Milne v Thompson
[2022] NZHC 937
•5 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002305
[2022] NZHC 937
UNDER Land Transfer Act 2017 and District Court Act 2016 IN THE MATTER OF
An application for orders that a caveat not
lapse and transferring a proceeding from the District Court
BETWEEN
GRAHAM ALLAN MILNE, MARILYN RUTH BEST, REX BRUCE SWENSEN and
JENNIFER MARIE MILNE, as trustees of the GREAT CHELSEA GARDEN TRUST
Applicants
AND
PHILIP CAMPBELL BROWNLEE THOMPSON and PARIN RAFIEI THOMPSON
Respondents
Hearing: 22 March 2022 Appearances:
P H Thorp for Applicants R J Latton for Respondents
Judgment:
5 May 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 5 May 2022 at 3.30 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date ……………………….
MILNE v THOMPSON [2022] NZHC 937 [5 May 2022]
Introduction
[1]These are caveat proceedings1 relating to a unit title complex in Birkenhead,
Auckland. The complex is subject to the Unit Titles Act 2010.2
[2] The property at issue, Accessory Unit 4,3 is a disproportionately large block4 to the rear of the complex and consists of a bush-clad gully. It is directly adjacent to the Rawene Reserve and sits below the Birkenhead shops. It was extensively damaged in a landslide in 2017.
[3] The Auckland Council has recently resolved to compulsorily acquire, if necessary, a substantial portion of the property. It intends to remediate the landslide.
[4] The applicants are the trustees of the Great Chelsea Garden Trust. The Trust has long sought to establish gardens on the property and the adjacent Rawene Reserve. They contend that they have a beneficial interest in the property on the basis of an agreement for sale and purchase entered into with the respondents,5 the current registered proprietors, in 2010. That agreement is conditional on a subdivision, which is yet to be undertaken, which would separate Principal Unit D6 from AU4.
[5] The respondents oppose any subdivision and say that the ASP is void and/or incapable of being performed because of the insurmountable legal hurdles that prevent any subdivision. They also say that the majority of owners in the unit complex oppose the subdivision proposals of the applicant and that they will agree to pay the applicants the proposed $93,500 compensation that Auckland Council will pay for the compulsory acquisition of the property.
[6] There are three critical issues for determination. They arise in the context of these summary proceedings, where the applicants must establish a reasonably arguable claim for a beneficial interest in the land:
1 Land Transfer Act 2017, s 143; an application that a caveat not lapse.
2 The UTA.
3 AU4, being the accessory unit for Principal Unit D.
4 5,550 square metres.
5 The ASP.
6 PUD.
(a)Is the ASP void ab initio because it breaches the decoupling prohibition in ss 53(1) and (7) of the UTA?
(b)Is the ASP otherwise incapable of being performed because the proposed subdivision cannot meet other requirements under the UTA, including the obtaining of a special resolution approving a subsidiary unit title development?
(c)If there is an arguable beneficial interest in the land should, as a matter of discretion, the caveat be allowed to lapse?
Factual background
[7] The Trust is an unregistered and unincorporated charitable trust of which Mr Milne has been Chair throughout its existence.
[8] The Trust was formed by Mr Milne and others for the purpose of the creation and operation of gardens of international significance in the Rawene Reserve.7
[9] In 2010, Mr Milne canvassed the owners of properties surrounding the Rawene Reserve for land to be donated to the proposed gardens project. Mr Milne discovered that the property was for sale.8 The property runs between Rawene Road and Huka Road and was seen by the applicants as ideal to be included in the gardens project.
[10] Mr Milne and a fellow trustee purchased the property for the Trust at auction on 31 March 2010, for $502,000. A deposit of $52,000 was paid.
[11] Later the same day, and after the auction had concluded, Mr Milne approached the respondents as the next highest bidders at the auction to determine their interest in purchasing the property. Mr Milne proposed that the area of AU4 adjacent to the Rawene Reserve be subdivided off for incorporation by the Trust into the gardens project.
7 Mr Milne conceived of the idea when he was a Birkenhead City and then North Shore City councillor until 1996.
8 The property being PUD and AU4 (NA72B/529), with the physical address being 4/45 Rawene Road.
[12] The respondents agreed. They were only interested in PUD and a small area for a garden. All the Trust was interested in was the remaining area of AU4 adjacent to the reserve.
[13] The Trust proposed and the respondents agreed that the respondents would be nominated to complete the Trust’s purchase of the whole property and would at the same time sell to the Trust the remaining area of the subdivided AU4 adjacent to the Rawene Reserve. The agreed purchase price was $485,000, which was the balance required to complete the Trust’s purchase, plus a refund to the Trust of $35,000 of the deposit. It was intended that the $17,000 balance of the $52,000 deposit would effectively be the price paid by the Trust for the area of AU4 remaining after the intended subdivision.
[14] Solicitors were retained by both parties. A deed of nomination and an agreement for sale and purchase were then executed.
[15] The ASP defines the property to be sold by reference to an attached plan and shown as Lot 1, being a portion of AU4.
[16]Clause 4 of the deed of nomination reads:
This deed of nomination and consequential settlement of the purchase by the nominees of the property at 4/45 Rawene Road, Birkenhead, is contemporaneous with and interdependent with an agreement for sale and purchase between the nominees as vendors and the vendors under this agreement as purchasers, in respect of Lot 1 of a subdivision of AU4 on Unit Plan 123976 (“the contemporaneous agreement”).9
[17]The terms of sale under the ASP included the following:
19.0If this agreement comes to an end for any reason then the nomination of Campbell Thompson and Parin Thompson as purchasers under the agreement for the purchase of 4/45 Rawene Road, Birkenhead, will also come to an end and vice versa. In either event. All payments made by either party to the other will be returned and neither party will have any recourse against the other.
…
9 Clause 18.0 of the ASP is expressed in similar terms.
21.0 The purchasers at the purchasers’ costs in all things undertake to obtain from the North Shore City Council any approval or consent necessary under the Resource Management Act 1991 or any other Act or rule upon terms and conditions which are satisfactory to the purchasers in their sole judgment, for the subdivision of the property to proceed in accordance with the plan attached to this Agreement. The vendors hereby grant to the purchasers a Power of Attorney to enable the purchasers to sign all documents and do all things on behalf of the vendors that are necessary to enable the subdivision to be undertaken and new titles issued. This condition is inserted for the sole benefit of the purchaser.
…
23.0 The parties acknowledge that the purchasers will pay the purchase price for the property on or before the time that the vendor settles the purchase of 4/45 Rawene Road, Birkenhead, from Michael Joseph Sterritt. The subdivision will not have been completed by that time and the vendors hereby authorise the purchasers to register a caveat over the title to 4/45 Rawene Road, Birkenhead, to protect the purchasers’ interest as unconditional purchaser of the land the subject of this Agreement. Upon the issue of the new titles, the vendors will transfer the title to the land the subject of this agreement to the purchaser and the purchasers will withdraw their caveat, both registrations to be effected contemporaneously.
24.0 The parties agree that there will be no time period within which the purchasers must complete the subdivision and that the completion of the subdivision will be at the discretion of the purchasers, having regard to prevailing legislative requirements and any other considerations that the purchasers deem fit.
25.0 The vendors will not sell the property at 4/45 Rawene Road, Birkenhead, before completion of the subdivision without obtaining, as a term of the agreement for sale and purchase, a covenant from the purchasers that binds them to the provisions contained in this agreement as to subdivision of the property.
[18] A suggested scheme plan of subdivision showing approximately where the subdivision boundary should be had been prepared by Axis Consultants on 1 April 2010. That scheme plan was attached to the ASP and is the plan to which cl 21 refers. The proposed subdivided section, Lot 1 (to be purchased by the applicants), comprises 5,299 square metres.
[19] On 1 June 2010, the respondents refunded to the Trust $35,000 of the deposit paid. On 8 July 2010, the respondents settled the purchase of the property. On 24 September 2010, the Trust registered the caveat. That is the same caveat at issue in these proceedings; it has remained on the title since 2010.
[20] The Trust says that progress with the subdivision and the gardens project then became delayed by the creation of Auckland City in 2010, its subsequent Auckland Unitary Plan process and the landslide in 2017.
[21] It was not until 2018 that the Trust proceeded further with its intended subdivision. At that time, Axis Consultants Ltd prepared a fresh plan that subdivided AU4 to create a separate freehold title for the Trust, access to which would be either by easement over 45 Rawene Road or through adjacent properties on Huka Road at the other end of AU4.
[22] A formal application for subdivision consent was made in October 2018. However, the application did not proceed to hearing and was withdrawn by the Trust.
[23] In February 2018, the respondents issued proceedings in the North Shore District Court seeking to bring the ASP to an end and to remove the caveat.10
[24] In September 2019, a committee of the Auckland Council resolved to acquire sections of private land in Birkenhead affected by the 2017 landslip, in order to complete remedial works. This included the property. The committee also approved the compulsory acquisition of this land under the Public Works Act 1981 if that was necessary.
[25] On 16 December 2021, Auckland Council gave the respondents formal notice of an intention to acquire 3,086 square metres of the property under s 18(1)(a) of the Public Works Act 1981. Notice was not given to the Trust. The notice expressly states that the land is required to remediate a landslip that occurred in October 2017.
[26] In December 2021, the respondents signed an agreement with the Auckland Council (in response to an offer from the Council) in which they agreed to the Auckland Council acquiring 3,086 square metres of AU4 (i.e. the Huka Road end) for
$93,500.
10 File Number CIV-2018-044-325. Those proceedings have now been transferred to this Court.
[27] That agreement requires and is conditional upon the respondents applying for the lapse of the current caveat, for which purpose Auckland Council is to pay up to
$15,000 plus GST towards the respondents’ legal costs.
[28] The Trust says that upon learning of Auckland Council’s intentions to acquire the land, it approached Axis Consultants again for advice on how to proceed with the proposed subdivision. It concluded that because access will no longer be available from the Huka Road end (because of the compulsory acquisition), the separate freehold title intended in the 2018 application was no longer practicable.
[29] Axis Consultants Ltd advised the Trust to create a subsidiary unit title development (under s 20 of the UTA). In February 2022 the Trust lodged an application with the Auckland Council for such a development. That application proposed to extend the area of Principal Unit D to 602 square metres to meet the site area required by the Auckland Unitary Plan without impacting on the existing use rights of the other three existing units.
[30] The application also provided for the respondents’ building extensions that were not reflected on the existing unit plan and for only one building platform so that only one dwelling can be erected on the site to be subdivided from the property (i.e. from AU4).
[31] On the original 1 April 2010 plan, and in cl 15 of the ASP, the area to be subdivided for the Trust to purchase was described as 5,299 square metres. In the October 2018 application, the area the Trust was to purchase was 5,175 square metres. In the current outstanding application, the area to be purchased by the Trust is 5,044 square metres (from which 3,086 square metres is to be taken by the Auckland Council).
[32] The Trust says that the latest subdivision application leaves, therefore, 255 square metres for the respondents extra to what was intended and agreed to initially. It also legitimises, the Trust says, the respondents’ building extensions.
Relevant legal principles
(a)Caveats
[33] In Philpott v Noble Investments Ltd, the Court of Appeal set out the basic legal principles for applications to sustain caveats:11
(a) The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b) It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c) The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained – either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists;12 and
(d) Where an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so, the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.13
[34] Philpott v Noble Investments Ltd dealt with the predecessor legislation, namely the Land Transfer Act 1952. However, it is not disputed that the principles laid down by the Court of Appeal apply equally to applications, such as this one, under s 143 of the Land Transfer Act 2017.
(b)Unit Titles Act 2010
[35]Section 53(1) of the Act reads:
Except where it is transferred to the owner of a principal unit shown on the same unit plan, no accessory unit or any interest in it may be sold, leased, mortgaged, or otherwise disposed of or dealt with except as part of a sale, lease, mortgage, disposition, or other dealing that includes a principal unit or a corresponding interest in a principal unit.
[36]Section 53(7) of the Act reads:
11 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].
12 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660; Zwarst v Saxton [2012] NZHC 448 at [12].
13 Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].
Despite anything to the contrary in the Land Transfer Act 2017, any purported sale, lease, mortgage, disposition, or dealing with any unit in contravention of subsection (1) or (3) is void.
Analysis and decision
Issue (a): Is the ASP void ab initio?
[37] It is not in dispute that the purchaser of land pursuant to an agreement for sale and purchase has an equitable interest in the property sufficient to support a caveat – and even if conditional on the consent of a third party so that specific performance in the strict sense is not available.14
[38] The respondents contend that the applicants cannot perform the ASP because the agreement underpinning it is void ab initio pursuant to ss 53(1) and (7) of the UTA. It is thus of no effect. It is contended that cl 21 expressly contemplates a particular subdivision to be carried out in accordance with the plan that is attached to the ASP. A subdivision of that kind could never proceed because it would breach the provisions of s 53 of the UTA. The respondents say that the only tenable interpretation of cl 21 is a subdivision in accordance with the specific plan, both attached and expressly referred to.
[39] This all means, the respondents say, that there is no caveatable interest because there are no conditions that the applicants can satisfy. Alternatively, even if there was a caveatable interest, it could not survive the failure of the applicants to be able to satisfy the conditions in the ASP. The respondents rely upon the Court of Appeal decision Mortre Holdings Ltd v ANCL Investments Ltd,15 where it was held:
… The beneficial interest will cease if the contract is avoided for failure of the condition in the same way as it may for cancellation for breach or upon non- payment of the purchase price.
[40] Section 53 of the UTA has received scant judicial consideration. The only known judgment, a formal proof one, is Arriesgado v Gallagher Family Investments
14 Bevin v Smith [1994] 3 NZLR 648 (CA) at 664 and 665; see also Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [24.2.9].
15 Mortre Holdings Ltd v ANCL Investments Ltd [2016] NZCA 494 at [10]. See also Bevin v Smith, above n 14, at 665 and McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 at 619.
Ltd.16 However, for present purposes, I accept that the statutory philosophy, on a plain and purposive reading of the Act, is clear enough.
[41] The starting point is ss 4 and 5 of the Act. Units are either principal units or accessory units (s 4(1)(b)(iii)). Accessory unit is defined in s 5 to mean a unit that is designed for use with any principal unit. This includes a garage or car parking space.
[42] As Gordon J held in Arriesgado v Gallagher Family Investments Ltd, s 53 does not prohibit ownership of an accessory unit independently of a principal unit, it prohibits “dealings” with an accessory unit except where that dealing includes a dealing with a principal unit.17 I agree with her Honour that the section seeks to prevent ownership of an accessory unit independently of a principal unit by prohibiting in broad terms dealings which might lead to that outcome. An obvious example of a prohibited outcome would be the purported transfer of a garage, an accessory unit, to a party wholly independent of the unit title complex.
[43] The subdivision now contemplated for the property differs from the subdivision expressly provided for in the plan attached to the ASP (and to which cl 21 expressly refers). The question of whether s 53 is engaged and renders the ASP void turns on the question of whether the subdivision now contemplated, namely a subsidiary unit title development under s 20,18 is a subdivision that falls within cl 21 of the ASP. If it does fall within cl 21 and the applicants have a right to proceed with a s 20 SUTD, then s 53 is arguably not engaged. The s 20 SUTD scheme is a separate and stand-alone statutory process.
[44] The ASP contains some unusual features; including an apparently open ended right of the applicants to subdivide. Clause 24 expressly says that there is no time period within which the applicants must complete the subdivision and in the event that the ASP comes to an end, then the nomination of the respondents as purchasers also comes to an end and all payments made by either party to the other are to be returned (cl 19). On the face of the ASP, very significant rights are accorded to the applicants.
16 Arriesgado v Gallagher Family Investments Ltd [2020] NZHC 232.
17 At [30].
18 s 20 SUTD.
[45] The wording of cl 21 of the ASP, when read together with cl 15, provides some support for the respondents’ submission that the ASP contemplates a specific subdivision, namely the one set out in the attached plan, and the applicants’ rights to subdivide are thus confined to the precise form of subdivision that the plan specifies. However, I find that it is reasonably arguable that the subsidiary unit title development now proposed does fall within cl 21. Clause 21 expressly refers to the need for approval or consent under the Resource Management Act 1991 or any other legislation. That must obviously include the UTA. Clause 21 also confers considerable powers on the applicants (i.e. the purchasers under the ASP) including the grant by the respondents of a power of attorney to do all that is necessary to achieve the subdivision. Clause 21 says that this is for the “sole benefit” of the applicants.
[46] In my view, the question of whether the subdivision now contemplated is so different in substance and kind from the original plan attached to the ASP and thus falls outside of the ASP, is a trial matter. It is reasonably arguable that the respondents have overstated the differences between the original plan and the subdivision now proposed, and the extent of the differences are disputable factual matters that need to be resolved through cross-examination and a full testing of the merits. It is reasonably arguable that the proposed s 20 SUTD, which will leave the respondents as the registered proprietors of PUD but separate out the Accessory Unit, is in substance the same as the subdivision contemplated by the plan attached to the ASP and a matter within the express contemplation of the parties.
[47] I accept that s 20 of the UTA expressly involves the subdivision of a principal unit and that if a principal unit has an accessory unit, both the principal unit and the whole accessory unit must be subdivided to create a single subsidiary unit title development. However, the outcome of the now proposed s 20 SUTD is arguably not materially different from the original plan attached to the ASP.
[48] I also acknowledge the concerns of the respondents that the s 20 SUTD now proposed may not result in the creation of any gardens, but rather lead to further residential development to the rear of the complex. However, there is nothing in the ASP which restricts the rights of the applicants to use the property in any way – and
in any event, the wider factual matrix as a basis for interpreting the ASP is a matter to be investigated at trial.
[49] Mr Latton emphasised that the s 20 SUTD now proposed will involve the creation of a layered unit title development and likely bring increased administration and associated costs for the unit holders. He relied on the learned authors of Hinde McMorland & Sim Land Law in New Zealand,19 for the proposition that a layered unit title development brings a range of complexities beyond the simple subdivision originally contemplated in the ASP.
[50] There may be some force in that submission. However, this is again a trial issue; the practical administrative and bureaucratic differences between the ASP plan and the s 20 SUTD should be investigated at trial. I cannot resolve them.
[51] I conclude that it is arguable that s 53 of the UTA is not engaged and has no application to the subdivision now proposed. It is therefore reasonably arguable that the ASP is not void under s 53.
Issue (b): Is the ASP otherwise incapable of being performed?
[52] As Mr Latton submitted, to fulfil the conditions under the ASP, AU4 must become a principal unit, capable of being sold. That requires a subsidiary unit title re- development pursuant to s 20 of the Act (i.e. as the current application for subdivision contemplates) or re-development pursuant to s 68 of the Act.20
[53] Regardless of the route taken under the legislation, a special resolution must be passed by the Body Corporate. Section 98(4) of the Act provides that for a special resolution to pass, 75 per cent of the eligible voters who vote on the resolution must vote in favour of it.
19 Thomas Gibbons and Donald McMorland Hinde McMorland & Sim Land Law in New Zealand
(online looseleaf ed, LexisNexis) at [14.015].
20 The applicants now say that a separate freehold title through re-development under s 68 or re- development under s 65 are no longer practicable because of the Auckland Council’s intended compulsory acquisition which will mean access is not available from the Huka Road end of AU4.
[54] The applicants say that the first step in their now proposed s 20 SUTD has been taken, namely the filing of the application with the Auckland Council. The steps it then intends to follow are:
(a)Pursuant to its power of attorney granted in cl 21 of the ASP, the applicants will apply to the Body Corporate for its consent under s 20(4). They say that in considering the matter, the Body Corporate must not unreasonably withhold consent and, within a reasonable time, advise that consent is given or withheld (s 208);
(b)Because the resolution and response will be “a resolution relating to subdivision of a principal unit to create a subsidiary unit title development” it will be a “designated resolution” under s 212(a). They say that notice of the Body Corporate resolution response will, therefore, be required to be served on the applicants as caveator (s 213(1)(b));
(c)The applicants will be entitled to object to the High Court as the appropriate decision-maker (s 215).
[55] The respondents say that a special resolution cannot be obtained. The owner of two of the units, Mr Bangma, has said definitively that he and his wife do not agree to the subdivision. Furthermore, Mr Bangma and the owner of the other unit have sworn affidavits confirming that they do not agree to the revised subdivision proposal the applicants have now made.
[56] The respondents further take issue with the applicants’ interpretation of s 212(a) of the Act. The respondents say that the designated resolution process operates only where a body corporate has “passed” a resolution. In this case, the designated resolution (i.e. to establish a subsidiary unit title plan) will not pass and accordingly there will be no special resolution to object to. Any High Court challenge under s 215 would thus not be available to the applicants.
[57]The respondents also submit:
(a)The section that applies to special resolutions that are not passed is s 211. That applies when a special resolution is not passed, but 65 per cent of eligible voters have voted in favour. In that case, any voter in favour can apply to the High Court. However, it is clear in this case that the vote will not even get to 65 per cent;
(b)Even if the matter could be reviewed by the High Court, the High Court would not overrule a 75 per cent majority against the applicants’ proposed re-development. Section 215 of the Act requires that no order should be made unless the Court is satisfied that it is just and equitable to do so.
[58] In addressing the issue of whether the applicants could obtain the necessary special resolution, I need to resolve the following:
(a)Will the applicants be able to object to the High Court under s 215 if the Body Corporate does not pass a resolution to establish the proposed s 20 SUTD?
(b)If a right of objection is available, is there any realistic prospect that this Court would uphold the objection and overturn the decision of the Body Corporate not to establish the proposed s 20 SUTD?
Will a right of objection be available to the applicants under s 215 if the Body Corporate does not pass the necessary special resolution?
[59] This issue is one of statutory interpretation and, in particular, the provisions of subpart 3 of Part 5 of the UTA 2010 (i.e. ss 210 – 216).
[60] The starting point is s 210 which deals with general relief for the minority where a resolution is required. Section 210(1) expressly states that where “the resolution is passed” any person who voted against the resolution may apply to the appropriate decision-maker (i.e. in this case the High Court) for relief. However, s 210(1A) provides that subsection 1 does not apply if the resolution is a designated resolution.
[61] Designated resolutions are expressly dealt with under s 212. Under that section, a designated resolution means “a resolution relating to” a number of specified matters, including the subdivision of a principal unit to create a subsidiary unit title development under s 20.
[62] The general scheme of the legislation provides strong support for the respondents’ position that any rights of the applicants to object would be limited to s 211. The wording in s 212, and in particular the phrase “a resolution relating to” (which the applicants place some emphasis upon), is a definition section; it does not confer as such any right of objection. The right to object is conferred by s 213(3) and arises once a notice in respect of the designated resolution has been served. A notice under that section is only served after the Body Corporate has passed a designated resolution (s 213(1)). The subsequent sections, including ss 214, 215 and 216, all proceed on the basis of a notice having been issued following the “passing” of the designated resolution. The “resolution” contemplated by s 215, which may be either overturned or confirmed by the High Court as the appropriate decision-maker, is the “designated resolution” that was passed by the Body Corporate and which gave rise to the notice issued under s 213(1).
[63] Mr Thorp, for the applicants, submitted that had it been the intention of the legislature to restrict the right to object to the passing of a designated resolution, then Parliament would not have used the words “a resolution relating to” but would have used words such as “a resolution approving” in s 212. However, as already noted, s 212 does not provide or confer any right of objection; the right to object is conferred by s 213(3) and follows the passing of a designated resolution.
[64] The Select Committee report relating to the Units Title Bill also provides some support for the respondents’ position. Designated resolutions are described in the report as “resolutions that once passed” can be objected to.21
21 Unit Titles Bill 2008 (212-2) (select committee report) at 34.
[65] The learned authors of New Zealand Land Law online,22 note that the threshold for applying for relief under the minority and majority relief provisions (i.e. subpart 3 of Part 5) is “stringent”. That might also provide some support for the respondents’ position.
[66] I am also inclined to agree with Mr Latton that the applicants’ reliance, or intended reliance, on s 208 would be misconceived. That section appears to have greater application to a situation where a party’s individual consent is required. It arguably does not apply in such a way as to coerce a unit owner to vote in a particular way on a special resolution. Any challenge by way of objection under s 215 is not subject to a reasonable test but rather to the “just and equitable” standard.
[67] I have considerable reservations about the merits of Mr Thorp’s submission that the applicants would have rights of objection under ss 212 – 216, which are additional to and not excluded by s 211. However, and despite those reservations, no vote by the Body Corporate has yet been taken and nor have the details of the designated resolution to be considered been finalised. The application for subdivision is of course yet to be approved by the Auckland Council. While I acknowledge the reality that the applicants are unlikely to obtain the necessary special resolution, the issue is not yet a live one. All these circumstances, including the absence to date of any relevant judicial determinations,23 all mean that this issue of statutory interpretation is unsuitable for summary determination. I cannot conclude at this interim stage that the applicants have no prospect of obtaining the necessary consent under s 98(4) to their proposed s 20 SUTD. The point is arguable.
If a right of objection is available, is there any realistic prospect that this Court would uphold the objection and overturn the decision of the Body Corporate not to establish the proposed s 20 SUTD?
[68] Even if it is reasonably arguable that the applicants do have a potential right of objection to a decision by the Body Corporate not to adopt a designated resolution,
22 Joanne Pidgeon and Susan Tappenden New Zealand Land Law (online looseleaf ed, Brookers) at [48.R.12.4.02].
23 Section 215 was considered by Jagose J in Tang v Body Corporate 155936 [2020] NZHC 2813, but in that case the applicants were objecting to ordinary and special resolutions passed by the Body Corporate. That was not a case where the Body Corporate had not adopted a special resolution.
they face a formidable obstacle to achieving the outcome they seek. That is because of the likely difficulty in establishing the just and equitable grounds under s 215. Section 215(2) provides that the High Court is not to make an order either confirming or overturning a resolution unless satisfied that it is just and equitable to do so.
[69] The approach under s 215 was considered by Heath J in World Vision of New Zealand Trust Board v Seal.24 That was a case concerning the cancellation of a unit plan. The approach adopted is equally applicable to applications under the designated resolution procedures of the UTA.25 In World Vision, Heath J held:26
… circumstances might arise where it becomes necessary for the Court to intervene [under s 46 of the previous legislation]. If a building has deteriorated through inadequate maintenance or cannot through the unavailability of funds be maintained properly, an order might be sought because the building is no longer fit for its original purpose. Similarly, if a disparate group of proprietors, together comprising a body corporate, interact so dysfunctionally as to require intervention from the Court, the jurisdiction may well be exercised on similar principles to those applied in company or partnership law where deadlock ensues.
… The application seeks, in effect, to change the status of World Vision’s interest in land to enable it to obtain the best possible price for the land. That, in my view, is not a sufficient justification to override the interests of other proprietors who compromise the body corporate and who disagree with that course of action.
[70] As already noted, the respondents are concerned that the applicants now wish to subdivide the land to create further residential housing and not proceed with the originally proposed gardens idea. If that is so, it may well be that the applicants will have real difficulties in meeting the just and equitable threshold.
[71] Even if the applicants are to proceed with the gardens project, the principles of World Vision suggest that a court would be reluctant to override the interests of the other proprietors comprising the Body Corporate and who clearly disagree with the proposed s 20 SUTD.
24 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC).
25 Foreshore Equities Ltd v Body Corporate 396688 [2021] NZHC 537, (2021) 22 NZCPR 123 at [49].
26 World Vision of New Zealand Trust Board v Seal, above n 244, at [86] and [94].
[72] Again, however, these are all matters for the future and at this interim stage the nature of any potential High Court objection remains far from clear. I cannot conclude at this summary stage that the applicants have no prospect of overturning any potential decision of the Body Corporate not to pass a designated resolution to approve the proposed s 20 SUTD. The point is arguable.
Issue (c): As a matter of discretion, should the caveat be allowed to lapse?
[73] The respondents submit that the caveat is of no utility; the property will inevitably be compulsorily purchased by the Auckland Council and the respondents agree to pay all of the compensation, namely $93,500, to the applicants. The respondents further say that the ASP cannot sensibly be interpreted as conferring an indefinite right on the applicants to subdivide and, in any event, the gardens proposal is no longer a realistic one. The applicants, it is said, have had ample opportunity to carry out the subdivision but have failed to do so.
[74] Those submissions are not without merit. However, the discretion to remove a caveat must be exercised on a cautious basis and before doing so the Court must be satisfied that the caveator’s legitimate interests would not be prejudiced.27
[75] Mr Milne, for the applicants, says that he has seen a valuation by Opteon New Zealand Limited, which valued the land in AU4 minus Lot 1, at $700,000. Mr Milne says that in his assessment the value has at least “doubled” since then. Mr Milne further says that the applicants would be content for the Auckland Council to compulsorily acquire Lot 1 from the applicants provided that fair value was paid. That would achieve the use of Lot 1 as a reserve alongside the Rawene Reserve so as to bring closer the possibility of a reserve extending down to the Chelsea Estate heritage park in Chelsea Bay and Kendall Bay as originally envisaged by the applicants.
[76] In weighing all the relevant factors, I conclude that as a matter of discretion the caveat should be maintained. The removal of the caveat could prejudice the applicants’ legitimate interests. The ASP expressly recognised the right of the applicants to a caveat to protect their interests (see cl 23) and I accept Mr Thorp’s
27 Philpott v Noble Investments Ltd, above n 111, at [26].
submission that the removal of the caveat may detrimentally impact on the applicants’ ability to participate in and influence the compulsory acquisition process.
[77] Without the caveat, the respondents arguably would be able to dispose of the indefeasible title to the property with substantial detrimental impact on the applicants’ right to subdivide. Furthermore, without the caveat the applicants will lose their standing as caveators to receive and potentially object to the notice of a Body Corporate resolution relating to their s 20 SUTD proposal.
[78] I note that the respondents are sceptical of Mr Milne’s valuation assessment. However, I am in no position to resolve that issue.
Conclusion
[79] The applicants have established a reasonably arguable beneficial interest in the property and as a matter of discretion the caveat should be maintained. In reaching those conclusions I accept that there is force in the opposing submissions of the respondents and that in order to secure the subdivision contemplated by the ASP, the applicants face some formidable legal hurdles. The reservations I have relating to those legal hurdles are reflected in the orders I now make and set out below.
Result
[80]I make the following orders:
(a)I extend the interim order made by Venning J on 7 December 2021, that caveat 8601076 not lapse, for a further six months, namely until 28 October 2022, or pending further order of the Court, whichever is the earlier date.28
(b)The Court will review the position in six months’ time following receipt of memoranda from the parties updating the Court as to the current situation. This should include advice as to the status of the pending
28 In making this order I have allowed for the possibility that developments and/or orders in the associated proceedings transferred from the District Court (i.e. CIV-2018-044-325) might have an impact on issues pertaining to the caveat.
application for subdivision, the status of the compulsory purchase by the Auckland Council and any further relevant steps that might be taken between now and the review date.
(c)These orders are conditional on the following:
(i)the applicants cooperating with the respondents to take all reasonable steps to ensure the prompt resolution of the substantive proceedings now before this Court and transferred from the North Shore District Court (i.e. CIV-2018-044-325).
(ii)the applicants taking all reasonable steps to obtain the subdivision consent they now seek.
(d)The parties are to file updating memoranda by 14 October 2022.
[81] Costs are reserved. I accept that the applicants have had a measure of success but the features of this case are unusual and, in my view, costs are best addressed at a later stage when more information is available to the Court as to the status of the significant number of outstanding issues.
Associate Judge P J Andrew
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