Kaimai Properties Limited v Queen Elizabeth the Second National Trust
[2023] NZHC 3433
•6 December 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-419-320
[2023] NZHC 3433
IN THE MATTER of the Declaratory Judgments Act 1908 and the Judicial Review Procedure Act 2016 BETWEEN
KAIMAI PROPERTIES LIMITED
First Plaintiff
AND
BARTONS KAIMAI FARM LIMITED
Second Plaintiff
AND
QUEEN ELIZABETH THE SECOND NATIONAL TRUST
First Defendant
AND
REGISTRAR-GENERAL OF LAND
Second Defendant
Hearing: 4 – 7 September 2023 Counsel:
I C Bassett and T Waikato for Plaintiffs
D Salmon KC, T Mullins and D Bullock for First Defendant No appearances for Interested Parties
Judgment:
6 December 2023
JUDGMENT OF ISAC J
[Application for declarations and judicial review]
KAIMAI PROPERTIES LTD v QUEEN ELIZABETH THE SECOND NATIONAL TRUST [2023] NZHC 3433
[6 December 2023]
TABLE OF CONTENTS Para no.
Introduction [1]
The issues [6]
Background [9]
Did the Trust act unlawfully when it acquired the open space covenant? [14]
What is the nature and extent of Bartons’ interests in the land? [19]
The relevant instruments [22]
The 1982 mortgage [23]
The 1982 quarrying agreement [29]
The 1993 quarrying agreement [33]
The plaintiffs’ claimed interests
Interests under the 1982 agreement and mortgage? [44]
An option to purchase? [49]
A right of expansion? [53]
Was the Trust required to “treat and agree” with Bartons as an “owner”? [62]
The text of s 22(1) [71]
Purpose and context [81]
Conclusion [95]
Is the Trust’s open space covenant “subject to” Bartons’ pre-existing unregistered interests? [98]
The factual and legal basis for the “subject to” argument [100]
Consideration [114]
The Trust’s indefeasibility of title [120]
Did the Trust breach a fiduciary duty owed to Bartons? [128]
Overall conclusion on the plaintiffs’ primary claims [140]
Did the Trust act unlawfully in refusing to vary the open space covenant
in 2021? [141]
The s 22A application [143]
Is the decision amenable to judicial review? [147]
Grounds of review [152]
Did the Board apply the incorrect statutory test? [154]
Did the Board make a valid decision? [157]
Did the Board provide sufficient reasons? [165]
Concluding remarks [174]
The Trust’s positive defences [176]
The relevant background [177]
Consideration [190]
Conclusion and result [197]
Introduction
[1] In 1977 Parliament passed the Queen Elizabeth the Second National Trust Act. The Act’s long title records that its passage was to commemorate the Silver Jubilee of Elizabeth II by establishing a national trust to promote the provision and enhancement of open space for the benefit and enjoyment of the people of New Zealand. By s 3 of the Act the first respondent, the Queen Elizabeth the Second National Trust, was created.
[2] At the time the Land Transfer Act 1952 did not permit registration of easements in gross. Such easements are made for the benefit of a specific person or class of person, rather than benefiting other land. Nevertheless one of the key features of the QEII Act was that in s 22 it provided for the creation of a form of easement in gross, known as an “open space covenant”. These registrable instruments require the subject land to be preserved for specified purposes, such as wildlife reserves or recreation areas.
[3] Between 2005 and 2007, the owner of a farm in the Kaimai ranges granted an open space covenant to the Trust over approximately a third of the property.1 Excluded from the covenanted area was approximately 40 ha used as part of a quarrying operation.
[4] In 2009, the first plaintiff, Kaimai Properties Ltd (Kaimai), purchased the farm. Its related entity, the second plaintiff, Bartons Kaimai Farms Ltd (Bartons), already owned the quarrying operation. When it acquired the property Kaimai was aware that the Trust’s open space covenant was a problem for expansion of the quarry. Unable to reach an accommodation with the Trust to expand the quarry, Kaimai brought proceedings in this Court in 2017 seeking a declaration that the terms of the open space covenant permitted it to do so without the Trust’s consent and, alternatively, rectification of the covenant.2 Having failed in those proceedings, the plaintiffs now
1 While there were in fact two effectively identical covenants registered over the two plots of land comprising the farm, the plaintiffs are really only concerned with the effect of one of them. For the sake of simplicity, I will refer to “the” covenant in this judgment.
2 Kaimai Properties Ltd v Queen Elizabeth the Second National Trust [2019] NZHC 1591 [High Court judgment]; and Kaimai Properties Ltd v Queen Elizabeth the Second National Trust [2021] NZCA 10 [Court of Appeal judgment].
directly challenge the lawfulness of the covenant, arguing again that they have a right to expand the quarry into the protected areas of the farm.
[5] The central point advanced by the plaintiffs is that the power of the Trust to obtain an open space covenant is constrained by s 22(1) of the QEII Act. It provides that where the Trust is satisfied private land ought to be established or maintained as open space, it may “treat and agree with the owner…of the land” for an open space covenant. Kaimai and Bartons contend they were the holders of registered and unregistered interests in the land and, accordingly, were “owners” with whom the Trust was obliged to treat and agree. As the Trust failed to do so, the plaintiffs say the covenant is unlawful and ought to be set aside.
The issues
[6] Kaimai and Bartons advance seven causes of action. Six of them principally turn on the requirements in s 22 of the QEII Act and indefeasibility of title. The sixth cause of action, seeking judicial review of the Trust’s 2021 decision under s 22A, requires discrete consideration.
[7] While Mr Bassett for the plaintiffs resisted simplification of their case, the issues that arose at the hearing which require determination can be reduced to four essential questions:3
(a)Did the Trust act unlawfully when it acquired the open space covenant? This question turns on whether s 22(1) of the QEII Act required the Trust to “treat and agree” with Bartons as the holder of both registered and unregistered interests in the land prior to acquiring the open space covenant. The answer to this question resolves the first, second, third, fourth, fifth and (arguably) seventh causes of action.
(b)Is the Trust’s registered interest under the open space covenant “subject to” Barton’s pre-existing unregistered interests? This issue squarely
3 While the plaintiffs filed 280 pages of written submissions (including appendices), my judgment responds to the matters addressed by counsel at the hearing given the parties refined their cases following the exchange of submissions.
engages the question of indefeasibility, and whether the plaintiffs have made out an exception to it.
(c)Is the Trust’s decision under s 22A amenable to judicial review and, if so, have the plaintiffs made out a ground of review?
(d)Are any of the Trust’s positive defences made out?
[8] The case proceeded as a submissions only hearing based on extensive affidavit and documentary evidence, and an agreed statement of facts.
Background
[9] The relevant background is set out in the judgment of the Court of Appeal dismissing Kaimai’s previous claim. None of the parties took issue with the summary and I gratefully adopt it:4
[3] The two blocks of relevant land [making up the farm] are adjoining titles in the Kaimai Ranges. Bartons Kaimai Farm Ltd operated a quarry on the main block from 1973 and then purchased that block in June 1979. In March 1982 it sold it to Hiona Heights Ltd, owned by a Mr Ian Diprose. Mr Diprose already owned the smaller block. In September 1982 Bartons and Hiona entered an agreement giving Bartons the right to operate the quarry in a defined area for a 40-year term commencing 21 December 1981. During that term no royalties were payable on rock mined.
[4] In 1983, Hiona entered a Land Improvement Agreement (LIA) with the Hauraki Catchment Board, whereby Hiona agreed that 100 ha of the mainly southern parts of the main block would be held as a reserve and protected from stock grazing.
[5] In 1986, the Swap family purchased Bartons. The appellant, Kaimai Properties Ltd, is part of a group of companies owned by the Swaps.
[6] In 1993, Hiona and Bartons reached an agreement under which Bartons retained its entitlement to operate the quarry within a defined quarry area until 2021 with no payment of royalties to Hiona. The 1993 agreement provided for a right of renewal for a further 40 years at a royalty rate to be agreed. It also contemplated the expansion of the quarry beyond the south eastern boundary. Clause 6 provided expansion outside of the quarry area, if necessary, would be subject to further negotiations between Hiona and Bartons, as would the question of any additional royalty payments.
4 Court of Appeal judgment, above n 2, at [3]–[23] (footnotes omitted).
[7] …Though both [the 1982 and the 1993] agreements record the quarry area as 39.4242 ha, the relevant plans in fact show the quarry area was extended to the east to a feature marked on a plan as the “point on crag”.
[8] In April 1998 the Matamata-Piako District Council granted a certificate of compliance for the quarry operation. This confirmed existing land use rights. Relevantly these provided for expansion of the quarry to the east.
[9] In 2003, Hiona reached an agreement with the Matamata-Piako District Council regarding the proposed establishment of a green belt. A Development Concept Plan (DCP) was developed and agreed in April 2003. The plan allowed quarrying, as well as conservation and commercial forestry, in the quarry area. The proposed expansion of the quarry, at least for that 10- year timeframe, was to the east.
[10] In November 2004, Mr Diprose began looking for ways to reduce his rates burden and get some fencing assistance. The Waikato Regional Council suggested he place parts of the land under covenant and put him in contact with Mr Hamish Dean of the Trust.
[11] In February 2005, Mr Diprose met with Mr Dean and Mr Rien van de Weteringh of the Waikato Regional Council at the blocks to discuss the possibility of covenanting the land. Messrs Diprose and Dean met several times subsequently.
[12] Exactly what was said between Messrs Diprose and Dean at those meetings is disputed and central to the claim for rectification. Both Messrs Diprose and Dean accepted they cannot recall exactly what was said. The contested nature of the content of the meetings can be summarised.
[13] Mr Diprose believes he made it clear to Mr Dean that flexibility would be needed to allow the quarry to expand. Mr Diprose’s belief that flexibility would be provided for in the covenant was to a degree corroborated by Mr Taris, the surveyor we refer to below. In cross-examination, Mr Diprose accepted he may not have stated the quarry would need to expand into the covenanted areas “in direct terms”, but that reality would have been obvious to Mr Dean from his site visits.
[14] Mr Dean on the other hand stated he would remember if Mr Diprose had said expansion was to be into the covenanted areas. If it had been said, Mr Dean said he would have explained it would not be possible. When cross- examined, Mr Dean stated he believed from the DCP the quarry would expand to the east; he did not recall any mention by Mr Diprose of expansion to the south. He said he was depending on Mr Diprose to advise him of any issue of conflict:
… if somebody had said that to me it would have been a simple matter of making the covenant boundary back to where it needed to be. [There]
… was no drive to have it right next to the quarry so … if that discussion had taken place … it would have been dealt with.
[15] Mr Dean compiled a report following these visits. That report mentioned three special conditions which were carried through into sch 3 of
the covenants (outlined at [20] below). The report does not mention expansion of the quarry.
[16] The Trust board approved two open space covenants over 151.2 ha of land in the blocks on 18 May 2005. The approval documents contained indicative boundaries. The proposed covenants were sent to Mr Diprose and his wife in June 2005. The Diproses signed the covenants in September 2005.
[17] The covenanted land was described by area and by reference to an attached aerial plan. This plan was not however attached until 2007, following a survey undertaken by Mr Taris. Mr Diprose showed Mr Taris around the land and subsequently made several changes to the indicative boundaries during the survey. One of those changes was to the boundary of the main block covenant to allow an area for overburden from the quarry to be deposited. Mr Diprose deposed Mr Dean agreed to the alteration and commented “it’s better to change now as it will be difficult to change later”.
[18] The covenants, featuring the now-agreed boundaries depicted in aerial plans, were registered over the blocks on 15 October 2007. The economic benefits of the covenants to Mr Diprose were modest: a sum of approximately
$11,000 from the Trust for surveying, fencing and planting, and approximately
$7,000 from the Regional Council for the latter two, together with a modest annual rates remission in respect of the land (which was less than $150).
[19] The most relevant clauses of the covenants are cls 2.1, 2.2(g) and 4.1 of sch 2. Clause 2.1 provides:
2.1 No act or thing shall be done or placed or permitted to be done or remain upon the Land which in the opinion of the Board materially alters the actual appearance or condition of the Land or is prejudicial to the Land as an area of open space as defined in the Act.
Clause 2.2(g) provides the owner agrees not to “[c]arry out any … quarrying of any minerals … or other substance” without the prior written consent of the Trust. Clause 4.1 provides:
4.1 If notified by any authority, body or person of an intention to erect any structure or carry out any other work on the Land, the Owner agrees:
(a)to inform the authority, body or person of this Deed;
(b)to inform the Trust as soon as possible; and
(c)not to consent to the work being done without consulting the Trust.
[20] Schedule 3 of the covenants recorded special conditions relating to the use of the land. Both covenants allowed the continued use of farm tracks and water for farming purposes, and cl 3 of sch 3 of the main block covenant allowed the continued use and expansion of communications and radar facilities located in the south-east corner of the main block. There is no special condition allowing expansion of the quarry into the covenant areas.
[21] In 2009 Hiona (and Mr Diprose) agreed to sell both blocks to Kaimai. During negotiations, the Swaps first became aware of the open space covenants. Following legal advice, the sale proceeded in September 2009 with ownership of the blocks transferring to Kaimai.
[22] In 2012, the Swaps determined the quarry would soon need to expand south, thereby affecting 40 ha of the covenanted area. Following a formal proposal by its sister company, Bartons, to expand the quarry, Kaimai advised the Trust of the request in October 2015. Kaimai took the position that cl 4.1 only obliged it to consult with the Trust, but the Trust had no right of veto over the expansion.
[23] In November 2015, the Trust advised it considered it had a veto right and did not consent to the expansion.
[10] Kaimai commenced its first proceeding in 2017. Edwards J dismissed the application in all but one respect, making an order by consent correcting an aspect of the open space covenant on the main block.5 The correction clarified that a boundary of one area of the covenant followed an existing stream as opposed to following a straight line.
[11] Unhappy with the High Court’s decision, Kaimai appealed to the Court of Appeal. The Court dismissed the appeal concluding that it could find no error in the approach of the High Court. The Court also made some additional observations on the evidence. The first was that Mr Diprose plainly made a series of errors, including by not consulting the quarry operator, Bartons, about the proposed covenants and (probably) by not obtaining legal advice.6 Second, the Court concluded that Kaimai had not demonstrated that Mr Dean had any apprehension of a mistake in understanding by Mr Diprose about the effect of the covenants.7 On the contrary, the Court observed that Mr Dean reminded Mr Diprose of the restricting effect of the covenants. Finally, the Court noted that Kaimai had brought the land “with its eyes open”.8 This was expressly recorded in cl 24 of the Agreement for Sale and Purchase, which was designed to deal with the possible consequences should Kaimai be unsuccessful in persuading the Trust to vary or amend the open space covenant.
5 High Court judgment, above n 2, at [93]–[94].
6 Court of Appeal judgment, above n 2, at [26].
7 At [27].
8 At [28]–[29].
[12] In concluding its decision, the Court observed that it was an unusual case “in that the covenants appeared to have been entered without complete understanding by the former owner”.9 It also seemed likely that, had the issue been raised in 2005 or 2007, the Trust would have accepted a smaller covenanted land area, accommodating potential quarry expansion to the south. The Court concluded:
As we noted at the hearing, these circumstances might be addressed in an application for variation [of the covenants] under s 22A of the Act, should one be advanced.
[13] Following its lack of success in the first proceeding, the plaintiffs (through an associated company, J Swap Contractors Ltd) made an application under s 22A of the QEII Act seeking a variation of the covenant areas. This appears to have been the first point at which the plaintiffs made it clear that they considered the failure of the Trust to “treat and agree” with them rendered the covenant unlawful.
Did the Trust act unlawfully when it acquired the open space covenant?
[14] The first issue is whether the Trust acted unlawfully when it acquired the open space covenant. Kaimai and Bartons contend that Bartons, as the holder of both registered and unregistered interests in land, was an “owner” for the purposes of s 22 of the QEII Act. Accordingly, the Trust was obliged to “treat and agree” with Bartons before it could lawfully acquire the open space covenant. The admitted failure of the Trust to do so renders the covenant void. Mr Bassett submitted that had the Trust approached Bartons about the open space covenant prior to its registration, it would have immediately caveated the title based on its unregistered interests under the 1993 quarrying agreement with the then farm owner, Hiona Heights. This would have prevented registration of the Trust’s open space covenant.
[15] In response, the Trust argues that the plaintiffs’ interpretation of its empowering Act is wrong, and that it had no obligation to negotiate with them before obtaining the open space covenant. It says that conclusion should dispose of all but the sixth cause of action. But in addition, it argues that instruments on which the plaintiffs’ claims rely do not confer the interests in land they assert.
9 At [63].
[16] It follows that there are two matters to be considered. The first concerns the nature and extent of Bartons’ interests in the land, and whether those interests are incompatible with the open space covenant. The principal point of difference between the parties is whether Bartons’ claimed unregistered interests extended over the area which became subject to the Trust’s open space covenant.
[17] The second matter concerns a question of law, namely the correct interpretation of s 22(1) of the QEII Act, and whether the plaintiffs are correct to say that one or both of them were “owners” of the land with whom the Trust was obliged to treat and agree.
[18]I begin with the first point.
What is the nature and extent of Bartons’ interests in the land?
[19] The plaintiffs’ case is that if the Trust is able to assert its rights under the open space covenant, the result is the misappropriation of Bartons’ interests in the land by the Trust. The Trust has done so exercising a public power without the consent of the holder of unregistered interests in land and without payment of compensation. The plaintiffs say this expropriation of private property is antithetical to the common law and contrary to Bartons’ rights under the New Zealand Bill of Rights Act 1990.
[20] The plaintiffs claim that at the time the Trust registered the open space covenant, they held four interests in the land:
(a)The first is the registered mortgage granted by Hiona in favour of Bartons in 1982 securing vendor finance of $20,000.
(b)The second is the unregistered profit-à-prendre to quarry and take rock under the 1993 agreement.
(c)The third is an unregistered option to purchase the farm in cl 19 of the 1993 agreement.
(d)Finally, Bartons claims it has an “expansion right” under cl 6 of the 1993 agreement. They say cl 6 provided them with a right to expand
the footprint of the quarry to any part of the farm whatsoever, and this amounted to a further unregistered interest.
[21] While the Trust accepts Bartons held the first two interests in land, it says the third and fourth are not established on the facts.
The relevant instruments
[22] As an overview of the ownership of the farm and operation of the quarry is set out above at [9], the following discussion focuses on the instruments on which the plaintiffs’ claim is based.
The 1982 mortgage
[23] In March 1982, Bartons sold the land to Mr Diprose’s company, Hiona Heights Ltd (Hiona). Of the $295,000 purchase price, $20,000 was left in by Bartons as vendor finance. A mortgage was registered over the property securing Bartons’ advance.
[24] The memorandum of mortgage between Hiona and Bartons secured a principal sum of $20,000 said to be repayable by 21 December 2021. Several clauses were identified in counsels’ submissions as relevant.
[25] The first is cl 9. It provides that the power of sale implied in mortgages by the Property Law Act 1952 would arise and be exercisable by Bartons as mortgagee if Hiona:
… shall, without the written consent of [Bartons], sell, assign, lease or exchange or agree to sell, assign, lease or exchange the said land…
[26] Allied to this is cl 13, which provided that if Hiona “shall sell, assign, transfer, or exchange or agree to sell, assign, transfer or exchange the said land or any part thereof”, it would forthwith give notice thereof to Bartons as mortgagee. Thereafter, Bartons could (whether such notice had been received or not) call up and demand payment of the principal sum, any outstanding interest and any other charges owing under the mortgage.
[27] The final clause on which the plaintiffs principally relied is cl 19. It linked back to the grant of quarrying rights “to be executed by [Hiona] in favour of [Bartons] pursuant to the provisions of an agreement for sale and purchase bearing [the] date the 17th day of December 1981”. The clause went on to provide that if for any reason prior to 21 December 2021 the first quarrying agreement was terminated, the principal sum secured under the mortgage would become payable on the date of termination.
[28] When Kaimai acquired the titles to the farm in 2009, it discharged Bartons’ mortgage. It follows that the plaintiffs’ case, to the extent it relies on Bartons’ interest as mortgagee, requires consideration of an alleged wrong said to have occurred 16 years ago and in relation to an interest in land that ceased to exist 14 years ago.
The 1982 quarrying agreement
[29] In September 1982, following Hiona’s purchase of the farm and quarry, Bartons and Hiona entered into the first quarrying agreement. This gave Bartons the right to operate the quarry for a 40-year term commencing on 21 December 1981.10
[30] Under the 1982 agreement, Bartons held “the right to quarry and excavate for metal, scoria and sand only… on that portion of the abovementioned land of [Hiona] comprising 39.4242 hectares…”. It appears the agreement annexed a plan outlining the quarry area, and referred to it as the “quarry zone” (although the version of the document provided to the Court did not include such a plan). A further area of just over 5 ha was identified on the plan as a “crusher, stockpile and office zone”.
[31] The operative provision of the agreement was cl 7. It provided that if Bartons paid “the rates assessed with respect of the metal, scoria and sand”, and otherwise performed its obligations, it would be entitled to enjoy its quarrying rights. Although nothing is likely to turn on it, it seems possible that the 1982 agreement contemplated the payment of royalties or “rates” based on the volume of quarried rock.
10 While Mr Lewis Swap’s evidence for the plaintiffs and the agreed statement of facts submitted by the parties records the date of the agreement as December 1981, the only available copy—itself in large parts unreadable—appears to be dated 20 September 1982, consistent with the view adopted in the Court of Appeal judgment, above n 2, at [3].
[32] Neither the mortgage nor the 1982 quarrying agreement—to the extent it is legible—contemplated any expansion of the quarry beyond the quarry zone or the related storage zone.
The 1993 quarrying agreement
[33] By 1993, control over Bartons had passed to the Swap family. The farm continued to be owned by Hiona and the Diprose interests.
[34] Under the 1993 agreement, Hiona once again granted Bartons the right to “quarry and excavate for rock, scoria and sand” within an area of land comprising 39.4242 ha, referred to as the “said area” in the balance of the agreement. The initial term was recorded as 40 years commencing on 21 December 1981 and terminating on 21 December 2021; in other words, consistent with the period of quarrying rights in the 1982 quarrying agreement.
[35]Importantly, however, the agreement went on to record that:
… notwithstanding anything hereinafter contained or implied that excavations for the purpose of taking the said minerals shall be restricted to the area of 19.2257 hectares more or less marked "QUARRY ZONE" on the plan annexed hereto … or otherwise as agreed between the parties in accordance with the provisions set to herein…
[36] The 1993 agreement also provided for the continuation of the “crusher, stockpile and office zone” of 5.0064 ha. By cl 10, if Bartons paid “the rates assessed with respect of the said area” and otherwise performed its obligations, it would be entitled to “hold and enjoy the said area and rights and powers granted hereunder during the said term without any interruption by [Hiona] or any person rightfully claiming under or in trust for it”.
[37] Clause 14 is a general arbitration provision, which provides that if “any question of difference or dispute” arises between the parties, “then such question difference or dispute shall be referred to the determination of a single arbitrator”.
[38] The agreement also provided, in cl 16, that Bartons would be entitled to lodge a caveat to protect its interests under the quarrying agreement but would co-operate
with Hiona in the event that Hiona wished to deal with its title in a way that was not inconsistent with Bartons’ interests in the quarry zone.
[39] Clause 17 then provided that if Bartons observed the conditions and obligations under the agreement, it could renew the quarrying agreement for a further term of 40 years:
… at a royalty rate then to be agreed upon and failing agreement to be fixed by arbitration. The renewed agreement shall also provide for the royalty rate to be reviewed every four (4) years [from] the date of commencement of the renewed agreement and settled by arbitration if the parties are unable to agree on the royalty for the renewed term.
[40] Notably, this specific provision for royalties to be determined by arbitration can be contrasted with the general arbitration provision in cl 14.
[41] Also significant to the plaintiffs’ claim is what they argue amounts to an option to purchase the farm. Clause 19 of the 1993 agreement provided that if Hiona wished to sell the farm to an unrelated purchaser, Bartons “shall have the option to purchase the whole farm or farms containing the quarry” within a period of two months of notice of Hiona’s intention to sell. This clause gave rise to a contest as to whether the right conferred on Bartons amounted to an option to purchase, as the plaintiffs argue, or merely a first right of refusal, as the Trust submits.
[42] The final provision to be considered—clause 6—is critical to the plaintiffs’ case. Mr Bassett argued that it confers a right on Bartons to expand the quarrying operation without any geographical limits. Given the significance of the provision I set it out in full:
THE Grantor and Grantee acknowledge and agree that for the quarry to operate effectively benching must take place and that this will take the confines of the quarry beyond the south eastern peg which is behind the current quarry face. The Grantor and Grantee agree that the south eastern peg will be relocated on top of the rock face to the eastern end of the pegs existing site at the point agreed to by the Grantor by representative of the Grantor and the Grantee in an orderly way to enable the operation of the quarry to continue with such expansion being done in such a way as to comply with the Health and Safety in Employment Act 1992. The Grantor and the Grantee agree that if further expansion out of the said area in the quarry zone is necessary, such expansion shall be subject of further negotiations between the Grantor and Grantee. Those negotiations may well include the question of a royalty for any rock quarried from any area outside the quarry zone or the said area as defined.
The parties acknowledge that the reason for the concession in shifting the peg referred to in this clause is because of the Health and Safety in Employment Act 1992 and the extension and expansion of the road that was necessary to comply with that Act and in recognition of the costs incurred by the Grantee in the extension and expansion of the road.
(emphasis added)
[43]A number of points can be made about cl 6:
(a)First, it reflects a “concession” on the quarry zone from that contained in the 1982 agreement. This concession—an expansion of the quarrying area to a feature marked on a plan as the “point on crag”— was made to recognise the costs Bartons incurred improving the access road in order to comply with the then Health and Safety in Employment Act 1992.
(b)Any further expansion of the quarry is conditional on two things. First, it will only occur “if necessary”. Second, any necessary expansion “shall be subject of further negotiations”. Such negotiations might, but would not necessarily, involve consideration of a royalty for any rock quarried outside the quarry zone.
(c)Finally, in contrast to cl 17, the provision makes no reference to arbitration as a mechanism for resolving the terms of any expansion of the quarry that cannot be achieved through negotiation. Unlike cl 17, which contemplates an arbitrator fixing royalties where the parties cannot agree, cl 6 would require resolution of the location of any quarry expansion, the geographical extent of such expansion, as well as the rate of royalties payable. It would seem likely that in any negotiation (or arbitration), each of these three components are likely to influence the others in ways that could be difficult to resolve.
The plaintiffs’ claimed interests
Interests under the1982 agreement and mortgage?
[44] Mr Bassett submitted that cl 19 of the memorandum of mortgage specifically incorporated the 1982 quarrying agreement into the mortgaged interests, while cl 13 contained a “prohibition” on Hiona transferring any part of the land without Bartons’ prior consent. Accordingly, the open space covenant breached the terms of the mortgage. I have been unable to accept this argument.
[45]Clause 19 of the mortgage provides:
In the event of the Grant of Quarrying Rights to be executed by [Hiona] in favour of [Bartons] pursuant to the provisions of an agreement for sale and purchase bearing date the 17th day of December 1981 and made between [Hiona] as purchaser of the one part and [Bartons] as vendor of the other part terminating for any reason prior to the 21st day of December 2021 [then and in] such case the principal sum hereby secured shall be repaid upon the date of the termination of such Grant of Quarry Rights.
[46] This provision does no more than recognise that if the 1982 agreement terminated for any reason prior to 21 December 2021, then Hiona’s obligation to repay the principal sum would immediately become due and payable. It does not “secure” Bartons’ rights in the 1982 agreement.
[47] Nor do I consider that cls 9 or 13 of the mortgage prevented Hiona’s grant of the open space covenant.11 The covenant did not amount to a sale, assignment, lease or exchange “of the land” as those clauses contemplate.12 And in any case, as Mr Salmon argued, the effect of s 105 of the Land Transfer Act 1952 was that if Bartons was ever required to enforce its security and sell the farm as mortgagee, any purchaser would acquire title free from the open space covenant, as a subsequent registered interest.13 It follows that the creation of the open space covenant was not
11 Mr Bassett did not rely at the hearing on cl 9 to support an argument that the grant of the covenant amounted to a breach of the terms of Bartons’ mortgage, however Mr Salmon addressed it in his submissions.
12 While the grant of a covenant might conceivably amount to an assignment of an interest in the land, cls 9 and 13 seem to be very much directed to crystallising a mortgagee’s right of sale, and for that reason it would seem unusual if any grant of an interest in land, no matter how trivial, should trigger the mortgagee’s draconian power of sale.
13 Section 105 of the Land Transfer Act 1952, largely replicated in s 103 of the 2017 Act, relates to transfers registered by a mortgagee after exercising a power of sale. The provision provides that
contrary to the terms of the mortgage, and there could be no loss or appropriation of Bartons’ registered interests as mortgagee.
[48] There is also no real argument that Bartons held an unregistered interest or right to quarry rock under the 1982 agreement within a specified area on the land until 21 December 2021, and a right of renewal. But neither of these rights were attenuated when the open space covenant was registered, and neither of these rights were acquired by the Trust. The area able to be quarried under that agreement was situated on land that was not subject to the open space covenant.
An option to purchase?
[49] Next there is what the plaintiffs say was an unregistered option to purchase the farm under cl 19 of the 1993 agreement, and what the Trust argued was no more than a first right of refusal.
[50] A right of first refusal, or right of pre-emption, gives the grantor the initial choice whether or not to sell before the grantee has the choice whether or not to buy.14 However, in the case of an option to purchase, the grantor has already committed to sell and the choice remains with the grantee whether or not to buy.
[51] The orthodox view is that a right of pre-emption does not give the grantee an interest in the land until the right has converted into an option to purchase, or at best when the right of pre-emption has been triggered. Tipping J’s analysis in Motor Works Ltd v Westminster Auto Services Ltd has generally been approved in subsequent decisions. According to it:15
(a)At the first stage all that exists is a bare right of pre-emption. It is generally considered at this stage the grantee does not hold an interest in the land.
the estate or interest of the mortgagor vests in the purchaser “freed and discharged…of any interest except an estate or interest created by any instrument which has priority over the mortgage”.
14 DW McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 118.
15 Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 762 (HC) at 766–767.
(b)The second stage is reached when a triggering event occurs requiring an offer to be made to the person holding the right of pre-emption. In other words, the owner of the land has manifested an intention to sell. It may be that at this point the holder of the right of pre-emption has an interest in the subject land capable of protection through an injunction or registration of a caveat. That will depend on whether the court can order specific performance, a matter which will turn on whether there is certainty of terms.
(c)The third stage relates to the period after an offer has been made pursuant to the right of pre-emption. This stage cannot be distinguished from an option to purchase, and constitutes an interest capable of protection.
(d)The fourth stage relates to the point when a contract of sale results from acceptance of the offer. Again, there is no doubt an interest in land exists.
[52] Given the terms of cl 19, and the clear line of authority beginning with Tipping J’s decision in Motor Works Ltd v Westminster Auto Services Ltd,16 I am not persuaded that the right was sufficient to constitute an unregistered interest in land. There was no more than a bare right of pre-emption which was not capable of protection by caveat or otherwise. I do not consider this is an appropriate case in which to consider whether the Motor Works framework should be modified, even if that had been open to me. The plaintiffs did not provide a developed submission, beyond
16 Mr Basset submitted that while the Motor Works framework is currently the orthodox position in New Zealand, the matter is “not finally settled”. He referred to DW McMorland, above n 14, at 120, the decision of the Singaporean High Court in Ho Seek Yueng Novel v J & V Development Pte Ltd [2006] SGHC 63, [2006] 2 SLR 742, and the obiter statements of Blanchard J in Bruce v Edwards [2003] 1 NZLR 515 (CA) at [54]. I note, however, that the approach in Motor Works appears to have been generally endorsed in the Court of Appeal’s subsequent decision in Botany Land Development Ltd v Auckland Council [2014] NZCA 61 at [38], and has been applied consistently by this Court: see for example Fanshawe 136 Ltd v Fanshawe Capital Ltd [2013] NZHC 3395 at [109]–[111]; Auckland Council v Pallister [2014] 2 NZLR 405 (HC) at [18]–[19]; and Wylie v Firmin [2022] NZHC 527 at [91].
reference to Blanchard J’s obiter observations in Bruce v Edwards, and a decision of the High Court of Singapore.17
A right of expansion?
[53] Finally, I am unable to accept the plaintiffs’ submission that cl 6 of the 1993 agreement gave rise to a right to expand the quarry area, and therefore a further unregistered interest in land. The text of the clause indicates that the prospect of expansion was merely a possibility subject to future agreement. In contrast to cl 17, where Hiona agreed to be bound by arbitration in the event future royalties could not be agreed, cl 6 provides no machinery to determine the three interrelated fundamentals of any expansion, namely location, extent, and the royalties that might be payable.
[54] While royalties in isolation might well be capable of resolution by arbitration, there is no indication that the grantor, Hiona, intended to be bound by a determination of an arbitrator on any aspect of future expansion. On the contrary, given the different approach adopted by the parties in relation to cl 17, the clear implication is that Hiona had not submitted the issue of expansion to determination by a third party. At the time the clause was negotiated, the property was still very much in use as a farm. Mr Bassett’s suggestion that Bartons had a right under cl 6 to expand the quarry into the farming operations without any geographical limitation is one that I find difficult to accept and contrary to commercial common sense.
[55] I am also unable to accept Mr Bassett’s submission that cl 14, which provides for the general submission of differences and disputes to arbitration, was intended by the parties to remove their contractual autonomy when it came to a future negotiation under cl 6 involving the possible expansion of the quarry.
17 In Ho Seek Yueng Novel v J & V Developments Pte Ltd, above n 16, Leong J appears to have concluded that a right of pre-emption ought to have been capable of supporting a caveat before an intention to sell had been formed on the part of the registered proprietor (in other words, at the first stage of the Motor Works analysis). My research does not suggest the decision has been followed in commonwealth jurisdictions. Respectfully, I would not be inclined to adopt it even if that was open to me in light of the well-established reasons that have differentiated between an option to purchase and a mere right of pre-emption. If a right of pre-emption gave rise to an equitable interest, the registered proprietor could be prevented from any future dealings with their title as a result of a caveat lodged by the holder of the pre-emption right long before the registered proprietor had made any decision to sell. The utility of pre-emption clauses as a contractual right would be undermined if they automatically gave rise to an interest capable of registration.
[56] In support of this submission, Mr Bassett relied on the decision in Attorney- General v Barker Bros Ltd, where the Court of Appeal determined that terms which could not be agreed between a landlord and tenant in relation to a renewal of a lease could be determined through a machinery provision, namely an arbitration clause.18
[57] However, in that case the principal issue between the parties was the level of rent payable for the renewed term of the lease. The judgment of Richmond P records that apart from increased rent, the only other variation to the lease sought by the landlord related to terms concerning the sale or removal of buildings owned by the Crown. The Court noted that the tenant did not take issue with that requirement, but did in relation to the proposed rental increase.19
[58] Ultimately, the Court considered that the parties intended to provide for an effective option for renewal and that any differences in the terms of that lease could be resolved by arbitration.20 The issue of the appropriate rental could be determined by an arbitrator on the basis that the rent should be “fair” or “reasonable”.21 It follows that while there are statements in the judgments of the Court which could be taken to suggest a broader scope for arbitral clauses as a means to resolve differences between parties to a lease, the decision is not in my view authority for the proposition that arbitration can be used to determine essential terms which the parties have as a matter of interpretation reserved for themselves.
[59] For these reasons, and as a matter of construction, I do not consider the 1993 agreement conferred an unregistered interest in land beyond the areas identified as part of the existing quarry. In addition, while I readily accept that Bartons’ 1992 mortgage provided a registered interest in land, there is nothing in the terms of the memorandum of mortgage which suggests Hiona or Mr Diprose were prevented from granting the open space covenant over areas of the property beyond the agreed limits of the quarrying operation. In summary then, I consider Bartons’ interests in land at the date the open space covenant was registered consisted of:
18 Attorney-General v Barker Bros Ltd [1976] 2 NZLR 495 (CA).
19 At 497 per Richmond P.
20 At 502–503 per Richmond P, 504 per Woodhouse J and 504 per Cooke J.
21 At 503 per Richmond P and 505 per Cooke J.
(a)its registered mortgage securing borrowing of $20,000, which was discharged when Bartons acquired its title in 2009; and
(b)an unregistered interest in the form of a right to quarry rock within the geographical parameters defined by the 1993 agreement.
[60] In all other respects I do not accept the interests in land claimed by the plaintiffs. It also follows from my conclusion that registration of the open space covenant did not result in the abrogation, appropriation or taking of the plaintiffs’ property rights. Their rights remained unchanged when the covenant was negotiated and registered by Hiona as the registered proprietor.
[61] The result of this conclusion is that the plaintiffs’ contention that they held interests in the land beyond the quarry fails. As such, there is no conflict between their property rights and the Trust’s open space covenant, and the first through fifth and seventh causes of action must be dismissed.
Was the Trust required to “treat and agree” with Bartons as an “owner”?
[62] The next question is whether the Trust was required by s 22 of the QEII Act to “treat and agree” with Bartons as a registered mortgagee and holder of an unregistered interest in the land before registering the open space covenant.
[63]Section 22 provides:
22 Open space covenants
(1)Where the board is satisfied that any private land, or land held under Crown lease, ought to be established or maintained as open space, and that such purpose can be achieved without the Trust acquiring the ownership of the land or, as the case may be, the lessee’s interest in the land, the board may treat and agree with the owner or lessee of the land for the execution by the owner or lessee in favour of the Trust of an open space covenant on such terms and conditions as the board and the owner or lessee may agree.
(2)In the case of any private land, where the person with whom the board is treating is an owner by virtue of being a lessee of the land, the consent of the lessor (and, if the land is Māori land, of the Registrar of the Māori Land Court) shall be required to the execution of the covenant, and any such consent may be given subject to the inclusion
in the open space covenant of any conditions that the person giving his consent thinks necessary.
(3)In the case of a Crown lease, the consent of the person or authority charged with the administration of the land shall be required to the execution of the covenant; and that person or authority may consent subject to the inclusion of any conditions in the open space covenant, and may agree to a reduction in rent if, having regard to the basis for fixing the rent, it appears fair and equitable to do so.
…
(5)An open space covenant may be executed to have effect in perpetuity or for a specified term, according to the nature of the interest in land to which it applies and the terms and conditions of the agreement between the Trust and the owner.
(6)Notwithstanding any rule of law or equity to the contrary, every open space covenant shall run with and bind the land that is subject to the burden of the covenant, and shall be deemed to be an interest in the land for the purposes of the Land Transfer Act 2017.
(7)On application by the board, the Registrar-General of Land must note the covenant on the register.
[64]The term “owner” is defined in s 2 very broadly:
In this Act, unless the context otherwise requires,—
…
owner in relation to any private land, includes any person having any interest in that land.
[65]“Private land” is defined as:
any land that is for the time being held in fee simple by any person other than Her Majesty the Queen; and also means Māori land
[66] In a nutshell, Mr Bassett’s argument is that the statutory definition of “owner” in the QEII Act is all encompassing. It includes any person having any interest in land. The opening words of s 2—“unless the context otherwise requires”—impose a high threshold. Parliament only intended the expression “owner” to have a narrower meaning in cases where the narrower definition is required. It follows from this broad definition, Mr Basset argues, that the holder of an unregistered interest in land, and a mortgagee, is for the purposes of s 22(1) and (3) an owner of the land with whom the Trust must treat and agree in order to obtain an open space covenant. The Trust’s
admitted failure to do so with Bartons prior to taking its registered interests in the land, according to Mr Bassett, was unlawful and renders the open space covenant void.
[67] In support of this argument the plaintiffs made quite a number of subsidiary points:
(a)As a consequence of the statutory language, and particularly the s 2 definition of “owner”, the Trust treating and agreeing with holders of both registered and unregistered interests in the land were mandatory pre-requisites to registration of the open space covenant.
(b)The Trust’s interpretation, which essentially limits the meaning of owner to the registered proprietor holding the fee simple interests, is contradictory because the definition of “owner” must include registered mortgagees such as Bartons, but would also exclude land outside the Torrens system, including Māori land, as well as the holders of unregistered interests.
(c)The definition of “owner” explicitly refers to an owner of “any private land”. Section 2 defines private land as “any land that is for the time being held in fee simple by any person other than Her Majesty the Queen; and also means Māori land”. While Crown land is clearly excluded from the definition of private land (and therefore the meaning of “owner”), fee simple land includes not only that land under the Torrens system but also land held under the common law deeds system and Māori land.22
(d)It is similarly clear that “private land” includes Māori land which itself is not within the Torrens system, so the definition of “owner” must be broader than that of a registered proprietor of the fee simple interests in land under the Torrens system. The emphasis in the definition of “private land” on both Torrens and non-Torrens land indicates that an
22 The Deeds Registration Act 1908 is still in force and operates in relation to any land which has not been brought within the Torrens system: see s 2.
owner” for the purposes of s 22 of the Act must include holders of unregistered interests in land.23
(e)The Trust in both its pleadings and evidence accepts that Bartons held both a registered mortgage and an unregistered interest in land in the form of a profit-à-prendre. Accordingly, Bartons owned an “interest” in the subject land for the purposes of s 22(1) and (2) of the QEII Act.
(f)The plaintiffs’ argument that the expansive definition of “owner” applies to the present case is supported by the context of other statutes which apply to land, namely the Land Transfer Act 1952 and 2017, and the Property Law Act 1952 and 2007. In summary, the plaintiffs argue that the definitions in the Land Transfer Acts of “proprietor” and later “owner”, as well as ss 10 and 11 of the 1952 Act and s 4 of the 2017 Act, all support the view that the meaning of “owner” extends beyond merely registered interests, and also includes equitable and unregistered estates.24
(g)Parliament’s use of the word “may” in s 22(1) should not be interpreted as giving rise to a discretion as to whom the Trust is obliged to treat and agree with. Rather, Mr Bassett argues that the word “may” in some circumstances can be read as mandatory rather than permissive.25
(h)An analysis of s 22(2) and (3) supports the contention that “owner” in s 22(1) should be accorded its broad statutory definition in s 2. Mr Bassett argued that the structure of s 22(1)–(3) indicates that s 22(1) contemplates the grant of an open space covenant over two kinds of land: first, private land, and second, Crown land subject to a lease or
23 The plaintiffs accept that the QEII Act appears to give no power to the Crown to grant an open space covenant over Crown land, but a Crown lessee may do so according to the terms of its own lease, as recognised by s 22(3) of the Act.
24 Mr Basset argued that statutory provisions must be interpreted consistently with the statute book as a whole (Agnew v Pardington [2006] 2 NZLR 520 (CA) at [41] per Glazebrook J; Burrows & Carter Statute Law in NZ (2021) 6th edition at 345), and that the Trust’s interpretation of “owner” is unlikely because it seeks to impose the narrow concept of a “registered proprietor” onto the broader statutory context of the QEII Act which applies to land outside the Torrens system.
25 Relying on B v Waitemata District Health Board [2017] NZSC 88, [2017] 1 NZLR 823 at [30]– [51].
grant. Subsections (2) and (3) then deal with each kind of land in turn: subs (2) deals with private land and includes lessees of such land as an “owner”; and subs (3) deals with Crown leases. The implication of both subss (2) and (3) is that the Trust must again treat not only with the lessee or tenant, but also with either the holder of the underlying fee simple estate as landlord, or with the appropriate Crown agent, in the case of a Crown lease. The plaintiffs argue that the context of the first three subsections of s 22 indicates a consistent meaning of the word “owner” throughout all three provisions, and a different meaning of the word “lessee” depending on whether the text of the statute and its context is referring to Crown leases. Thus, in s 22(1) and (3) “lessee”— regarding a Crown lease or licence—has a corresponding meaning with that under the Land Act 1948.26
(i)The wider statutory context of the QEII Act also supports the plaintiffs’ case. In particular, the few other statutory references to the term “owner” are at best neutral for interpretation purposes.27
(j)Statutory purpose is also said to support the unaltered application of the s 2 definition of “owner”. The Act is said to be not penal or regulatory, nor intended to limit personal property rights. Rather, it explicitly provides a framework for the consensual engagement of property owners of private land and lessees of Crown land to promote and retain open spaces for the public good and community benefit. Section 22 itself is a provision “safeguarding” property rights, and overall the Act concerns environmental values and protection of open spaces as evidenced by the Act’s long title and the functions of the Trust listed in s 20.28 It follows that there is no reason in the statutory purpose to
26 Section 2 of the QEII Act defines a “Crown lease” as meaning “a lease or licence granted under the Land Act 1948 or under any former Land Act”; and that “lessee” has a corresponding meaning.
27 The term “owner” or “owners” appears in s 5(1)(eb), s 22(2)(e) and s 34(2)(b).
28 Which are to “encourage and promote, for the benefit and enjoyment of the present and future generations of the people of New Zealand, the provision, protection, preservation, and enhancement of open space”.
consider that Parliament intended the statutory framework to apply only to land registered under the Land Transfer Act.
(k)Mr Bassett submits that interpreting “owner” for the purposes of s 22 as including a mortgagee meets the purposes of the Act, namely the longevity of an open space covenant. In particular, if the Trust fails to treat and agree with a mortgagee, prior to the enactment of the Land Transfer Act 2017, a mortgagee sale would proceed to transfer title free of any subsequent registered encumbrance. Parliament would not have intended that an enactment designed to result in the protection of open spaces in perpetuity should be undermined by the ability of a mortgagee to remove the covenant in all cases where they have not provided consent to the subsequent registration of the open space covenant. This supports the plaintiffs’ contention that Parliament intended mortgagees to be treated as an owner for the purposes of s 22(1). The notion that owner “consent” is integral to the lawful taking of an open space covenant is consistent with the overarching purpose of the Act which was to facilitate consensual and voluntary provision of covenants by agreement.
(l)It also appears that by 2002 it was the Trust’s practice to obtain mortgagee consent prior to registration of an open space covenant. While this practice appears to have been abandoned prior to negotiation of the covenant in the present case, Mr Bassett points to the Trust’s operations manual which at the relevant time continued to indicate that the appropriate practice was to obtain mortgagee consent.
(m)The plaintiffs also submit that as of December 1977, when the QEII Act came into force, Parliament would have been aware of the desirability of the Trust not registering an open space covenant as part of a process which would defeat existing unregistered interests in land and thereby provoke litigation by holders of unregistered interests alleging Land Transfer Act fraud against the Trust.
(n)The principle of legality and the fundamental values of the current common law also support giving the word “owner” its widest statutory meaning. Mr Bassett made reference to recent judgments of the higher courts which make clear the importance and fundamental nature of the principle of legality. The fundamental values protected by the common law presumption include property rights,29 and Parliament must speak clearly if it wishes to “trench upon fundamental rights”.30 The principle of legality requires that there can be no abrogation of fundamental rights by general words. It follows that the interpretation advanced by the Trust infringes the principle of legality and of Parliamentary accountability. That is because the Trust’s interpretation of s 22 permits it to abrogate (or, as Mr Bassett at times put it, appropriate) private property rights of holders of unregistered interests in land.
(o)Even if s 22(1) does not give rise to a statutory obligation on the Trust to treat and agree with pre-existing holders of both registered and unregistered interests in land, the combination of the common law values informing property rights, the principles of natural justice and s 27 of the New Zealand Bills of Rights Act 1991, the requirement in s 6 of that Act that rights consistent interpretations be preferred, the common law principle of legality, and the scheme of the Land Transfer Act 1952 (as it was in 1977), support an interpretation of s 22(1) which “at the very least required [the Trust] to give notice to and/or consult with existing holders of interests in land before entering into an open space covenant”.
(p)The relevant parliamentary materials do not, in Mr Bassett’s submission, indicate a clear intention to narrow the meaning of “owner” for the purposes of s 22 of the Act.
29 The plaintiffs rely on dicta of Arnold and O’Regan JJ in Fitzgerald v R [2021] NZSC 131, [2021] 1 NZLR 551 at [209] and [215].
30 R v Pora [2001] 2 NZLR 37 (CA) at [25].
(q)It is not onerous or impractical to require the Trust to identify and treat and agree with all holders of unregistered interests in land. In particular, given the profound effect of registration on prior unregistered interests, amounting to appropriation of property rights without compensation, no other standard would be appropriate. Mr Bassett when pressed to clarify how the Trust might go about ascertaining the existence of unregistered or even claimed unregistered interests in a large high country station was unable to point to any fail safe mechanism through which the Trust could confidently identify such interests, but submitted that the risk of a failure to identify all such interests should sit squarely on the Trust rather than the holder of an unknown unregistered interest. In counsel’s submission, the Trust could take its open space covenant, but in all cases where it had done so without prior agreement or notification to an unregistered interest holder, its covenant would be subject to the prior unregistered interest in land. Mr Bassett did not consider such an approach would place the Trust in a position worse than any other party acquiring an interest in land who relies upon the registered title and, even if it did, that asymmetry is justified as a matter of policy given the Trust is a Crown entity exercising public functions which might otherwise result in the appropriation of private interests in land.
(r)Finally, Mr Bassett submitted that as a “State actor” pursuant to s 3(b) of the Bill of Rights, the Trust must exercise its public powers consistent with the rights and freedoms contained within the Act, including the right to judicial review of its decisions and the right to the observance of natural justice. The Trust’s conduct in failing to treat and agree with the plaintiffs, or at the very least to put them on notice, constituted a breach of the Bill of Rights, a matter relevant to interpreting the meaning of “owner”.
[68] In response, the Trust submits that the plaintiffs’ interpretation of s 22(1) is simply wrong and that, when the subsection is seen in light of its context and purpose, it confers a discretion on the Trust to choose to treat and agree with any “owner” of
the land. In practical terms that will necessarily be someone with the ability to execute a covenant that would have the effect of preserving open space. The Trust emphasises that although Bartons and BNZ had registered interests in the subject land as mortgagees, neither those interests, nor Bartons’ unregistered interests under the 1993 quarrying agreement, permitted Bartons or BNZ to execute a covenant over the land to preserve open space. The Trust was entitled by s 22 to treat and agree with the holder of a “higher” interest in the land.
[69] The Trust says that s 22(1) cannot oblige the Trust either to treat and agree, or to carry out some lesser form of consultation, with every person who may fall within the broad definition of owner in s 2 of the Act.
[70] I now turn to ascertain the meaning of s 22(1) from its text and in light of its purpose and context.
The text of s 22(1)
[71] The opening words of s 22(1) of the QEII Act establish an opening threshold. The Trust must be satisfied first that the private land ought to be established as an open space and, second, that this outcome can be achieved without the Trust acquiring “ownership” of the land.
[72] If these requirements are met, the Board “may treat and agree with the owner” for the execution “by the owner” of an open space covenant.
[73] There are three implications of the statutory language in s 22(1). First, use of “may” indicates the Board has a discretion, not a statutory obligation, to agree to an open space covenant where the gateway test has been met.31 The use of discretionary language supports the conclusion that s 22(1) is an enabling rather than constraining provision.
[74] Second, Parliament linked in s 22(1) the concept of “owner” with the concept of “ownership” of private land by the Trust. The Trust may treat and agree with the
31 “May” does not normally mean “must”. See B v Waitamata District Health Board, above n 25, at [31].
owner where it is satisfied that it does not itself need to obtain ownership of the land in order to preserve open space. The use of “the owner” is also significant. It suggests that there will be an owner—one party—with whom the Trust will negotiate to conclude the covenant. I accept the Trust’s submission that the rights the Trust acquires will be the rights within the power of that owner to grant. While the statutory language does not preclude the possibility that the Trust might also treat and agree with other holders of interests in the land, it does not require it.
[75] A narrower meaning of “owner” for the purposes of s 22(1)–(3) is also contemplated by the opening words of s 2. Like all definitions in s 2, the expansive statutory definition only applies “unless the context otherwise requires”. That context includes the text of a provision in question, the purpose and policy of the legislation, its history, and the practical consequences of the plaintiffs’ interpretation. As the Trust submits, “any interest in land” includes ownership of a fee simple title, lease, easement, mortgage, licence and profit-à-prendre. Not all of these interests confer rights on the holder to take steps to preserve open space on the land. That necessary implication tells against a mandatory obligation in s 22(1) to treat and agree with every person holding a registered or unregistered interest in the land (even if they fall within the definition of “owner” in s 2).
[76] Third, s 22 does not mention any lesser obligation to enquire into the state of interests in land and consult with other “owners” at all. There is neither an express basis for such an obligation nor any words from which such an obligation could be implied.
[77] Finally, I agree with Mr Bassett that subss (2) and (3) of s 22 reflect the basic division in subs (1) between “private land” on the one hand and “land held under a Crown lease” on the other. Subsection (2) is an additional requirement where the person with whom the Board is treating is a lessee of private land. The additional requirement is that the consent of the lessor (or if the land is Māori land, the Registrar of the Māori Land Court) is required for the execution of the covenant. Similarly, subs (3)’s requirement relates to land held under a Crown lease. Echoing subs (2), it makes clear that the Trust must, in addition to the holder of a Crown lease, also obtain the consent of the authority charged with administration of the land.
[78] As the Trust submits, it is significant that under both subs (2) and (3) the requirement is to obtain the consent of someone with a stronger interest in the land than the person with whom the Trust has negotiated the open space covenant. In both cases, the provision makes clear that the lessee alone has an insufficient or incomplete interest to grant an open space covenant, and the landlord or lessor in both instances must also provide consent. Again, this implies that the Trust has no obligation to treat and agree under s 22(1) with holders of lesser interests, including unregistered interests.
[79] This narrower meaning of “owner” is also consistent with s 22(4), which is directed to the effect of an open space covenant. If an “owner” could not actually use their interest to preserve open space, it makes little sense for the Trust to treat with them at all, let alone for there to be a requirement to agree with them.
[80] This view is consistent with the definition of “covenantor” in s (2). The definition was inserted by an amendment in the QEII Act passed in 1991 which added a mechanism for the variation of covenants in s 22A. It confirms that the relevant “covenantor” who can agree to vary an open space covenant with the Trust is “the owner or lessee for the time being of the area to which the covenant applies”. This does not envisage the holders of unregistered interests applying to vary the open space covenants, but rather the registered proprietor or their lessee. In other words, the holders of a stronger interest than a person merely claiming an equitable interest.
Purpose and context
[81] The parties were at odds in relation to the underlying purpose of s 22. The Trust considers it is an enabling provision. By contrast, the plaintiffs submit that s 22(1) is a rights-focussed provision ensuring a public power is not exercised to the detriment of any person holding a prior registered or unregistered interest in land.
[82] The difficulty with the plaintiffs’ position is noted already at [64(q)] above. Mr Bassett argues that subordinating the Trust’s open space covenant to undiscovered but pre-existing unregistered interests ensures protection of private property rights and is reflective of Parliament’s intention. I cannot agree with this submission.
[83] As Mr Bassett appeared to accept, unregistered interests in land, by their very nature, may not be capable of discovery by the Trust no matter how thorough its enquiries or investigations are. I do not consider Parliament should be taken to have intended that the Trust embark on an impossible exercise. In my view, s 22 is simply an enabling provision reflecting Parliament’s desire to resolve an existing legal impediment in the Land Transfer Act 1952 concerning easements in gross. Given s 22’s emphasis on the negotiation and registration of open space covenants by agreement only, there is no reason to consider that Parliament intended to place the Trust in a worse position than any other party seeking to acquire a registered interest in land.
[84] I consider Parliament intended that the Trust should be entitled, like any other party, to rely on the registered title when determining with whom it should treat and agree. Conversely, I consider the interpretation advanced by the plaintiffs would render open space covenants virtually worthless given they would be impeached by unregistered and undiscoverable interests in land that at the time the covenant was registered.
[85] I am reinforced in my view that Parliament intended a much narrower meaning of “owner” for the purposes of s 22(1)–(3) by the statements of parliamentary purpose and intent during the legislation’s drafting phase.
[86] When the Queen Elizabeth the Second National Trust Bill was introduced to Parliament, the Explanatory Note recorded with respect to cl 22 (which later became s 22):32
Where the Board is satisfied that any land ought to be maintained as open space, it may treat and agree with the owner for the execution of an open space covenant in favour of the Trust.
The Explanatory Note went on to record:
The terms of particular covenants will depend on the agreements negotiated with the owners, and may vary from case to case.
32 Queen Elizabeth the Second National Trust Bill (No 52-1).
[87] These statements do not suggest a complex negotiation with every holder of an interest in land. Rather, they indicate a Parliamentary understanding that there would be one covenant negotiated with a single land owner in order to meet the purpose of the QEII Act.
[88] In the first reading of the Bill, the Hon Venn Young, the Minister of Lands at the time, stated in the House:
A feature of this Bill is provision for the trust board to negotiate open space covenants. This provision is the same as the conservation covenant provisions of the Reserves Bill. The provision is carried over into this Bill because the Government considered there may be landowners who would prefer to deal with an independent body such as the National Trust, rather than a Government department, as the case under the Reserves Bill. The covenants provision is a means by which particular landscape features can be protected without the necessity for the trust actually to acquire the land in question. It will be a private arrangement between the owner and the trust, for a specific period or in perpetuity, and a consideration to the owner is negotiable. The covenants can be registered against the title to the land.
(emphasis added)
[89]Then, during the second reading of the Bill, Mr Young, further explained:
It may be helpful to the House if I explain in more detail how the open space covenants are to be negotiated. The covenant is simply an alternative to the outright acquisition of land when, for example, the requirement is to preserve a representative and aesthetically pleasing area of existing landscape from some form of detrimental development. A covenant will be for a specific period or could be in perpetuity, and can be registered against the land title. It will be a purely voluntary matter. Landowners can approach the trust or vice versa. If either party does not wish to negotiate, the matter lapses at that point. The question of the amount of consideration to be paid will be dependent on the uses the landowner might forgo in permitting the trust to take out a covenant. Public access, use, or even some development may be involved, or alternatively the covenant may simply protect the land from detrimental development. The Bill uses the words “treat and agree”, and this has been inserted to be deliberately flexible to allow both parties to come to any kind of mutually agreed arrangement.
(emphasis added)
[90] These statements also indicate that Parliament had in mind bilateral and flexible negotiations, with a focus being on the “landowner”, not other persons who might have lesser interests.
[91] Section 22(2) of the QEII Act, requiring consent from the freehold title owner where an open space covenant has been agreed with a lessee, was added to the Bill when reported back from the Land and Agriculture Select Committee.33 The report from the Department of Lands and Survey provides further context for this particular change. Federated Farmers had submitted that the definition of “owner” could include a lessee, and that open space covenants are meant to be in perpetuity. As a result, it sought a refined definition of “owner” in those areas where the status of the owner is essential to a long-term commitment.
[92]The Department responded to this in its report, noting:34
Open space covenants over leased land negotiated with the lessee are only valid to the extent of the interest of the lessee and for the period of the lease. It is therefore agreed that the owner is the key to a long term commitment but it is not necessary to redefine the term “owner”. An amendment to Clause 22 (covenant clause) is all that is necessary to provide that the consent of the freehold owner of land is necessary in any case where covenanted land is subject to a lease.
[93]The recommended clause which became s 22(2) read as follows:35
In the case of a lease, the consent of the freehold owner shall be necessary to the execution of the covenant and the owner may give his consent subject to the inclusion in the open space covenant of any conditions that he thinks necessary.
[94] The Department also noted a similar issue with respect to Māori land held on lease in response to a submission from the NZ Māori Council. It recommended in its report:36
… that in the case of any Māori land the consent of the owner or owners of that land and the Registrar of the Māori Land Court shall be necessary to the execution of a covenant and consent may be given on such terms and conditions as the owner or owners and the Registrar of the Māori Land Court shall so decide.
33 Queen Elizabeth the Second National Trust Bill (No 52-1), cl 22(1A).
34 Department of Lands and Survey Queen Elizabeth II National Trust Bill (Departmental Report)
at 8.
At 8.
36 At 25.
Conclusion
[95] For the foregoing reasons I am unable to accept the plaintiffs’ primary argument that s 22(1) required the Trust to treat and agree with Bartons prior to registration of the open space covenant. I also do not accept their contention that, at the very least, s 22(1) imposed a lesser “consultation” or natural justice obligation on the Trust. In my view, Parliament’s central concern was to ensure that the Trust could negotiate and obtain open space covenants with owners of land. Primarily, that will be the holder of the fee simple interest or, where the land is subject to a lease, will involve the consent of both the landlord and tenant.
[96] Nor am I able to accept the plaintiffs’ contention that Parliament meant to constrain the Trust’s ability to negotiate open space covenants as a means to protect private property rights. There is no indication that Parliament was concerned the Trust’s operation could amount to the appropriation of property rights by the State.
[97] It is the subsequent effect of registration of the open space covenant and the Trust’s indefeasible interest in the land which is now the cause of the plaintiffs’ problem. It follows that, quite apart from my conclusion about the requirements of s 22, the real cause of any misfortune for the plaintiffs is:
(a)first, Bartons’ failure to protect its claimed unregistered interests in the farm by registering a caveat; and
(b)subsequently, Kaimai’s decision to acquire title with full knowledge of the Trust’s prior registered interest, and the consequences of indefeasibility in relation to the plaintiffs’ claimed interests.
Is the Trust’s open space covenant “subject to” Bartons’ pre-existing unregistered interests?
[98] Although not pleaded as a discrete cause of action, the plaintiffs argue that irrespective of the statutory provisions of the QEII Act, the Trust “acknowledged” that it obtained registration of the open space covenant “subject to” Bartons’ claimed interests in the land, including its asserted expansion right, and “by its conduct” agreed
to honour those interests. Mr Bassett submitted that this was the strongest of the plaintiffs’ claims.37
[99] This argument is advanced as a response to the Trust’s first affirmative defence, namely that it acquired the open space covenant upon registration and is entitled to indefeasibility of title. It is therefore convenient to deal with both aspects of the claim and defence together.
The factual and legal basis for the “subject to” argument
[100] The plaintiffs’ argument focuses on the Trust’s alleged knowledge of the plaintiffs’ unregistered interests prior to the agreement to grant the open space covenant in 2005, and the subsequent survey and registration of the covenant in 2007.
[101] As noted above, Mr Hamish Dean from the Trust visited the land on three occasions in 2005 to explore the possibility of covenanting parts of it. In the first visit in February, he drove around the base of the quarry and observed it was a commercial activity with machinery. He was aware that Mr Diprose of Hiona was not the quarry operator, and that the Swaps held a quarrying licence.
[102] Between March and May 2005, Mr Dean prepared a report titled “Open Space Covenant Report” for the Trust Board. The report included a map of the land depicting the boundaries of the proposed covenants as well as the quarry area. The Trust also obtained a title search during this time.
[103] On 3 May 2005, the Trust’s Manager of Legal Services, Mr John Bishop, countersigned a document titled “Legal Group Pre Assessment New OSC Proposal”. Attached to it was an annotated aerial map of the land which identified the proposed covenant areas and the quarry area. The quarry area was highlighted a different colour and had an arrow pointing to it with the words “Quarry area excluded from OSC”.
37 While not pleaded as a cause of action in the plaintiffs’ amended statement of claim of 26 August 2022, the contention that the covenant was registered subject to the plaintiffs’ claimed interests in the land first appears in the plaintiffs’ statement of reply of 29 September 2022. The Trust did not take a pleadings point so I have dealt with the issue in this judgment, but for my part it seems inappropriate for the plaintiffs to advance a fresh ground of challenge on the basis of matters arising only by way of reply to a statement of defence.
[104] On 18 September 2005, Mr and Mrs Diprose executed the open space covenant on behalf of Hiona, and authorised the Trust to insert the area and legal description into the open space covenant document and attach approved survey plans, which were still to be prepared. As a result, Mr Bassett submits, the Trust assumed responsibility for the preparation and inclusion in the open space covenant of “the area and legal description” of the covenanted land.
[105] On 21 September 2005, the Trust provided Hiona with an executed copy of the covenant.
[106] At no time during this process did the Trust approach Bartons or the Swaps regarding the proposed open space covenant, or enquire as to the nature and legal consequences of Bartons’ unregistered interests in land and mining rights.
[107] In early to mid-2007, the Trust instructed Mr John Taris to survey the land for the purpose registration of the open space covenant.
[108] On 31 August 2007, Mr Taris sent an email to the Trust advising that he had visited the land three times “to try to get it right”, and identifying several “points” that “need to be noted and even acted upon”. Attached to the email was an aerial photograph of the land with the proposed covenant areas marked up as Areas A, B and
Did the Trust act unlawfully in refusing to vary the open space covenant in 2021?
[141] I now turn to the sixth cause of action, in which the plaintiffs seek to judicially review the decision of the Trust to decline Kaimai’s application to vary the open space covenant pursuant to s 22A of the QEII Act.
[142]Section 22A governs the variation of open space covenants in these terms:
22A Variation of open space covenants
(1)Subject to subsections (2) and (3), the board and the covenantor may, by a memorandum of variation executed by them both,—
(a)make to any of the terms and conditions of an open space covenant executed under section 22 any variation that is not contrary to the purposes and objectives of the covenant; and
48 Queen Elizabeth the Second National Trust Act 1977, s 20(1).
(b)correct any error of description in the covenant (whether with respect to the boundaries of an area of land or otherwise).
(2)Notwithstanding section 9(10), the board shall not enter into any memorandum of variation under this section unless all of the members of the board agree to the proposed variation.
(3)Any consent required by section 22 to the execution of an open space covenant shall also be required in the case of any variation of that covenant under this section.
…
(emphasis added)
The s 22A application
[143] On 6 May 2021, following the Court of Appeal’s decision declining to grant rectification, Kaimai wrote to the Trust seeking a variation of the open space covenant pursuant to s 22A of the QEII Act, reducing the area covered.49 Representatives from Kaimai met with members of the Trust’s Board at the subject land on 22 July 2021, and the Board held a meeting shortly afterwards to consider the proposal.
[144] The Chair of the Board, Mr Bruce Wills, asked all Board members individually to share their views on Kaimai’s application for variation. There was a clear concern expressed from all Board members around the size and scale of the area that would be lost were the covenant varied, as well as the subsequent impact this could have on biodiversity within the area. It was apparent that unanimous approval would not be achieved, and so Mr Wills put to the Board that the meeting be closed. The Board then unanimously agreed to close the meeting. Mr Wills did not ask for a formal ‘yes-no’ vote from each Board member on Kaimai’s proposal before he did so.
[145] On 19 August 2021, the Board wrote to Kaimai informing it of the decision to decline the application. It advised that after careful consideration of the application, the Board was “not able to achieve the unanimity required” under s 22A of the Act. Kaimai subsequently requested further information about the reasons for the decision, including under the Official Information Act 1982.
49 The application was by Kaimai and its related company, J Swap Contractors Ltd.
[146] The Board provided a response on 19 October 2021. It noted that the application was discussed in private, and the content of that discussion was not recorded. While observing that there is no statutory requirement to provide reasons,50 the letter advised that the Chair of the Board, Mr Bruce Wills, had provided the following statement:
At the private Board meeting which took place shortly after the Kaimai property visit I asked all Board members, on a one by one basis, to share their views on the Application for Variation in question. There was a clear concern expressed from all Board members around the size and scale of the area of the covenant that would be lost as part of this Variation, and the potential loss of the significant biodiversity that sits within this area.
It was apparent that these concerns were strongly felt and so I put it to the Board, as it was very apparent that unanimous approval would not be achieved, that the meeting be closed. This was agreed to unanimously.
Is the decision amenable to judicial review?
[147] The Trust argues that decision-making on applications for variations under s 22A of the QEII Act are not amenable to judicial review, other than on grounds analogous to fraud, corruption, bad faith, or improper purpose. Mr Salmon calls this the ‘default’ standard, as set out in in Mercury Energy Ltd v Electricity Corp of New Zealand and Lab Tests Auckland v Auckland District Health Board.51 The Trust’s principal submission on this point is that decision-making under s 22A is properly seen as an extension of the decision to agree an open space covenant in the first place. It says that the relationship between the Trust and Kaimai is already governed by contract, and any presumption of reviewability can be displaced where there remains an alternative pathway of redress.
[148] Without determining the point, I would be slow to conclude that a decision on an application to vary an open space covenant under s 22A of the QEII Act is not amenable to judicial review.
50 The Board asserted that the discussions are subject to “deliberative privilege”.
51 Mercury Energy Ltd v Electricity Corp of New Zealand [1994] 2 NZLR 385 (PC) at 391 as further adapted in Lab Tests Auckland v Auckland District Health Board [2008] NZCA 385, [2009] 1 NZLR 776 at [91].
[149] While Mr Salmon is correct in arguing that the presumption of reviewability may be weakened where alternative forms of redress exist,52 determining the amenability of a particular decision requires a broader contextual analysis.53 The question is whether the exercise of power is “public” in nature, or has public consequences or effect.54 This means that the source of the power—whether statute, contract law or some other origin—is not necessarily determinative of the issue, and the subject-matter of the purported exercise of public power becomes important.55
[150] Where the function of the Trust is to protect spaces with ecological and cultural significance across New Zealand for the benefit of the general public, the Trust’s power of decision-making in relation to open space covenants are inherently public in nature and consequence. The purpose of the Trust is recognised explicitly in the QEII Act and cannot be ignored. Similarly, the variation of such a covenant is a statutory power of decision conferred by s 22A of the QEII Act with the potential to affect the rights and liabilities of private individuals. For these reasons, I would be more inclined to conclude that it is accordingly a statutory power for the purpose of s 5 of the Judicial Review Procedure Act 2016 and reviewable under that Act.
[151] Regardless, even if I am wrong as to the justiciability of the Trust’s decision, I find that this cause of action must fail on the merits for the reasons set out below.
Grounds of review
[152]There are three main grounds of review under this cause of action. They are:
(a)the Board failed to take into account a mandatory relevant consideration—that the open space covenant was invalid as a result of unlawful creation—which meant the Board applied the incorrect statutory test for a variation of such a covenant pursuant to s 22A;
52 Mercury Energy Ltd v Electricity Corp of New Zealand, above n 51, at 388.
53 Philip A Joseph Joseph on Constitutional and Administrative Law (5th ed, Thomson Reuters, Wellington, 2021) at [22.6.1(1)].
54 At [22.6.1(1)].
55 Ririnui v Landcorp Farming Ltd [2016] NZSC 62, [2016] 1 NZLR 1056 at [89].
(b)the Board failed to follow the correct process when making the decision not to vary the open space covenant, which meant it effectively did not make a decision at all; and
(c)the Board failed to give sufficient reasons for its decision, which was a breach of natural justice.
[153] In terms of relief, the plaintiffs seek a declaration that the purported decision was unlawful, orders setting the decision aside and orders that their request for a variation be granted. The issue of relief is discussed further below.
Did the Board apply the incorrect statutory test?
[154] On this first ground of review, Mr Bassett argues that the Board applied the incorrect legal test because it wrongly assumed that the open space covenant was valid and lawfully obtained. He submits that the Board accordingly failed to take into account a range of mandatory relevant considerations, including whether the covenant was improperly or unlawfully obtained, or otherwise invalid.56
[155] To the extent this ground of review repeats arguments which have already been dealt with, it must fail for the same reasons set out above. As I have found, there was no impropriety or illegality in the obtaining of the covenant, nor any issues with its validity. There was no obligation to treat and agree with or otherwise consult the plaintiffs. Nor did the covenant infringe on any rights in land which the plaintiffs held. Any failure by the Board to consider these matters therefore goes nowhere.
[156] In any case, it is doubtful whether the claimed defects in the covenanting process could be relevant considerations. Section 22A(1) provides the Board with a wide discretion to vary an open space covenant provided the variation is “not contrary to the purposes and objectives of the covenant”. The evidence of Mr Wills shows that the Board—which was concerned by the significant loss of covenanted area and
56 Other relevant considerations that the Board allegedly failed to consider include that the open space covenant “had no legitimate purposes or objectives”, “was not operative and would never become operative”, and “was obtained subject to the rights of [Bartons]”.
ecological impact of the expansion proposal—directed itself to those factors. The Board therefore applied the correct test, and this ground of review must fail.
Did the Board make a valid decision?
[157] The second ground of review advanced by Mr Bassett is that the Board failed to exercise its statutory power of decision by failing to comply with the requirements of decision-making in ss 9 and 22A of the QEII Act. In essence, Mr Bassett says that these provisions required the Board to hold a formal vote on whether to accept Kaimai’s application to vary the open space covenant, and also to subsequently record that decision. He argues that informally asking each of the Board members to provide their views on Kaimai’s application for variation did not meet the procedural requirements set out in s 9, meaning the Board effectively failed to make a decision at all.
[158]I am unable to accept Mr Bassett’s submission.
[159] Section 9 of the QEII Act sets out procedural requirements for meetings of the Trust Board. In particular, s 9(10) provides:
Every question before a meeting of the board shall be decided by a majority of the votes of the directors present at the meeting.
[160] Despite that provision, however, s 22A(2) requires unanimous consent among the Board members before an open space covenant may be varied:
Notwithstanding section 9(10), the board shall not enter into any memorandum of variation under this section unless all of the members of the board agree to the proposed variation.
[161] Two key points arise from these provisions. The first point is that s 9(10) does not specify any particular voting procedure. To the contrary, s 9(13) provides that the Board may, subject to the other provisions of the Act, “regulate its own procedure as it thinks fit”. Thus, there is no requirement for a formal poll of each member of the board or a “yes-no” vote. The second and more fundamental point is that unanimity is a necessary pre-requisite for variation. So, if the procedure adopted plainly indicated an absence of unanimity, that is all that was required.
[162] It follows that the Board’s process was clearly sufficient in the circumstances to satisfy the requirements of ss 9(10) and 22A(2). The members individually shared their views on the application and it quickly became apparent that there was no prospect of unanimous agreement. The pre-requisite of unanimity was not met, and the Board had no ability to grant the variation.
[163] I also agree with Mr Salmon that to require a specific voting procedure would be to place form over substance. It would also involve reading requirements into the Act that Parliament did not see fit to include, as well as require the Court to ignore the broad discretion conferred on the Board by s 9(13).
[164]For these reasons this ground of review must be dismissed.
Did the Board provide sufficient reasons?
[165] As noted above, the Board communicated its decision to the plaintiffs on 19 August 2021, which prompted a request for reasons under s 23 of the OIA.57 The Trust responded with a statement from Mr Wills explaining the process that was taken, although noted the Trust’s view that the Board’s discussions were subject to privilege, and that s 22A of the Act did not require reasons to be given.
[166] The final ground of review advanced by Mr Bassett under this cause of action is a general assertion of procedural impropriety. He submits that, regardless of the Court’s finding on the above two grounds of review, the Board did not provide Kaimai with sufficient reasons for their refusal to vary the open space covenant. He says that, by their letter of 19 October 2021, all the Board did was provide a record of a “clear concern” of its members without providing sufficient detail. Mr Bassett argues that
57 I note at this point that the OIA ordinarily only applies to official information held by an agency (that is, information that is already known to the agency and within its control). Where a request requires the agency to form an opinion or provide an explanation and so create new information to answer the request, this is generally not considered official information that must be disclosed. The exception to this is requests made under s 23 of the OIA, which require an agency to create a response if the material is not readily available.
this is a breach of natural justice.58 Finally, he also says that the reasons disclosed show that the Board was unaware of numerous failures it had made during its deliberations.59
[167] In response, Mr Salmon says that the circumstances did not require any, or any detailed, reasons to be given. He says that if such a duty did arise, then the Trust complied with it through its correspondence with the plaintiffs in August and October 2021. Mr Salmon notes that the Board did identify its main reason for declining the application—being a concern about the reduction in the size of the open space covenant and the impact on biodiversity—and explained that unanimity could not be reached.
[168] Both counsel and I are agreed that the requirements of natural justice may differ depending on the factual context and the provision of any relevant statutory scheme. The question is whether the requirements were met in the current case.
[169] If there was a duty to give reasons under the QEII Act, it could only arise at common law,60 and, as both parties noted, there is no “inflexible rule of universal application” requiring detailed reasoning for a decision given.61 At common law, if reasons are given for particular decisions, they can be abbreviated and may be evident without express reference.62
[170] Here, the Board provided adequate reasons for declining Kaimai’s application. Its letter of 19 October made clear that the consensus required to vary the covenant was not reached, and that the main reasons for this were the loss of covenanted area to the proposed variation and the potential effects it would have on biodiversity.
58 Citing Freeman v Associate Minister of Justice [2020] 3 NZLR 49 at [85]–[89] (HC); Singh v Department of Labour [1999] NZAR 258 at 262 (CA); and Lewis v Wilson & Horton [2000] 3 NZLR 546 at [75]–[77] (CA).
59 These alleged failures, which largely repeat arguments already pursued, include issues such as a failure to take into account mandatory relevant considerations (being that the open space covenant was not valid), an inadequacy of information and reports before the Board rendering subsequent decisions invalid, a misunderstanding of the law such that the process and decision was so unreasonable and untenable as to amount to an error of law (this includes a failure to apply the correct statutory test), a failure to abide by the Trust’s own open space covenant guidelines and act in a consistent manner, and a failure to consider the substantive merits of the s 22A application.
60 Waikanae Christian Holiday Park v New Zealand Historic Places Trust Māori Heritage Council
[2015] NZCA 23, [2015] NZAR 302 at [69].
61 R v Awatere [1982] 1 NZLR 644 at 649.
62 Lewis v Wilson & Horton, above n 58, at [81].
[171] I do not believe that s 23 of the OIA required the Board to provide more detailed reasoning than this. Section 23(1) of the OIA allows a person to request from agencies reasons for decisions that affect them. The requester is entitled to a written statement of the findings on material issues of fact and, subject to certain exceptions, the reasons for the decision itself. Decisions to vary open space covenants under s 22A of the QEII Act do not require the Board to make findings on material issues of fact. In this case all the Board could have done in satisfaction of s 23 of the OIA is provide reasoning for the decision itself which, as set out above, it has done sufficiently.
[172] Finally, the general allegations and concerns raised by Mr Bassett’s, noted at [166], are not supported by the evidence. I have already found that there was no error of law nor any failure to take into account mandatory relevant considerations. No further detail is provided as to why the Board failed to follow its own guidelines or why the information provided to it was insufficient such that an incorrect decision was made. There is also nothing to suggest that the Board did not adequately consider the merits of Kaimai’s application.
[173] For these reasons, I am satisfied that the reasons provided by the Board were sufficient. There has been no breach of natural justice and this ground of review must also fail.
Concluding remarks
[174] It follows that the three grounds of review raised by Kaimai are not sufficient to establish any reviewable error on behalf of the Board. It is therefore not strictly necessary to consider the issue of relief. Nevertheless, I note I would not have granted the relief sought by Kaimai, even I was satisfied an error had been made out.63
[175] The granting of relief in judicial review proceedings is discretionary.64 The court is primarily concerned with the lawfulness of the decision under review. The
63 For completeness, I note that had the Board acted unlawfully, it would have been possible for a declaration to have been made to this effect. Given the QEII Act and s 22A are still operational, such a declaration would likely not have been futile in that that issues of law and decision-making regarding variation of OSCs cannot be considered academic or moot.
64 Gill v Attorney-General [2010] NZCA 468, [2011] 1 NZLR 433 at [27]; and Judicial Review Procedure Act 2016, s 18.
answer the court might have reached had the decision been its to make is irrelevant. This means that it is generally not for the court to substitute its view for that of the decision-maker, unless the court is satisfied that only one lawful decision was available.65 I do not consider that the only lawful decision here was to grant the application to vary the open space covenant such that I am able to legitimately substitute the Board’s decision with an order to that effect. Nor would I have been prepared to direct that the Board reconsider Kaimai’s s 22A application for variation.66 Given the unanimity requirement and the Board’s clear concerns about the proposal, that would be a pointless exercise.
The Trust’s positive defences
[176] In addition to indefeasibility, which I have already addressed above, the Trust raised positive defences of laches, waiver, and estoppel.67 Mr Mullins, who carried the argument for the Trust on this issue, helpfully set out the facts said to give rise to these defences.
The relevant background
[177] Negotiations for the sale and purchase of the farm on which the quarry is situated began in 2008. During these discussions, Bartons and the Swaps became aware of the open space covenant.
[178] Kaimai was incorporated on 4 August 2009. Its directors were the same as Bartons, and I accept the Trust’s submission that Kaimai and Bartons should be regarded as privies.
[179] On 2 September 2009, Kaimai and Hiona entered a sale and purchase agreement for the land, with settlement to occur on 30 September 2009. Clause 24 of the agreement explicitly recorded that the parties “acknowledge that there may be difficulties with the QEII National Trust in relation to the Open Space Covenant on
65 Financial Services Complaints Ltd v Chief Ombudsman [2022] NZCA 248, [2022] 2 NZLR 740 at [6].
66 Judicial Review Procedure Act, s 17.
67 While not explicitly pleaded, the Trust in its written submissions also submitted that the defence of acquiescence (a form of waiver) is made out.
the land”. While the parties appeared optimistic about the prospect of agreement with the Trust, it also clear that they appreciated the possibility that negotiations may prove fruitless. Clause 24 went on to record:
The parties will review the situation in relation to the negotiations with the Trust on or before 24 September 2009. In the event that satisfactory progress has not been made the parties agree to revisit either the price or the settlement date.
[180] Then, on 9 September 2009, the Trust’s Manager of Legal Services, Mr Bishop, sent a letter to the plaintiffs’ solicitors. The letter indicated there had been a telephone conversation on 25 August 2009 in which the plaintiffs had expressed interest in exploring the possibility of expanding the existing quarrying activity south into areas subject to the covenant. Mr Bishop noted that the areas had been identified by the District Council as having outstanding landscape value, and concluded:
Any proposal for an adjustment to the extent of covenanted land will require careful consideration and a unanimous decision by the QEII Trust Board. If any loss of protected land was proposed such loss may well need to be compensated by the formal protection of other areas in the locality.
[181] There was no indication at this stage that the plaintiffs considered there was anything wrong with the covenant, let alone invalid or unlawfully obtained. As the Trust points out, the sale and purchase agreement included a standard term that the purchaser is deemed to have accepted the vendor’s title “except as to objections or requisitions” served on the vendor by the tenth working day after the date of the agreement.68 Further, Bartons held a registered mortgage over the land, and presumably could have exercised its rights as mortgagee, including potentially the power of sale. The Trust submits that if the plaintiffs had considered that the covenant was incorrect or unlawful, they could have exercised the rights they held in relation to the property but either chose not to or failed to do so.
[182] Instead, Kaimai settled the transaction knowing the property was encumbered by the covenant, and Bartons discharged its mortgage.
68 Auckland District Law Society and Real Estate Institute of New Zealand Agreement for Sale and Purchase of Real Estate (8th ed, 2006), cl 5.2.
[183] Over the following years, Kaimai indicated that it would like to mine south of the quarry. On 19 February 2014, Mr Dudley Clemens, Environmental Manager at J Swap Contractors Ltd, provided the Trust with a draft application proposing the modification of the covenant boundary to enable expansion of the quarry into covenanted areas. The executive summary of the document noted that a review of the covenant formation had identified issues in the process, including that Matamata Metal Supplies Ltd, which has been involved in quarrying operations on the land since 1959 and is now a member of the Swap group of companies, “was not formally involved at the time of covenant creation” which “has led to errors in the boundaries we see today”. Not long afterward, on 9 May 2014, Mr Clemens emailed the Trust to advise that the applicants did not wish to proceed with the draft application, and requested that it be withdrawn and not put before the Board.
[184] In 2015, there were some without prejudice discussions during which members of the Trust’s Board visited the site. Subsequently, in a letter dated 31 August 2015, the Board advised Kaimai that it would be unable to accept a request to quarry land subject to the covenant. The letter noted that the clear purpose of the covenant is to protect the land in perpetuity and manage it so as to enhance and maintain the indigenous biodiversity and protect its landscape values. The Board could not consider variations or requests to undertake works on the land contrary to those objectives.
[185] Once again, the Trust highlights that the plaintiffs were not alleging at this time that the covenant was unlawful, but were rather seeking to persuade the Trust to agree to modify its boundaries.
[186] On 16 October 2015, Kaimai, now represented by new solicitors, Cooney Lees Morgan, sent a letter to the Trust advising that it considered the terms of the covenant—as a matter of interpretation—permitted Kaimai to authorise expansion of the quarry into the covenanted areas provided it first consulted with the Trust. The Trust was advised that it had 14 days to provide its views on Kaimai’s expansion proposal, after which Kaimai would makes its decision. The letter did not suggest the covenants were unlawful, or that there had been a failure to comply with the requirement to treat and agree in s 22.
[187] The Trust’s solicitors replied on 22 October 2016 advising that it disputed the plaintiffs’ interpretation of the covenants, and would seek interim relief to preserve its position if necessary.
[188] Subsequently, in 2017 Kaimai launched its first set of proceedings against the Trust. The first cause of action alleged, in accordance with the position set out in the letter of 16 October 2015, that the covenant allowed Kaimai to permit quarrying in the covenanted areas without the Trust’s consent. The second cause of action sought, in the alternative, rectification of the covenant. As previously noted, Kaimai’s claim was entirely unsuccessful, apart from an order made by consent amending the boundary south of the quarry to follow a stream.
[189] Then, as discussed in the foregoing section, Kaimai wrote to the Trust in May 2021 requesting a variation of the covenant under s 22A of the Act. In that letter, Kaimai indicated—apparently for the first time—that it considered the covenant was unlawful, and raised many of the arguments about the validity and legality of the covenant that it now makes in the current proceeding.
Consideration
[190]The Trust submits that the following points arise from this summary:
(a)Kaimai purchased the property with full knowledge that the title was encumbered by the open space covenant, and the potential difficulty this may pose for future plans to expand the quarry;
(b)the plaintiffs made no effort to challenge the covenant, and Bartons subsequently discharged its mortgage;
(c)for well over a decade—during a period spanning from the pre-sale discussions in 2008 through to the litigation in the Court of Appeal in 2021—there was never any suggestion by Kaimai that the covenant was unlawful or invalid;
(d)on the contrary, implicit in Kaimai’s position during all those years of dealing with the Trust was an acceptance that the covenant is valid and lawful, and it was in that context that the Trust agreed to consent orders varying the covenant boundary; and
(e)Kaimai’s arguments in the present proceeding represent a complete reversal in the position it had held for the previous 12 years since purchasing the property.
[191] In these circumstances, the Trust submits that Kaimai has effectively waived the right to challenge the covenant’s legality or, alternatively, it should be estopped from doing so. The lengthy delay in bringing the present proceeding is a further factor said to weigh against the grant of relief.
[192] While I acknowledge that the plaintiffs’ change of approach after so many years may have come as a surprise to the Trust, it is not obvious that the Trust has relied on the plaintiffs’ conduct or suffered prejudice as a result (aside from the prejudice inherent in having to defend a second set of litigation). While the Trust did consent to a variation of the covenant, that appears to have involved a fairly minor change designed to rectify an error in the drawing of a boundary. There was no real detriment to the Trust or the open space covenant. The lack of reliance or prejudice in my view poses considerable difficulties for the defences raised. And while delay is undoubtedly a factor relevant to the Court’s discretion to relief in judicial review, I would not be inclined to find this factor alone sufficient to deny the plaintiffs relief had they established a ground of review (even though I have some doubts about the plaintiffs’ claim that they only discovered their “rights” in relation to the alleged illegality in 2021).
[193] At the hearing I raised with counsel whether the rule in Henderson v Henderson may be a more appropriate framework through which to view the plaintiffs’ litigation conduct, and Mr Mullins and Mr Salmon subsequently made submissions on the point.
[194] In essence, the rule in Henderson v Henderson provides that it may be an abuse of process to bring a claim in later proceedings that should have been raised in earlier proceedings.69 The principles underpinning the rule are addressed in LMCHB Ltd v Buller Coal Ltd.70 As I said there:71
Litigation should not be undertaken by instalment. It is therefore generally incumbent on a party to litigation to raise every point that is relevant to the issues before the court in that litigation. Except in special circumstances, the courts will not permit litigants to later re-open the same subject on a different basis. The rule promotes finality and alleviates the burden on defendants who might otherwise face successive waves of litigation concerning the same subject matter. It also promotes public confidence in the administration of justice by ensuring economy in the allocation of public resources to the question between the parties.
[195] Application of the rule requires a broad, merits-based assessment taking into account all the facts of the case and the public and private interests involved.72 The central question in each case will be whether a subsequent proceeding amounts to a misuse or abuse of the process of the court by seeking to raise an issue which could have been raised before. The intention or aim of the guilty party may not be directly relevant to the assessment. A failure to raises a claim by mere inadvertence could qualify.
[196] Ultimately, I do not consider that it would be procedurally fair to find against the plaintiffs based on an unpleaded affirmative defence raised during the hearing, even if the relevant evidence on which it is based is already before the Court. However, had it been pleaded, there are features of the prior litigation that would lead me to seriously question whether a Henderson v Henderson misuse of procedure arises.
Conclusion and result
[197]For the foregoing reasons, I dismiss the plaintiffs’ claim.73
69 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL) at 31.
70 LMCHB Ltd v Buller Coal Ltd [2023] NZHC 633 at [123]–[125].
71 At [123] (footnotes omitted).
72 Johnson v Gore Wood & Co (a firm), above n 69, at 31, cited in White v Attorney-General [2021] NZCA 479 at [31]–[32].
73 In light of this conclusion, the rights of the interested parties—Lightwire Ltd and Airways Corporation of New Zealand Ltd—are not affected and there is no need for them to be heard on the issue of relief.
[198] The first defendant is entitled to costs. If the parties are unable to agree, they may file memoranda.
Isac J
Solicitors:
Cooney Lees Morgan, Tauranga for Plaintiffs LeeSalmonLong, Auckland for Defendants
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