Gladstone Heights Ltd

[2022] NZHC 1953

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2022-412-000041

[2022] NZHC 1953

UNDER

the Property Law Act 2007

IN THE MATTER

of an application by GLADSTONE HEIGHTS LTD to modify or partially

extinguish Land Covenant 11331709.19 (Otago Registry)

Applicant

Hearing:

8 August 2022

Appearances:

T J Shiels QC for Applicant

Mr Davis for interested party R Davis

Judgment:

9 August 2022

JUDGMENT OF DOOGUE J

This judgment was delivered by me on 9 August 2022 at 11.45 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

RE GLADSTONE HEIGHTS LTD [2022] NZHC 1953 [9 August 2022]

Introduction

[1]        The applicant is, by incremental stages, developing a block of land in Mosgiel on the outskirts of Dunedin into residential lots.

[2]        A land covenant registered at the time of the first stage of the subdivision is causing practical difficulties for the second and subsequent stages of the subdivision.

[3]        The applicant is applying to the Court under s 316 of the Property Law Act 2007 (the Act) for an order under s 317 modifying or partially extinguishing land covenant 11331709.19 (the land covenant) for the sole purpose of removing the practical difficulties for the second and subsequent stages of the subdivision.

Background

[4]        A subdivision of the subject land was originally authorised by a Dunedin City Council resource consent on 6 May 2011. This was followed by an objection to conditions and a revised consent was issued on 28 June 2011.

[5]        In 2015, an application was made to extend the lapsed period, to vary the subdivision and staging of the land use consent for subdivision, earthworks and overall reduction of yard spaces. This was processed on a non-notified basis and an amended consent issued on 19 June 2015 (the revised resource consent).

[6]        The revised resource consent makes it clear that a number of stages of subdivision are contemplated and consented. The relevant titles are affected by various easements.

[7]        The land covenant was registered at the time the first stage of the subdivision took place. The intention of the applicant as the subdivider was to ensure that the buildings on the subdivided sections would be of high quality and the subdivision would be an attractive and pleasant living environment.

The land covenant

[8]Clause 1 provides that the grantor shall not subdivide any of the allotments.

[9]        Clause 2 of the land covenant limits the erection of structures on the lots broadly to one new dwelling space plus ancillary buildings on each lot. Other aspects of cl 2 relate to roof and exterior cladding, and also building heights on some lots.

[10]Clauses 3 to 9 of the land covenant have no relevance to this application.

[11]Clause 10 provides as follows:

While the Grantee remains registered proprietor of any lot the Grantee reserves the right to itself (with the intent that this right does not enure to its successors in title) to waive or modify any of the above restrictive covenants but will only do so if in its opinion such action does not impinge on the integrity of the subdivision in its entirety and provided that the Grantee may not vary clause 1 and clause 2.

[12]      Clause 10 permits the applicant as grantee to waive or modify the restrictive covenants. However, the grantee may not vary cls 1 or 2. It is the covenants in cls 1 and 2 that are causing the practical difficulties for the second and subsequent stages of the subdivision.

[13]      Clause 12 provides that the covenants shall apply for a period of 10 years from the date titles issue for the first stage of the subdivision.

[14]      Clause 13 provides that in the land covenant the words “the grantee” means the applicant.

[15]      All the lots in Stage 1 (except for Lot 71, at the north-western corner, and  Lot 75 which vested as roads) have both the benefit and burden of the land covenant.

[16]      The land covenant binds future owners of the various lots in the first stage of the subdivision, including Lot 100 but excluding Lot 71. In particular, it binds the then owners and any future owners of the balance lot, being Lot 100.

[17]      At the time the land covenant was registered the applicant owned all the land being subdivided but subject to the agreements for sale and purchase for the Stage 1 sections (except Lot 71).

The issues that have arisen

[18]      In December last year it became apparent that the land covenant could cause two practical difficulties for the second and subsequent stages of the subdivision.

[19]      The first difficulty became clear after the plan for the second stage of the subdivision was provided to Land Information New Zealand (LINZ). LINZ pointed out that s 224(1)(b)(i) of the Resource Management Act 1991 required that for any land that would vest in a territorial authority the consent of the registered owner of any interest in that land had to be endorsed on a survey plan or, alternatively, deposited with the Registrar General of Lands. That means the consent of every lot owner of the first stage of the subdivision would be required.

[20]      The second difficulty is the land covenant prohibited the further subdivision of Lot 100. Each one of the lot owners in the first stage of the subdivision would be able to claim a breach of the covenant as a result of the further subdivision of Lot 100.

Discussion

[21]Section 317 of the Act 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; or].

(e)[in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or

(f)in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.]

(2)An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.

[22]      I am satisfied that none of the purchasers of the sections in the first stage of the subdivision understood or expected that the owner of Lot 100 would be restricted to one dwelling house plus ancillary buildings or prevented from further subdivision.

[23]      Further, at the time the sections in the first stage of the subdivision were being marketed there was already visible work underway for the second stage of the development. Photographs produced demonstrate that physical work was being undertaken very early on in the period that the first lots were being sold. It would have been evident from the earthworks that there was an intention to carry the subdivision further up the hillside.

[24]      All relevant parties have been served with the proceeding. Some of the parties have expressly indicated their consent to what is proposed. The owners of one lot have informally indicated they are not likely to consent but have not said they would oppose. A number of the lot owners did not reply to an enquiry by correspondence about their stance. Overall, it is plain there is a lack of engagement by the relevant lot

owners with the issues, which has meant that the most practical way of resolving the difficulties is by this application to the Court.

[25]      The evidence is that all parties to the covenant were well aware of the applicant’s intention to further develop the balance lot in stages, initially by the current Stage 2 subdivision. There is nothing in the evidence to suggest that the development of further residential land adjacent to the first stage of the subdivision will have any negative effects for lot owners in the first stage.

[26]      There is no evidence of any injury or prejudice to any person entitled to the benefit of the covenant. In particular, the ability of lot owners to continue to enforce the covenant in accordance with its terms as between themselves and other purchasers of the first stage sections remains. It is a clear inference that that is all they expected.

[27]      None of the purchasing lot owners have incurred any expense in relation to this proceeding. There is no evidence they will incur any expense or even inconvenience by the granting of the order and its implementation.

[28]      I am satisfied that jurisdiction to make the order has been made out in this case (s 317(1)(d)).

Result

[29]      An order shall issue pursuant to s 317 of the Property Law Act 2007 modifying or extinguishing land covenant 11331709.19 (Otago Registry) (the covenant) insofar as it applies to Lot 100, DP 526034.

Doogue J

Solicitors:

Joynt Andrews Solicitors, Christchurch CC:

T Shiels, Dunedin R Davis, Mosgiel