Larsen v Skelton
[2022] NZHC 3028
•18 November 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2112
[2022] NZHC 3028
UNDER Parts 7 and 9 of the High Court Rules 2016 and Sections 316 and 317 of the Property Law Act 2007 IN THE MATTER OF
the modification of a land covenant
BETWEEN
WAYNE WILLIAM LARSEN, MARGARET GAYE LARSEN, PETER GEORGE GOODMAN and LORELLE
SHARON GOODMAN as Trustees of the WOOTTON TRUST and BIRICHINO
TRUSTEES LIMITED
ApplicantsAND
TUI JACQUELINE SKELTON, ROBERT MARTIN HODGE, CHRISTINE MARIE HUTTON, DANIEL JAMES HUTTON, HARRY HAMLET ABRAHAM and JACQUELINE ANN ABRAHAM
Respondents
Hearing: 4 July 2022; site visit 13 July 2022 Appearances:
EJ Taia for the Applicants
TJ Skelton and RM Hodge (self-represented), First and Second- named Respondents
MD Talbot for the Third and Fourth-named Respondents
Judgment:
18 November 2022
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 18 November 2022 at 3.00pm,pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
LARSEN v SKELTON [2022] NZHC 3028 [18 November 2022]
Introduction [1]
The parties and the lots [4]
The application [9]
The evidence [12]
Preliminary points and aerial images [13]
Mr Larsen’s evidence [20]
The Goodmans’ evidence [43]
The Birichino evidence [46]
Valuation evidence – Mr Bates [51]
Mrs Hutton’s evidence [57]
Mr Hodge and Ms Skelton’s evidence [72]
The Goodmans’ reply evidence [81]
Mr Morris’ reply evidence [83]
Mr Larsen’s reply evidence [84]
Evidence of Gregor Hoheisel [91]
Evidence of Michael Sprague [92]
The site visit [102]
Legal principles – general [105]
Section 317(1)(a)(i) – change in nature or extent of use [116]
Approach [116]
Discussion [118]
Section 317(1)(b) – impediment to reasonable use [124]
Approach [124]
Discussion [126]
Section 317(1)(a)(ii) – change in character of neighbourhood [127]
Approach [127]
Discussion [132]
Result and costs [144]
Introduction
[1] The applicants apply for an order pursuant to s 137 of the Property Law Act 2007 (the Act) to modify or extinguish a land covenant which has the effect of preventing further subdivision on their properties (the Covenant). The applicants own three properties in a six-property subdivision (the Site). The first named applicants, to whom I will refer in this judgment as the Larsens, originally purchased the Site as a single block of land in 1975. They built a home on the Site in 1982, and in 1994 decided to subdivide the Site into six lots, retaining the largest lot for themselves. As part of this subdivision, the Covenant was registered against each of the new titles. An interesting feature of this case is that, other than in respect of one of the lots, all of the owners of the remaining lots are the original owners.
[2] While a number of grounds for modification or extinguishment of the Covenant are relied on, counsel for the applicants, Mr Taia, confirmed that an alleged change in the neighbourhood for the purposes of s 317(1)(a)(ii) of the Act is at the heart of the application. The change in neighbourhood is said to arise from the combination of a residential development to the north of the lots, a smaller residential development to the east, some further developments in the surrounding Silverdale area and the likely implications of the planned Penlink motorway development.
[3] The respondents oppose the application on the basis that the residential developments to the immediate north and east of the Site have been in place for some 20 years, they were known about at the time the Covenant was registered, they have not altered the essential rural nature of the Site, the other developments relied on do not form part of the neighbourhood, and there is no evidence as to the implications of the planned Penlink development.
The parties and the lots
[4] As noted earlier, the Larsens purchased the Site in 1975, as a single block comprising 3.915 hectares. At the time of purchase, the area was zoned Rural A under the (then) Rodney County Council’s operative district scheme.
[5] The Site was re-zoned Residential B in 1990. Taking advantage of this zone change, the Larsens subdivided the Site in 1994. The image below depicts the Site separated into the six lots:
[6]The Covenant was registered against the six lots on 6 May 1994. It provides:1
… that [the owners of the burdened properties] will not at any time hereafter further divide into separate lots any of the lots comprising the land subject to the Covenant each of such lots to forever hereafter retain their current areas and dimensions.
[7]In terms of ownership of the lots:
(a)Lot 6 is owned by the Larsens. As noted earlier, it is the largest lot.
(b)Lot 1 is owned by the first-named respondents, Ms Skelton and Mr Hodge, who purchased their property from the Larsens in April 1996.
1 A further aspect of the Covenant is a height restriction, which is not a part of the application.
(c)Lot 2 is owned by the second-named applicants, Peter Goodman and Lorelle Goodman (as trustees of the Wootton Trust), who purchased their land from the Larsens in August 1996.
(d)Lot 3 is currently owned by Birichino Trustees Ltd (Birichino), the third-named applicant. The directors of Birichino are Graham and Georgina Morris. They purchased their land in June 2016.2
(e)Lot 4 is owned by Harry and Jacqueline Abraham, the third-named respondents, who purchased their land from the Larsens in January 1994.
(f)Lot 5 is owned by Christine and Daniel Hutton, the second-named respondents, who purchased their land from the Larsens in March 1996.
[8] Before going further, it is relevant to note that while the Abrahams are strictly respondents to these proceedings, they have filed an affidavit confirming their support for the application to extinguish the Covenant.3 Accordingly, of the six lots, four of the owners support the application and two oppose.
The application
[9] The application seeks orders which would relieve only lots 2, 3 and 6 of the burden of the Covenant. Accordingly, were I to grant the application, the Covenant would still have effect in relation to lots 1 (the Hodge/Skelton lot), 4 (the Abrahams’ lot, despite their support for the application) and lot 5 (the Huttons’ lot).
[10] To put the application and its grounds in context, it is helpful to set out s 317 of the Act:
317 Court may modify or extinguish easement or covenant
(1)On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish
2 The previous owners had owned lot 3 for the prior 15 years.
3 They have not taken any other steps in this proceeding.
(wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that —
(a) the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii)the character of the neighbourhood:
(iii)any other circumstance the court considers relevant; or
(b) the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
(c) every person entitled who is of full age and capacity —
(i)has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or
(ii)may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or
(d) the proposed modification or extinguishment will not substantially injure any person entitled; or
(e) in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or
(f) in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
(2)An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
[11] The application, in its original form, relied on s 317(1)(a)(i) (change in nature or extent of use), s 317(1)(a)(ii) (change in character of neighbourhood), s 317(1)(b) (impediment to reasonable use) and s 317(1)(f) (just and equitable to extinguish or modify). At the hearing, however, Mr Taia confirmed that s 317(1)(f) was no longer relied on.4 There was also a suggestion in the applicants’ written submissions that
4 On the evidence before the Court, it would have been unlikely that this ground would have been made out in any event. That is presumably the reason why it was not pursued.
s 317(1)(d) of the Act was relied on, namely that “the proposed modification or extinguishment will not substantially injure any person entitled”. I ruled that this ground could not be relied on by the applicants. It is of quite a different nature to the grounds referred to in the application, and because it was not included in the application, there was no evidence directed specifically to this ground. Accordingly, the respondents would have been materially prejudiced had the applicants been permitted to rely on it.
The evidence
[12] I now summarise the evidence in support of and in opposition to the application.
Preliminary points and aerial images
[13] I make three preliminary points. First, it is unfortunate that no expert planning evidence was put before the Court. Rather, a number of the parties purported to give expert evidence on the relevant zoning and planning implications of the Covenant, the ability to further subdivide the Site, and the development of the neighbourhood over the last 20 or so years. I am unable to place any significant weight on this type of evidence, at least to the extent it purports to give opinion evidence on planning and zoning matters. Strictly such evidence is inadmissible, given the parties do not purport to be experts in such matters.5 Further, much of this evidence represents the parties’ own subjective views and opinions, naturally reflecting their support for or opposition to the application as the case may be.
[14] Nevertheless, it is not in dispute that at the time the Larsens purchased the Site in 1975, it was zoned Rural A. There is also no dispute that by the time the Covenant was registered, the Site was zoned Residential 3D under the Rodney District Scheme, the change in zoning having come about in 1990. The Site is now zoned Residential Single House zone under the Auckland Unitary Plan. There is no evidence that there is any material difference between this zoning and Residential 3D under the Rodney District Scheme, and I accordingly proceed on the basis they are substantively the
5 Evidence Act 2006, s 25.
same. There is also no information before me as to the zoning of the land to the immediate north and east of the Site at the time the Covenant was registered in 1994. But given the development of the subdivisions on that land in the late 1990s/early 2000s, and there being no evidence to the contrary, it is reasonable to assume that that land was also re-zoned from Rural A to Residential 3D in 1990.
[15] Second, given the terms of s 317 of the Act, the relevant time to assess any suggested change to the neighbourhood and other similar matters is from the date of creation of the covenant to the time of the application. In this case, this is from 1994 to date. Accordingly, while some of the evidence before the Court addresses the nature of the Site at earlier points in time, the focus is on the period after 1994.
[16] Third, Mr Larsen appended to his affidavit a helpful series of aerial images of the Site and its immediate surrounds over the period 1996 to 2017. The full series is contained in Appendix A to this judgment. The images from 1996 and 2017 are replicated below for ease of reference:
[17] The Site is indicated by the red arrow labelled “163 Duck Creek Rd”. As can be seen, the key change is the “filling in” of the development to the immediate north/north-east of the Site. This is known as the “Coastal Heights” subdivision. The images in Appendix A show that the subdivision was well underway by the late 1990s/early 2000s. There is also a smaller development to the immediate east of the Site, called “Inlet Views” (Mr Larsen’s evidence is that this was developed in the early 2000s). As can be seen from the 2017 image, there is still no development to the west and south of the Site.
[18] The current situation is also helpfully shown in an aerial image appended to Ms Skelton’s affidavit, which is replicated below. As can also be seen in this image, the boundaries to the west and south remain undeveloped; what was the Weiti Forest Block to the south was felled in or around 2010 and the land is re-growing. Part of Duck Creek Road (a horseshoe bend) can be seen in the top left/centre of the image:
[19]I now turn to the parties’ affidavit evidence.
Mr Larsen’s evidence
[20] Mr Larsen describes the area surrounding the Site at the time he and his wife purchased it in 1975 as elevated with rural views to the Weiti River. The southern boundary was at that time a sheep station and subsequently became the Weiti Forest Block.
[21] Mr Larsen produces a valuation report from 1981. Relevant extracts from that report include the following observations:
The proximity of the block to the Stillwater urban and camping area is its main advantage….
…
In this immediate vicinity, being so close to the urban Stillwater area, the rural blocks have basically not been developed, although at the top of the Stillwater Hill there is a good standard of dwelling, not always evident on the drive to this area.
[22] Mr Larsen states that the Rural zoning of the property was changed to Residential 3D in 1990, which permitted subdivision into sites with a minimum area of 625m2.
[23] By the early 1990s, and taking advantage of that zone change, Mr Larsen says he and his wife started investigating subdividing the Site. Mr Larsen produces a 1990 valuation report prepared in this context. The report describes the Site as being on the “western fringe of Stillwater, a small pocket of residential development at the mouth of the Weiti River…”. Silverdale is said to be approximately eight kilometres away. The report states:
The property’s outlook is mainly to the north being of a bush and semi-rural nature with views into part of the Weiti River. From the elevated rear ridge an outlook is gained back into Stillwater and down the Weiti River. Part of the property adjoins the Weiti Station, afforestation area.
[24]The report notes the subdivision potential for the Site, stating that:
Although a minimum site size of 625m2 is permitted, the most suitable and optimum form of subdivision for the property would be into approximately six large residential lots, this minimising development expenditure and being more likely to meet market demand.
[25] Mr Larsen says that because there was no access to wastewater infrastructure near the boundaries of the Site prior to 1998 (the beginning of the Coastal Heights development), a septic tank was required for each additional subdivided lot. Mr Larsen says that the lots could not therefore be 625m2, as they needed a much bigger footprint to take into account the septic tank systems.
[26] Mr Larsen also addresses the reasons for the Covenant being registered at the time of subdividing the Site. He says:
One of the reasons why we wanted to restrict further subdivision was that we wanted to maintain the rural outlook of the property and the lifestyle block feel, and to keep uninterrupted rural and river views. We wanted to maintain our ability to enjoy activities that only living on a rural property could give us.
Another important reason for registering the Covenant was because of environmental concerns we had regarding having too many septic tanks on the land. …6
[27] I interpolate to note that registration of the Covenant could obviously not affect or protect against development on land outside the Site’s boundaries, which would only be controlled by the underling zoning provisions. As noted at [14] above, I proceed on the basis that when the Larsens’ land was re-zoned Residential 3D, so too was the land which later became Coastal Heights and Inlet Views.
[28] Mr Larsen also produces a valuation report from 1996, that is, shortly after the subdivision of the Site. This records lot 6 as zoned Residential 3B in the Operative Rodney District Plan.7 The report states that “the surrounding rural locality mainly comprises small lifestyle blocks with a mixed standard of housing development”. It also states that “from the house site a pleasant bush and rural view is obtained, together with a restricted view east to part of the tidal Weiti River”.
[29] Mr Larsen produces a further valuation report from 2002. The report is in materially the same terms as the 1996 report, though three points should be noted:
(a)First, there is mention of the Coastal Heights subdivision, stating that “[i]mmediately to the east is the Coastal Hights subdivision which comprises a range of average to good quality, modern homes.”
(b)Second, the report records the same observations on the views from lot 6 as the 1996 report quoted at [28] above.
(c)Third, there is mention of the potential Penlink development. The report states:
The proposed Weiti crossing route from East Coast Road to the Whangaparaoa Peninsula will pass to the north-west of the property across a bush covered hill face approximately 400 m from the dwelling. The proposed road may be visible in places but will
6 It also seems that given the nature of the soil at the property, it was fairly slow draining.
7 It is not clear whether the reference to 3B is a typographical error. I note that the earlier report recorded the zoning as 3D. In any event, there is nothing to suggest any substantive difference between the two.
be substantially screened by vegetation. This proposed road is still in the planning stages and it is not certain it will proceed.
[30] In terms of lot 6’s current description, Mr Larsen describes it as a lifestyle block, part in grass and part in bush. Annexed to his affidavit is a letter from Auckland Council which says that the current zoning of the lot under the Unitary Plan is Residential Single House, with subdivision permitted to a minimum of 600m2.
[31] Mr Larsen says that until around 1999, lots 2, 3, 4 and 6 had unobstructed views, including to the Weiti River. Mr Larsen says that a separate height covenant (which burdens only lot 3) was registered to protect the Larsens’ views. Mr Larsen says that the height covenant is no longer effective given the Coastal Heights subdivision “fully obstructs our views”. I interpolate to note that from the site visit I conducted (discussed at [102] to [104] below), I could not see the Coastal Heights subdivision (or the Weiti River) from the Larsens’ property, and there appeared to be “screens” of large mature bush and trees all around the property.
[32] Returning to Mr Larsen’s evidence, he says that in 1994, all of the lots had views to the south of the Weiti Pine Forest. He says the forest was harvested in around 2010 and that:
There are two new housing developments that are planned for the forest area. One is already under construction, which I understand is to be known as Weiti Bay, with the other to follow which will be called Weiti Village.
[33] I again interpolate to note that there is no expert or other similar evidence as to these planned or partly constructed developments. No development to the south of the lots can be seen in the aerial images in Appendix A or that replicated at [18] above. Nor could any such development be seen from the Larsens’ property during my site visit. An Auckland Council geomap appended to Mr Larsen’s affidavit suggests that the Weiti Bay development is around two kilometres from the Larsens’ property.
[34] Mr Larsen also describes changes to the wastewater infrastructure. He says that with the construction of Coastal Heights, lots 2, 3 and 4 now have immediate access to wastewater infrastructure on their northern boundaries. I proceed on the basis that this had been the case since the late 1990s. Mr Larsen says that lots 1 and 2 now connect to the Coastal Heights wastewater infrastructure. Mr Larsen also says
that with the construction of the Inlet Views subdivision, “our property also has immediate access to wastewater infrastructure on its eastern boundary. We did not have this before.” I proceed on the basis that this has been the case since the early 2000s, when the Inlet Views subdivision was completed.
[35] Mr Larsen also says that he is currently in negotiations with the joint owners of an access lot which forms part of the Inlet Views subdivision, about the removal over that lot of a mature pine plantation “that we currently have no way of getting off the property”. Mr Larsen does not address how he originally planned to remove the trees from the property following the subdivision in 1994.
[36] Mr Larsen also gives evidence of what he considers to be changes in use of the lots, some for commercial purposes (though he acknowledges that the Covenant does not prevent this). He says that:
(a)He and his wife run a business from their property, based on pneumatic automation light manufacturing.
(b)Ms Skelton and Mr Hodge run a swing manufacturing business from their property (lot 1).
(c)The Goodmans run a private investigation business from their property (lot 2). He also says that the Goodmans built a “granny flat” on their property in 1998.
(d)The Huttons (lot 5) lived in Australia from November 2010 to June 2013, and the property has not been their main residence since January 2021 (and Mr Larsen understands they are intending to sell it).
[37] Mr Larsen then goes on to give evidence about changes to the surrounding area. He gives general evidence as to the development and planned development in the Whangaparāoa, Weiti, Orewa and Silverdale areas. He also discusses the proposed Penlink development, but I observe that there is no detailed or expert evidence of the current planned route of Penlink, or its proximity to the Site and any resulting impact
on it (though Mr Larsen estimates that part of Penlink could be between 141 to 257 metres from the boundary of lot 6, and will be closest to lot 5 (the Huttons)). Mr Larsen gives his personal view that “I consider the project is going to have a major impact on the surrounding area and character of our property”. Mr Larsen then goes on to give (largely inadmissible opinion) evidence as to the development of Penlink and what it will involve, such as a substantial increase in noise, increased traffic (stating that traffic on Duck Creek Road has increased since 1994) and being in view of lot 6. Mr Larsen says that if they could subdivide lot 6, he and his wife would seriously consider building a new house for themselves on the “top piece of our land”, which would give views of the Weiti River and no view of Penlink. Mr Larsen also expresses a concern about air pollution from Penlink.
[38] Mr Larsen then goes on to summarise the various subdivisions of surrounding land over the years. He refers to the following:8
(a)1998 – Coastal Heights (around 60 lots).
(b)2000 – Norfolk Downs (33 lots, around 1.7 kilometres from the Site) and Newman Road (12 lots, around 3.1 kilometres from the Site).
(c)2002 – Donald Place (11 lots, around 200 metres from the Site).
(d)2003 – Inlet Views (26 lots).
(e)2005 – Millwater and Milldale (approximately four kilometres from the Site, and estimated by Mr Larsen to hold around 10,000 residents).
(f)2011 – Lennon Access Road (15 lots, around 1.6 kilometres from the Site).
(g)2014 – Charity Way Stillwater (five lots, 700 metres from the Site).
(h)2015 – Long Bay (450 homes, around 3.7 kilometres from the Site).
8 Including that development or proposed development of the Weiti Forest Block referred to at [32] above, and which is not repeated here.
(i)2018 – East Coast Heights (200 homes, around 3.6 kilometres from the Site).
(j)2019 – Newman Road, Stillwater (eight lots, around 3.1 kilometres from the Site).
[39] Mr Larsen also refers to a proposed development of the Stillwater Motor Camp, which he says has 15 lots planned and has resource consent. Mr Larsen says this development will be around 760 metres away from the Site.
[40] Mr Larsen also discusses activities that used to be carried out on lot 6 which he says are no longer possible. This appears to stem largely from the change of zoning from Rural to Residential. No real detail is given around this, but I again note that the Site was re-zoned Residential in 1990, well before the Covenant was registered. In terms of the change in use, Mr Larsen refers to:
(a)Pest control. Mr Larsen says that “now we are classed as urban”, controlling pests through firearms is not possible.
(b)Tree felling and burn offs. Mr Larsen says that he and his wife planted stands of trees in 1996/1997 for firewood and timber, which have now reached maturity. He says that given lot 6 is “now surrounded by housing”, preparation of firewood needs to be carefully considered due to the noise and safety. Mr Larsen says that due to the houses that are now in close proximity, it is “difficult” to use any farm-type machinery including a tractor, ride-on mower, scrub cutter, chainsaw and log splitter for preparing firewood.
(c)Open fires. Mr Larsen says “we are no longer allowed to have open fires to burn vegetation”. It is not clear, however, if this has been the case since 1990 with the change to Residential zoning.
(d)Tree felling and removal. Mr Larsen refers to a stand of 250 mature pine trees planted in 1996 (on the eastern boundary of lot 6). He says
that these were planned to be removed from 2016 onwards through the eastern boundary, which is now the Inlet Views subdivision. Mr Larsen notes that neighbours to date have refused consent to remove the timber through that area via trucks.
(e)Livestock. Mr Larsen says that the number of livestock able to be on the property is limited, given the “urban classification”. Again, it is unclear whether this has been the case since the 1990 zoning changes. He also says that “the close proximity of urban subdivisions makes living a rural life more difficult”, and refers to complaints about noise (such as dogs barking).
[41] Finally, Mr Larsen sets out plans for future development. He says that, “although we would like some flexibility for future subdivision,” he and his wife want lot 6 to be used as a family property for future generations. He says (but there is unfortunately no expert planning evidence) that even if the Covenant is lifted, there will be “restrictions on subdivision”. Mr Larsen says that his and his wife’s “anticipated development” involves subdividing two sections for their daughters on the top part of lot 6, being on the eastern boundary next to the Inlet Heights development. Mr Larsen produced a subdivision plan showing the two proposed sites, which is replicated below:
[42] For completeness, I note that Mr Larsen also addresses a dispute with the Huttons about their source of power (being taken from a pole slightly over the boundary on lot 6). I do not consider this dispute relevant to any of the matters for determination on the present application, and so say nothing further about it.
The Goodmans’ evidence
[43] The Goodmans swore a joint affidavit in support of the application. As noted earlier, the Goodmans are the owners of lot 2, which is immediately adjacent to the Coastal Heights development to the north-east of the Site.
[44] The Goodmans say that they have read Mr Larsen’s affidavit and “endorse the contents contained therein”. They further say that when they purchased their property, it was adjacent to a sheep farm to the north, and their views over the farm gave them uninterrupted views of the Weiti River. The Goodmans say that within two years of purchasing their property (thus by 1998), the farm was developed into the Coastal Heights subdivision. The Goodmans say that not only have they lost the rural nature of their lifestyle block, but they have also lost their river views. They say they no
longer felt isolated and that given the development of Coastal Heights, there are three residential properties now adjoining directly to their northern boundary, with one dwelling around 10 metres from their house.
[45] The Goodmans state that they are semi-retired and wish to plan for their retirement. They say that if the Covenant is removed, they intend to downsize the property and reduce the amount of property maintenance that they are currently obliged to undertake. They say “we will have the option of subdividing and reducing our land area, subject to the appropriate restrictions under the operative Council district plan”. No further details of what might be proposed in this regard are given, and as noted, given the absence of any planning information before the Court, it is not known to what extent the Goodmans’ property could be subdivided and if so, into how many separate lots.
The Birichino evidence
[46] Mr and Mrs Morris, as directors of Birichino, also swore a joint affidavit in support of the application. As noted, Birichino purchased the property in June 2016. Like the Goodmans, the Morrises say that they have read Mr Larsen’s affidavit. They say “we are aware of the extensive changes that are planned around the neighbouring areas”. They support the evidence provided by Mr Larsen “setting out the proposed development in the area, including the Penlink highway”. They say:
In short, the urban residential development in the area will have a substantial impact on our property. In the short time we have been here the area has already changed significantly.
[47] The Morrises then set out some background to where they lived when they first arrived in New Zealand in 1998. They describe how they sold a property when neighbouring land was subdivided for residential housing, and “decided to investigate purchasing another property to maintain the rural outlook and setting”. They state that “eventually after much time searching, we found and purchased [lot 3]”. I interpolate to note that this tends to suggest that, in at least 2016, the Morrises considered lot 3 to have a rural outlook and setting (despite the adjacent Coastal Heights subdivision). They refer to putting some sheep on the property in 2017, and “since moving in we have enjoyed the relative seclusion, space and open living”.
[48] The Morrises refer to more recent health issues for Mr Morris in particular, which reduce his ability to do manual work. This has led to an advantage of maintaining sheep on the property, enabling them to keep the grass short and relatively tidy. The Morrises note that in 2019, they received a call from Auckland Council regarding a complaint about the sheep and the noise they were making. They understood that the complaint came from a neighbour in the Coastal Heights subdivision. This led to them moving their sheep to another location, which they say led to grass maintenance being a real problem. Having investigated the planning and zoning rules, the Morrises say they subsequently realised that they could keep sheep on their property, and confirm that they now have around two to four sheep on the property. They say that there have been further complaints about the sheep. They state:
With the increasing urbanisation of the area, and the potential continuing subdivision of the neighbouring land, it is likely that our ability to keep sheep and to maintain our property will diminish in the foreseeable future. Rather than fight against the spreading urbanisation, it appears to be prudent to embrace as inevitable and to make provision to subdivide our property to achieve a more manageable property size for a retired couple with health issues limiting physical abilities.
[49] No particular details are given as to the extent to which the property could be subdivided.
[50]I now summarise the evidence in opposition.
Valuation evidence – Mr Bates
[51] Mr Bates is a registered valuer, with approximately 20 years’ experience of valuation in the Stillwater area. Mr Bates makes a number of observations on Mr Larsen’s evidence in particular. As a preliminary point, however, Mr Bates notes that no planning or surveying evidence was filed with the application, and in particular, evidence about the subdivision potential of each of the lots in question. He says such evidence would be necessary in order to assess the potential value gain to those lots which would be “freed” from the Covenant, and any corresponding loss to the respondents.
[52]In terms of Mr Larsen’s evidence, Mr Bates says the following:
(a)That the Penlink development has been “on and off the books” for a very long period of time, and well before 1994.
(b)That Mr Larsen has made “obvious errors and misstatements as to distances and proximity of various developments” (though does not give details around this).
(c)That increased urbanisation can enhance the relative benefit of covenants preventing subdivision (which are not uncommon), providing some relative tranquillity to surrounding development. Mr Bates says that Mr Larsen’s evidence does not acknowledge this.
(d)He endorses a point noted by Mrs Hutton in her evidence as to the uneven benefits and disadvantages to different lots were the Covenant to be removed generally (see further below at [71]). He says “those lots which are already adjacent to or influenced by the nearby subdivision, would have a significant benefit in removal of the covenant to allow subdivision. But, for the respondents’ sites, the situation is clearly different.”
[53] Mr Bates then gives valuation evidence about the lots. He notes that surrounding developments include earlier baches, to 1960s bungalows, through to now dated 1990 to 2005 subdivision development. Mr Bates says that “this combination of older residential properties and lifestyle–rural land properly characterises Stillwater”.
[54] In terms of zoning, Mr Bates states that lot 5 (the Huttons) adjoins land to the west which is zoned “Rural – Countryside Living Zone”, as is the land across the road. He states that the land to the south (the Weiti Forest Block) is zoned “Coastal – General Coastal Marine Zone, Residential – Rural and Coastal Settlement Zone, Rural – Rural Conservation Zone and Rural – Countryside Living Zone”. Mr Bates refers to the Coastal Heights development (which he describes as “small”) and states:
Within Coastal Heights and occasionally throughout the older part of Stillwater there are a few more recently constructed houses, but little has been developed in Stillwater in the last 20 years and this is reflected in the zoning maps.
[55] Mr Bates then gives some generalised and high level evidence of potential detriment to the respondents’ properties were the Covenant to be lifted. This includes loss of privacy, loss of rural character, increased traffic on the shared driveway, and noise and similar implications from construction.
[56] In the absence of expert evidence as to the subdivision potential from removing the Covenant, Mr Bates says that it is not possible to arrive at proper values and compensation estimates. He says, however, that the land values are “significant” and that:
I expect there would be millions of dollars involved in the values and a proportion of the windfall gain to be allowed for as a reasonable price to be compensated or paid to the respondents if their rights were taken/transferred would likely be significant sums.
Mrs Hutton’s evidence
[57] As noted, the Huttons are the owners of lot 5. Mrs Hutton describes the property being surrounded by bush at the time of purchase, and “if things could be more perfect”, there was also the Covenant preventing further subdivision. Mrs Hutton says she and her husband relied on this, among other things, in purchasing the property.
[58] Mrs Hutton says that over the 25 years of living at their property, their “privacy and lifestyle expectations have largely remained unchanged and have largely been met”.9 Mrs Hutton says that the views from and use of their property has not changed during the time they have owned it. She also confirms that she and Mr Hutton do not plan to sell their property.
[59] Mrs Hutton says that lot 5 is much closer to Duck Creek Road than the Larsens, and they do not notice the “commuter traffic” to which Mr Larsen refers. She says
9 Mrs Hutton says the exception to this is the conduct of a commercial business from the Larsens’ property.
that the use of the lots has not changed over time, or not to any degree that is noticeable to the Huttons, other than the Larsens moving their engineering business to their property which has increased traffic on the shared driveway.
[60] Mrs Hutton expresses concern at the lack of information as to what is proposed by way of subdivision were the Covenant to be removed, noting that if the Larsens’ lot could be subdivided down to properties of 625m2, this could lead to up to 30 dwellings on that lot.
[61] In terms of development since the creation of the Covenant, Mrs Hutton says that she and her husband were aware when they purchased their property of the planned Coastal Heights development (construction beginning approximately two years after the Huttons’ purchase). Mrs Hutton says they were not concerned about the subdivision, given it was small and did not directly adjoin their property. She says that the expected development of Coastal Heights and Inlet Views made the Covenant all the more important to their purchase. Mrs Hutton also says that the Penlink development was also known about at that time, though no roading designations were in place.
[62] Mrs Hutton disagrees with Mr Larsen’s description of development in the broader area, stating that Stillwater has had very limited development over the years, other than the small Coastal Heights and Inlet Views subdivisions. She also says that Mr Larsen’s evidence relies on developments some distance from the Site, and which are not visible from it.
[63] In terms of Stillwater itself, other than in respect to Coastal Heights and Inlet Views, Mrs Hutton says it has changed very little since 1996. She says it still does not have a superette or dairy, and has “just the boating club and private campground”. She says she is not aware of any plans for commercial development.
[64] In response to Mr Larsen’s description of the property immediately to the west of the Hutton’s property being subdivided and intensified, Mrs Hutton says that two homes had been constructed on one title in 1996. She says the property remains no more urbanised or developed than it was in 1996. She notes that at some later point,
the property was subdivided to provide each house with its own title. Mrs Hutton says that all of the land to the west, north and south of their property, including the
5.5 kilometres of rural land up to East Coast Road, is zoned Rural – Countryside Living, and comprises homes occupying lifestyle or farm blocks.
[65] Mrs Hutton also discusses the Weiti Forest Block to the south of the properties. She notes this was originally 864 hectares, and since being felled is in some places regressing back to light scrub and wilding pines. Mrs Hutton says that the implication from Mr Larsen’s evidence that this area is or is planned to be developed is “completely incorrect”. She notes that the land to the south of the Larsens’ property remains zoned “Rural – Conversation Zone”. Mrs Hutton also discusses the planned Weiti Village, which she says is many kilometres away from Stillwater and cannot be seen from Stillwater.
[66] Mrs Hutton also addresses the other developments referred to by Mr Larsen, saying that he has overstated the impact of them on the Site, with most of the developments being some distance away. For example, Mrs Hutton refers to Mr Larsen’s evidence concerning Norfolk Downs, which she says is 6.8 kilometres from their shared driveway and comprises a number of properties ranging upwards of
1.5 hectares. Similarly, she says Norman Road is 7.4 kilometres away via rural roads, and properties in that development are also large lifestyle blocks. She says neither development impacts on the Site or the Stillwater village.
[67] In terms of the proposed development of the Stillwater Motor Camp, Mrs Hutton notes there has been talk for some years of a potential development, and at most this would result in a small number of properties within a gated area. Mrs Hutton says the Motor Camp is two kilometres away by road.
[68] Mrs Hutton then discusses Penlink, noting that she had been part of a group negotiating conditions to be attached to it to preserve the rural nature of their property. Mrs Hutton notes that she was the secretary of the Stillwater Residents’ and Ratepayers’ Association at the time, which successfully lobbied for various conditions to be imposed as part of the consenting process. She says these conditions were designed to protect Stillwater village’s character and current rurality.
[69] Mrs Hutton disputes Mr Larsen’s evidence about the proximity of Penlink to the Huttons’ property. She says it will cross a ridge above and to the north and west of their property and the majority of it will not be in view of their property, if at all. She says that at its closest point, it will be 500 metres away. Mrs Hutton also refers to a number of resource consent conditions which she says will mitigate any adverse effects on their property.
[70] Mrs Hutton then addresses her discussions with the Larsens about their proposed development if the Covenant were to be removed. I do not find this, or Mr Larsen’s evidence on the same topic, particularly helpful or relevant to what I must determine.10
[71] Finally, Mrs Hutton refers to what she says would be detrimental impact to their property were the Covenant to be lifted, given her understanding that lot 5 is the only lot which could not use existing mains, wastewater, power or sewerage from either Coastal Heights or Inlet Views to service any subdivided lots. Given what Mrs Hutton describes as “significant costs” in subdividing their property as a result, she says “there would be no upside for us whatsoever” in the Covenant being removed from all six lots. She says that lot 5 would be surrounded by development but unable to be developed itself, which she says would lead to a significant decline in lot 5’s value.
Mr Hodge and Ms Skelton’s evidence
[72] As noted, Mr Hodge and Ms Skelton are the owners of lot 1, and have represented themselves in this proceeding. Mr Hodge says that he and Ms Skelton were happy for the Larsens to subdivide the top part of their land for two houses for their daughters, but became concerned when the Larsens showed them plans for a subdivision of up to 10 properties. Mr Hodge confirms that he and Ms Skelton do not object to the Covenant being modified to permit two extra properties on the Larsens’ lot.
10 There is also evidence from a resident of Inlet Heights, to the effect that there has been no agreement between the Larsens and the joint owners of a shared driveway in the Inlet Heights subdivision that trees may be removed from the Larsens’ property over that driveway.
[73] Mr Hodge notes that lot 1 has a stream running through it, and says that “we have neither the ability nor desire to subdivide”. Mr Hodge disputes Mr Larsen’s description of development in Stillwater, noting that other than Coastal Heights (which he says was completed in 1998) there remains rural lifestyle blocks from Coastal Heights all the way up to Silverdale (an 11 kilometre drive away).
[74] Ms Skelton gives more detailed evidence. She says that she and Mr Hodge relied on the Covenant when originally purchasing the property. She goes on to say that she and Mr Hodge objected in 1997 when the Goodmans proposed to build a “granny flat” on their lot (though the minor dwelling was ultimately constructed). She says that this dwelling is 9.5 metres from the boundary fence between lots 1 and 2 and rather than being a “granny flat” for Mr Goodman’s mother as first indicated, it is a rental property. Ms Skelton states:
We have been consistently upset at living next door to this rental when we thought we would have no close neighbours due to the Covenant. However, as our house was constructed simultaneously as the Wotton Trust “granny flat”, we have now lived next door to this house for 23 years.
The Larsens and other applicants have failed to understand the impact this dwelling has had on our lives and dreams to live on a rural property. My affidavit explains our reluctance to agree to the Covenant being modified or extinguished, as we already know how it can affect us.
[75] Ms Skelton also recounts that in 1998, the original owners of lot 3 asked the other lot owners to consent to the Covenant being lifted to allow a further house to be constructed on that property. Ms Skelton attaches to her affidavit a proposed subdivision plan by the then owners of lot 3, showing a building on a steep bank overlooking lot 1. Ms Skelton says that she and Mr Hodge opposed the request at the time, and lot 3 was shortly thereafter sold to new owners who resided there for over 15 years, prior to selling to Birichino in 2016. Ms Skelton notes that apart from lot 3, no properties in the subdivision have been sold in the past 24 years.
[76] It appears that in the context of the proposed subdivision of lot 3 in 1998, Ms Skelton took legal advice on the possibility of further subdivision within the Site. The legal advice is appended to her affidavit. The solicitor stated:
It would appear that you are well protected at this stage to ensure that the lots are not further subdivided. However, you may wish to record your concerns
in writing to the local District Council (individually for each lot in question) which means that they would have to place your letter on file and your objection will hopefully be apparent should the owners of lots 3 and/or 6 submit sub divisional plans to the Council in future.
[77] It seems that Ms Skelton acted on this advice. She attaches to her affidavit a copy of a letter from her to the Rodney District Council in 1998 which states:
Although we haven’t been formally approached (sic) by the owners we would like this letter to be held on file to acknowledge our objection to the above covenant being removed and our neighbours therefore being able to subdivide their lot.
[78] Ms Skelton further states that their lot, lot 1, is the most impacted by traffic noise and vehicles on the shared driveway, given lot 1 is immediately adjacent to the entrance to the shared driveway from Duck Creek Road.
[79] Ms Skelton also says that the area surrounding the Site is largely rural and has remained the same since the late 1990s. She states that lot 1 has “nil impact” from the Coastal Heights development which was completed many years earlier. Ms Skelton states that Penlink has been in the pipeline for many years, and “prior to purchasing our property in 1996, I was well aware of the Penlink proposal”.
[80] Ms Skelton also addresses the use of the properties. She notes that she and Mr Hodge have a home workshop which is used at weekends to run a small business which they bought in 2021. She discusses the Larsens running their engineering business from their property and what she describes as increased use of the shared driveway as a result. She refers to the Morrises running a dog breeding business on lot 2. Ms Skelton also refers to the Stillwater village, which she describes as having a “village and community feel to it”. Ms Skelton also addresses the discussions between her and Mr Hodge and the Larsens about the Covenant, but as noted earlier, this is not relevant to the issues I must determine. Like Mr Hodge, however, Ms Skelton confirms that she does not object to the Larsens’ proposal to subdivide two smaller lots on the eastern side of their property for their daughters’ use.
The Goodmans’ reply evidence
[81] The Goodmans’ reply evidence is focused on Ms Skelton’s evidence and description of the minor dwelling on their property as a “granny flat”. The Goodmans reject that there was anything untoward about the manner in which they constructed a second dwelling on their property, and reject the suggestion that it was intended to be or is a “granny flat” for relatives only. They attach the resource consent for the dwelling.
[82] The Goodmans say they were not aware of the Coastal Heights development when they purchased in 1996. They also say they do not have any particular subdivision plans in mind at this time, given they do not wish to incur the associated costs while the Covenant is in place. They say, however, that they do not intend to sell to a developer or propose to subdivide with intensive housing. The Goodmans say that most of their land is steep, meaning there is limited scope for subdividing (though there is no expert evidence before the Court on this topic).
Mr Morris’ reply evidence
[83] Mr Morris gives similar evidence to the Goodmans about Birichino’s plans for subdivision, and the limited ability to subdivide given their sloping section.
Mr Larsen’s reply evidence
[84] Mr Larsen comments on various aspects of the respondents’ evidence. I refer only to that which I consider relevant to the issues I must determine.
[85] Mr Larsen rejects that he and his wife are planning a multi-development project for their property. Mr Larsen notes that parts of lot 6 are classed as Significant Ecological Areas, and when combined with the steepness of the section, “there is no prospect of intensive subdivision”.
[86] Mr Larsen says he was not aware of the Coastal Heights subdivision when the Covenant was created, and attaches company documents which show that the development company was not registered until April 1997. Mr Larsen does not, however, address his knowledge of zoning changes in the immediate area in 1990.
[87] Mr Larsen states that the traffic on Duck Creek Road has necessarily increased given the additional development in Stillwater over the years.
[88] Mr Larsen attaches to his affidavit information concerning proposed developments on the Weiti Forest Block land. Mr Larsen says that in addition to areas of development referred to as Weiti Bay and Weiti Village, there are also planned developments named Weiti Station and Weiti Forest. The information attached is a Penlink Traffic and Economic Analysis prepared by Beca Ltd. It contains a very brief reference to Weiti Station and Weiti Forest, but does not state where they are, the timing of them and their impact, if any, on the Site.
[89] Mr Larsen disputes that there was any certainty around Penlink, and notes that it had been in the investigatory stages for many years. Mr Larsen attaches to his affidavit various extracts from the Auckland Council website about Penlink, but again, this information does not clearly address Penlink’s location vis-à-vis the Site, or its potential impact on the Site.
[90] Mr Larsen says that the shared driveway is limited to 10 lots, though at present is only used by five lots. There was no information as to the basis for the 10-lot limit. I accordingly sought and the applicants filed an affidavit following the hearing by a planner, which states that the shared driveway must not serve more than ten proposed rear sites.11
Evidence of Gregor Hoheisel
[91] Mr Hoheisel is an architect who has worked with the Larsens in relation to the potential subdivision of their land. He notes that he provided them with a number of plans, one of which involved “a full subdivision of their lot”. Mr Hoheisel does not detail what this subdivision would involve, in terms of the number of separate lots. He says that the Larsens were not interested in that plan and indicated that they are only considering houses for their daughters.
11 Auckland Unitary Plan, Chapter E38, Standard E38.8.1.2(1).
Evidence of Michael Sprague
[92] Mr Sprague is a valuer and provides evidence (in part) in reply to that of Mr Bates (though other aspects of his evidence are not in reply to Mr Bates’ evidence). Mr Sprague says that prior to preparing his report, he visited lot 6 and “observed the other properties from some distance”.
[93] Mr Sprague notes the Larsens’ plans for two lots on the eastern side of lot 6, to be accessed by the shared driveway (and then access formed over lot 6 itself). Mr Sprague says that the other applicants “are also clear that they do not wish to undertake significant subdivision” and their plans have not progressed to a formal stage.
[94] Mr Sprague then summarises the timeline in relation to development and zoning changes, though this does not add materially to the information discussed earlier in this summary of the evidence. He confirms, however, that the zoning of lots 1 to 6 changed in 1990 from Rural A to Residential 3D permitting subdivision down to 625m2. He also notes that under the current Auckland Unitary Plan, the land is zoned Single House Zone, to 600m2. Mr Sprague then says the following:
As at the date of purchase, whilst there was residential housing on relatively small sections in Stillwater, the prevailing land use was most likely small to medium lifestyle lots. During the intervening period subsequent to the covenant being registered significant locational changes have occurred in Stillwater, hand in hand with the re-zonings, to permit medium intensity residential development. This has been followed by the completion of two subdivisions (Coastal Heights and Inlet Views) both of which adjoin the subject blocks. The Weiti Forest block is now cut over and remains another significant landholding adjoining the subject blocks to the south, which will no doubt eventually be redeveloped as medium intensity residential housing with the effect of further urbanising modern Stillwater.
[95] Mr Sprague also appends to his affidavit what appear to be extracts from the Auckland Council website, which he says show “a significant lift in traffic volumes using Duck Creek Road”. The graphs cover the period 2016 to 2020 and at least as I can discern from them, generally show a steady rate, or even a decline, in the earlier part of that period, with an increase from 2017/2018. How this compares to earlier years is unknown.
[96] Mr Sprague then gives evidence about the nature and history of covenants, some of which is hearsay, and which would also appear to be outside his area of expertise. He notes in this context that while covenants were traditionally registered on titles in perpetuity, more recent covenants tend to be time bound.
[97] Mr Sprague goes on to give his opinion as to the ability to subdivide the Site, which he describes as compromised for intensive subdivision given its characteristics. Without further information, however, I am not satisfied that this is within Mr Sprague’s expertise, and he does not detail how he has reached his (high level) conclusions.
[98]Mr Sprague goes on to state:
View factors which once were available from most of the house sites within the six lots have long been lost or compromised by the completion of the two adjoining subdivisions (Coastal Heights and Inlet Views).
[99]Mr Sprague then says the following, under the heading “Summary Overview”:
It is apparent to me that as at the date of the registration of the covenants in January 1994, the intention was to protect the peace and quiet of the six lots by precluding subdivision and preserving peaceful rural environment.
Unfortunately, despite these good intentions in 1994, what is best described as ongoing urbanisation facilitated through more intensive re-zonings by local authorities between 1994 and the present date, has led to significant in-fill now abutting to both the east and north-eastern boundaries of the subject site. The subject land is now zoned Single House Zone (1 to 600 density), although in my opinion none of these lots are suitable to take full advantage of the development density available by virtue of the SEA Overlays and the challenges presented by the contour.
It is worth mentioning that I would expect deep pole foundations to be a necessity should any development consent to build on steeper areas of the sites be granted, and that this might require geotechnical advice on the stability of the overall block.
In summary therefore, whilst I can understand the purpose of the covenants as at the date of their registration, urban and locational factors coupled with contour and SEA Overlays have extinguished any benefits to the lots. In fact it could be argued that in a broader market sense (willing buyer / willing seller basis) that the covenants are in fact a handbrake in terms of unlocking value from an informed buyer’s point of view. To put it in a simple way, if two adjoining lots, say over 2,000 sm and both fairly identical, were offered for sale within the Single House zone, with similar contour, etc, then the one without the burden of a covenant precluding subdivision or intensification
would be more attractive to the purchaser and I would expect it to sell for a higher sum.
(Emphasis added.)
[100] Mr Sprague then responds to aspects of Mr Bates’ evidence, commenting that an additional two lots on the Larsens’ property “is hardly likely to contribute to the catastrophes that the respondents signal were the covenant to be removed”. I interpolate to note that this aspect of Mr Sprague’s evidence appears to proceed on the basis that the application to remove or modify the Covenant is limited to modification to permit two lots on the Larsens’ property, when this is not the effect of the application.
[101] Finally, Mr Sprague agrees with Mr Bates’ comment that there would likely be significant value increases to some of the properties were the Covenant to be removed. Mr Sprague says he “would go further to state that there is no reason why [all lots] would not all benefit from freeing up of land use by removing or at least modifying the existing covenant”. Mr Sprague concludes by stating:
I consider that for these reasons, if the covenant remains on the respondents’ lots, it is unlikely that they would suffer a loss in value if the covenant is removed over the applicants’ lots based on the evidence filed, the impediments to development and the proposed developments.
The site visit
[102] They say a picture paints a thousand words, and a site visit in this case was equally beneficial. With the parties’ agreement, I conducted a site visit in the early afternoon of 13 July 2022.
[103] The Stillwater area was significantly more rural in character than the impression given in the applicants’ evidence. The intensive development of Silverdale is some considerable distance away, and the character of the land from East Coast Road down to Stillwater is largely rural in nature, with what appear to be large lifestyle blocks/farmland. The neighbourhood becomes slightly more residential, as one would expect, at Stillwater itself. I am bound to observe, however, that the whole area appeared coastal and “sleepy”. For much of the drive from East Coast Road to Stillwater, only one other car was observed, though I acknowledge it was outside
commuter hours. The village itself is small with no obvious commercial activity, and the Coastal Heights subdivision was well established, in keeping with it having been developed in the late 1990s.
[104] I then visited the Site itself which is located on land which in parts is very steep. There may well be impediments to subdividing some areas of the Site, but without expert evidence, the extent is unknown. The Site itself was very quiet (an occasional car could be heard on Duck Creek Road) and is lush with bush (mainly pine trees and native bush). The Coastal Heights subdivision was not clearly visible from those lots which adjoin it, screened with trees. The shared driveway is narrow and in places very steep. The Larsens’ property is to the rear of the Site and is completely surrounded by bush. I could not see any of the Coastal Heights subdivision from the front deck (or the inlet), which looks out over mature bush. I could not see any development from the Larsens’ property.
Legal principles – general
[105] The text of s 317 is already set out at [10] above, but for ease of reference is replicated here:
317 Court may modify or extinguish easement or covenant
(1)On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish (wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that —
(a) the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii)the character of the neighbourhood:
(iii)any other circumstance the court considers relevant; or
(b) the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
(c) every person entitled who is of full age and capacity —
(i)has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or
(ii)may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or
(d) the proposed modification or extinguishment will not substantially injure any person entitled; or
(e) in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or
(f) in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
(2)An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
[106] As a preliminary point, the applicants accept that the onus of proof lies on the burdened owner (that is, the applicants in this case) to show that reason exists for any orders sought, and that it is not for the owner of the benefited land (the respondents) to show a need for the continuation of the easement or covenant.12
[107] The leading modern authority on the proper approach to s 317 of the Act is the Supreme Court’s decision in Synlait Milk Ltd v New Zealand Industrial Park Ltd (Synlait).13 The Court confirmed that the authorities envisage a two-stage approach to applications under s 317:14
(a)first, to determine whether one (or more) of the grounds in s 317(1) is made out; and
(b)second, to determine whether the discretion to extinguish or modify the covenant should be exercised.
12 Manuka Enterprises Ltd v Eden Studios Ltd [1995] 3 NZLR 230 (HC) at 233.
13 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657.
14 At [67].
[108] The Court noted, however, that if one of the grounds set out in s 317(1)(a) is made out, the Court will have already found at the first stage that “the easement or covenant ought to be modified or extinguished (wholly or in part)” (emphasis added). The Court accordingly stated that this “may bring into play at the first stage some of the considerations that are also relevant at the second stage”.15
[109] The Court also discussed amendments to s 317 and/or its predecessor. It observed that s 317 had replaced the equivalent provision of the Property Law Act 1952, which did not contain a provision similar to s 317(2), namely that a Court may extinguish or modify a covenant on the condition the applicant(s) pay compensation to the respondent(s). Further, s 317 itself has been amended in recent years to include subparas (e) and (f). In Synlait, the Supreme Court referred to Randerson J’s observations on the statutory history of s 317, and endorsed his comment that “while a degree of caution was appropriate, the power to modify should not be so restrictively applied that the section ceased to have the remedial effect intended”.16 The Supreme Court went on to state:17
[84] We consider caution is necessary in overlaying the clear statutory wording of s 317 with requirements that cases be exceptional, that sanctity of contract be protected, that property rights not be expropriated and the like. Easements and covenants are created subject to the provisions of the Property Law Act, including s 317. The extent of the sanctity of the contracts underlying easements and covenants and the nature of the property rights they create are governed by s 317. There is a circularity about saying that property rights must be protected from the exercise of the power conferred by s 317 when the fundamental premise of the section is that those property rights are liable to be modified or extinguished.
[85] We would not, therefore, overlay the requirements of s 317 with additional, non-statutory criteria that have the effect of altering the clear parliamentary intention that easements and covenants should be amenable to modification or extinguishment in defined circumstances (noting that the defined circumstances are broader in the case of covenants because of the new paras (e) and (f) in s 317(1).
[86] Nor do we consider it is correct to say that s 317 cannot be used to free the owner of burdened land from an easement (or covenant) simply to improve the enjoyment of his or her property for his or her private purposes, as the Court of Appeal said in Okey v Kingsbeer. There is nothing in s 317 to that effect. As Cooke J noted in Pollard v Williams, “All applicants to vary an
15 At [67].
16 At [77].
17 Citations omitted.
easement or covenant are no doubt seeking to improve the enjoyment of their own property.”
[87] We agree with the sentiment expressed in the context of equivalent Victorian legislation by Morris J in Stanhill Pty Ltd v Jackson. He expressed the view that the generally conservative approach taken by the Australian courts to the equivalent provision in the relevant state legislation was the result of judges allowing themselves to be guided not by the words of the legislation but by the words of other judges. He considered that some of these judicially imposed restrictions were without justification given the language of the relevant section.
[88] All of this does not mean that the importance of contractual and property rights can be ignored. But they must be considered in the factual context before the court, rather than as generic fetters on the court’s discretion. Contractual rights may well be significant where the original parties to a covenant are still the parties at the time of the s 317 application. And concern about expropriation of property rights may arise where the s 317 applicant is a public body. These are just examples. We think it is important that each application is considered on its own merits, without assuming these considerations arise in every case.
[89] We agree with Cooke J’s observation in Pollard v Williams that s 317 requires a balancing of policy considerations. The factors he mentions are important, but others, such as environmental factors, may be important in other cases. Further, the recent amendment to s 317(1) makes it clear that issues of fairness may arise in some cases. Given the broad range of situations in which s 317 applications are made, the potential range of relevant matters should not be restricted.
[110] The principles governing applications under s 317 were also considered by the Court of Appeal in Reynolds (as trustees of the F & J Reynolds Trust) v Parklands Properties Ltd (Reynolds), a decision which followed the Supreme Court’s decision in Synlait.18 The Court in Reynolds was divided, though agreed on the proper approach to applications under s 317. In summarising the approach, Venning J stated:19
I take from the above comments [those from Synlait quoted at [109] above] that the Supreme Court intended that lower courts were to take a less restrictive approach to applications under s 317 than had been taken in the past. …
[111]The majority agreed.20
18 Reynolds (as trustees of the F & J Reynolds Trust) v Parklands Properties Ltd [2021] NZCA 394, (2021) 22 NZCPR 516 [Reynolds].
19 At [33].
20 At [138].
[112] The majority also considered the approach to applications under s 317(1)(a) generally. It agreed with Venning J’s conclusion that, factually, there had been a significant change in the neighbourhood for the purposes of s 317(1)(a)(ii). But it emphasised that:
[142] As the Supreme Court explained in Synlait Milk Ltd v New Zealand Industrial Park Ltd, s 317(1)(a) deals with changes that satisfy the court that the covenant ought to be modified or extinguished. The focus is not on the fact of change, but on the impact of the change on the benefit or burden flowing from the covenant or, as in this case, the easement.
(Emphasis in original.)
[113] The majority therefore disagreed with Venning J that it was a change in neighbourhood of a kind that meant the easement in that case ought to be extinguished, “in circumstances where those easements were created relatively recently, by Parklands itself, at a time when the change in the character of the neighbourhood was both foreseeable and foreseen”.21 The majority then observed:22
That leads into an important, and closely related, point. As the Supreme Court said in Synlait Milk Ltd v New Zealand Industrial Park Ltd, contractual rights may well be significant where the original parties to a covenant are still the parties at the time of the s 317 application.
[114]The majority summarised this aspect of its judgment by stating:23
The more distant the creation of a covenant or easement in terms of time and parties, and the less foreseeable the change in circumstances that has occurred since the covenant or easement was created, the easier it will be to make out a case for the extinguishment of that covenant or easement under s 317(1)(a) in light of that change.
[115] I turn now to consider the specific grounds relied on by the applicants. I have found it convenient to first consider ss 317(1)(a)(i) and 317(1)(b), before turning to s 317(1)(a)(ii), which is at the heart of the applicants’ case.
21 At [147].
22 At [148].
23 At [149].
Section 317(1)(a)(i) – change in nature or extent of use
Approach
[116] Section 317(1)(a)(i) concerns a change in the use of either the benefited or burdened land. The change is most likely to be relevant if it has altered the benefit or disadvantage resulting from the continuance of the easement or covenant.24
[117] In Reynolds, Venning J emphasised that s 317(1)(a)(i) requires the change in the nature of the use to have occurred between the grant of the easement or covenant and the application to the court.25 Venning J stated that the change in the use of land does not include future potential use of the land (in that case, Parklands’ desire to develop the land and to have the easement extinguished as a result).26 The majority agreed with Venning J’s approach.27
Discussion
[118] Dealing with that final point first, any future intended use of the land in this case, namely subdivision, is to be put aside.
[119] I am not persuaded that there has been any qualifying change in use of the benefited or burdened land which means that the Covenant ought to be modified or extinguished. All of the lots continue to be used primarily for residential purposes in a broadly “lifestyle” fashion. While businesses of various types are now run from at least some of the lots, there is nothing to suggest that any of these activities have altered either the benefit or burden of the Covenant, namely the restriction on further subdivision (as the burden) or protection from subdivision (as the benefit). The most significant of those businesses, at least from an impact perspective, appears to be the Larsens’ engineering business. It is difficult to see how this change means the Covenant ought to be modified or extinguished. For completeness, however, I do not accept the submission made on behalf of the Huttons that “it is not appropriate that Mr and Mrs Larsen change their own usage of their land and then seek to use their
24 Manuka Enterprises Ltd v Eden Studios Ltd, above n 12, at 234.
25 Reynolds, above n 18, at [46].
26 At [47].
27 At [138].
own actions as a reason to modify or extinguish the very Covenant they registered against the land”. There is nothing in the evidence to suggest that the carrying out of the Larsens’ business from their property is contrary to any zoning or planning rules, and it is not a breach of the Covenant, as was the case in Synlait. Accordingly, the fact that the applicants have – lawfully – altered the use of their land ought not itself be a disqualifying factor under s 317(1)(a)(i).28
[120] Unlike in some of the cases to which I have been referred, there have been no relevant zoning or planning changes to the Site since the Covenant was created. For this reason, I do not accept the applicants’ submission that the approach taken by Gault J in Re Barfilon Investment Ltd is relevant, that case involving zoning and other planning changes which were unforeseen at the time the covenant was registered.29 For similar reasons, I reject the applicants’ submission that the Site is “envisaged as residential rather than rural” according to the residential zoning. It was “envisaged” in that same way at the time the Covenant was registered in 1994, given the land was re-zoned Residential in 1990.
[121] I am also not persuaded that there are any real activities that used to be able to be carried out at the Site at the time the Covenant was registered, but which cannot now be carried out or are more difficult. There is some reference to complaints about noise from certain machinery, but no details are provided in this regard. There is certainly no evidence of any material difficulties over a period of more than two decades (since Coastal Heights was completed or near completed). Sheep continue to be able to be run on the properties, and it is difficult to see how any related complaints materially alter the burden or benefit of the Covenant in any event. Mr Larsen refers to being unable to control pests with firearms, but if that is suggested as being the result of the land no longer being zoned Rural, then that zone change occurred four years prior to the Covenant being registered. I therefore do not accept the applicants’ submission that the “normal use” of the Site envisaged at the time the Covenant was registered is now being impeded by changes to the surrounding area.
28 Depending on the circumstances, however, it may be a factor relevant to the second, discretionary phase of the inquiry.
29 Re Barfilon Investment Ltd [2019] NZHC 780.
[122] Mr Larsen also refers to some of the lots now being able to make use of other wastewater infrastructure resulting from the Coastal Heights and Inlet Views developments. As a result, he says the need to maintain larger parcels of land for septic tank use no longer exists. I observe that I am somewhat sceptical about the septic tank ground coverage being a reason, or at least a driving reason, for the Covenant being registered, given the underlying planning/regulatory rules concerning septic tank requirements would have no doubt driven and thus controlled lot size, without the need for a separate covenant to act as a control. Further, there is no expert evidence about this issue, and it is not apparent that all lots within the Site could benefit from surrounding wastewater infrastructure in any event.
[123] For these reasons, I am not persuaded that there has been a change in the use of the benefited or burdened land which means the Covenant ought to be extinguished or modified. This ground of the application is not made out.
Section 317(1)(b) – impediment to reasonable use
Approach
[124] In Synlait, the Supreme Court confirmed that the focus of s 317(1)(b) is whether the nature or extent of the impediment created by a covenant or easement has changed, not whether the nature or extent of the reasonable use of the land has changed.30
[125] In Synlait, the covenant restricted the use of the land in question to grazing and forestry. Zoning changes subsequent to the covenant being created meant that the activities that were permitted on the burdened land (grazing and forestry) were no longer permitted under the zoning. As a result, a resource consent would have been required in order to continue to use the land in the manner required by the covenant, and if not granted, the land could not be used at all. The Supreme Court concluded that these matters changed the nature of the impediment created by the covenant, and such changes could not have been foreseen at the time the covenant was entered into.
30 Synlait Milk Ltd v New Zealand Industrial Park Ltd, above n 13, at [161].
Discussion
[126] This case is quite different. There have been no relevant zoning changes either to the Site or its immediate surrounds since the Covenant was created. What development has occurred in the immediate neighbourhood was reasonably foreseeable and was largely complete around 20 years ago (see further below at [138] to [141]). At the time the Covenant was created, the underlying land was zoned Residential with subdivision permitted down to 625m2 per site. That remains the case.31 Reasonable use of the land was and continues to be subdivision in the context of permitted surrounding subdivision. The impediment to reasonable use created by the Covenant has accordingly not changed, let alone in a manner which was unforeseeable. This ground is also not made out.
Section 317(1)(a)(ii) – change in character of neighbourhood
Approach
[127]In Reynolds, Venning J stated:32
While the benefitted and burdened land may be part of the neighbourhood, the neighbourhood is not restricted to the properties affected by the easement. The neighbourhood may extend to other properties in the immediate vicinity not entitled to the benefit of or burden of the easement.
(Emphasis added.)
[128] There is no suggestion that the majority disagreed with Venning J’s characterisation of “the neighbourhood” in this way.
[129] Venning J also observed that “[w]hile the development may have been contemplated, the character of the neighbourhood only changes when the development is completed.”33 As such, contemplated development does not itself give rise to a change in the neighbourhood. The rationale for yet to be developed projects not qualifying as a change in the character of the neighbourhood is understandable. It would be unfair to respondents to modify or extinguish a covenant on the basis of a
31 The evidence suggesting that the only change is that subdivision may now be permitted down to 600m2 per site. There is no suggestion this is a material change.
32 Reynolds, above n 18, at [69].
33 At [71].
proposed development or project, only for that development or project not to come to fruition. Such a scenario is unlikely to be rare.
[130] This approach is also consistent with the Supreme Court’s decision in Synlait, namely that while a zoning change may be relevant under s 317(1)(a)(ii), it would be unlikely itself to amount to a “change in the character of a neighbourhood”.34 Of some relevance to the present case, the Court stated that:35
If that were not the case, there is a risk of undermining the purpose of covenants designed to resist the impact of zoning changes. A change in zoning can, however, be brought into consideration when determining whether the characteristics of the neighbourhood have changed.
(Emphasis added.)
[131] There was some discussion at the hearing before me as to whether foreseeability of the change in neighbourhood is relevant to s 317(1)(a)(ii) (not being an express statutory criterion as it is in s 317(1)(b)). The majority in Reynolds was clear, however, that the foreseeability of the change in circumstances since the covenant or easement in question was created is a relevant aspect of the inquiry (see that extract from the majority’s judgment set out at [114] above). While that observation was framed in relation to s 317(1)(a) more generally, it was a central part of the majority’s reasoning as to why the easements in that case ought not to be modified or extinguished pursuant to s 317(1)(a)(ii).36
Discussion
[132] The first step is to define the relevant “neighbourhood” for the purposes of the present application. The respondents accept, rightly in my view, that the neighbourhood comprises not only the Site and the immediate surrounding properties, but also Stillwater itself.
[133] I do not consider the broader Silverdale, Orewa, Milldale and Millwater areas to be part of the neighbourhood for the purposes of s 317. Those areas are some
34 Synlait Milk Ltd v New Zealand Industrial Park Ltd, above n 13, at [151].
35 At [151].
36 In that case, the changes were not only foreseeable, but also foreseen by the applicant (Parklands).
considerable distance away from the Site (in terms of metres or kilometres), and this was evident from the site visit I conducted.
[134] I also put to one side evidence of potential future developments at sites such as Weiti Village, Weiti Station and the like. There was no detailed evidence in relation to these developments, including where they will be located, what they involve and when they will occur. Further, and at least based on what evidence there is about their location, they are unlikely to form part of the neighbourhood (subject, of course, to where they are actually located vis-à-vis the Site).37 In addition, and perhaps most importantly, there is no suggestion they have yet been constructed, and so on the approach adopted in Synlait and Reynolds, the fact that they may be in the planning stages does not amount to a change in the character of the neighbourhood.38
[135] For the same reasons, I put aside the forthcoming Penlink development. There was an unfortunate lack of detail and admissible evidence on this topic. On the basis of the evidence that is before the Court, it is not clear precisely where the Penlink route will be in relation to the Site, when it will be developed, and once it has been developed, what its impact, if any, will be.39
[136] I am nevertheless satisfied that as a matter of fact, there has been some change in the character of the neighbourhood since the creation of the Covenant, namely by the development of the Coastal Heights and Inlet Views subdivisions. That change is evident from the “timeline” aerial images contained in Appendix A to this judgment. I am not persuaded, however, that this change in the neighbourhood is of a kind which means the Covenant ought to be extinguished. I say this for the following reasons.
[137] First, the zoning that enabled the Coastal Heights and Inlet Views subdivisions was put in place in 1990, four years before the Covenant’s creation. Those
37 For example, a development near the south boundary of the Site is likely to form a part of the neighbourhood.
38 As was also the case in North Holdings Development Ltd v WGB Investments Ltd [2014] NZHC 670 at [27].
39 The foreseeability of the Penlink development would also need to be taken into account. I accept, however, that it appears to have been “on and off” the table for a very long period of time, such that what now appears to be certainty about it proceeding, and when and where it will be, is likely to ameliorate any such argument.
developments have therefore not come about as a result of zoning changes subsequent to the Covenant.
[138] Second, and allied to the above point, development of this nature was in my view foreseeable. The very fact that the land to the north/north-east of the Site, as well as the Site itself, was re-zoned from Rural to Residential in 1990, permitting subdivision of lots down to 625m2, meant development of this type was highly likely if not inevitable. I acknowledge Mr Larsen’s evidence that he was not aware of the Coastal Heights development itself until later, but that is different to the foreseeability of development of the general type that has actually occurred.
[139] Third, and again flowing from the point just made, the fact that the zone change came about before the Covenant’s registration makes the Supreme Court’s observation that the Court ought to avoid the risk of undermining the purpose of covenants designed to resist the impact of zoning changes particularly relevant. As Mr Larsen explains, a key reason for the Covenant was to preserve the rural character of the Site. Plainly the Covenant could only provide that protection in relation to the Site itself, and again this must have or ought to have been understood by the Larsens when creating the Covenant.
[140] Fourth, the area still has a distinctly rural character about it, and certainly the Site itself does. In this context, I do not accept Mr Sprague’s generalised and high level evidence that “despite these good intentions in 1994, what is best described as ongoing urbanisation facilitated through more intensive re-zonings by local authorities between 1994 and the present date, has led to significant in-fill now abutting to both the east and north-eastern boundaries of the subject site”. Mr Sprague’s evidence does not appear to acknowledge that the relevant land was re-zoned Residential in 1990, or that the developments he refers to were completed some 20 years ago. There is no other evidence of “urbanisation facilitated by more intensive re-zonings” since 1994, at least in what is to be considered “the neighbourhood” for the purposes of s 317(1)(a)(ii). In my view, the Site and its immediate surrounds retain a sufficiently rural character that the Covenant still has relevance and is not obsolete.
[141] Fifth, and as just noted, the developments which comprise the change in neighbourhood occurred some 20 years ago. I consider this an important point when considering whether that change is of a kind which means that the Covenant ought to be extinguished or modified. The fact that the only development relevant to s 317(1)(a)(ii) occurred some 20 or so years ago means the effluxion of time since the Covenant was registered is not as material as it could otherwise be. This, together with the fact that, other than lot 3, all of the lots remain in their original ownership, also tends to suggest that the Covenant remains relevant and is not obsolete.
[142] The collective effect of those matters discussed at [137] to [141] above is that I do not consider the change to the neighbourhood since the Covenant was registered has led to any material change to the benefits or burdens flowing from the Covenant. There is no material change to the benefit, in terms of enjoying a site which remains broadly rural and free of intensive development. Similarly, there is no material change in the burden, in terms of preventing subdivision when that is permitted by the underlying zoning and when neighbouring development was foreseeable. That burden is essentially the same today as it was in 1994.
[143] There are a number of additional factors which I also take into account (that would ordinarily be considered at the second, discretionary phase of the inquiry), which further support the conclusion that the Covenant ought not to be extinguished or modified:
(a)As the applicants accept, the Larsens, who are the driving force behind the current application, created the Covenant. While I do not place great weight on this factor, it is recognised in the authorities as something that can weigh against extinguishing or modifying a covenant.40
(b)I take into account the term of the Covenant,41 which refers to the restriction on subdivision applying “forever hereafter”. This is
40 As was the case in Reynolds, above n 18, at [147] and [149].
41 The Supreme Court in Synlait accepted that the term of a Covenant may be a relevant factor:
Synlait Milk Ltd v New Zealand Industrial Park Ltd, above n 13, at [171(b)].
particularly relevant in the context of a zoning change from Rural to Residential shortly prior to the Covenant being created, and the foreseeability of development in the neighbourhood as a result.
(c)While the Larsens’ current proposal is only to create two additional lots on their property for the use of their daughters, there is no certainty in this regard and the application is not limited to that change. Rather, the Larsens wish to retain flexibility. The other applicants similarly do not give any evidence of particular subdivision plans. Wholesale extinguishment of the Covenant on the applicants’ lots, but its retention on the respondents’ lots, therefore gives rise to considerable uncertainty and what I accept to be potential injury to the respondents. Again, it is unfortunate that there is no suitable expert evidence as to the subdivision potential of the applicants’ lots and the resulting injury, if any, to the respondents’ lots. Ultimately, the burden rested on the applicants to put the relevant information before the Court.
(d)Finally, I also take into account that this is not necessarily “the end of the road” for the applicants. At least on the evidence before the Court, it seems unlikely that subdivision restricted to two additional lots on the Larsens’ land (in the locations indicated) would give rise to substantial injury to any of the remaining lots. Ms Skelton and Mr Hodge have confirmed that they do not object to that development, and the shared driveway is permitted to support up to 10 properties. This tends to suggest that any application to modify the Covenant to that extent may well be successful (on the basis the modification does not give rise to substantial injury for the purposes of s 317(1)(d)). In this context, I expect the parties would be able to reach an agreed resolution on this particular change to the Covenant on lot 6. In addition, if and when there is actual further change to the neighbourhood, it will remain open to any one or more owners of the lots to apply (with suitable evidence) for modification or extinguishment of the Covenant, should agreement not be able to be reached.
Result and costs
[144]The application to extinguish or modify the Covenant is dismissed.
[145] My preliminary and non-binding view is that there appears to be no reason why costs should not follow the event in the ordinary way, on a 2B basis. That would result in a costs award against the applicants and in favour of the respondents (noting that any costs award in favour of Ms Skelton and Mr Hodge, as self-represented litigants, would be limited to disbursements). On the information currently before the Court, there does not appear to be any basis for increased or indemnity costs.
[146]If, despite this preliminary indication, the parties are unable to agree costs:
(a)the respondents may file a costs memorandum within 15 working days of this judgment; and
(b)the applicants may file a costs memorandum in response within a further five working days.
[147] No memorandum (excluding schedules) is to be longer than five pages in length. Unless I need to hear further from the parties, I will then determine costs on the papers.
Fitzgerald J
Solicitors: Franklin Law, Auckland
Braun Bond and Lomas, Hamilton
To:T Skelton, Auckland R Hodge, Auckland
APPENDIX A