Mandic v The Cornwall Trust Board (Inc) - [2010] NZCA 576

IN THE COURT OF APPEAL OF NEW ZEALAND
CA787/2009
[2010] NZCA 576
BETWEENLISA MARIE COLLEEN MANDIC AND STEPHEN NEIL DOHNT
Appellants

ANDTHE CORNWALL TRUST BOARD (INC)
Respondent

Hearing:12 October 2010

Court:Glazebrook, Randerson and Harrison JJ
Counsel:B P Keene QC and J F Anderson for Appellants
M E Casey QC, J K Macrae and A F Buchanan for Respondent

Judgment:3 December 2010 at 12.00 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. We certify for two counsel.

____________________________________________________________________
REASONS OF THE COURT
(Given by Harrison J)
Introduction
[1]       A group of lessees who are dissatisfied with the Cornwall Park Trust Board’s (the Board’s) application of an agreed formula for fixing ground rental on renewal of leases of residential land appeal against an adverse judgment delivered in the High Court at Auckland.[1]
[1]      Mandic v Cornwall Park Trust Board (2009) 10 NZCPR 790.
[2]       With one exception, Courtney J dismissed the lessees’ application for eight declarations against the Board.[2] While the lessees’ notice of appeal and written submissions challenged the Judge’s dismissal of the balance of the declarations, the lessees’ counsel, Mr Keene QC, limited the scope of appeal in oral argument to three declarations. This step had the effect of focusing the lessees’ appeal on what might have been realistically available by way of relief in the High Court.
Background
[2] See [79].
[3]       In 1901 Sir John Logan Campbell transferred on trust to the Board a large area of open land near Epsom within a triangle formed by Manukau, Great South and Campbell Roads. The property, known as Cornwall Park, has since been farmed and maintained by the Board and is used by the general public for a range of recreational purposes.
[4]       In 1908 Sir John transferred an additional 58 hectares of adjoining land to the Board on trust to provide revenue for the maintenance and development of Cornwall Park. Between 1910 and 1923, following subdivision of this land, the Board leased 115 residential sections to individual lessees at agreed ground rentals. In due course, the lessees constructed homes on and made associated improvements to their sections. The leases (known as Glasgow leases) are in standard form for terms of 21 years with perpetual rights of renewal reserved to the lessees. Mr Casey QC for the Board advises that all lessees have exercised that right at every renewal since inception.
[5]       The leases provide for the ground rental payable by the lessee to be fixed on renewal for the full period of the renewed term. There are no rights of review. The rent is to be determined according to an agreed formula which requires valuers appointed separately by the Board and the lessee to make two separate valuations. One is of the gross or capital value of the fee simple of the property. The other is of the value of all substantial improvements of a permanent character made…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Mandic v The Cornwall Trust Board (Inc)

Details

AGLC: Mandic v The Cornwall Trust Board (Inc) [2010] NZCA 576
Case: [2010] NZCA 576
Decision Date: 3 December 2010

CaseChat Overview and Summary

The appeal was brought by a group of lessees who were dissatisfied with the Cornwall Park Trust Board's application of an agreed formula for fixing ground rental on renewal of leases of residential land. The lessees appealed against an adverse judgment delivered in the High Court at Auckland. Courtney J dismissed the lessees' application for eight declarations against the Board. While the lessees' notice of appeal and written submissions challenged the Judge's dismissal of the balance of the declarations, the lessees' counsel, Mr Keene QC, limited the scope of appeal in oral argument to three declarations. This step had the effect of focusing the lessees' appeal on what might have been realistically available by way of relief in the High Court. The Court found that the lease materially provides that on the expiration of the term, the outgoing Lessee shall have the right to obtain a new lease of the land at a rent to be determined upon the basis of the valuation made in accordance with the said provisions for the term of twenty-one years computed from the expiration of the expiring term. The duty of the umpire on reference to him of any question shall be to consider the respective valuations of the two arbitrators in the matter in which their valuations do not agree and then to make an independent and substantive valuation and the last mentioned valuation shall be the decision of the umpire. The Court found that the lessees sought a declaration that the two separate valuations under clause 13(b) of the lease (respectively Gross Valuation and Improvements Valuation) are required to be derived independently of each other. The Court found that clause 13(b) requires each separately appointed valuer to make separate valuations of the gross value of the fee simple and of the lessees' improvements. The Court found that the word "separate" in this context means apart from but does not mean wholly unrelated to. The valuer must carry out two distinct or discrete exercises. But that does not mean that, when undertaking one, he or she is bound to shut out or disregard the other. The Court found that for the purposes of the cl 13 exercise improvements must be considered as part of the composite whole. The Court found that the lessees sought a declaration that the figure derived from deducting the improvements valuation from the gross valuation pursuant to cl 13(h) is not necessarily always equivalent to an assessment of the freehold value of the land as though it were vacant and unimproved. The Court found that the Court concluded that "... the terms of the lease do mean that the residual value on which ground rent is paid is the equivalent of the unimproved value of the land...". The Court found that the Court accepted that a valuer cannot start with unimproved value. The Court found that consistently with best practice, a valuer who has calculated the residual value according to the formula is entitled to take into account the unimproved value as a means of verifying the result. The residual and unimproved values may frequently be the same. The Court found that the Court rejected Mr Keene's submission that the Board's valuers have calculated ground rent as if the land were vacant and unimproved. The Court found that the Court's judgment must be modified to that extent, but it is not necessary to make any formal declarations. The Court found that the lessees sought a declaration that the gross valuation is limited by any restrictions arising from current zoning and town planning requirements applying to the property, the state of land as occupied by the improvements, and user restrictions under the lease. The Court found that Courtney J found in the lessees' favour on this component. The Court found that the Court declined to make declaration 3(b). The Court found that the Court endorsed Courtney J's conclusion as follows: "The leaseholders' argument ignores the very nature of the leasehold interest and the purpose of the valuation process, which is the notional separation of the lessee's and lessor's interests. With the exception of the fencing covenant said to be registered on the fee simple (but which actually does not appear in the lease) none of the restrictions relied on affect the fee simple at all. They affect only the lessee and they would cease to exist if the lease was not renewed and the land reverted to the lessor. Further, since some obligations (e.g. to maintain and to insure) require payment by the lessee, there is no reason to distinguish them from the payment of the rental which Mr Keene submitted was something to be put aside from the valuation of the fee simple. I therefore conclude that restrictions under the lease are not to be taken into account." The Court found that the lessees' appeal was dismissed. The lessees must pay the Board's costs for a standard appeal on a band A basis and usual disbursements. The Court certified for two counsel.

Orders