Kingsbeer v Okey
[2017] NZHC 57
•1 February 2017
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2013-454-458 [2017] NZHC 57
BETWEEN PAULINE ANNE KINGSBEER AND
BERNADETTE PLAW AS TRUSTEES OF THE PAK TRUST
Plaintiffs
AND
RONALD GORDON OKEY First Defendant
AND
MCKENZIE MCPHAIL CORPORATE TRUSTEES LIMITED
Second Defendant
Hearing: 26, 27 and 28 September 2016 Appearances:
C J Tennet and R P Strachan for Plaintiffs
J G Toebes and N J G Smith for DefendantsJudgment:
1 February 2017
JUDGMENT OF CULL J
Introduction
[1] This case concerns a $1 unregistered right of way easement, giving access to industrial land, by way of a sealed private driveway (Cessna Place). Ms Kingsbeer, on behalf of the plaintiffs, seeks an order extinguishing the equitable grant of easement dated 13 July 2009. In the alternative, Ms Kingsbeer seeks an order that the defendants (the Okey interests) pay the total costs of bringing the access way up to Palmerston North City Council (the Council) standards and pay the continuing
repair and maintenance costs associated with their use of it.
KINGSBEER v OKEY [2017] NZHC 57 [1 February 2017]
Background
[2] Ms Pauline Kingsbeer and Ms Bernadette Plaw are the trustees of a Trust known as the PAK Trust (the Trust). The Trust is the owner of a rural property situated at Cessna Road, Palmerston North, which I will refer to as the Trust land.
[3] The Trust land was owned by the late Mr Don Kingsbeer until his death on
18 January 2012. Ms Pauline Kingsbeer is Mr Kingsbeer’s daughter, and she is the
sole beneficiary under his last will.
[4] Following the late Mr Kingsbeer’s death, the Trust land was transmitted to his executor and trustee, the Public Trustee, and the Public Trustee conveyed the Trust land to Ms Pauline Kingsbeer in accordance with the terms of the deceased’s will. Ms Pauline Kingsbeer subsequently transferred the Trust land to the Trust.
[5] The Okey interests are the owners of an industrial property which has a common boundary with the Trust land. I will refer to it as the Okey land.
[6] The Okey interests say that they purchased the Okey land from the late Mr Kingsbeer in the early 1980s, and that over the ensuing years an informal arrangement existed between them under which a private road (Cessna Place) on the Trust land was used to provide vehicular access to the Okey land. Ms Kingsbeer says that the driveway existed before 1986 and was not created for the intended agreement between the parties. Approximately 22 years ago Cessna Place was sealed with an asphalt concrete surface, to replace the previously unsealed metal surface. The Okey interests and Mr Kingsbeer shared the cost of the maintenance of Cessna Place equally.
[7] There is direct legal access from Cessna Road, a legal road, onto the Kingsbeer land and the Okey land by virtue of two registered easements named “R” (belonging to Ms Kingsbeer) and “T” (belonging to the Okey interests). Those registered easements enable each of the parties to have direct access onto their respective lands. Apart from Cessna Place, there is sufficient land for a driveway on the Okey land, although Mr Okey has erected a warehouse which is built on part of it.
[8] In 2009 Mr Okey sought building consent to erect a warehouse on the Okey land. Following correspondence with the Council, Mr Okey was required to provide the Council with confirmation that the Okey interests had legal access to the private road referred to as Cessna Place. The correspondence ensued from April 2009 to the production of the Project Information Memorandum (PIM) on 16 July 2009. In the course of the correspondence, the Planning Officer for the Council recorded in an email that:
[t]here are issues over legal access with the site as ‘Cessna Place’ as shown on the site plan is not a legal or private road/way (it’s just a sealed area on the adjoining property). I have suspended the building consent until the application is amended or legal access created.
[9] The planner specifically noted that Mr Okey wished to gain legal right of access under s 348 of the Local Government Act 1974 and before he applied, he wanted to know if any conditions would be required.
The equitable easement
[10] On 13 July 2009 and 1 August 2009, the late Mr Kingsbeer granted Mr Okey a right of way easement over Cessna Place on the Trust land. The grant of easement signed on 13 July 2009 provided:
I Don Harold Kingsbeer acknowledge that I am the registered proprietor of [the Trust land]…in consideration of the sum of $1 paid to me by [the Okey interests] I hereby agree to grant [the Okey interests] a Right of Way easement over [the private road on the Trust land].
[11] On 1 August 2009, the parties entered into an agreement, which provided for the Okey interests to reimburse the late Mr Kingsbeer for a proportion of rates paid by him to the Council in respect of Cessna Place. The agreement went on to record that the costs of services (water, storm water, sewerage, telephone and roadway maintenance etc) were to be shared equally by the parties. The term of the agreement was to be in perpetuity or until both parties agreed on new terms. The signed agreement dated 13st [sic] July 2009 provides:
I, DON HAROLD KINGSBEER acknowledge that I am the registered proprietor of CT 48449 a copy of which is attached hereto marked “A” (“the land”).
That in consideration of the sum of $1.00 paid to me by RONALD
GORDON OKEY and McKENZIE McPHAIL CORPORATE TRUSTEES LIMITED I hereby agree to grant RONALD GORDON OKEY and McKENZIE McPHAIL CORPORATE TRUSTEES LIMITED a Right of Way Easement over that part of Lot 2 marked “P”, “Q” and “R” on DP 77691 to allow access to Lot 3 DP 60169.
Dated at Palmerston North this 13st day of July 2009.
“D H K 13-7-9”
D H KINGSBEER
[12] A further agreement was typed and signed by both parties on 1st August 2009 and provides further:
THIS AGREEMENT IS BETWEEN DON HAROLD KINGSBEER AND RONALD GORDON OKEY AND MCKENZIE MCPHAIL CORPORATE TRUSTEES LTD AND THEIR SUCESSORS.
ITS PURPOSE IS TO REIMBURSE D.H.KINGSBEER FOR THE RATES PAID BY HIM TO THE PALMERSTON NORTH CITY COUNCIL COVERING THE JOINTLY USED COMMON ROADWAY SHARED BY D.H.KINGSBEER AND R.G.OKEY.
THIS PORTION OF LAND IS .353 (POINT THREE FIVE THREE) OF D.H.KINGSBEERS RATES AND AS AT 01-08-09 AMOUNTED TO
$1972.21.
THE PAYMENT IS TO BE BY MONTHLY BANK AUTHORITY FROM R.G.OKEYS BANK OF $164.35 COMENCING [sic] ON THE FIRST DAY OF AUGUST 1909 [sic] AND THIS AMOUT [sic] TO BE ADJUSTED EACH YEAR AS THE RATES VARY BY THE COUNCIL.
IT IS ALSO REAFIRMED [sic] THAT THE SERVICES I.E.(WATER, STORM WATER, SEWERAGE, POWER, PHONE AND ROADWAY MAINTENANCE (ETC) ARE SHARED EQUALLY BY BOTH PARTIES.
THE TERM OF THIS AGREEMENT IS IN PERPETUITY OR UNTILL [sic] BOTH PARTIES AGREE ON NEW TERMS.
SIGNED THIS FIRST DAY OF AUGUST TWO THOUSAND AND NINE.
RONALD GORDON OKEY
DON HAROLD KINGSBEER
[13] At the time of sign ing the grant of easement and subsequent rates agreement, Mr Kingsbeer was 83 years of age and frail. Three days after signing the grant of easement, the PIM confirmed that the proposed building work for the Okey interests could be undertaken, subject to any requirements of the Building Consent dated 23
July 2009. The PIM specifically stated:
As part of the occupation and use of the proposed warehouse a suitable right of way easement must be created over Lot 2 DP 77691 and the sealed area on Lot 2 DP 77691 covered by the easement must be upgraded to the satisfaction of Council’s Roading Manager.
[14] No other right of way easement was created over the Trust’s land, other than the equitable grant of easement dated 13 July 2009. The sealed area referred to in the PIM was Cessna Place, existing at the time of the Building Consent. There was no upgrading of the surface of that access way to Council standards or to the satisfaction of the Council’s Roading Manager.
[15] Mr Okey proceeded to build a warehouse, which was designed for substantial commercial use. The plans submitted to the Council by Mr Okey and the correspondence between Mr Okey and the Council were not disclosed to Mr Kingsbeer at any of the relevant times.
[16] The warehouse was tenanted by a commercial company known as Packers and Sorters from 2010 to 2013. During that time, large and heavy commercial trucks, Class 3 and up,1 used Cessna Place, often blocking the access road to the Trust land and its respective industrial tenants.
[17] Before and after Mr Kingsbeer’s death in 2012, difficulties arose over the Okey interests’ alleged use of Cessna Place. The Kingsbeer parties contend that the Okey interests, or their employees or contractors or tenants, have been using the road for heavy industrial traffic, causing significant damage to the road.
[18] The Okey interests have attempted to have the right of way over the Trust land formally registered on the titles to the Trust land and the Okey land. However,
there is a dispute between the parties about the state of the roadway and the need to
1 Class 3 vehicles have four axles or more.
have the road bought up to Council standards, as the road does not have the capacity to bear the continued use of heavy commercial trucks Class 3 or more. The plaintiff obtained a report from Higgins Contractors Limited dated 20 January 2005, which gave two options for the costs of reconstructing Cessna Place. Option A required
$139,303.70 to upgrade it to accommodate Class 3 vehicle use. Option B was estimated to cost $93,831.20 for upgrading to accommodate Class 1 or 2 light vehicle use. In addition, there were provisional items for excavation and construction costs of $13,374.95 in respect of either option.
[19] Significant cracking and “punch-holes” appear in portions of the road, where heavy commercial trucks have been loaded and unloaded and stay supports have left round circles, particularly adjacent to the Okey interests.
[20] The Okey interests have carried out some work patching portions of Cessna Place, but the repairs have not been sufficient to get the road up to a standard capable of achieving Council consent to registration of the easement. In August 2012, Ms Kingsbeer wrote to the Okey interests, setting out the Trust’s position that the Okeys should pay for the full cost of the road repairs. In November 2013
Ms Kingsbeer obtained a quote of $108,117 for the total cost of bringing the roadway up to the Council’s standard. The Okey interests have failed to respond.
[21] Ms Kingsbeer sought the total cost of repairs from the Okey interests because they wanted to register the easement and it was the Okey use of the road that had caused its degradation.
[22] On 8 February 2013, the Trust’s solicitors sent a letter to the Okey interests giving notice of cancellation of the grant of easement. The letter stated that the easement cancellation would be effective from 1 March 2013.
[23] The Okey interests continued to use Cessna Place and registered a caveat against the Trust land to protect their interests under the 2009 easement agreements.
[24] When the dispute over the parties’ respective responsibilities for the repair and maintenance of the right of way had not been resolved by December 2013, this proceeding was issued by Ms Kingsbeer.
[25] Ms Kingsbeer filed a statement of claim by way of application under ss 316 and 317 of the Property Law Act 2007 (PLA 2007) seeking to extinguish the equitable right of way easement on the ground that there has been a change to the Trust land since the right of way was created. The change pleaded is that the roadway has been degraded beyond fair wear and tear because of the continued heavy industrial traffic. Ms Kingsbeer claims that the proposed extinguishment of the easement would not harm the Okey interests, as there is alternative access to the Okey land if the Okey interests wish to use it.
[26] As alternative relief, in the event that the easement is not extinguished, Ms Kingsbeer seeks orders that the Okey interests pay the costs to bring the road up to a standard acceptable to the Council and the continuing repair and maintenance costs associated with their use of Cessna Place. The Trust also seeks an order for monetary compensation for lack of amenity and distress caused by the damage to the road.
[27] The Okey interests filed a statement of defence in the right of way proceeding on 3 March 2015. They deny liability and ask the Court to make such orders as may be necessary to enable them to continue to have a right of way over Cessna Place and the use of the services.
The Okey declaratory judgment proceeding
[28] These present proceedings were filed on 17 December 2013 by Ms Kingsbeer and a statement of defence and notice of appearance was filed on 2 March 2014 for the Okey interests. After several High Court telephone conferences, a fixture was allocated for October 2015. The fixture was vacated because the Okey interests advised that in their view the matter was not ready for hearing.
[29] On 10 September 2015, the Okey interests filed a declaratory judgment proceeding against the Public Trustee, as executor of Mr Kingsbeer’s will, alleging
that it was on notice of their equitable interest in the Trust land as early as 14 March
2012. The declaratory judgment further alleged that legal title was conveyed to the Trust land from the late Mr Kingsbeer to itself, as executor, wrongly stating in its statutory declaration that the Trust land was free from all trusts and equities. The Okey interests sought a declaration that the purported transmission from the Public Trustee to Ms Kingsbeer was defective.
[30] The second cause of action alleged that Ms Kingsbeer knew of the equitable easement granted to the Okey interests and “recognised it”. She proposed to the Okey interests that they should meet the full costs of repairing the road, and that if they did, she would consent to the formal grounds of an easement to them. The claim referred to the late revocation of this offer by Ms Kingsbeer and her purported cancellation of the easement from 1 March 2013. The Okey interests sought a declaration that the Trust land was subject to the right of way in favour of the Okey interests including unspecified damages and costs, and any other order the Court deems just.
[31] In a third cause of action against the Trust, the Okey interests claimed that Ms Kingsbeer acknowledged that the Trust land is subject to the right of way and the Trust then purported to cancel the easement. Similar relief to that sought against Ms Kingsbeer was sought against the Trust.
[32] The Public Trust and the Trust applied to strike-out the Okey claims and following a defended hearing before Associate Judge Smith, the Okey declaratory judgement proceedings were struck-out. The facts relied on in this judgment are taken in part from Associate Judge Smith’s decision.2
The 1986 Deed
[33] Some days before the hearing of this proceeding, the Okey interests became aware of relevant documents from the Okey interests’ accountant’s office. The documents disclose two drafts of a Deed between Mr Kingsbeer and Mr Okey, granting Mr Okey the right to use “the existing six metre roadway” on the land
owned by Mr Kingsbeer, as well as the right to connect with Mr Kingsbeer’s sewer, storm water, mains, water supply and electricity supply located on his land. In the unsigned draft, Clause 5 provided that “it is agreed between the parties that the rights created herein shall not be registered against the Certificate of Titles in the Land Transfer Office.” This draft was not signed by either party.
[34] The second draft included the same provisions, but with the addition of a clause that provided Mr Kingsbeer covenanted that he shall not sell, lease, assign or part with possession of his land without granting to Mr Okey a registerable right of way at Mr Okey’s expense. This draft was signed by Mr Kingsbeer and witnessed by a solicitor. Mr Okey however did not sign the Deed.
[35] For Ms Kingsbeer, Mr Tennet submits that the signed Deed is an expression of intention of Mr Kingsbeer in 1986 and that Mr Kingsbeer never intended a grant of right of way easement to be registered.
[36] For the Okey interests, Mr Toebes submits that these proceedings do not involve the 1986 deeds and should only be referred to by the Court as part of its discretion in reaching the ultimate decision. The Okey interests contend that the relevant documents are those entered into between Mr Kingsbeer and Mr Okey in
2009, where Mr Kingsbeer granted Mr Okey and his interests a right of way easement over the Trust land, marked “P” and “Q”.
The easement land
[37] The lots are numbered 2 (Kingsbeer) and 3 (Okey). The lots are themselves divided into pieces labelled with letters. Cessna Place forms an L shaped driveway of pieces P and Q over lot 2. Where lot 2 meets lot 3, Cessna Place is divided into two pieces; piece T covering lot 3 and piece R covering lot 2.3
The Kingsbeer case
[38] The essence of the Kingsbeer claim is that the late Mr Kingsbeer granted
Mr Okey a right of way easement over Cessna Place on the Kingsbeer Trust land
when he was unaware of the magnitude of the proposed warehouse that Mr Okey was planning to build and, as a result, the increase in volume and weight of the commercial vehicles that would be using the roadway. At the time of the grant of easement, the roadway was adequate for Class 1 or 2 vehicles only. The heavy traffic use of Class 3 commercial trucks and increased weight of concrete trucks and their slabs, were submitted as beyond the contemplation or knowledge of Mr Kingsbeer at the time.
[39] Ms Kingsbeer relies on the factors in s 317(1)(a) of the PLA 2007, that the easement should be extinguished because of a change since its creation in all or any of the following:
(a) The nature or extent of the use being made of the benefitted land, the burdened land, or both;
(b) The character of the neighbourhood; and
(c) Any other circumstance the Court considers relevant.
The evidence
[40] Ms Kingsbeer gave evidence, outlining the history of the easement in 2009. She confirmed that Mr Okey was a long-time business acquaintance of her father and emphasised that the equitable grant of easement from her father to Mr Okey was made without the benefit of independent legal advice. Her father died on 18 January
2012 and she inherited the Kingsbeer interests, which are now held in the PAK Trust. Ms Kingsbeer drew the Court’s attention to the shaky signature of her father on the
2009 documents, stating that her father would have been aged 83 as at 13 July 2009.
[41] Ms Kingsbeer referred to an exercise book, in which her father had left her written instructions. In particular, he records that he and Mr Okey have an agreement whereby Mr Okey reimburses Mr Kingsbeer, now Ms Kingsbeer, for .353 of the Council rates, Horizons Council rates as well as a half share of the services (power, phone, sewer, storm water etc). He confirmed that those payments apply to the roadway and to the services on the roadway, but not to services provided to the
buildings owned by either of the parties. In particular, Mr Kingsbeer said this: “the roadway is on our title, so is legally ours” and Ms Kingsbeer noted that he put in brackets “yours” and her father then wrote “and keep it that way”.
[42] In describing the layout, Ms Kingsbeer gave evidence about the reason Mr Okey sought access over Cessna Place. Mr Okey constructed a building across the land that could have given a driveway to the Okey properties from the registered access easements at the property on 99 Cessna Road. Without obtaining the equitable easement over the Kingsbeers’ land, Mr Okey could not have obtained a building permit to construct the warehouse that was erected in 2009 and, given the placement of that warehouse, Mr Okey needed alternative right of way easement to the warehouse. In the initial development plans by Mr Kingsbeer, the land owned by the Okey interests was to gain access along the western boundary with services provided on a separate easement.
[43] Ms Kingsbeer had obtained the services of an expert engineer, Dr Martin Gribble, whose written reports were accepted by the Okey interests. The relevant parts of his evidence were:
(a) Cessna Place could not be approved by the Council for the purposes of registration of an easement of right of way until a suitable pavement rehabilitation was undertaken to reduce the pavement to a deflection less than 1.2mm. Further testing was required to establish the stabilisation requirements, the pavement depth and the sub-grade strength required for such an upgrade.
(b)He confirmed that Class 1 and 2 vehicles do not contribute significantly to pavement deterioration and failure but Class 3 or above, defined as a heavy vehicle, does. He confirmed that the original pavement for Cessna Place was never suitable for regular heavy trafficking by Class 3 vehicles. Simply replacing the surface of Cessna Place and continuing heavy trafficking by Class 3 vehicles would result in its pavement surface rapidly failing.
(c) Aside from the main wheel paths on Cessna Place, the asphalt typically was seen to be in good condition, indicating that the alligator cracking and ponding observed on the driveway was directly related to loading from heavy vehicles. The pavement deterioration was aggravated by the failure of the pavement’s surface which has allowed water into the pavement structure. Loss of pavement shape, low cross fall and damaged dish drains have all exacerbated deterioration of the pavement.
(d)The pavement requires extensive rehabilitation to allow for trafficking by Class 3 vehicles.
[44] Ms Kingsbeer obtained an assessment and quotes for remediation work to upgrade Cessna Road to Class 3 vehicle use and in the alternative, to upgrade it to Classes 1 and 2 vehicle use. Mr Trass from Higgins Contractors Limited gave evidence of earlier tests carried out in 2009 and 2010 and previous quotes for remediation work conducted in 2011 and 2013. He produced revised quotes dated
20 January 2015, which would now need a 10 per cent uplift to make them current. To upgrade to Class 3 vehicle use, would cost $139,303.00 (exclusive of GST) and to Class 1 or 2 light vehicle use would cost $93,831.20 (exclusive of GST). Provisional items for excavation and construction would cost a further $13,374.00. His evidence, by way of brief and exhibits, was also accepted by the defendants.
[45] Ms Kingsbeer also commissioned a cinematographer, Mr Michael Knudsen, who filmed a DVD in her presence, giving a view of Cessna Place, the respective parties’ properties and damage on the road. Ms Kingsbeer produced the photographic record and evidence of the effects from the increase in volume and weight of the Okey interests’ commercial vehicles and the destruction of the roadway since the construction of the large commercial warehouse on the Okey land. Ms Kingsbeer deposed that the principal Okey tenant of the warehouse was Packers and Sorters, whose large delivery trucks were the cause of the degradation and cracking of the current roadway, making it unacceptable for ongoing heavy vehicle use.
[46] Ms Kingsbeer produced photos that show large trucks and vehicles on Cessna Place. In the photos, there is visible debris and damage to the driveway. The damage visible varies from patches of small cracks, to larger cracks and drain channels blocked with debris. There is also some dirt, some concrete spilled, and some patched holes that have been repaired quite obviously and are sunken.
[47] Importantly, Ms Kingsbeer stated that as a result of the use of heavy transport on Cessna Place, the road’s condition has worsened and its intended use has changed. Ms Kingsbeer ultimately submits that Mr Okey has not met his obligations under the 2009 agreement and the driveway needs to be excavated and rebuilt at significant cost.
The Okey defence
[48] Prior to the hearing, Mr Okey made an open offer to contribute 50 per cent of the cost of upgrade to the roadway to Council standards for use by Class 3 vehicles.
[49] The Okey interests base their defence on the statutory provisions governing easements and apportionment of costs for repair and maintenance. They rely on the
2009 grant of easement, submitting that s 317 of the PLA 2007 applies only after the
2009 grant. Section 313 governs the Court’s discretion to enforce easements and impose any conditions the Court sees fit, including apportionment of the reasonable and proper costs of any required work to be undertaken, under the terms of an easement.
[50] The Okey interests stress that the grant of easement over the right of way in
2009 implied that the roadway was “to the appropriate standard”. They say that in granting the easement, the Kingsbeer parties ignored the obligation on them to provide an adequate and appropriate standard of roadway. In the correspondence between the parties, they say further, no objection was taken by the plaintiff to the truck usage of the right of way: the issue was one of costs to upgrade it to the appropriate standard.
[51] The Okey interests seek the remedy outlined in Dr Gribble’s 2012 report and
the Young Consulting report, that “if a right of way is to be established, then the
existing pavement will need to be strengthened.” The report concludes that the current pavement does not meet current Council standards for a right of way in an industrial area and the Okey interests claim that the roadway needs to be upgraded to a proper standard for regular commercial use. They do not rely on the 1986 Deed, but say that the parties signed a collateral Deed and both parties agreed that the grant of easement would occur, because they did not want to bring the land up to standard at that time in 1986.
[52] It was also submitted that s 348 of the Local Government Act would have applied, if the Deed was signed. The defendants contend that the roadway is for regular trafficking of heavy vehicles and accordingly the road needs to be upgraded.
[53] The Okey interests also submit that s 297 of the PLA 2007 applies to the
2009 grant of easement, in that the implied covenants in Schedule 5 of the PLA
2007, applies to any grant of vehicular right of way. The Okey interests point to s 297(2) in particular and say that, for a vehicular right of way, the implied covenants may be negatived, varied or extended by:
(a) The instrument, contract or arrangement creating the vehicular right of way; or
(b) The express terms of any other instruments; …
[54] Section 297(5) provides that s 90D of the Land Transfer Act 1952 and its 7th Schedule also applies. The Okey interests claim that the Kingsbeer interests were obliged to comply with all the statutory provisions relating to a grant of easement over a vehicular right of way and they failed to do so.
[55] No evidence was adduced from or on behalf of Mr Okey, although
Ms Kingsbeer was cross-examined by counsel for Mr Okey.
The issues to be determined
[56] The following are the issues for determination:
(a) Does s 348 of the Local Government Act apply either in 2009 at the date of grant of the easement or to the current application?
(b)If so, was there however, implied permission of the Council on which the parties could rely, given that the Council gave permission for the Okey building work to be undertaken on the condition of a suitable right of way easement?
(c) Should the equitable grant of easement be modified or extinguished because of a change since its creation?
(d) If the equitable easement remains in existence, then:
(i) Should the easement be registered over the Kingsbeer Trust’s
land in favour of the Okey interests?
(ii)To what standard should the roadway be constructed or repaired?
(iii)In what proportion should the reasonable and proper costs of any required work be met by the grantee and grantor of the easement?
[57] I will now deal with each of the issues under the relevant headings.
Issues
Does s 348 of the Local Government Act 1974 apply either in 2009 at the date of grant of the easement or to the current application?
[58] The first issue is whether s 348 Local Government Act applied at the time
Mr Kingsbeer granted a right of way easement to Mr Okey in 2009.
[59] Section 348 of the Local Government Act provides:
(1) Except with the prior permission of the council, no person shall lay out or form any private road or private way, or grant or reserve a right of way over any private way, in the district.
(2) Subject to section 347, in granting any such permission the council may –
(a) impose such conditions as to widths, levels, entrances, courses, formation, cost of formation, maximum number of buildings to be erected fronting any such private road or private way, minimum distances between any 2 buildings, position of building line, and otherwise in all respects whatsoever as the council thinks fit; and
(b) require the owner or owners to whom permission is given to enter into a bond to comply with any conditions imposed by the council. Every such bond shall be deemed—
(i) to be an instrument creating an interest in each parcel of land to which the conditions apply within the meaning of section
62 of the Land Transfer Act 1952, and may be registered accordingly; and
(ii) to be a covenant running with each such parcel of land, and shall bind subsequent owners.
(3) Any permission of the council under subsection (1) to lay out or form any private road or private way as aforesaid shall be deemed to lapse on the expiration of 3 years after the grant thereof, unless the work has then been completed to the satisfaction of the council; but may from time to time be extended by the council for a period or periods not exceeding 1 year at any one time.
(4) With respect to any private road, the council—
(a) may require any projection or obstruction in or over any part thereof to be removed at the expense of the person causing the same or to whom the same belongs:
(b) may by notice in writing require the owners of land or buildings abutting on the private road to construct or repair the road, with the footways, kerbing, and channelling thereof, and every such owner shall be liable for the construction and repair of so much of the private road as the council thinks fit:
(c) in case of default, may execute the said works, and recover the cost from the owners in the aforesaid proportions.
(5) Subsection (4) shall apply to every private way which for the time being serves as an approach to 2 or more allotments that are separately owned or separately occupied or to any allotment on which there are 2 or more buildings that are separately occupied.
...
[60] Section 348(1) requires the prior permission of the Council, before anyone can grant a right of way over any private way in the district.
[61] In June 2009, when Mr Okey had applied for building consent the Planning Officer, Mr Briggs, stood by the Council’s initial assessment. This was that the issue of access to the existing buildings on the rear of the Okey interests’ site, the proposed warehouse’s car parking area and loading zone would require complying access to these areas or legal rights of access over 96 Cessna Road as a whole, namely the Kingsbeer Trust land, to be established.
[62] On 11 June 2009, Mr Briggs reiterated that “there are issues over the legal access with the site as ‘Cessna Place’ as shown on the site plan is not a legal or private roadway.” He described it simply as “a sealed area on the adjoining property”. He suspended the Building Consent therefore, until the application was amended or legal access created. In his email correspondence, Mr Briggs noted that Mr Okey wished to gain legal right of access under s 348 of the Local Government Act and Mr Okey wanted to know if any conditions would be required.
[63] The Council, in giving confirmation that the proposed building work may be undertaken, specifically noted that prior to the occupation and use of the proposed Okey warehouse, a “suitable right of way easement must be created over Lot
2 DP 717691 and the sealed area, namely the Cessna Place roadway, must be
upgraded to the satisfaction of Council’s Roading Manager.” This never occurred.
[64] The issue between the parties now before this Court is whether the roadway should have been upgraded to accommodate heavy vehicular traffic, in accordance with the Council standards, at the time of the grant of the equitable easement.
[65] I am driven to the conclusion that on the application of s 348(1) of the Local Government Act, and without the prior permission of the Council, Mr Kingsbeer could not have granted a right of way over Cessna Place to Mr Okey. In my view, there was no valid grant of easement.
[66] However, on the payment of $1, the Okey interests have had regular access over the roadway, using it for Class 3 heavy commercial vehicles. The road, which was constructed to accommodate Class 1 and 2 vehicles, cannot withstand the weight and pressure of Class 3 vehicles and has cracked and deteriorated markedly to the point where the roadway needs to be reconstructed.
[67] At the time of seeking the right of way easement in 2009, Mr Okey did not bring to Mr Kingsbeer’s notice the fact that the roadway was not sufficient for his intended future use of vehicles and nor did he inform Mr Kingsbeer of the nature and size of the proposed warehouse. Given that there was no valid grant of easement
under s 348(1), I take the view that there is no legal right for Mr Okey to continue to use Cessna Place.
Was there however, implied permission of the Council on which the parties could rely, given that the Council gave permission for the Okey building work to be undertaken on the condition of a suitable right of way easement?
[68] Under s 348(3) of the Local Government Act, if the permission of the Council had been obtained to lay out or form any private road or private way as required in s 348(1), the Council’s permission is deemed to lapse on the expiration of three years after the grant, unless the work has been completed to the satisfaction of the Council. Even if I am wrong about the invalid grant of easement by Mr Kingsbeer in 2009, by July 2012 any “implied permission” of the Council would have lapsed. It was plain from the Council Planner’s correspondence that a legal right of way with appropriate access was required, as part of the Council’s Building Consent.
[69] Mr Toebes for the Okey interests submits that even if the Court views the grant of easement as an illegal contract, the Court should rectify it under the Illegal Contracts Act 1970. He relied on the decision of Olo Limited v KA No 3 Trustee Limited (Olo) where this issue was discussed.4 There was no pleading or amendment seeking rectification under the Illegal Contracts Act 1970. Nevertheless, I allowed Counsel to raise the issue orally.
[70] In Olo a caveat was lodged over an adjoining property. The grantee had acquired an equitable easement entitling it to gain vehicular access to its property through that adjoining property, in order to demolish an existing dwelling and build a new dwelling. The grantee claimed that the equitable easement arose from a clause in the sale and purchase agreement, which enabled the purchaser/grantee vehicle access over the adjoining land for a period of 36 months from settlement date. Lang J observed there is no direct authority as to whether s 348(1) of the Local
Government Act would prevent an equitable easement coming into existence5 where
neither party sought the permission of the Auckland City Council. In that case, the
4 Olo Ltd v KA No 3 Trustee Ltd [2014] NZHC 1075, (2014) 15 NZCPR 332.
5 At [61].
grantee of the easement had not yet begun to exercise the access rights, as it wanted to demolish an existing dwelling and rebuild. The grantee claimed that an equitable easement entitled it to gain vehicular access to its site but the grantor opposed the application on the ground that it was a contractual licence and not an equitable easement. Lang J observed that in the absence of any objection by the Council, the Court would probably validate the contract under s 7 of the Illegal Contracts Act
1970 and would be prepared to enforce the grantor’s obligations under the sale and purchase agreement.
[71] It should be recorded that in the present case before this Court although the
Council was notified of this hearing, it did not wish to be heard or participate.
[72] Mr Toebes submits that the Olo decision is on all fours with the facts in this case and, despite the fact there is no pleading seeking relief under the Illegal Contracts Act 1970, seeks the Court’s validation under s 7 of the Illegal Contracts Act of the 2009 grant of easement.
[73] There were three reasons that the rights granted under the sale and purchase clause in Olo constituted an equitable easement. They were:
(a) The grantors were responsible for obtaining permission from the Council under s 348(1) of the Local Government Act before the purchaser/grantee entered into the agreement for sale and purchase containing the relevant clause.
(b)The grantee had not yet begun to exercise the access rights under the clause. It was still possible for the grantor to seek permission from the Council for the grantee to exercise those rights.
(c) The arrangement between the grantor and the grantee did not affect any public roadway or other public work or amenity and there was no objection or conditions raised by the Council. The Court specifically noted that in the absence of any objection by the Council, the Court
would be prepared to enforce the grantor’s obligations and validate the contract.
[74] The Olo decision is distinguishable from the present case in a number of respects. They are:
(a) The context of the decision in Olo was an application for orders that a caveat not lapse. The Court was concerned only with whether it was arguable that an equitable easement existed. Unlike the present case, there remained an opportunity to seek Council approval for the roadway before the contract was formally validated.
(b)The grantor in Olo did not accept that it had granted an equitable easement to the grantee, but did accept that it was contractually obliged to provide the grantee with vehicular access over its property to enable the grantee to demolish the existing dwelling on his land and construct a new dwelling. Here, the grantor seeks to extinguish the easement because of the disproportionate disadvantage to the grantor and because of the changes in use since 2009, which were not in contemplation of the parties at the time of grant.
(c) In Olo, the grantors were held to be responsible in terms of s 348(1) of the Local Government Act for obtaining permission from the Council before the grantee entered into an agreement for sale and purchase containing that clause. Lang J noted that the Courts would obviously be reluctant to penalise the grantee in respect of an omission for which it was not responsible. In this case, the grantee, (the Okey interests) sought a grant of easement in the knowledge that the Council required a legal right of way as part of the proposed warehouse building consent. Mr Okey was going to receive the benefit of such a right of way. However, the Council’s permission for the right of way was never sought.
(d)The Okey interests, as grantee, and distinct from Olo, had the obligation to inform Mr Kingsbeer, the grantor, of the nature of the proposed warehouse and the likely vehicular access required. The suitability of the roadway for heavy commercial vehicles, which is now at issue, was a matter which Mr Okey should have raised at the time of his seeking a right of way easement and was a matter which should have been brought to the attention of the Council for approval.
(e) In contrast to Olo, the Council, through its Planner, specifically reserved the Council’s position on giving consent, which was subject to legal access being obtained, on the basis outlined in the PIM memorandum. The suitability of the road and the appropriateness of access for heavy commercial use was a matter that the Council was foreshadowing and for which it required confirmation.
[75] The narrow question the Court was required to determine in Olo was whether the rights contained in the agreement for sale and purchase constituted an equitable easement capable of supporting the grantee’s caveat, which was registered against the grantor’s land.
[76] Here, there was a grant of easement, but not a registrable easement. The payment of $1, by Mr Okey to Mr Kingsbeer, has enabled the Okey interests to obtain commercial advantage for seven years, with no additional payments for repairs, apart from those Mr Okey undertook himself. Mr Okey did not seek a registrable easement at the time, preferring to obtain an agreement from an elderly Mr Kingsbeer.
[77] The expert opinion verifies that the roadway was inadequate for Class 3 vehicular use. Thus, the Council Standards for Class 3 roadways were not met. The fact that the roadway now requires upgrading illustrates the reason for requiring the Council’s permission prior to a grant of a right of way easement.
[78] I am satisfied that without the Council’s permission to create a legal right of
way, the equitable easement should not have been granted and was invalid. Mr Okey
approached Mr Kingsbeer, knowing that the Council required a legal right of way but did not disclose to Mr Kingsbeer the nature of the commercial warehouse he was intending to erect. Unlike in Olo, Mr Okey was going to receive considerable commercial benefit, not Mr Kingsbeer. From the documentary evidence, Mr Okey was aware of the Council’s requirement, but did not inform Mr Kingsbeer of this and withheld the information about the commercial operation from the Council.
[79] The arrangement constitutes an illegal contract and has no effect by virtue of s 6 of the Illegal Contracts Act 1970. In the circumstances, I am not prepared to validate the contract under the Illegal Contracts Act. Without the Councils’ permission, the equitable right of way easement should not have been granted.
Should the equitable grant of easement be modified or extinguished because of a change since its creation?
[80] In the event that I am wrong in my conclusion under s 348 Local Government
Act, I turn now to consider ss 316 and 317 of the PLA 2007.
[81] The application filed by Ms Kingsbeer sought an order for the extinguishment of the equitable easement pursuant to ss 316 and 317 of the PLA
2007. Under s 317, the Court may modify or extinguish an easement or covenant if satisfied that:6
(a) the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i) the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii) the character of the neighbourhood;
(iii) any other circumstance the court considers relevant; or
(b) the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
…
6 Emphasis added.
(2) An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
[82] The Kingsbeer claim is based on the following pleaded facts:
(a) The use of heavy transport in the years since 2009, when the easement was granted, has wrecked the roadway, worsening with the use of large container trucks after the Okey warehouse was built. The intended use has changed substantially from the date of grant of the easement.
(b)Mr Okey’s behaviour and his failure to pay his contribution to the roadway is a special circumstance, as he has not met his obligations under the agreement that existed in 2009.
(c) The driveway will have to be completely excavated and rebuilt at a substantial cost, when Mr Okey has an existing easement to the public road on his own property.
[83] As set out earlier,7 Ms Kingsbeer gave evidence and produced photographic and video records to support her claims. I accept the evidence from Dr Gribble and Ms Kingsbeer that the significant damage to the roadway was caused by Class 3 vehicles, used by the Okey tenants and interests and such use was not an intended use for that roadway. I find there has been a change of use since the grant of the easement.
Property Law Act authorities
[84] In Manuka Enterprises Limited v Eden Studios Limited, the High Court dismissed an appeal from a refusal by the District Court to extinguish a right of way over land owned by Manuka in favour of the adjoining property owned by Eden. Section 126G of the Property Law Act 1952 was the precursor to s 317 of the PLA
2007. The High Court upheld the District Court’s decision, on the basis that the
7 Refer to the previous section under “The Kingsbeer case” at [38] and following.
District Court had been entitled to reach the conclusion that it was unrealistic to contend that Eden would not suffer “real, considerable (or) significant” injury to its usage and enjoyment of its property if compelled to give up access by the right of way. Thorp J stated that “change” in s 317(1)(a) of the PLA 2007 is most likely to be relevant if it has altered the benefit or disadvantage resulting from the
continuance of the easement.8
[85] The High Court observed further that it was not sufficient to justify, under s 126G(1)(a) of the 1952 Act, that changes have occurred in the use of the properties affected by the right of way, where changes in the use of the dominant and servient lands should have been within the contemplation of the parties at the time when they acquired their properties. The Court said further it is not sufficient to show that the applicant would be advantaged by the extinguishment of the easement. The trial judge had found that the changes in the use of the dominant and servient land since the creation of the right of way were only “slight” and those changes were permitted by the existing zoning. This meant that they should have been within the contemplation of the parties to the application at the time when they acquired their property. Thorp J said of the Court’s appellate jurisdiction that the Court should not exercise discretion to permit contractual obligations undertaken in the recent past to
be swept aside unless it was shown strong grounds for doing so.9
[86] Thorp J, canvassed other authority on the proper approach to the exercise of discretion under s 126G of the Property Law Act 1952.
[87] Two decisions were cited. In Waikauri Bay Reserve Ltd v Jamieson, the
approach to the exercise of discretion under the “recent enactment” of s 126G was:10
In my judgment the benefit of a right-of-way or other easement should be taken away only where good grounds are shown. It is not for the owner of the dominant tenement to demonstrate a necessity for the continuation of the easement. It is for the parties seeking extinguishment or modification to satisfy the Court that reasons exist for any orders sought. It is for those parties to satisfy the Court that a proposed modification is appropriate and to set out clearly and precisely that which is sought. In this respect the belated
8 Manuka Enterprises Ltd v Eden Studios Ltd [1995] 3 NZLR 230 (HC).
9 Citing Jones v Rhys-Jones (1974) 30 P & CR 451 (CA); Cresswell (Trustees of the Cobbett
Settlement) v Proctor (Trustees of the Convent of the Holy Family) [1968] 1 WLR 906 (CA).
10 Waikauri Bay Reserve Ltd v Jamieson HC Auckland CP 1981/87, 12 February 1990 at 13.
proposal for modification offered by the first and second defendants was not satisfactory.
[88] In Jansen v Mansor, McKay J delivering the judgment for the Court of
Appeal said of the discretion under s 126G(1)(a):11
The focus is not on the fact of change, but rather on its impact from the point of view of making it appropriate to modify the covenant. It is unhelpful to consider the existence of a change separately from the context as part of the composite test which the section provides.
[89] In Mikitasov v International Recruitment Partners Limited12 an easement was granted creating physical access over the grantor ’s land to the owners of nine other properties and their occupants. The grantor applied to extinguish that part of the easement over his property. The Court found there had been a change in circumstances since the easement was created. At the time of the grant, right of way access on foot was all that was intended and since the grant of easement, a series of physical obstacles, created by persons other than the grantor, made foot access impracticable. The Court cancelled the relevant part of the easement and made an order for compensation.
[90] In this case, I am satisfied on the evidence adduced by Ms Kingsbeer, namely the video and photographic footage of the damage to the roadway from Class 3 vehicles and her own description, that the usage of such heavy commercial vehicles was not contemplated at the time of the grant of the easement by her father in 2009. The disadvantages to the Kingsbeer interests have become totally disproportionate, by reason of the changes that have occurred since the creation of the easement. The cost to upgrade and repair the road was not foreseen by Mr Kingsbeer when he granted the easement. Indeed, given his age and frailty, it is evident that he was not fully aware of the extent of the proposed warehouse that Mr Okey intended to build, or of the consequential heavy traffic flow following the completion of the building.
[91] From the photographic records of the right of way it is plainly evident that the constant use by heavy commercial vehicles on the roadway has led to substantial
pavement cracking; inadequately repaired holes (which were punched into the
11 Jansen v Mansor CA331/91, 16 October 1992 at 4.
12 Mikitasov v International Recruitment Partners Ltd [2011] DCR 623.
surface of the roadway by container truck supports); sunken patching in the roadway; and pavement damage. It is clear that the roadway surface was not constructed for Class 3 or heavier commercial vehicles and the subsequent damage over the years reveals the effects of such usage on a road designed for Class 1 and 2 vehicles.
[92] I am satisfied that there has been a change in circumstances, which could not have been reasonably foreseen by Mr Kingsbeer at the time he granted the easement. The change in use has necessarily resulted in the easement being a greater burden to the grantor’s servient tenement. The right of way, therefore, does not embrace the intention of the parties prior to the creation of the easement.
[93] On the application under ss 316 and 317 of the PLA 2007, I find that there has been a change of circumstances since the grant of the easement on 16 July 2009 from Mr Kingsbeer to Mr Okey, resulting in disproportionate disadvantage to the Kingsbeer interests.
If the equitable easement remains in existence, should it be registered over the Kingsbeer Trusts’ land over the Okey interests and to what standard should the roadway be constructed or repaired?
[94] Because of my conclusions reached under the first three issues, the Court is not required to address the remaining issues.
[95] The only question remaining is whether compensation is payable to the Okey interests, as a result of the extinguishment of the easement.
[96] Mr Okey never sought a registrable easement either in 2009 or subsequently. He relied on two signed agreements with Mr Kingsbeer, when Mr Kingsbeer was elderly and frail.
[97] Since 2009, the Okey interests have had the use of the roadway to conduct their commercial operations. The consideration paid for the grant of easement was
$1. The benefits acquired by the Okey interests over a period of almost nine years, for the payment of $1, in my view far outweighs the need for payment of
compensation by the plaintiffs. Further, Mr Okey has not met his share of the outgoings pursuant to the 1 August 2009 agreement. In the circumstances, I do not propose awarding compensation to the Okey interests for the extinguishment of the easement.
[98] As the easement is to be extinguished, I do not consider damages should be awarded to the plaintiffs in the circumstances.
The result
[99] The right of way easement granted by Mr Kingsbeer on 13 July 2009 to
Mr Okey was invalid, by virtue of s 348(1) of the Local Government Act.
[100] In case I am wrong in reaching that conclusion, the equitable grant of easement (if valid), is hereby extinguished under s 317 of the PLA 2007, because of the change of circumstances in use since the grant of easement on 16 July 2009, resulting in disproportionate disadvantage to the plaintiffs. The effect of the extinguishment of the easement is to take effect six weeks from the date of this decision.
[101] Costs are awarded to the plaintiffs on a 2B basis.
Cull J
Solicitors:
Strachan O’Connor for Plaintiffs
Brittens, for Defendants
Annexure A
3