
11 Infinity Enterprises NZ Ltd v Kinara Trustee Ltd [2020] NZCA 309.
12 Bunt v Hallinan [1985] 1 NZLR 450 (CA) at 460–461; quoting Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1926] AC 101 (PC) at 106–107.
13 Thornley v Ford [2022] NZHC 667, (2022) 23 NZCPR 148 at [49] (footnotes omitted).
(a)Mr Gordon admits that he had actual knowledge of the existence of a pipe from 2013 onwards, and he was aware that the pipe discharged into the river, because in 2013 and 2016 the defendant’s related company Longburn Shingle Company Limited was asked by Fonterra to extract gravel from the river in the general area that the outlet is located where gravel had been building up, and Mr Gordon knew that the outlet was the end point for a drain that came from the plaintiff’s factory, or at least was the end point of a drain used by the plaintiff;
(b)Further, Mr Gordon knew that the plaintiff paid for the maintenance work around this outlet in 2013 and 2016, and again in 2018, albeit after the sale of the subject land.
[56] The plaintiff contends that in the circumstances, the defendant’s conduct at least shows wilful blindness in that the defendant chose to not make further enquiries of either the Crown or the plaintiff about the pipe and the plaintiff’s drainage rights throughout the six-seven year sale process, even when “drainage rights” were referred to in cl 23 of the ASP.
[57] The plaintiff contends that it would be a “fraud” for the defendant to deny the plaintiff’s existing rights to use Wastewater Pipe 2 where:
(a)There was knowledge of the drain, and if the defendant did not have full knowledge of the drain or its purpose then that was only because it chose not to explore further what those existing drainage rights might be or ask anything further about “the pipe” it knew the plaintiff was using;
(b)The defendant acquired the subject land through a private process with the Crown by convincing the Crown it would face competition for the land, and the defendant knew that the plaintiff was paying its related company to maintain the outlet, and would look to protect that right by buying the land in any public process; and
(c)The defendant bought the land with clear notice that it would have to honour any rights or restrictions relating to the land, including unregistered rights and restrictions.
[58] There are several difficulties for the plaintiff in obtaining summary determination of this cause of action.
[59] First, the plaintiff must have an unregistered interest against which the “fraud” can occur. In this case, as discussed above, there is doubt and uncertainty as to whether the plaintiff has an unregistered drainage right.
[60] Second, the evidence must establish without any doubt or uncertainty that the defendant had actual knowledge of, or was wilfully blind to, the existence of Wastewater Pipe 2, and that it was being used by the plaintiff, and that the plaintiff had an unregistered drainage right in respect of the pipe.
[61] Third, even if the plaintiff can overcome the hurdles above, it needs to establish that the defendant intended at the time of sale in 2018 to defeat the plaintiff’s unregistered interest in respect of the pipe. The dishonest conduct must not be assumed solely by reason of knowledge of the unregistered interest.
[62] Mr Gordon has provided a detailed affidavit. He states that the outlet area is extremely overgrown and covered in vegetation. When the gravel extraction work was done in 2013 and 2016 in the general area of the outlet, he did not know and did not ask for any more information about the outlet and the pipe, where it was coming from, or what was going into the water. He says that he just undertook the work that the plaintiff requested him to do.
[63] With regard to the sale process, Mr Gordon states that the process was entirely in accordance with Land Information New Zealand’s process. He states that he became aware that the Crown intended to sell the land in September, 2010. He asked for consideration of a preferential sale to the defendant because the defendant had a longstanding lease and the business could not be relocated. He says that he had no further part in the process, apart from a few follow-up calls and a survey of the river
boundary, until 2018. He states that he was not in a hurry to acquire the land because the plaintiff might find out about the sale. He states that the plaintiff never crossed his mind as he worked through the process with the Crown.
[64] Mr Gordon states that when the defendant acquired the land, he was aware of all existing rights stated in the ASP including the unregistered interests listed in cl 27.0. He states that there was no mention of Wastewater Pipe 2 at any stage of the sale and purchase process, despite thorough due diligence. Mr Gordon recalls a burst in a pipe in 2018 which was fixed by the plaintiff, and that this happened in the area close to the outlet covered by vegetation. It is not clear whether this was before or after the sale.
[65] Mr Gordon states that he first became aware of Wastewater Pipe 2 and where it might actually be when he was contacted by a representative of the plaintiff on 3 May 2022, asking to have an easement put on the defendant’s land for a pipe that carried wastewater to the river. Mr Gordon states that his email exchanges with the plaintiff’s representative at that time confirm he knew very little about the pipe and where it was and had no knowledge of any easement the plaintiff claimed it had. He says that he only found out details about what was in the pipe when he read a resource consent application by the plaintiff after receiving an affected party letter from Horizons Regional Council in September 2022.
[66] Mr Gordon states that while the pipe may be important to the plaintiff, it was never important to him in the past, and was certainly not mentioned to the defendant at any time before the defendant purchased the land. He states that this is a pipe which runs under the ground, which he cannot see, and until relatively recently did not even know was there or where it was. He states that it had no effect on his life or business until recently.
[67] I consider that Mr Gordon’s evidence on these issues meets the threshold of credibility for the purposes of summary judgment. I do not consider that his evidence is obviously inconsistent with undisputed contemporary documents or other statements he has made, or is inherently improbable. His evidence raises issues around whether the defendant had actual knowledge of, or was wilfully blind to, the existence
of Wastewater Pipe 2 and in particular any unregistered interest of the plaintiff in respect of the pipe. His evidence also raises issues as to whether there was a dishonest intention to defeat any unregistered interest held by the plaintiff in relation to Wastewater Pipe 2. In my view these issues can only properly and fairly be determined after cross-examination and testing of Mr Gordon’s evidence, and other relevant evidence, at trial.
[68] Overall, I am not satisfied that the defendant has no defence to the plaintiff’s fourth cause of action. There is real doubt or uncertainty as to the existence of the unregistered interest, and if it existed, whether the defendant had actual knowledge of, or was wilfully blind to its existence, and intended at the time of sale to defeat the interest. As with the first and third causes of action, I consider that the fourth cause of action can only properly be determined at trial with the benefit of all the related processes including discovery, and any relevant non-party discovery, and oral examination and cross-examination of all available relevant witnesses.
Result
[69] The plaintiff’s application for summary judgment in respect of the first, third and fourth causes of action in its amended statement of claim is dismissed.
[70] Costs on unsuccessful applications for summary judgment are usually reserved.14 My preliminary view is that I do not see any reason to depart from the usual position. However, if either party disagrees with this preliminary view, then memoranda may be filed not exceeding three pages (excluding costs schedules) and costs will be determined on the papers.
[71] The matter is to be listed in the next Associate Judge’s Chambers List for Palmerston North for directions to be given as to the next steps in the proceeding.
Associate Judge Skelton
Harkness Henry, Hamilton for Plaintiff
Hornabrook MacDonald, Auckland for Defendant
14 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 and McKechnie Aluminium Solutions Ltd v Macaulay Metals Ltd [2024] NZHC 809.
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