Menzies v Goodley
[2015] NZHC 1481
•30 June 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000101 [2015] NZHC 1481
BETWEEN GRAEME ROSS MENZIES, JULIE
ANNE MENZIES AND DONALD WILFRED MENZIES AS TRUSTEES OF THE GRAEME MENZIES FAMILY TRUST AND JULIE ANNE MENZIES, GRAEME ROSS MENZIES AND DONALD WILFRED MENZIES AS TRUSTEES OF THE JULIE MENZIES FAMILY TRUST
Plaintiffs
AND
WAYNE MICHAEL GOODLEY AND PAMELA DIANNE GOODLEY AS TRUSTEES OF THE PAW FAMILY TRUST
Defendants
Hearing: 25, 26 May 2015 Appearances:
N R Hall for the Plaintiffs
S P Bryers for the DefendantsJudgment:
30 June 2015
JUDGMENT OF GILBERT J
This judgment is delivered by me on 30 June 2015 at 4 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
MENZIES v GOODLEY [2015] NZHC 1481 [30 June 2015]
Introduction
[1] This case concerns the proper interpretation of a height restriction covenant limiting what may be built on a beachfront property owned by the defendants at Mt Maunganui. The plaintiffs, who own the property directly behind, contend that the dwelling the defendants propose to build will breach the height restriction. They seek a permanent injunction preventing the building work going ahead. Alternatively, if their interpretation of the height restriction covenant is not upheld, the plaintiffs seek an order rectifying it so that it reflects what they say was the common intention of the parties at the time the covenant was signed, over 20 years ago.
[2] It is common ground that if the defendants’ interpretation of the covenant is correct, then the dwelling they propose to build, which is a two storey house with a flat roof rising at a 22.5 degree angle from west to east, will comply. It is also common ground that if the plaintiffs’ interpretation of the covenant is correct, the proposed building will not comply because they say that the maximum height permitted under the covenant is for a central apex on a roof pitched at a maximum angle of 22.5 degrees.
[3] The parties who negotiated the covenant, Wayne Goodley and Warwick Broughton, have differing recollections of their discussions leading to the execution of the covenant. This is hardly surprising given the amount of time that has now passed. Unfortunately, all relevant documents, other than the Memorandum of Transfer and the Deposited Plan, have long since been destroyed. The Court is left in the difficult position of trying to determine what occurred more than 20 years ago, without the benefit of contemporaneous records, based on the accounts of witnesses who understandably have imperfect memories and whose evidence is directly in conflict.
[4] The height restriction was negotiated in the context of a four lot subdivision leading to the creation of lot 3, the dominant tenement now owned by the Menzies, and lot 4, the servient tenement owned by the Goodleys. I start by setting out the
basic facts relating to the subdivision, which are not materially in dispute, before addressing the contest about the discussions leading to the execution of the covenant.
The subdivision
[5] In 1993, Mr Goodley and his wife, Pamela, who live in Auckland, wanted to purchase a beachfront property at Mt Maunganui to use initially as a holiday home but with a long-term view of living there permanently in their retirement. A local real estate agent introduced them to an elderly couple who he thought may consider selling their large beachfront property. The property, comprising some 1600 square metres, extended from Ocean Beach Road to the beach. There was a large backyard between the road and the house. The house was situated on the most elevated part of the site with a retaining wall in front. There was a garage in front of the retaining wall on the lower part of the section, nearer to the beach. Following discussions over Labour Weekend, the Goodleys signed an agreement in November 1993 to purchase the property for $580,000 with settlement to take place in late March 1994.
[6] The property was larger and more expensive than the Goodleys were looking for. They only wanted the beachfront part of the property where the garage was. For this reason, the real estate agent introduced them to Warwick Broughton, a local builder and property developer, to see whether he would be interested in subdividing and redeveloping the rear part of the property in a joint venture arrangement. Mr Broughton and his wife Janne agreed to this proposal.
[7] No formal agreement was signed but there is no dispute about the essential terms of the oral agreement reached between the Goodleys and the Broughtons, other than whether any height restriction in relation to lot 4 was agreed at that stage. They agreed to take title to the property as tenants in common in unequal shares, 11/20ths to the Broughtons and 9/20ths to the Goodleys, although no one can now recall how this split was arrived at. The Goodleys agreed to pay $250,000 for the beachfront site in front of the retaining wall where the garage was situated. This became lot 4 with an area of 534 square metres. They also agreed to meet a proportionate share of the costs of the subdivision. The Broughtons agreed to pay $330,000 for the remaining part of the site which included the house. They would carry out the
subdivision and would be free to redevelop their part of the land as they pleased and retain all profits from this.
[8] Settlement was duly completed on 24 March 1994 with title to the entire property being taken in the agreed shares. The transfer was registered on
13 April 1994.
[9] Prior to settlement, in late 1993 or early 1994, Mr Broughton instructed a surveyor, Peter Crane, to prepare a plan of subdivision showing four lots. The subdivisional plan was prepared in February 1994 and approved by the Council the following month.
[10] New titles were issued in June 1994. Lots 1, 2 and 3 were transferred to the Broughtons in August 1994 to enable them to on-sell. Lot 4 was not transferred to the Goodleys until the following year. The height restriction covenant is contained in the Memorandum of Transfer for lot 4 which was signed by the Broughtons and the Goodleys in March 1995.
[11] Mr Broughton moved the existing house on lot 3 to lot 1, the site nearest the road. He built a two storey townhouse on each of lots 2 and 3 which he then sold. The Broughtons retained lot 1 with the original house and rented this out for a time before selling it. The Menzies are the fourth owners of lot 3 taking into account the Broughtons.
[12] Mr Broughton assisted the Goodleys with modifications to the garage on lot 4 to enable them to use it as a holiday home. It was not until late last year that the Goodleys were ready to build their new home on the site.
The covenant
[13] Mr Broughton says that at the time the joint venture was agreed, the District Plan would have allowed a three storey building of up to eight metres in height to be built on lot 4. A building of this size would block all views from lot 3. He says that he only agreed to proceed with the joint venture on the basis that there would be a height restriction limiting any building on lot 4 to a single storey with a
pitched roof. However, he acknowledged that the precise details of the restriction were not developed at the time he and his wife committed to the venture.
[14] Mr Broughton says that the Goodleys did not raise any issue with his proposal for a height restriction limiting any building on lot 4 to a single level dwelling. He says they told him that they intended to use the house in their retirement and did not want to have stairs to contend with when they were older.
[15] Mr Broughton says that after he committed to the venture, he gave further thought to how the height restriction would work. He says he was concerned that the lack of certainty surrounding the future development of lot 4 would deter potential purchasers of lot 3. He nevertheless appreciated that any restriction needed to allow for the construction of a suitable dwelling on lot 4. Mr Broughton says that both parties put considerable thought into the matter and discussed it on a number of occasions in late 1993 and early 1994. However, he cannot now recall the detail of these discussions or even where they took place.
[16] Mr Broughton says he recalls discussions about the angle of pitch on the roof. He says he proposed a 20 degree angle and suggested that the Goodleys look at a house he had built nearby with a pitched roof having that angle. He says that after viewing that house, the Goodleys came back proposing a 25 degree angle. Mr Broughton says that they agreed to compromise by splitting the difference at
22.5 degrees.
[17] Mr Broughton says he then prepared a plan showing elevations for a single storey dwelling with a pitched roof rising at a 22.5 degree angle to a central apex and an attached garage between it and lot 3. The garage was set in line with the western side of the house allowing for a turning area on the eastern side. It featured the same roofline but at a reduced height. Mr Broughton’s plan included setbacks from the boundaries for the sides of the house and garage. He based these on the minimum requirements set out in the District Plan which at the time allowed building up to
3 metres from a common boundary. The exception was the setback between the garage and the boundary with lot 3 which was set at 4 metres. Mr Broughton says he discussed the plan with the Goodleys and they agreed to it. He says the price was
negotiated after the detail of the height restriction had been agreed and claims that the price for lot 4 was “substantially discounted from market value to reflect the impact that this height restriction had on lot 4”.
[18] Mr Broughton gave his plan to Mr Crane who incorporated the measurements onto the Deposited Plan, having translated the heights to Reduced Level heights with reference to a known datum point in accordance with his survey. The Deposited Plan prepared by Mr Crane shows the footprint of the house and garage as drawn by Mr Broughton with the boundary setbacks detailed. Mr Crane described this area on the Deposited Plan as “Areas of Height Restrictions, see Elevations”. Alongside where the lots were depicted, Mr Crane reproduced Mr Broughton’s southwest and southeast elevations of the house and offset garage showing the roofline of the garage and house rising at an angle of 22.5 degrees to an apex in the middle. The heights of the apexes of the garage and house roofs are shown as RL 15.17 and RL 16.17 respectively. The wall heights are shown as RL 13.56.
[19] Mr Goodley has a completely different recollection of these events. He says there was no discussion about any height restriction prior to the joint venture being agreed. He is adamant that he and his wife always intended to build a two storey house and would never have agreed to limit themselves to a single storey house. He also says he did not look at any other house to appraise the pitch of the roof. He says that he never saw Mr Broughton’s plan and it is accepted that he did not have any dealings with Mr Crane.
[20] Mr Goodley believes that the prospect of a height restriction was not even raised with him until May 1994 when Mr Broughton asked him to sign an easement certificate relating to intended easements for services. The certificate also referred to a right of way on the eastern side of lots 1, 2 and 3 providing for vehicular access to each of the four lots and a further, narrower, right of way extending down the eastern side of lot 4 to allow pedestrian access to the beach. The rights of way referred to in the easement certificate were shown on the Deposited Plan that Mr Crane had prepared. Mr Goodley nevertheless contends that he signed the easement certificate, which is dated 11 May 1994, without seeing the plan. He says that he objected to the proposed pedestrian access way over lot 4 because there was an existing public
access way on an adjacent reserve. However, after discussing the matter with Mr Broughton and the Council, he agreed to the pedestrian access way on the basis that it would only be exercised if the existing public access way ceased to exist. Mr Goodley says that Mr Broughton mentioned at that time “in passing” that he may seek a height restriction for any building on lot 4.
[21] Mr Goodley says that he did not see the Deposited Plan until early the following year when Mr Broughton asked him to sign the initial draft of the Memorandum of Transfer for lot 4 which had been prepared by his solicitor and incorporated the covenant. Mr Goodley says that he was angry when he saw the height restrictions on the Deposited Plan and made it clear that he would not agree to these. He says that he discussed the matter with Mr Broughton and they agreed to amended heights for the house and garage roofs as set out on the executed copy of the Memorandum of Transfer. He says these were adjusted to ensure that he and his wife would be able to build a two storey house on their property.
[22] These competing accounts are not reconcilable. I accept that both men gave their evidence honestly and to the best of their recollection but, after such a lengthy passage of time and without access to contemporary records to assist, it is not possible for either to be able to recall these events accurately.
[23] I consider that as an experienced property developer in this locality, Mr Broughton would have recognised the need for a height restriction to protect the value of the land he was to acquire and would have raised this with Mr Goodley before committing to the venture. Mr Broughton knew that the District Plan at that time would permit a three level development to be constructed on lot 4 which would block all views from lot 3 and dramatically affect its value. I accept Mr Broughton’s evidence that he did discuss this with Mr Goodley during the early stages of their negotiations, prior to him committing to the venture.
[24] However, I also accept Mr Goodley’s evidence that he did not agree to restrict any building to a single storey. I accept his evidence that he and his wife always intended to build a two storey house on this valuable beachfront property, consistent with the neighbouring properties and the two storey townhouses that
Mr Broughton proceeded to erect on lots 2 and 3. Mr Goodley’s unchallenged evidence was that Mr Broughton offered to build a townhouse to the same design on lot 4, at the same time as he constructed the others. I find that the height restriction was intended to accommodate a two storey house.
[25] I consider that Mr Broughton is mistaken when he says that the price was negotiated after the details of the height restrictions were agreed. Although there had been discussions about the basic concept, the details of the height restrictions had not been developed at that stage. Mr Broughton said that he came up with “the design for the height restriction which was depicted on the Deposited Plan” at about the time he designed the new houses for lots 2 and 3. The price was agreed well before this and was based on the amount the Goodleys had available to invest. I reject Mr Broughton’s evidence that the price agreed for lot 4 was substantially discounted from market price to reflect the height restriction.
[26] It appears that Mr Broughton and Mr Goodley anticipated that any house built on lot 4 would likely have a pitched roof with an apex near the middle. This is supported by the drawing Mr Broughton prepared and gave to Mr Crane and by the fact that the second level of the townhouse on lot 3 was designed to maximise the views from each side of the expected apex. It is further supported by the fact that in late 1995, after the townhouse on lot 3 was completed, Mr Broughton erected a profile on lot 4 with Mr Goodley’s consent to give prospective purchasers of lot 3 an appreciation of the views that would be available in the event of lot 4 being developed in accordance with the proposed height restriction. Mr Goodley said that this profile was erected against scaffolding and may have had a flat section in the middle. I do not accept this. I find that the profile had a centre apex and a pitch angle approximating 22.5 degrees.
[27] Although I find that height restrictions were discussed in late 1993 or early
1994, no binding commitments were made at that time. Mr Broughton acknowledged that the details of the intended height restriction were not developed at that stage and he knew, as did Mr Goodley, that a covenant of this nature had to be formalised in writing before it would become binding. The parties had a good
relationship and proceeded in the expectation that they would be able to reach agreement on the details when the time came for the restriction to be formalised.
[28] I do not accept Mr Goodley’s evidence that he signed the easement certificate detailing the proposed vehicular and pedestrian rights of way without sighting the Deposited Plan showing their size and location. These were important rights affecting lot 4. As a former Assistant Land Registrar, Mr Goodley would have been aware of the significance of these rights and would have wanted to see the Deposited Plan showing what was proposed before signing the easement certificate. The fact that Mr Goodley negotiated a modification in relation to the pedestrian access way demonstrates that he carefully considered the certificate before signing it.
[29] It is therefore likely that Mr Goodley would have seen the height restrictions on the Deposited Plan. It appears that he did not take any exception to these at the time which indicates that they were not inconsistent with what he had discussed with Mr Broughton. However, Mr Goodley would have known that he and his wife would not become bound by any height restrictions until a formal covenant was prepared and signed.
[30] Mr Broughton instructed his solicitor to prepare the Memorandum of Transfer for lot 4 containing the height restriction covenant. As originally drafted, the transfer recorded a consideration of $275,000. Mr Goodley noted this error when Mr Broughton brought the document to him to sign in or about February 1995. He told Mr Broughton that it would need to be amended to record the correct figure of
$250,000.
[31] At this time, the Memorandum of Transfer detailed the height restriction in the following terms:
[the owners of lot 4] will not at any time hereafter take place erect maintain or permit any building or part of any building or other structure or obstruction whatsoever or allow any trees shrubs bushes or any other vegetation on the servient land or any part or parts thereon to a height greater than that shown in the schedule hereto …
[32] The schedule read as follows:
THE SCHEDULE
The height to which the foregoing restriction shall apply shall be the horizontal plane shown on Deposited Plan S.67620 being reduced level
13.56 metres PROVIDED that the roof line of any buildings may slope at an angle of 22.5 degrees from the reduced level of 13.56 metres up to:
1. A reduced level of 16.17 for any house and;
2.A reduced level of 15.17 for any ancillary building to the house including any garage or carport.
The origin of levels are in terms of Moturiki Datum as shown on Deposited Plan S.67620 also shown reduced level 7.406 metres above old reference mark 61 SO.59650 and also shown reduced level 11.32 metres above Old Iron Spike III on Deposited Plan S.65878.
[33] It is common ground that Mr Broughton and Mr Goodley spent some time discussing the terms of the height restriction on this occasion. They climbed up onto the balcony of the partly completed townhouse that Mr Broughton was building on lot 3 to assess the effect of the proposed restriction. Mr Broughton initially said that Mr Goodley wanted to increase the roof height because, having “shown the design on the Deposited Plan to their architect in Auckland, …[the architect] had said that the maximum apex height for the house should be increased to allow for a greater internal stud height”.
[34] I do not accept this evidence. Mr Goodley says that he did not have an architect at that time, in Auckland or elsewhere. He says he did not have a copy of the design on the Deposited Plan and would not have been able to show it to anyone. Mr Broughton acknowledges that Mr Goodley “may have mentioned building two storeys”. I find that Mr Goodley insisted on the change to the proposed roof heights to enable him to build a two storey house, as he and his wife always intended.
[35] Following these discussions, Mr Broughton arranged for his solicitor to amend the consideration to $250,000 and change the maximum roof heights by
.33 metres from 16.17 and 15.17 to 16.50 and 15.50 respectively. There was no change to the roof angle or the base height restriction of 13.56 metres. The amended Memorandum of Transfer was subsequently signed by the Goodleys and the Broughtons and dated 7 March 1995.
What is the correct interpretation of the covenant?
[36] In their original statement of claim, the Menzies alleged that:
6.The covenant limits the erection of any building on Lot 4 to a height of 13.56 metres above Moturiki Datum, with the exception of the area shown on the Deposited Plan as “Areas of Height Restrictions” where the restriction may be exceeded by an apex roof line as depicted on the Deposited Plan with both sides of the apex of the building sloping upwards from the western and eastern boundaries of the “Areas of Height Restrictions” at a maximum angle of 22.5 degrees from 13.56 metres above Moturiki Datum with the apex running in a south/north direction.
7.Notwithstanding that the Transfer refers to a “16.50 for any house” and “15.50 for any ancillary building”, the effect of the covenant is to restrict the height of any building in the “Areas of Height Restriction” to:
(a) an apex point of 16.17 metres above Moturiki Datum in the case of any house; and
(b) an apex point of 15.17 metres above Moturiki Datum in the case of any ancillary buildings.
[37] The reason for the pleading in paragraph 7 of the statement of claim was that it is not possible to achieve heights of 16.50 and 15.50 metres with a roof rising at an angle of 22.5 degrees to an apex in the middle from a starting height of 13.56 metres at the edge of the building footprint as shown on the Deposited plan. The obvious difficulty with the interpretation advanced in paragraph 7 is that it gives no effect to the amendment that Mr Broughton and Mr Goodley plainly intended.
[38] Recognising this problem, the Menzies amended their claim during the trial, without objection, by deleting paragraph 7 and amending the base height from 13.56 metres to 13.89 metres. They contend that the base height of 13.56 metres referred to in the Memorandum of Transfer should be interpreted as 13.89 metres because the parties must have intended to increase all relevant heights by .33 metres to enable the increased roof heights to be achieved.
[39] Paragraph 6 of the amended statement of claim reads:
The covenant limits the erection of any building on Lot 4 to a height of
13.56 metres above Moturiki Datum, with the exception of the area shown
on the Deposited Plan as “Areas of Height Restrictions” where the restriction
may be exceeded by an apex roof line sloping to a maximum height of 16.50 metres (in the case of a house) and 15.50 metres (in the case of an ancillary building) from 13.89 metres above Moturiki Datum and as otherwise depicted on the Deposited Plan with both sides of the apex of the building sloping upwards from the western and eastern boundaries of the “Areas of Height Restrictions” at a maximum angle of 22.5 degrees with the apex running in a south/north direction.
[40] The covenant in the Memorandum of Transfer does not require the roofs to have an apex, let alone a central apex running in a north/south direction. The interpretation of the covenant promoted by the Menzies requires recourse to the height restrictions shown on the Deposited Plan. This could only be justified if these restrictions formed part of the covenant, which they do not. The only reference in the covenant to the Deposited Plan is the reference in the Schedule to “the horizontal plane shown on Deposited Plan S.67620 being reduced level 13.56 metres”. This reference does not provide any licence to incorporate all other aspects of the purported height restrictions shown on the Deposited Plan, including the footprint of the buildings and the boundary setbacks.
[41] The Deposited Plan and the Memorandum of Transfer are in conflict in relation to the height restrictions. The operative document is the Memorandum of Transfer, not the Deposited Plan. The covenant in the Memorandum of Transfer is clear and unambiguous. There is nothing in it to offend common sense. It means what it says. There is no basis to interpret it as including the additional wording set out in paragraph 6 of the amended statement of claim.
[42] I therefore reject the Menzies’ interpretation of the covenant. The first cause
of action based on a threatened breach of the covenant fails.
Should the covenant be rectified?
[43] The height restriction covenant is an important and valuable property right conferring benefits on the current and future owners of lot 3. It compromises the use and enjoyment of lot 4 by the Goodleys and their successors in title. Parties dealing in either property are entitled to rely on the terms of the covenant.
[44] The Court cannot re-write the covenant unless there is convincing evidence that the drafting failed to capture the common intention of the parties at the time they signed it. The plaintiffs have fallen well short of providing such proof. Mr Goodley and Mr Broughton have markedly differing recollections of their discussions leading to the completion of the covenant over 20 years ago. As noted, there are no contemporaneous records other than the Memorandum of Transfer and the Deposited Plan.
[45] The plaintiffs have not established that Mr Broughton and Mr Goodley intended to restrict any building on lot 4 to the footprint shown on the Deposited Plan. The setbacks Mr Broughton used on his plan which were then shown on the Deposited Plan were taken from the requirements of the District Plan other than in relation to the boundary with lot 3. Mr Broughton acknowledged that the building footprint did not form part of his agreement with Mr Goodley regarding the height restrictions. This no doubt explains why Mr Broughton’s solicitors did not purport to include building line restrictions in the covenant they prepared.
[46] Although Mr Broughton plainly contemplated that any house built on lot 4 would have an apex near the middle of the roof running in a north/south direction, he did not secure Mr and Mrs Goodleys’ commitment to this. Again, this likely explains why this requirement was not included in the Memorandum of Transfer prepared by Mr Broughton’s solicitors on his instructions.
[47] No final commitment was made by the Goodleys to any height restriction until they signed the covenant. There was no discussion about the specific surveyed RL heights until the initial draft of the Memorandum of Transfer was provided. When Mr Goodley sought clarification of the implications of the proposed roof heights, they were amended. This shows that there was no earlier common intention about those heights.
[48] There is no justification for the Court to make an order rectifying the covenant by changing the covenanted height of 13.56 metres to 13.89 metres. There is no evidence that this was discussed. If that height remains unchanged, the other
proposed modifications confront the difficulty that the increased roof heights that were plainly intended cannot be achieved.
[49] In summary, there is no convincing evidence to support the order for rectification sought by the plaintiffs. This cause of action also fails.
Result
[50] Judgment is entered for the defendants on the plaintiffs’ claims.
[51] The order for interim injunction made by Keane J on 11 March 2015 is discharged.
[52] Leave is reserved to the defendants to apply for an order pursuant to the plaintiffs’ undertaking as to damages filed in support of their application for interim injunction.
[53] If the issue of costs cannot be resolved, memoranda should be filed.
M A Gilbert J
0
0
1