GOM Properties NZ Limited v Pezic
[2022] NZHC 2234
•2 September 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1147
[2022] NZHC 2234
UNDER The Property Law Act 2002 (the Act) IN THE MATTER
of an application pursuant to ss 316 and 317 of the Act for an order modifying the
easement in instrument 7889230.2
BETWEEN
GOM PROPERTIES NZ LIMITED
Applicant
AND
MICHAEL PEZIC
First Respondent
DONNA ANN MARTIN
Second Respondent…/2
Hearing: On the papers Appearances:
M Casey QC for Applicant
S McAnally for First Respondent
No appearance for remaining RespondentsJudgment:
2 September 2022
JUDGMENT OF LANG J
[on costs]
This judgment was delivered by me on 2 September 2022 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
GOM PROPERTIES NZ LTD v PEZIC [2022] NZHC 2234 [2 September 2022]
JEMMA KATE HUNTER and MARK CHRISTOPHER TONKIN
Third Respondents
KENNETH H A JOHNSON and SUSANNE STEPHANIE JOHNSON
Fourth Respondents
WEBSTER MALCOLM LAW
Fifth Respondent
[1] On 8 August 2022, I granted an application by GOM Properties NZ Limited (GOM) for orders under s 317 of the Property Law Act 2007 (the Act) modifying an easement registered against the title to a property that it owns in Warkworth. The first to fourth respondents own adjoining properties that enjoy the benefit of that easement.
[2] GOM does not seek costs against the second to fourth respondents and has reached a settlement as to costs with the fifth respondent. It now seeks costs against the first respondent, Mr Pezic. GOM contends it should receive an award of increased costs because of the approach Mr Pezic took to the proposed modification of the easement. Mr Pezic opposes any order for costs being made against him.
Background
[3] GOM has obtained resource consent to subdivide its property into 20 lots for resale. The subdivision provides for an existing street that adjoins GOM’s property to be extended through GOM’s land to provide access to the rear lots of the subdivision. The roadway extension will vest in Auckland Council.
[4] GOM’s property, including part of the proposed roadway extension, is subject to an easement that was registered in July 2008. The easement was granted in favour of Mr Pezic’s property, which adjoins GOM’s land. It relates to a strip of land running from the southwestern corner of GOM’s property along its western perimeter to the edge of the existing roadway. The strip is approximately 42 metres in length and three metres in width.
[5] The easement permits the owner of Mr Pezic’s land to install and maintain infrastructure relating to water supply, stormwater and wastewater under GOM’s property. Mr Pezic’s property was therefore the dominant tenement and GOM’s property the servient. Under the subdivision, the easement will now run not only through GOM’s land but also through part of the roadway extension.
[6] GOM approached Mr Pezic’s solicitors, the fifth respondent, with a request that he sign documents consenting to the modification of the easement to enable the
subdivision to proceed. At that time the fifth respondents were also acting for GOM. They provided Mr Pezic with the documents he was required to sign and he took them away with him.
[7] GOM subsequently instructed new solicitors and on 4 July 2022 they wrote to Mr Pezic asking that he provide his consent. On the same date GOM’s counsel, Mr Casey, wrote to the fifth respondents advising them as follows:
4.Mr Pezic can have no reasonable objection to the modification of the easement. He was requested in April 2022 to sign the necessary consent form but he has not done so, and has provided no reasons. A further copy of the consent required to be signed is enclosed. If Mr Pezic has not signed and returned the consent by 5 pm on Friday 8 July 2022, I am instructed to prepare an application to the High Court pursuant to sections 316 and 317 of the Property Law Act 2007 for an order modifying the easement.
5.The application will be made on the grounds that the nature and extent of the use being made of the burdened land has changed (i.e. by subdivision) and that there will be no substantial injury to the benefited land.
6.Such application should not be necessary in the circumstances and, if it does become necessary to make one, my client will seek the costs of doing so from your client.
[8] At or about this point GOM discovered that Mr Pezic had subdivided his land and several of the sections had been sold to third parties. The new owners of the sections are the second, third and fourth respondents in this proceeding. GOM approached those parties and they subsequently consented to the modification of the easement.
[9] Mr Pezic did not provide his consent. GOM accordingly filed an originating application on 11 July 2022 seeking orders under ss 316 and 317 of the Property Law Act 2002 modifying the easement to accommodate the proposed subdivision. It was necessary to include the second to fourth respondents as parties to the proceeding because they were directly affected by the application.
[10] The application was listed for first call in the Duty Judge List on 3 August 2022. On 1 August 2022 Mr Pezic filed a notice of appearance confirming that he did not oppose the application but reserved the right to be heard on the issue of costs. This
was the first time he had communicated his intention not to oppose the modification of the easement.
[11] At the first call of the matter on 3 August 2022, Mr McAnally appeared as counsel for Mr Pezic to confirm his client’s position as set out in the notice of appearance. Edwards J adjourned the application until 8 August 2022 to enable the applicant to file an affidavit of service on the fourth respondents, who had taken no steps in the proceeding.
[12] I then made the orders GOM sought when the matter was next called in the Duty Judge List on 8 August 2022.
Preliminary issue
[13] On 26 August 2022 counsel for GOM filed and served reply submissions on costs together with an affidavit by one of GOM’s directors, Mr John Cull. Mr McAnally objects to the Court receiving the affidavit because he says no provision was made for the filing of further evidence and the affidavit contains hearsay statements that are inadmissible.
[14] As will become apparent, I have not found it necessary to take the evidence contained in the affidavit into account in reaching my decision as to costs.
The arguments
[15] Mr Casey, on GOM’s behalf, points out that Mr Pezic had several opportunities to consent to the proposed modification of the easement before GOM was forced to file the present proceeding. It follows, he says, that the proceeding only became necessary because of Mr Pezic’s refusal to sign documents consenting to the proposed arrangement. Furthermore, Mr Pezic has never provided an explanation as to why he refused to provide his consent. Mr Casey submits the position is aggravated by the fact that the proposed modification did not affect Mr Pezic’s rights in any way. His property will still retain the full benefit of the easement notwithstanding the modification occasioned by the subdivision.
[16] Mr Casey acknowledges that conduct by a party prior to the commencement of a proceeding is usually not relevant to the determination of costs. He nevertheless submits that Mr Pezic’s conduct in refusing to provide his consent should be taken into account, and that it also justifies an uplift in costs under r 14.6(3)(d) of the High Court Rules 2016. This permits the Court to award increased costs for any reason that justifies such an order.
[17] Mr McAnally submits that the Court should not award costs against Mr Pezic. He points out that Mr Pezic was not required to consent to the modification of the easement. He also says it is irrelevant that the application would have been unnecessary if Mr Pezic had provided his consent at an earlier stage. An award of costs, he points out, is designed to reflect the manner in which a party acts during litigation and not before the litigation commences.1 Mr McAnally therefore contends Mr Pezic was entitled to exercise his rights, including the right to give or withhold consent as he chose.
Decision
[18] As both counsel acknowledged, the general principle is that costs are awarded to reflect steps taken in a proceeding, including any conduct by party that may justify an award of increased or reduced costs. However, costs remain at the discretion of the Court.2 The discretion must be exercised in accordance with the principles contained in r 14.2. These include the general principle that a party who fails with respect to a proceeding should pay costs to the party who succeeds.3
[19] In the present case GOM was clearly the successful party because it obtained the orders that it sought. Furthermore, Mr Pezic did not consent to the orders being made. He merely advised that he would not oppose GOM’s application.
[20] A party whose property enjoys the benefit of an existing easement, usually referred to as the dominant tenement, obviously has the right to closely scrutinise any proposed modification of the easement. In some cases the modification may adversely
1 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 at [160] (CA).
2 High Court Rules 2016, r 14.1(1).
3 High Court Rules 2016, r 14.2(1)(a).
affect the interest held by the dominant tenement under the easement. In those circumstances that party is entitled to question the modification and, if necessary, oppose any application for orders under s 317 of the Act.
[21] However, the owner of the dominant tenement has no interest or rights in relation to the servient tenement beyond those conferred by the easement. Where those rights are not adversely affected by the proposed modification it will generally be unreasonable for the owner of the dominant tenement not to consent to the modification.
[22] In the present case, Mr Pezic has never suggested the proposed modification will adversely affect the benefit his property enjoys under the easement. In the absence of such a concern his refusal to sign the relevant documents must be regarded as unreasonable. This led directly to GOM issuing the present proceeding because it had no other means of having the easement modified. Mr Pezic was warned of the consequences of failing to provide his consent, but this did not alter his approach.
[23] A similar situation arose in the case of Mora v Davis.4 In that case the applicants sought an order extinguishing a restrictive covenant on the basis that it was only to remain in effect whilst the original grantee remained the owner of the land over which the covenant was registered. The two respondents were subsequent owners of that land and were therefore not entitled to enjoy the benefit of the covenant. Neither of the respondents opposed the application but I nevertheless awarded costs against them for the following reasons:
[5] Mr Casey seeks an order for costs against both sets of respondents. He points out that they were asked to cooperate in signing documents that would have avoided the need for this proceeding to be issued. The respondents then engaged in correspondence with the applicants’ solicitors but ultimately never signed and returned the documents that were sent to them for execution. It was therefore necessary for the applicants to file the present proceeding.
[6] Mr Bartlett QC points out that the first respondents are subsequent purchasers of the property that enjoyed the benefit of the restrictive covenant and are well down the chain from the previous owners in whose favour the covenant was registered. He says there was little his clients could have done to facilitate the extinguishment of the covenant.
4 Mora v Davis HC Auckland CIV-2021-404-431, 31 March 2021.
[7] This submission overlooks the fact that both sets of respondents were specifically asked in December 2020 to sign documentation that the applicants’ solicitors had prepared. They were also told the applicants would meet their reasonable legal costs. The respondents were reminded again in March 2021 that Court proceedings were about to be issued. They were obviously entitled to ask questions about the applicant’s intentions as to the future use of their land. Ultimately, however, the failure of the respondents to sign the documents made it necessary for the applicants to issue the present proceeding. In those circumstances I consider both sets of respondents ought to contribute to the applicants’ costs.
[8] I therefore make an order requiring the first and second respondents to pay one-half of the applicants’ costs calculated o a Category 2B basis together with disbursements as fixed by the Registrar.
[24] I take a similar view in the circumstances of the present case. I consider, in the exercise of my discretion, that Mr Pezic should be required to pay costs to GOM on a category 2B basis in relation to the preparation, filing and service of the originating application. I do not consider an award of increased costs can be justified.
[25] Mr Pezic should also pay costs in relation to the first call of the proceeding on 3 August 2022. However, I do not consider Mr Pezic should be liable for costs beyond that date, as the adjournment of the proceeding was caused by unrelated matters.
Result
[26] Mr Pezic is required to pay GOM costs on a category 2B basis for the commencement of the proceeding, and steps taken up to and including the first call on 3 August 2022. GOM is also entitled to disbursements as fixed by the Registrar.
Lang J
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