Mt Cardrona Station Limited v Elliston
[2022] NZHC 2457
•27 September 2022
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2019-425-000135
[2022] NZHC 2457
UNDER Sections 316 and 317 of the Property Law Act 2007 IN THE MATTER
of an application for an order modifying land covenants
BETWEEN
MT CARDRONA STATION LIMITED
Applicant
AND
DEBBIE LEE ELLISTON, JAMES
RICHARD ELLISTON and OTHERS
First RespondentsAND
PURE H20 CARDRONA LIMITED
Second Respondent
AND
CHARLES LAYTON ROBERTS,
CHRISTINE JENNIFER ROBERTS and OTHERS
Third Respondents
AND
IAN LESLIE and PETI NOHOTIMA
Fourth Respondents
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
Fifth Respondent
Hearing: 30 May 2022 Appearances:
M J Hammer for the Applicant
A M Lovelock for the Respondents
Judgment:
27 September 2022
Reissued:
7 October 2022
MT CARDRONA STATION LTD v ELLISTON [2022] NZHC 2457 [27 September 2022]
JUDGMENT OF NATION J
Background
[1] In 2004, Mt Cardona Station Ltd (the applicant) purchased Mt Cardrona Station in the Cardrona Valley near Wanaka at the bottom of the Cardrona Alpine Ski Resort. In 2011, approximately 131 ha of Mt Cardona Station was rezoned under the Queenstown Lakes District Council’s (QLDC) district plan to be within the “Mt Cardrona Station Special Zone”. The special zone provides for the development of that part of Mt Cardrona Station into a large alpine village intended to comprise approximately 500 residential homes, visitor accommodation, a golf course and retail, food and beverage areas.
[2] The applicant intends to sell part of the special zone to a third party developer who would subdivide and develop that part of the special zone (the development area). The development required the obtaining of a resource consent from QLDC to carry out a bulk title subdivision and the first stage subdivision of residential lots. Resource consents for the stage one Mt Cardrona Station residential subdivision and associated roading, utilities and infrastructure have now issued.
[3] As part of the development, roads, reserves and associated infrastructure would be built and likely be vested in QLDC for the benefit of members of the public and to service the development.
[4] It is QLDC’s preference to own the roads, reserves and associated infrastructure created from such large developments.
[5] Parts of the Mt Cardrona Station land have been rezoned as a special zone. The lots that will result from a subdivision of that special zone, along with other parts of the Mt Cardrona Station land, will have the burden/benefit of covenants in three instrument numbers: 5246992.7, 8079074.1 and 9244805.2 (the covenants). Additionally, a number of neighbouring lots in Cardrona have the burden/benefit of
the covenants registered over parts of the Mt Cardrona Station land, including the special zone and other third party owned land.
[6] Instrument 5246992.7 (covenant one) essentially creates a private water scheme for the benefit of various lots of land. The covenant provides for a company, Pure H2O Cardrona Ltd, to operate a water supply scheme and sets out the rights and obligations owners of relevant lots have to benefit from the scheme and participate in the administration and governance of the company. Schedule C of the covenant provides for what is known as a “no complaints” covenant. The applicant, as a burdened and servient landowner under covenant one, and thus any subsequent owner of the development area, is bound by the covenant. Schedule C of covenant one provides:
1. The Transferee shall :
(a)not submit in opposition nor permit nor suffer any agent or servant or any other representative howsoever to submit in opposition nor support any submission in opposition to:
(i) any present or future application for any resource consent made by the transferor …
(b)The Transferee shall not withhold the Transferee’s consent to:
(i) any approval dispensation or consent required in connection with any application for a resource consent or approval …
2. The Transferor shall not permit any building platform on the land in Certificate of Title OT 19127 to be located within a distance of 100 metres from that part of the legal boundary of the land in Certificate of Title OT 19125 that adjoins the land in Certificate of Title OT 19127.
[7] The second condition of sch C currently prevents any building platform on the development area that is within 100 m of the boundary of some of the first respondents’ land.
[8] Covenant one is mutual, so the “no complaints” covenant also applies to the applicant and any subsequent owner.
[9] Instrument 8079074.1 (covenant two) is a similar “no complaints” covenant. It was dated 17 February 2009 and was registered over parts of the Mt Cardrona Station land including special zone and other third party owned land.
[10] Instrument 9244805.2 (covenant three) was registered on 26 November 2012. It constituted a side agreement in relation to covenant one regarding the allocation of water, but it also includes a similar “no complaints” covenant.
[11] In December 2019, the applicant filed a without notice application for leave to bring an originating application for orders under s 317 of the Property Law Act 2007 to modify the covenants. The variation sought would have modified the covenants to record:
(a) those with the benefit of the covenants would consent to any part of the servient lots being vested or dedicated as any road or reserve in the local authority, territorial authority, New Zealand Transport Agency or the Crown;
(b) the extinguishment of the rights and obligations in the covenants in respect of any land that is so vested as road or reserve; and
(c) for the grantee of the covenants to provide any written consent that LINZ or other governing body might require to vest or dedicate road or reserve in the relevant authority.
[12] On 18 December 2019, Associate Judge Paulsen granted leave to the applicant to commence the proceeding by originating application under pt 19 of the High Court Rules 2016. He directed that the originating application and all documents in support were to be served upon the respondents.
[13]In December 2019, when the application was filed:
(a) the registered proprietors of the benefitted land of covenant one were the first respondents and the applicant;
(b) the registered proprietors of the benefitted land of covenant two were the third respondents; and
(c) the registered proprietors of the benefitted land of covenant three were the fourth respondents.
[14] The second respondent was the company that had been established to operate the water scheme in covenant one.
[15] There have been some changes in registered proprietorships since December 2019 (and therefore the respondents).
[16] The only notice of opposition to the application was from some of the first respondents.
[17] By memorandum of 14 December 2021, counsel for the applicant asked the Court to reconsider making orders without notice based on developments in the law regarding s 317 applications. Counsel referred to the judgment of the Supreme Court in Synlait Milk Ltd v New Zealand Industrial Park Ltd and the fact the applicant had amended the wording of the modified covenant to further prevent any “substantial injury”.1
[18] In a judgment of 17 December 2021, Associate Judge Lester declined to vary the covenants on a without notice basis.2
[19] In a memorandum of 2 May 2022, counsel for the applicant advised agreement had been reached with the third respondents and the applicant was no longer seeking an order in respect of covenant two.
[20] Section 317 of the Property Law Act sets out the grounds under which a covenant can be modified:
317 Court may modify or extinguish easement or covenant
(1) On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish (wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that—
(a)the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
1 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657.
2 Mt Cardrona Station Ltd v Elliston [2021] NZHC 3537.
(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii)the character of the neighbourhood:
(iii)any other circumstance the court considers relevant; or
(b)the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
(c)every person entitled who is of full age and capacity—
(i)has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or
(ii)may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or
(d)the proposed modification or extinguishment will not substantially injure any person entitled; or
(e)in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or
(f)in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
(2) An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
Service and parties
[21] I have read the three affidavits of service filed for the applicant. I am satisfied that all respondents and those who are to be substituted as respondents through having acquired properties from some initially named as first respondents were served with the proceedings so as to fully inform them of the modification to the covenants which the applicant was seeking and the reason for those modifications.
[22] I make an order under r 4.56(1)(a) of the High Court Rules 2016 that the following people originally named as respondents be removed as parties to the proceeding:
(a) Brent O’Callahan;
(b) Jo-Anne Leslie Johns;
(c) Patrick Andrew Frengley;
(d) Paul Benjamin Friedlander;
(e) Sally Margaret Frengley; and
(f) CSI Electrical Services and Inspection Ltd.
[23] The following company and individuals are joined to the proceeding as new first respondents under r 4.56(1)(b)(ii):
(a) Cornwall Trustees 7 Ltd;
(b) Simon John Alexander and Nicola Suzanne Alexander;
(c) Laura Christine Power;
(d) Graeme Edward Preiss; and
(e) Cardrona Valley Farms Ltd.
The analysis of the application
[24] The modifications sought require those with the benefit of the covenants to agree to the vesting of roads and reserves in the development area in the appropriate authority, likely to be QLDC, so those road and reserve areas can be used as such and for utilities to be fully under the control of the relevant authority. With the modification, the land vested in the authority would no longer be subject to the “no complaint” covenant.
[25] The evidence for the applicant was that, in carrying out the subdivision, it would be necessary to obtain a resource consent for the first stage subdivision of residential lots (approximately 50 to 100 lots). As part of that development, roads and reserves would have to be built for the benefit of members of the public and to service the development. It was the applicant’s evidence that the ability to deliver roads, utilities and reserves will be integral for any development, and will benefit the community and viability of the development as a whole.
[26]There is no evidence to the contrary.
[27] In a letter of 26 November 2019, solicitors for QLDC said to the applicant’s solicitor:
We understand that [the applicant] is intending to make an application under s317 of the Property Law Act (PLA) to vary the interests so that all land (whether road or reserve) can vest in QLDC free from all existing interests. We confirm that QLDC does not require to be served with any application under s317 of the PLA.
[28] Despite this, QLDC was served with the documents through service on its solicitors on 22 February 2022. It filed no notice of opposition.
[29] Subsequent to the hearing on 30 May 2022, I was provided with a copy of an email from the solicitor for QLDC confirming QLDC was comfortable with the proposed variations to covenant one which the solicitor referred to as the “Pure H2O” covenant.
[30] The evidence of Mr Huse, a solicitor for the applicant, was that the lawyers and planning engineering teams for QLDC would not recommend to QLDC that it accept the “dedication” of road or vesting of reserves without the covenants being removed from the relevant land or being amended so they do not apply when roads or reserves are vested.
[31] I am satisfied the modification sought to enable the vesting of roads in QLDC is necessary for the proposed subdivision of the development land to proceed.
[32] I accept the proposed modification is necessary because of changes since the covenants’ creation in the nature or extent of the use being made of the benefitted land and the burdened land, the character of the neighbourhood and the change in the zoning of the applicant’s development area from being in the “rural general” and “rural visitor” zones to the special zone. It will now be a significant residential development. The zoning and planning changes are a relevant circumstance.3
3 Synlait Milk Ltd v New Zealand Industrial Park Ltd, above n 1, at [150].
[33] Here, there has been not just a change in the zoning but a change in the use of the land in the neighbourhood as a result of that change. Counsel also advised that resource consent (RM210888) for the subdivision of the development land was issued in March 2022 for the first stage of the development covering approximately 90 lots and the applicant is now undertaking the physical works in accordance with the resource consent with titles expected to issue in 2023.
[34] The only notice of opposition filed in the proceedings was on behalf of some of the first named respondents. The respondents in opposition owned the land most proximate to the buffer land, being the land for which covenant one creates a building restriction. It was apparent from that notice of opposition that they agreed to the modifications the applicant was then seeking subject to there being restrictions in the way the buffer land, which is part of the development area, can be used.
[35] On 15 December 2021, the applicant filed an updating affidavit from Mr Huse in support of the application. In that affidavit, he said there had been contact with a number of the registered proprietors under covenants one and two to obtain consent to the proposed modification. He said the applicant was proposing further modification of wording to the covenants as to the buffer land to further limit its use for the benefit of the first respondents. Mr Huse pointed out that the grantee under covenant three also has the benefit under covenant one. Therefore, despite the wording of covenant three not being amended to include any buffer land protection, they are afforded the additional protection under covenant one.
[36]The applicant then proposed that, with the modified covenant:
(a) the buffer land would not be subject to the variation relating to road or reserve vesting (to give the first respondents comfort that they would not need to consent to any road or reserve vesting in the future within the buffer land);
(b) no motorised vehicle would be allowed within the buffer land (except for a narrow definition of “Permitted Motorised Vehicles”);
(c) no tennis courts, swimming pools or formal sporting fields would be allowed within the buffer land; and
(d) except for infrastructure and buildings containing the infrastructure (for example, pump sheds) that would be allowed within the buffer land, no other buildings would be allowed in the buffer land.
[37] Attached to Mr Huse’s affidavit of 14 December 2021 was the proposed modification of the wording for covenant one and slightly amended modifications as to covenants two and three. The original modification sought had been to record the grantees’ consent to any part of the servient lots being vested or dedicated as any road or reserve including (without limitation) “any local purpose reserve for public utilities or esplanade reserve or strip”. The varied modification provided was to record the grantees’ consent to any part of the servient lots (other than the buffer land) being vested or dedicated as any road, reserve or vested in any other way in the highlighted relevant authority. There were then associated changes so the modification referred to “vested land” rather than road and/or reserve. The affidavit showed both the original and varied modification. The affidavit was served on all relevant parties. In a further affidavit of 2 September 2022, Mr Huse explained that the wording was modified to allow for flexibility in the way governing bodies might obtain ownership of the land through, for instance, legislative reform.
[38] Through Mr Huse’s 14 December 2021 affidavit and an accompanying memorandum, the applicant sought another variation to covenant one to have the development area surrender any rights and obligations under the water scheme in covenant one.
[39] Counsel for the applicant and the respondents in opposition filed a joint memorandum dated 24 May 2022. They recorded their agreement to further modified wording for covenant one. Counsel for the respondents confirmed that the substantive changes they sought related solely to the buffer land.
[40] Schedule C in the covenant had prohibited any building platform on the buffer land. The applicant, through Mr Huse’s updating affidavit, had sought to clarify and
provide further restrictions on the particular use of the buffer land or any developments on it. (para f)
[41] The applicant and the respondents in opposition had agreed to the wording as to the restricted future use of the buffered area so that the scope of that infrastructure above ground would be limited:
2. The registered owner from time to time of the Buffer Land:
a.subject to clause 3, will not permit any building platforms, buildings or structures within the Buffer Land;
b.will not permit any motorised vehicles within the Buffer Land (with the exception of Permitted Motorised Vehicles); and
c.will not permit tennis courts, swimming pools or formal sporting fields within the Buffer Land.
3. Notwithstanding anything contained in clause 2(a), the below are permitted within the Buffer Land:
a.Permitted Water and Power Utilities;
b.underground infrastructure, utilities or easement facilities (including manholes and covers at ground level);
c.fences;
d.earth mounding, planting, landscaping, vegetation, irrigation systems; and
e.tracks and trails for pedestrian and cycle use and Permitted Motorised Vehicle (with reasonable health and safety and directional signage).
[42] The proposed modification to covenant one was also more limited than the modification as originally sought and as sought in Mr Huse’s updating affidavit in that the grantees’ consent to the vesting of land as road or reserve, or otherwise expressly excluded the buffer land and the “No Road Strip”. The No Road Strip was defined to mean the area of the Mt Cardrona Station land (the development area) that is one metre wide and immediately adjoins the boundary of Pringles Creek Road. Counsel explained that this provides the respondent with “covenant protected comfort” that the existing Pringles Creek Road will not extend to provide legal road access to the development area.
[43] It is apparent from a plan of the area that, with this protection over the No Road Strip, the owners of properties adjoining the buffer land and Pringles Creek Road will not have the enjoyment of their properties diminished through increased traffic from Pringles Creek Road to the access road which links to the Cardrona ski field access road and to the main Cardrona Valley Road.
[44] Counsel for both the applicant and the respondents who had filed notices of opposition jointly stated “[a]ccordingly, there is no prejudice to other affected parties from the modifications sought. The earlier wording proposed, which was served upon all respondents, was more permissive.”
[45] The applicant, as indicated in Mr Huse’s updating affidavit, is seeking to modify covenant one so that the development area no longer has any rights or obligations as to the water scheme. That may well be of benefit to the respondents whose properties are subject to or have the benefit of covenant one. Were future homes in that development area to join in the scheme, the demand for water from it would substantially increase. It was a condition of the water scheme that it would serve each parcel of land recorded in 12 different titles. It was a term of sch B that “[n]o warranty as to the availability and uninterrupted supply of water or the suitability of the Water Scheme is given or shall be implied on behalf of the Transferor or the Company” — the company being the one operating the scheme, namely, Pure H2O Cardrona Ltd. The covenant further provided “the Transferee Transferor and the Company acknowledge that there is a need to conserve water and that each party shall use its best endeavours to utilise water supplied from the Water Scheme in an economic manner”.
[46] It might have been thought there could be a potential benefit for all registered proprietors utilising the water scheme to benefit from having more properties involved, as parties to the scheme had to contribute to the operating costs, the amount and frequency of such contributions to be determined by the company.
[47] The notice of opposition filed was for the owners of four different properties which had the benefit of covenant one and who were parties to the water scheme. They consented to the proposed amended modification as to the development land being withdrawn from the water scheme. The proprietors of all lots with the rights and
obligations of being in the scheme each have a share in Pure H2O Cardrona Ltd. The directors of Pure H2O Cardrona are three of the respondents who were in opposition.
[48] In his further affidavit of 2 September 2022 in response to a query from the Court, Mr Huse explained that most of the existing available allocation of water from the scheme is already spoken for. The scheme does not have the capacity to provide water to the proposed 500 lots of the subdivision. Their obligation to contribute to the costs of the scheme would only arise on those lots being connected to the scheme. This would be unlikely to happen.
[49] Mt Cardrona Station Ltd has agreed to surrender its rights to any excess capacity in the scheme which should be of benefit to existing Pure H2O users.
[50] All those who had the benefit of the covenants were served with relevant documents filed in the proceedings. They were served with a copy of the memorandum of counsel for the applicant dated 14 December 2021. All those served had notice that the applicant was seeking the modification by which the development area would no longer be subject to rights and obligations as to the water scheme. No party other than the respondents represented by Galloway Cook Allan filed any notice of opposition.
[51] I am satisfied that, insofar as the variation removes from the development area all rights and obligations associated with participation in the water scheme, through not objecting to that variation, those who are members of the water scheme can be considered to have abandoned or waived their right to insist the lots within the development area be part of the water scheme.
[52] With the agreement that has been reached over the protection of the buffer land and the exclusion of the one metre No Road Strip of the development area adjoining the boundary of Pringles Creek Road, the proposed modification will not substantially injure any person entitled to the benefit of the relevant covenants in their present terms.
[53] I am further satisfied the continuation of the relevant covenants in their existing form would impede the reasonable use of the burdened land, being the development area, as a subdivision area. That use could reasonably have been foreseen by the original parties to the covenants at the time of their creation.
[54] I am satisfied that it is just and equitable for covenants one and three to be modified in the manner sought by the applicant.
[55] I accordingly make orders as sought by the applicant and as consented to by those parties who had originally filed a notice of opposition, namely:
(a) Instrument 5246992.7 be modified to include the clauses set out in the memorandum attached as Schedule One to the memorandum of counsel for the applicant dated 23 May 2022;
(b) Instrument 9244805.2 be modified to include the clauses set out in Schedule Two as attached to the memorandum of counsel for the applicant dated 23 May 2022;
(c) the Registrar-General of Land shall note against all relevant titles that Instrument 5246992.7 and 9244805.2 have been modified in terms of the orders above;
(d) leave be reserved to the applicant to apply by interlocutory application in this proceeding for further orders should there be any technical or administrative difficulties in perfecting the matter;
(e) an order under the High Court Rules 2016, r 4.56(1)(b)(ii) that Cornwall Trustees 7 Limited, Simon John Alexander, Nicola Suzanne Alexander and Cardrona Farms Ltd be joined as parties to the proceeding;
(f) an order under the High Court Rules 2016, r 4.56(1)(b)(ii) that Laura Christine Power and Graeme Edward Preiss be joined as parties to the proceeding; and
(g) an order under the High Court Rules 2016, r 4.56(1)(a) that Brent O’Callahan, Jo-Anne Leslie Johns, Patrick Andrew Frengley, Paul Benjamin Friedlander, Sally Margaret Frengley, and CSI Electrical Services and Inspection Ltd are removed as parties to the proceeding.
Solicitors:
Anderson Lloyd, Queenstown Gallaway Cook Allan, Wanaka.
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