Menzies v Omanu Holdings Ltd
[2015] NZHC 441
•11 March 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-101 [2015] NZHC 441
BETWEEN GRAEME ROSS MENZIES, JULIE
ANNE MENZIES AND DONALD WILFRED MENZIES
Plaintiffs
AND
OMANU HOLDINGS LTD Defendant
Hearing: 5 March 2015 Counsel:
N R Hall for Plaintiffs
A Gilchrist for DefendantJudgment:
11 March 2015
JUDGMENT OF KEANE J
This judgment was delivered by me on 11 March 2015 at 4.45pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Simpson Grierson, Auckland for Plaintiffs
Vlatkovich & McGowan, Auckland for Defendant
MENZIES v OMANU HOLDINGS LTD [2015] NZHC 441 [11 March 2015]
[1] Omanu Holdings Ltd, an Auckland company, whose shareholders are Wayne and Pamela Goodley, owns 221D Ocean Beach Road, Mt Maunganui, just above the beach. Graeme and Julie Menzies, and their co-trustee, as trustees of their two family trusts, own 221C Ocean Beach Road, the property immediately behind, on the crest of the slope above.
[2] These two properties, and two behind them, result from a June 1994 subdivision made by the Goodleys and a local builder and his wife, Warwick and Janne Broughton, as tenants in common in nearly equal shares, in which they divided into four a long piece of land extending from the sand dunes just above the beach to Ocean Beach Road, lot 1 at the roadside and lot 4 at the beach, and gave access to lots 2 – 4 by right of way.
[3] Their purpose in making this subdivision was to enable the Goodleys to acquire their beach front property, lot 4, and the Broughtons to acquire, develop and sell the remaining three lots, most pertinently that immediately behind the Goodleys’ property, now owned by the Menzies, lot 3.
[4] In August 1994 the Broughtons took title to lot 3. They moved the house then standing there to lot 1 by Ocean Beach Road. They built a house in its place and sold the property in December 1995. When in August 2012 the Menzies acquired lot 3 they did so as the fourth owners.
[5] In March 1995 the Goodleys took title to lot 4, and then in 1999 transferred their interest to Omanu, the present owner. They left standing a garage and boat shed until December 2014, when they demolished both. They now wish to build a house and an ancillary building to a design which the Menzies oppose.
[6] The Goodleys are obliged to comply with a height restriction imposed by a covenant into which they entered both as transferors and transferees, set out in the March 1995 transfer under which they took title to lot 4. As to that there is no issue. The issue is as to the nature and extent of the height restriction that covenant imposes.
[7] Omanu’s proposed house design complies with the height restriction in the covenant, if as Omanu says, relying in the first instance on a 2006 barrister’s opinion, it is definitive standing alone. Omanu’s design does not comply with that covenant, if it imports, as the Menzies contend that it must, a more closely prescriptive height restriction set out in the 1994 deposited plan creating lots 3 and 4.
[8] The Menzies contend, and it appears uncontested, that Omanu’s house design exceeds the deposited plan height restriction in four ways: (i) it exceeds the apex roof line envelope; (ii) it does not confine the apex to a ridge line at the midpoint of lot 4; (iii) it includes a non compliant second storey; (iv) it provides for a non compliant ancillary building.
[9] On 23 January 2015 the Menzies brought this claim seeking interim and final injunctive relief to prevent Omanu exceeding the deposited plan height restriction, contending that: (i) the covenant, conventionally interpreted, embodies that restriction; and (ii) if it does not, that this was its agreed purpose and it should be rectified to say so. Where the balance of convenience and overall justice of the case lie are contingent on whether those grounds raise serious issues to be tried.
[10] Until this application is resolved the position remains governed by a consent memorandum, dated 18 December 2014. Omanu then agreed to halt work until at least the end of February 2015. The Menzies agreed that their damages undertaking was to run from that date, not from the date on which they brought their claim in January 2015. The agreement is to continue to apply until the issue of this decision.
Interim relief principles
[11] To succeed on this application for interim relief the Menzies must establish that they have some serious question to be tried, and that the balance of convenience lies in favour of granting them relief. Ultimately, the overall justice of the case must
be considered.1
1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA) at 142.
[12] As to whether there is a serious question to be tried, the issue is whether there is ‘a tenable combination of resolutions of the issues of law and fact on which the plaintiffs could succeed’.2 In Eng Mee Yong v Letchumanan, one of the foundational cases, Lord Diplock equated a serious question to be tried with one which is ‘neither frivolous nor vexatious’;3 a question that rests on relevant statements in affidavit evidence that ‘have sufficient prima facie plausibility to merit further investigation as to their truth.’4
[13] Assuming a serious question to be tried, the issue then becomes where the balance of convenience lies. That involves identifying what has been described as the ‘balance of the risk of doing an injustice’.5
[14] If an award of damages would compensate the Menzies for any loss they might suffer before trial, assuming they succeed at trial, and assuming also that Omanu is solvent and capable of paying damages, that could well prove fatal to their application. As Lord Diplock said in the other foundational case, American Cyanamid, that may well be so, ‘however strong ... (their) claim appeared to be’.6
[15] If an award of damages would not compensate the Menzies they must still make out their claim; and whether damages would compensate Omanu, if interim relief were granted but it were to succeed at trial, must also be assessed. If damages would compensate neither adequately, the status quo and the overall justice of the
case assume decisive importance.7
[16] Where the overall justice of the case lies does not call for a separate inquiry. It is a notion coextensive with the balance of convenience. It calls for a ‘global consideration of where the interests of justice lie in the light of any irreparable harm
likely to be suffered by the parties in the interim’.8
2 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 311.
3 Eng Mee Yong v Letchumanan [1980] AC 333 (PC) at 337.
4 At 341.
5 Cayne v Global Resources Plc [1984] 1 All ER 225 (CA) at 237.
6 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 510.
7 Ashmont Holdings Ltd v Bayer New Zealand Ltd (HC Auckland CIV 2007-404-3518, 10
September 2007).
8 The Property People Ltd v Housing New Zealand Ltd CA260/99, 16 November 1999 at [21].
[17] As I have said, the decisive question in this instance is whether the Menzies are able to establish a serious question to be tried and that turns firstly on the principles governing interpretation and rectification.
Interpretation and rectification principles
[18] As to the issues governing the interpretation of the covenant standing alone, and when set against the deposited plan, the application has been argued on this uncontested basis:
(a) A covenant, including a restrictive and registered covenant, is a promise enforceable between the parties to it and, depending on the circumstances, by and against others not originally parties to it;
(b)It is to be interpreted in accord with the principles of contractual interpretation, taking into account the context, and any relevant extrinsic materials.9
(c) It is to be interpreted objectively to give it the ‘… meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the [original] parties in the situation in which they were at the time of the contract.’10
(d)It is to be set against its intended purpose in the eyes of those who first subscribed to it, having regard to the benefit it was intended to confer and the burden it was intended to impose.11
(e) If it is ambiguous it is to be given the meaning which best accords with common sense.12 But even where words are clear, the Court is
9 Bonnar v Summerland Property Development Ltd (2002) 8 NZCPR 616; Hosken v Wu [2013] NZHC 1506.
10 Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28, [1998]
1 WLR 896 at 912; Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 at 82.
11 Bonnar, above at n 9, at [37].
12 Lumley General Insurance (NZ) Ltd v Body Corporate 205963 [2010] NZCA 316 at [41].
entitled to look beyond their natural meaning if they flout common sense.13
(f) If it contains words depriving it of commercial sense, which must have been included mistakenly, it may be corrected;14 and the converse is the case, words mistakenly excluded may be introduced.
(g)In the last resort it may be construed contra proferentem.15 A covenantor ‘having given a thing with one hand is not to take away the means of enjoying it with the other’; and that is so even if the covenantor is an assignee.16
[19] Rectification is an equitable remedy, which as Wylie J described it in Queen Elizabeth II National Trust v Green Growth No 2 Ltd & Registrar of Lands, requires the one seeking it to show that:17
(a) The parties had a common continuing intention in respect of a particular matter and the agreement sought to be rectified;
(b) The common continuing intention was objectively apparent;
(c) The intention continued up to the time of the execution of the agreement sought to be rectified; and
(d) By mistake, the agreement did not reflect the common continuing intention.
[20] The question whether a successor in title to an original subscriber to a covenant, registered against a title, is entitled to have it rectified is, the Court of Appeal said in Child v Dynes, ‘a difficult and debatable issue’, which it did not then resolve.18 On the interlocutory application that issue was not contested; and I will accept, for the reasons given by Wylie J in Queen Elizabeth II, that the Menzies may
pursue rectification.
13 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444.
14 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 3 WLR 267.
15 Hinde McMorland & Sim, Land Law in New Zealand (online ed) at [16.037(b)]; McLean v
Grace [1953] NZLR 567, 570.
16 Currumbin Investments Pty Ltd v Body Corporate Mitchell Park Parkwood Cts (2012) 2 Qd R
511 at [33]; Ferella v Otvosi (2005) 64 NSWLR 101 at 108.
17 Queen Elizabeth II National Trust v Green Growth No 2 Ltd & Registrar of Lands [2014] NZHC
3275 at [107].
18 Child v Dynes [1985] 2 NZLR 554 (CA) at 561.
[21] The issue, which does arise, is whether the Menzies have grounds for rectification on the evidence as it is; an issue to which I will return after first setting out the contrasting height restrictions.
Contrasting height restrictions
[22] The covenant appears in the memorandum of transfer relating to lot 4, dated
7 March 1995, between the Broughtons as tenants in common as to an 11/20th share and the Goodleys as to a 9/20th share, as transferors, and the Goodleys as transferees. It imposed on the Goodleys a height restriction in favour of the registered proprietors of lot 3, then still the Broughtons, in these terms:
… they or any of them 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 … on the servient land or any part or parts thereon to a height greater than that shown in the schedule hereto.
[23] The schedule attached to the transfer says this:
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 roofline 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 16.50 for any house; and
2.A reduced level of 15.50 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.
[24] The deposited plan to which the schedule refers is that creating lots 3 and 4, deposited plan S.67620, dated 19 June 1994. It defines prescriptively not just how high any house and ancillary building on lot 4 may be, but where on the lot they may constructed and within what dimensions:
(a) It demarcates an area on lot 4, called ‘Areas of Height Restrictions’: permitting a house no greater than 12.60 metres wide and 12.16 metres long; and an ancillary building, attached to the house, aligned
with its western wall, no greater than 7.80 metres wide and eight metres long.
(b)It sets this demarcated area towards the centre of lot 4, five metres from the northern boundary, four metres from the southern boundary,
1.50 metres from the western boundary and 3.01 metres from the eastern boundary.
(c) It sets roof ridge lines for the house and for the ancillary building at their mid-point on a broadly north – south axis.
[25] This prescription is complemented by equally prescriptive south west and the south east elevations. They set a maximum general height, 13.56 metres above the Moturiki Datum, but higher maximum roof heights: 16.17 metres for the house, and
15.17 metres for the ancillary building. Then, by linking those maxima to the general maximum by a 22.5 degree angle, the elevations confine them to the north-south axis depicted on lot 4 in plan. In short, those precise roof height maxima express the integrated effect of lot 4 in plan and the elevations.
[26] The covenant is consistent with the plan to this extent. It fixes the general height restriction at 13.56 metres above the Moturiki Datum, and the 22.5 degree angle at which the roof height maxima are to link with that general lower maximum. But it does not prescribe where on lot 4 any house or ancillary building may be, or how they are to relate with each other, or in what dimensions. It does not fix the roof height maxima along the north-south axis. Nor are those maxima, as in the plan,
16.17 and 15.17 metres. They are 16.50 and 15.50 metres.
[27] To import the deposited plan prescription to the covenant, if it is not embodied as a matter of interpretation, the Menzies say, the schedule would first have to be amended by inserting the words I now set out in italics:
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 roofline of any buildings as depicted on
Deposited Plan S.676210 may slope at an angle of 22.5 degrees from the reduced level of 13.56 metres up to:
[28] That, however, would not be enough, as the Menzies recognise. They seek to have the next two numbered paragraphs rectified to substitute the deposited plan roof height maxima 16.17 metres and 15.17 metres for those in the covenant, 16.50 metres and 15.50 metres. In short they seek to reverse an obvious amendment to the schedule to the covenant, made when the transfer was signed.
Conclusions
[29] The Menzies’ primary ground for relief, that the covenant, conventionally interpreted, embodies the deposited plan height restriction, faces two difficulties, and the first is this. The covenant standing alone is intelligible and capable of being given effect. It does not, as it so easily could have, expressly incorporate the deposited plan height restriction.
[30] The second difficulty the Menzies face is this. The two prescriptions are inconsistent as to the roof height maxima they prescribe; and the deposited plan maxima express the integrated effect of other dimensions in the plan and elevations, whereas the covenant maxima do not, suggesting that the deposited plan dimensions have no place in the covenant.
[31] The Menzies’ secondary ground for relief, that the covenant ought to be rectified to incorporate the deposited plan height restriction, faces the same two difficulties. But in that instance the deposited plan prescription, and why and how it was agreed to, must assume a larger significance.
[32] The deposited plan height restriction is unusually prescriptive. The Goodleys subscribed to it, in subscribing to the deposited plan in June 1994. It may well have been in their interest, as they say, to have it relaxed when they acquired lot 4 in March 1995. But Mr Broughton, who devised the deposited plan height restriction, still owned with his wife lot 3 with the benefit of that restriction. He is not to be assumed to have abandoned it intentionally or willingly. He may have considered it was embodied in the covenant.
[33] In the result, while I am not convinced that the Menzies in their primary ground for relief do raise a serious question to be tried, I am satisfied without being
able to be definitive because I do not know what Mr Broughton would say, that they do raise a qualifying question as to rectification; and I am satisfied also that the balance of convenience and the overall justice of the case justify a grant of interim relief in the terms applied for.
(a) The Goodleys’ house design does exceed the deposited plan height restriction in the four ways identified; and the extent to which it does so is significant to the Menzies, certainly subjectively, and perhaps also objectively if it reduces the value of their property.
(b)The Menzies first learned in December 2014 of the Goodleys proposed design, and of their 2006 barrister’s opinion, after the Goodleys had demolished the garage and boat shed on their property and were about to start building their house. The Menzies had to respond to a fait accompli.
(c) On this application the Menzies had been unable to set against the Goodleys’ evidence any favouring them from Mr Broughton. In December 2014 he said he would only give evidence if compelled. He has been elusive since. His evidence is plainly relevant to their application for final relief.
(d)If the Menzies were denied interim relief and the Goodleys began construction, and the Menzies eventually succeeded, it is unlikely that damages would be a sufficient remedy. That could be equally complicating for the Goodleys. If, conversely, the Goodleys are obliged to delay construction, and they succeed at trial, they will be able to be more readily compensated in damages.
(e) The issues at trial will turn on a question of interpretation set against a limited body of evidence, and ought to be able to be resolved within a fixture of less than two days. A priority fixture ought to be feasible and is certainly warranted.
(f) The interim injunction the Menzies seek appears less restrictive than the deposited plan height prescription. They do not wish to confine the Goodleys to the demarcated area on lot 4. They wish to confine them to the 13.56 metres general height restriction beyond the demarcated area, and the deposited plan height restriction within that area. That may allow the Goodleys some latitude.
[34] I grant the Menzies the interim injunction they seek, in the terms set out in their application. The injunction is to continue until their application for final relief is resolved; and that application is to be given a priority fixture.
[35] Strictly costs should follow the event. But because I find the issue whether they have a serious question to be tried to be finely poised, I will not make an immediate award in their favour. Their entitlement to costs is best decided by the
Judge who decides their application for final relief.
P.J. Keane J
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