Okey v Kingsbeer
[2017] NZCA 625
•21 December 2017 at 3.00 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA106/2017 [2017] NZCA 625 |
| BETWEEN | RONALD GORDON OKEY MCKENZIE MCPHAIL CORPORATE TRUSTEES LIMITED |
| AND | PAULINE ANNE KINGSBEER AND BERNADETTE PLAW IN THE CAPACITY OF TRUSTEES OF THE PAK TRUST |
| Hearing: | 12 October 2017 |
Court: | Kós P, Woolford and Collins JJ |
Counsel: | J Toebes and N J G Smith for Appellants |
Judgment: | 21 December 2017 at 3.00 pm |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BA declaration is made that there is an equitable easement in the form of a vehicular right of way over Cessna Place on the respondents’ property in favour of the appellants.
CAn order is made under s 313 of the Property Law Act 2007 that the appellants pay 75 per cent and that the respondents pay 25 per cent of the costs to upgrade the vehicular right of way to the standard required for use by trucks to the satisfaction of the Palmerston North City Council.
DThe respondents must pay the appellants costs for a standard appeal on a band A basis and usual disbursements. We certify for two counsel.
____________________________________________________________________
REASONS OF THE COURT
(Given by Woolford J)
Introduction
This appeal arises from a dispute over an unregistered right of way easement on industrial land in Palmerston North. The appellants, Mr Okey and McKenzie McPhail Corporate Trustees Ltd, have been using the right of way over the property, now owned by the PAK Trust — of which the respondents Ms Kingsbeer and Ms Plaw are trustees — since 1986. A dispute has arisen because of increased use of the right of way by trucks visiting the appellants’ property, which has taken a toll on the quality of the right of way surface.
The respondents applied to the High Court for an order extinguishing the equitable easement over the land. Alternatively, they sought an order that the appellants pay the total cost of upgrading the right of way to the standard required for use by trucks. In a decision of the High Court, Cull J held that the equitable grant of easement was invalid, and, in the alternative, that the easement should be extinguished by the Court.[1] The appellants appeal.
Factual background
[1]Kingsbeer v Okey [2017] NZHC 57.
The subject matter of this appeal is a private formed road, called Cessna Place, wholly situated on the respondents’ property in a Palmerston North industrial zone and which allows access to buildings on an adjoining property owned by the appellants.
Originally, Don Kingsbeer, the father of Ms Kingsbeer, owned all the land at issue which comprised several lots held in one certificate of title with a total area of 1.3437 hectares. In 1986, Mr Kingsbeer created three new lots by re-subdividing the existing allotments into Lots 1, 2 and 3. Lot 2 was retained by Mr Kingsbeer and Lot 3 was sold to the appellants’ predecessor in title, R Okey Ltd.
The sale included the grant of mutual rights of way easements over the initial part of the formed road, which were registered against the titles to the respective properties. Proposed access to the remainder of the formed road was formalised in a document called a deed and signed by Mr Kingsbeer (but not by R Okey Ltd) at around the same time. It referred to the agreement for sale and purchase of Lot 3 and noted that although the agreement provided for legal access in favour of R Okey Ltd, it was not intended by the parties that such legal access should be used. The document instead recorded that Mr Kingsbeer agreed to allow R Okey Ltd to use the existing six-metre roadway on his land. The document also recorded that the rights created in the document should not be registered against the certificate of title. Finally, the document stated that Mr Kingsbeer would not sell, lease or part with possession of Lot 2 without first obtaining and granting to R Okey Ltd a registerable right of way at the expense of R Okey Ltd.
That document included the following relevant provisions:
AND WHEREAS although the said Agreement for Sale and Purchase provides for legal access in favour of the Grantee as purchaser it is not intended by the parties that such legal access should be used
…
1. THE Grantor agrees to allow the Grantee its tenants, servants, agents, invitees, licencees [sic], visitors and workmen with or without vehicles to use the existing 6 metre roadway on the land owned by the Grantor more particularly described in the Second Schedule hereto and is shown in the subdivision plan prepared by T E Roots Harper & Associates a copy of which is annexed for access to the land to be purchased by the Grantee.
2. IT is agreed between the parties that the Grantee will ensure that the said roadway is kept clear and free from obstruction at all times and that the Grantee, its tenants, servants, agents and invitees, licensees [sic], visitors and workmen will not park or allow any vehicle to park on the said 6 metre roadway at any time.
3. IT is agreed between the parties that the Grantee will pay a share of the maintenance of the said 6 metre roadway on an area basis apportioned at 56.9% of the total cost thereof. Where the need for any maintenance or repairs is directly attributed to the actions of one only of the Grantor or the Grantee or their respective tenants, servants, agents and invitees, licencees [sic], visitors and workmen then the cost of such maintenance or repairs shall be borne wholly by one of the Grantor and the Grantee as the case may be.
4. IT is agreed between the parties that the rights created herein shall not be registered against the Certificate of Title in the Land Transfer Office.
5. THE Grantor covenants that he shall not sell, lease, assign or part with possession of the land described in the Second Schedule hereto without first obtaining and granting to the Grantee a registrable Right of Way at the Grantee’s expense in accord with terms and conditions contained in paragraphs 1, 2 and 3 hereof.
In 1986, as now, the Palmerston North City Council (the Council) required private roads or rights of way in industrial areas to be constructed to a standard suitable for use by trucks. Counsel for the appellants submits that the parties intended to implement the right of way as an unregistered equitable easement subject to these terms because the whole of the formed road had not been constructed by Mr Kingsbeer to the minimum standards required by the Council. There was, however, no direct evidence of this as Mr Kingsbeer died in 2012 and the appellants elected not to call any evidence in the High Court.
The copy of the 1986 deed was never signed by R Okey Ltd. It is, however, apparent that the appellants have been permitted to use the right of way consistently with its terms continuously since 1986.
At the time the appellants started to use the formed road, it had an unsealed metal surface constructed by Mr Kingsbeer. The road was already in use by Mr Kingsbeer by the time the appellants bought Lot 3 and commenced use. Sometime in the mid-1990s the road was upgraded to its current state with an asphaltic concrete surface.
In 2007, R Okey Ltd transferred ownership of its land to the appellants, Mr Okey and McKenzie McPhail Corporate Trustees Ltd.
Then in 2009, some 23 years after the initial grant of the legal and equitable easements, the appellants sought building consent to erect a warehouse on their property. Following correspondence with the Council, the appellants were required to provide the Council with confirmation that they had legal access to the private road referred to as Cessna Place. The following endorsement was added to the building consent issued by the Council on 23 July 2009:
Prior to the occupation and use of the proposed warehouse a suitable right of way easement must be created over Lot 2 DP77691 and the sealed area on Lot 2 DP77691 covered by the easement must be upgraded to the satisfaction of the Council’s Roading Manager.
It appears that the documentation from 23 years earlier was either forgotten about or misplaced. To provide evidence of the right of way easement, Mr Kingsbeer signed a new document, dated 13 July 2009, in which he stated:
I DON HAROLD KINGSBEER acknowledge that I am the registered proprietor of CT 48449 a copy of which is attached hereto marked “A” (“the land”).
That in consideration of the sum of $1.00 paid to me by RONALD GORDON OKEY and MCKENZIE MCPHAIL CORPORATE TRUSTEES LIMITED I hereby agree to grant RONALD GORDON OKEY and MCKENZIE MCPHAIL CORPORATE TRUSTEES LIMITED a Right of Way Easement over that part of Lot 2 marked “P”, “Q” and “R” on DP77691 to allow access to Lot 3 DP60169.
A further document, dated 1 August 2009, was then signed by both Mr Kingsbeer and Mr Okey. It stated:
This agreement is between Don Harold Kingsbeer and Ronald Gordon Okey and McKenzie McPhail Corporate Trustees Limited and their successors.
Its purpose is to reimburse DH Kingsbeer for the rates paid by him to the Palmerston North City Council covering the jointly used common roadway shared by DH Kingsbeer and RG Okey.
This portion of land is .353 (point three five three) of DH Kingsbeer’s rates and as at 1-08-09 amounted $1,972.21.
The payment is to be by monthly bank authority from RG Okey’s bank of $164.35. Commencing on the first day of August 1909 [sic] and this amount to be adjusted each year as the rates vary by the Council.
It is also reaffirmed that the services i.e. (water, storm water, sewage, power, phone and roadway maintenance (etc)) are shared equally by both parties.
The terms of this agreement is in perpetuity or until both parties agree on new terms.
Signed this 1st day of August 2009.
The warehouse was subsequently constructed on the appellants’ land, but no code compliance certificate has been issued for the building because the right of way has not been upgraded to the satisfaction of the Council’s Roading Manager.
Mr Kingsbeer died in 2012 and his daughter, Ms Kingsbeer, inherited her father’s property. Ms Kingsbeer then formed the PAK Trust and transferred the property to it. Ms Kingsbeer and the PAK Trust were aware of the existence of an equitable easement prior to transfer of the title.[2] Correspondence from this time demonstrates that they recognised the easement as valid.
[2]Okey v Public Trustee [2015] NZHC 3318.
When the PAK Trust took title to the property, the surface of the right of way needed repair. Ms Kingsbeer commissioned a report from Young Consulting Wanganui Ltd on the roadway (the Young Consulting Report) dated 27 July 2012. That report concluded that the roadway did not meet current Council standards for a right of way in an industrial area. It proffered the opinion that, because the roadway was on private property, it was highly likely that no consideration was given to the pavement strength when it was constructed. It noted further that since Mr Kingsbeer retained ownership of the area there would be no need to ensure that the paved area met Council standards. The Young Consulting Report then commented:
Undoubtedly the success of the pavement has been due in part to the generally lighter loadings that it has carried over the years. Greater loadings have occurred in the last two years, but even then they are not excessive in industrial terms.
Following the Young Consulting report, Ms Kingsbeer wrote to the solicitors for R Okey Ltd acknowledging that her father had agreed to grant an easement to Mr Okey and that Mr Okey currently enjoyed an equitable easement “premised upon part performance”. She then stated:
It has now been established that the private roadway is not required to meet any Council standards unless a formal easement is to be registered. Therefore it is unnecessary for me, and it is not my intention to contribute to any of the costs in bringing the road up to Council standard. The resulting easement is only beneficial to Mr Okey.
Ms Kingsbeer stated that she had not departed from her willingness to grant the appellants a formal easement over the land. However, her willingness was subject to a number of conditions, which included Mr Okey meeting all costs in bringing the roadway up to Council standards. This required the complete replacement of the existing roadway and sub-structure.
Finally, Ms Kingsbeer stated that if the appellants found the above conditions unsatisfactory, Mr Okey’s prior equitable easement would revert to a license that would be revoked at 5.00 pm on Friday 7 September 2012. She stated it was her intention to enforce such a revocation by installing such equipment as necessary to control the users of the road. Ms Kingsbeer did not explain how the equitable easement would revert to a licence that would then be revoked.
Further correspondence followed. The respondents’ solicitors then wrote to the appellants’ solicitors in a letter dated 8 February 2013 as follows:
We enclose a copy of an engineering report dated 27 July 2012 [the Young Consulting Report]. It is apparent from the report that your client Mr Okey is causing increasing damage to the private road owned by the trustees of the PAK Trust.
It is further apparent that the industrial commercial use of the land by Mr Okey’s vehicles must stop unless remedial action is undertaken on the private road.
The Trust does not wish, nor could it afford, to bring the private road up to a standard that the Palmerston North City Council would grant approval for the creation of an easement of right of way. If no easement can be registered for Mr Okey’s benefit, then Mr Okey cannot continue to use the private road.
The original easement proposed by letter dated 1 July 2009 between Mr Okey and Mr Kingsbeer cannot be achieved because the private road physically is unable to incur Mr Okey’s use.
Given that Mr Okey has not made any offer to purchase, nor to undertake to pay for the upgrading of the private road to Council easement standards, the PAK Trust gives formal notice of cancellation of the proposed easement granted by letter on 1 July 2009 due to the damage occurring to the private road by it’s continued use as thoroughfare by Mr Okey’s trucks.
Please accept this letter as formal cancellation of the proposed easement granted 1 July 2009, effective 1 March 2013.
Following that correspondence, the appellants registered a caveat over the respondents’ property.
Then on 16 December 2013, the respondents issued proceedings in the High Court at Palmerston North in which they applied for an order under s 317 of the Property Law Act 2007 extinguishing the equitable easement because of change to the land since the easements creation. In the alternative, if the easement was not extinguished, the respondents sought an order that the appellant pay the total costs of bringing the road up to a standard acceptable to the Council. The respondents did not, at least in the initial proceedings, seek a declaration that the easement was invalid from the beginning.
High Court judgment
On 1 February 2017 Cull J delivered a judgment in which she held that the equitable easement granted by Mr Kingsbeer on 13 July 2009 was invalid.[3] She made no finding on the 1986 equitable easement.
[3]Kingsbeer v Okey, above n 1.
The Judge listed the issues to be determined as follows:[4]
(a)Does s 348 of the Local Government Act 1974 apply either in 2009 at the date of grant of the easement or to the current application?
(b)If so, was there nevertheless implied permission of the Council on which the parties could rely, given that the Council gave permission for the Okey interests’ building work to be undertaken on condition of a suitable right of way easement?
(c)Should the equitable grant of easement be modified or extinguished because of a change since its creation?
(d)If the equitable easement remains in existence, then:
(i)Should the easement be registered over the PAK Trust’s land in favour of the Okey interests?
(ii)To what standard should the roadway be constructed or repaired?
(iii)In what proportion should the reasonable and proper costs of any required work be met by the grantor and grantee of the easement?
[4]At [56].
As to the first issue, the Judge noted that s 348(1) of the Local Government Act required the permission of the Council before anyone could grant a right of way over any private way in the district. The Judge said that she was driven to the conclusion that on the application of s 348(1), and without the prior permission of the Council, Mr Kingsbeer could not have granted a right of way over Cessna Place to Mr Okey. In her view, there was no valid grant of easement, equitable or otherwise.
As to the second issue, the Judge noted that under s 348(3) if the permission of the Council had been obtained to lay out or form any private road or private way as required in s 348(1), the Council’s permission was deemed to lapse on the expiration of three years after the grant unless the work had been carried out to the satisfaction of the Council. So even if she was wrong about the invalid grant of easement by Mr Kingsbeer in 2009, the Judge was of the view that by July 2012 any implied permission of the Council would have lapsed. She characterised the purported grant of an easement between Mr Kingsbeer and Mr Okey as being an illegal contract and as of no effect by virtue of s 6 of the Illegal Contracts Act 1970. She stated that in the circumstances she was not prepared to validate the contract under that Act. Without the Council’s permission the equitable right of way easement should not have been granted.
The third issue only arose in the event that the Judge was wrong in her conclusion about the applicability of s 348 of the Local Government Act. Section 317 of the Property Law Act enables a court to modify or extinguish an easement because of a change in the nature or extent of the use being made on the benefited or burdened land. The Judge noted Ms Kingsbeer’s evidence, which included photographic and video records of the vehicles using the roadway. She accepted that significant damage to the roadway was caused by trucks used by the appellants’ tenants and interests. The Judge was of the view that the disadvantages to the respondents had become totally disproportionate by reason of changes that had occurred since the creation of the easement and that the cost to upgrade and repair the road was not foreseen by Mr Kingsbeer when he granted the easement. On the application under ss 316 and 317 of the Property Law Act she therefore found the 2009 grant of easement, if valid, should be extinguished.
Finally, because of her conclusions on the first three issues, the Judge did not address the remaining issue about the reconstruction or repair of the roadway. The only question remaining was, therefore, whether compensation was payable to the appellants due to extinguishment of the easement. The Judge was of the view that the benefits acquired by the appellants over a period of almost nine years far outweighed the need for payment of compensation by the respondents. She, therefore, did not consider compensation should be awarded to the appellants in all the circumstances.
The formal findings of the Judge were, therefore, these:
(a)The right of way easement granted by Mr Kingsbeer on 13 July 2009 to Mr Okey was invalid by virtue of s 348(1) of the Local Government Act.
(b)In case she was wrong in reaching that conclusion, the equitable grant of easement (if valid) was extinguished under s 317 of the Property Law Act because of the change of circumstances and use since the grant of easement on 16 July 2009 resulting in disproportionate disadvantage to the respondents.
Discussion
Existence of an equitable easement
We turn first to the legal basis of the right of way. The Judge focused only on the creation of equitable agreement by contract in 2009. However, it is our view that an equitable easement was created much earlier, by 1986. In that year Mr Kingsbeer subdivided his property, and R Okey Ltd purchased Lot 3. It is accepted by both parties that the respondents have been using the driveway ever since.
Although the easement agreement in 1986 was never completed, use has continued apparently on its terms ever since. A written contract is not required to create an equitable easement. For an equitable easement to be established, the following elements are required:[5]
(a)the right to be granted must possess the essential characteristics of an easement;
(b)valuable consideration (necessary for the existence of a contract); and
(c)either a sufficient record in writing to satisfy s 24 of the Property Law Act, or a sufficient act of part performance.
[5]DW McMorland McMorland on Easements, Covenants and Licences (3rd ed, LexisNexis, Wellington, 2015) at [16.035].
Section 24 of the Property Law Act requires that a contract for the disposition of land will be enforceable by action where the contract is in writing or its terms recorded in writing, and where the contract is signed by the party against whom the contract is sought to be enforced. On that basis the 1986 deed signed by Mr Kingsbeer satisfies the requirements of s 24.
Even if it were not signed, the agreement has been confirmed by acts of part performance.[6] The parties’ conduct is not only consistent with an agreement that the respondents would be granted an easement over the existing formed road, but unequivocally referable to it. The respondents and their predecessors in title have continued to use the road since 1986, through changes in title, and to contribute to maintenance with no evidence of any complaints prior to the beginning of the current dispute.
[6]Explicitly preserved by s 26 of the Property Law Act 2007.
Quite clearly the right possessed the essential characteristics of an easement as articulated by the England and Wales Court of Appeal decision in Re Ellenborough Park:[7]
… (1) there must be a dominant and a servient tenement: (2) an easement must “accommodate” the dominant tenement: (3) dominant and servient owners must be different persons, and (4) a right over land cannot amount to an easement, unless it is capable of forming the subject-matter of the grant.
[7]Re Ellenborough Park [1956] Ch 131 (CA) at 163.
The first and second requirements have been made largely redundant by s 291 of the Property Law Act but regardless are clearly met in this case, as is the third requirement. Lang J in Olo Ltd v KA No 3 Trustee Ltd summarised the principles relating to the fourth requirement articulated in Re Ellenborough Park as follows:[8]
(a)the rights cannot be too wide or vague;
(b)the rights cannot amount to joint occupation that would substantially deprive the proprietor of the servient tenement of its right to possession; and
(c)the rights must be more than mere rights of recreation.
[8]Olo v KA No 3 Trustee Ltd [2014] NZHC 1075, (2014) 15 NZCPR 332 at [28].
These criteria are met here. The extent of the right of way was clear given the formed road was already in existence. The grant was not personal; the rights ran with the land when the appellants replaced R Okey Ltd in title in 2007. And the rights were clearly valuable to the appellants. The rights granted amount to an orthodox right of way easement except for the fact that the parties agreed not to register it.
Although the respondents acknowledged the equitable easement prior to this dispute, as the litigation progressed, they made some collateral challenges to its existence. In particular, the respondents deny valuable consideration was given. We are satisfied that the purchase of the property and the grant of the easement were part of the same transaction.[9] The circumstances clearly raised an implication that the parties intended that use of Cessna Place would be granted with sale of Lot 3 from Mr Kingsbeer to R Okey Ltd. It is not relevant that documents relating to the subdivision from prior to the sale and agreement show access to the property by way of a separate easement on the western boundary of the property, nor that the appellants could access their land by that boundary over the legal easement.
[9]Casey v Commissioner of Inland Revenue [1959] NZLR 1052 (SC).
The parties do appear to have agreed at the time, however, that the easement would not be registered. That agreement was recorded in the signed draft-1986 deed, and the parties never took steps to register the easement prior to 2009. The respondents contend that Mr Kingsbeer did not want the easement to be registered because he did not wish to upgrade the driveway as required. But even if this is true, it does not refute the existence of an equitable easement. And given this provision was ostensibly inserted for Mr Kingsbeer’s benefit, the respondents cannot rely on it to defeat the appellants’ equitable interest.
In any event, the parties formalised their easement in 2009 with the written grant of easement. As the Judge found, even if there was no existing easement, this agreement certainly amounted to an equitable agreement. But we are of the view that there was already an equitable easement in place. The 2009 agreement modified that only to the extent that there was no longer a provision stipulating that the easement would not be registered.
Effect of s 348 of the Local Government Act
The Judge held that the equitable easement was never valid by dint of s 348 of the Local Government Act, which relevantly provides:
348 Powers of council with respect to private roads and private ways
(1) Except with the prior permission of the council, no person shall lay out or form any private road or private way, or grant or reserve a right of way over any private way, in the district.
…
(3) Any permission of the council under subsection (1) to lay out or form any private road or private way as aforesaid shall be deemed to lapse on the expiration of 3 years after the grant thereof, unless the work has then been completed to the satisfaction of the council; but may from time to time be extended by the council for a period or periods not exceeding 1 year at any one time.
It is our view that s 348 of the Local Government Act 1974 has assumed a prominence in this case that it does not deserve. Section 348(1) provides that no person shall lay out or form any private road or private way or grant or reserve a right of way over any private way “except with the prior permission of the Council”. Section 348 was not referred to by the respondents in their pleadings, evidence or submissions in the High Court. The pleadings were predicated on the fact that Mr Kingsbeer had granted an equitable right of way over his property to Mr Okey. It was not alleged that the equitable right of way was invalid from the beginning.
The appellants argued before us that s 348 has no bearing on the easement for two reasons. First, specific permission from the Council was not required because roads in an industrial zone are a permitted activity in terms of the District Plan. Secondly, on the other hand, if specific permission was required, the appellants argued that the Council inferentially gave permission for the easement in the correspondence between the Council and the appellants when it issued a building consent to the appellants in 2009.
We are not attracted to the first argument, but see merit in the second. The language used in the correspondence is imprecise and somewhat inconsistent, but a building consent was issued with the following endorsement:
Prior to the occupation and use of the proposed warehouse a suitable right of way easement must be created over Lot 2 DP77691 and the sealed area on Lot 77691 covered by the easement must be upgraded to the satisfaction of Council’s Roading Manager.
The Council knew of the sealed area used as a roadway and wanted proof of “a suitable right of way easement”. It was subsequently provided with a copy of the document signed by Mr Kingsbeer on 13 July 2009 granting the appellants a “right of way easement”. Permission of Council to the grant of a right of way in terms of s 348(1) is to be inferred from the Council’s request for documentation evidencing the right of way. No formal document specifically referring to s 348(1) is required. We note in passing that approval by the Council of a survey plan of subdivision is conclusive evidence that all private ways shown on the survey plan have been authorised and accepted by the Council under the Local Government Act 1974.[10] It is also possible therefore that permission to form the private way had been given by the council at the date of subdivision, although the High Court was not provided with all the plans and correspondence from the date of the original subdivision and sale.
[10]Resource Management Act 1991, s 223(5).
Even if prior permission of the Council had not been obtained to the grant of the right of way easement we are not convinced that the right of way easement would consequently be invalid as suggested by the Judge. First, the responsibility for obtaining the prior permission of the Council must fall on the grantor, in this case Mr Kingsbeer. A court would naturally be reluctant to penalise a grantee, such as the appellants, in respect of an omission for which they are not responsible.
Secondly, the Local Government Act does not provide that any private road or private way laid out or formed or right of way over any private way granted or reserved without prior permission is invalid. Section 350 instead provides a penalty for laying out a private road or private way or granting or reserving any right of way contrary to the provisions of the Act of a fine not exceeding $50 for every day during which the offence has continued “after the day on which [the defendant] received notice from the Council that the offence has been continued”. The Council has not given notice to the respondents (the respondents as grantor would be the liable party, not the appellants as grantee). Section 351 then goes on to provide that:
[n]o plan, deed, or instrument of any kind whatsoever whereby contrary to the provisions of this Part any private road or private way is created, recognised, referred to, granted, or reserved shall be received for deposit or registration under the … Land Transfer Act 1952.
If the Council had not granted prior permission, then the statute provides an easement instrument or plan showing a right of way could not be registered, but an equitable easement may still exist.
We are, therefore, respectfully of the view that the Judge was wrong to hold that there was no valid grant of easement.
The Judge proceeded to hold that even if she was wrong about the invalid grant of easement by Mr Kingsbeer in 2009, by July 2012 any implied permission of the Council would have lapsed. The Judge relied on s 348(3) of the Local Government Act, which provides that any permission of the Council to lay out or form any private road or private way shall be deemed to lapse after three years unless the work has then been completed to the satisfaction of the Council.
Section 348(3), however, refers only to permission to lay out or form any private road or private way. It does not refer to the grant or reservation of a right of way over any private way. The endorsement on the building consent did not refer to the laying out or forming of the roadway, but referred to the creation of a suitable right of way easement. It did also refer to the upgrade of the sealed area, but it seems to us that the roadway had already been laid out or formed many years previously. In those circumstances we do not see that s 348(3) has any relevance to the present case. Council permission for a mere grant or reservation of right of way would not lapse under s 348(3). It is therefore unnecessary for us to consider whether or not the easement was an illegal contract and whether or not the Court should rectify it under the Illegal Contracts Act.
Modification or extinguishment of the easement
The third issue considered by the Judge was whether or not the equitable grant of the easement should be modified or extinguished because of a change in the use of the land since its creation. Without the intervention of the courts under s 317 of the Property Law Act to alter the burden on the respondents, the appellants’ activities would certainly fall within the terms of the current easement. The use of an easement is not confined to use only for the purposes of the dominant tenement in the condition it was in at the time of the grant; a change in the activities of the person benefitting from an easement is allowed so long as the more intrusive use falls within plain meaning of the terms of the easement.[11] Undoubtedly it does here. That cannot be cancelled or limited unilaterally by one party, as the respondents purported to do in 2013. Thus it is only the remedial power of the Court under s 317 that would allow modification or extinguishment as a result of any changed use of this kind.
[11]Grinskis v Lahood [1971] NZLR 502 (SC) at 508–509.
The respondents claimed in the High Court that the easement should be modified or extinguished under s 317(1)(a)(i) or s 317(1)(b), which provide:
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:
(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; …
The courts have traditionally taken a conservative approach towards the exercise of discretion under s 317 and its predecessors. This is for good reason: applications to modify or extinguish an easement generally impact adversely on existing property interests. However, there has been a progressive broadening of the statutory power granted to the courts, and a commensurate relaxation of the approach the courts have adopted.[12] This is especially so given an award of compensation is now available under s 317(2). But s 317 still cannot be used to free a servient tenement owner from an easement simply to improve the enjoyment of his or her property or for his or her private purposes.[13] The courts should be hesitant to allow contractual property rights to be swept aside in the absence of strong reasons.
[12]Harnden v Collins [2010] 2 NZLR 273 (HC) at [25], cited in Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776 at [64]. See also Manuka Enterprises Ltd v Eden Studios Ltd [1995] 3 NZLR 230 (HC) at 233.
[13]Manuka Enterprises Ltd v Eden Studios Ltd, above n 12, at 234.
Neither the respondents nor the Judge clearly distinguished between s 317(1)(a) and 317(1)(b). Section 317(1)(a) focuses on the use of the dominant and servient lands. The focus must be on the impact of the change on the benefit or burden flowing from the easement, rather than the fact of change alone.[14] By contrast, s 317(1)(b) focuses on the foreseeable imposition on reasonable use of the burdened land. Although there will be some crossover between the two subsections, they nonetheless have a different focus: the first on the use made of each land; and the second on the imposition of the easement on the reasonable use of the burdened land and its foreseeability.
[14]Jansen v Mansor (1993) 2 NZVJ 54 (CA) at 56; and Manuka Enterprises Ltd v Eden Studios Ltd, above n 12, at 233.
As to whether there has been a change to the nature and extent of the use being made by of the dominant and servient land, we do not consider that any relevant change is demonstrated. Both properties were used for industrial purposes at the time of the grant, with industrial buildings on or to be built on the land. This was within the zoning restrictions at the time, which have not changed. The only real change is the construction of a warehouse on the dominant land and a corresponding increase in traffic using that property. To the extent that this is a change we consider it is only slight and does not provide reason to conclude that changes in use to the land warrant modification or extinguishment.
Nor do we consider the easement impedes the respondents’ reasonable use of their land in a different way, or to a different extent, than that which could have been reasonably foreseen at the time of the grant. At the time of grant over an industrial property with industrial buildings it could easily have been envisaged that the delivery of goods to and from the buildings would utilise all forms of transport, including trucks. The Council required then and requires now a roadway constructed in an industrial zone to be suitable for use by trucks. It seems that the roadway in the present case was never suitable for trucks. An increase in the number of trucks passing over the land was undoubtedly foreseeable, and certainly by 2009, but nonetheless was not excluded from the terms of the grant. And while there has been an increase in trucks passing over the land in recent years, the Young Consulting Report obtained by the respondents notes that “even then they are not excessive in industrial terms”.
The Judge made findings that Mr Okey had not brought to the attention of the late Mr Kingsbeer that the roadway was not suitable for his future intended use by trucks, nor details of the size of the intended building to be constructed on his land. With respect, there was no evidence of these matters. Mr Kingsbeer is deceased and Mr Okey did not give evidence.
It appears that the primary reason the respondents consider a modification to the easement is required is due to the unexpected cost of upgrading the easement. We are not convinced that this falls within the ambit of s 317(1)(a). It is a question of costs arising from the use of the existing easement, not a change in the use of the land itself or a change in the impact on the use of the dominant tenement. The matter of cost sharing of easements is covered in other sections of the Property Law Act, such as s 314 which allows the courts to make orders dividing the cost of works between those entitled to use a vehicular right of way. There is nothing to suggest Parliament intended the courts to resort to extinguishing or modifying easements under s 317 due only to concerns about maintenance costs that could be dealt with by s 314.
Even if one of the grounds of s 317 were made out, then the Court must consider whether it would be appropriate to exercise its discretion, and in what form.[15] Even if we agreed with the Judge that a change had occurred that warranted exercise of the Court’s discretion, total extinguishment of the easement would be plainly disproportionate. The respondent did not provide a clear proposal for modification.[16] Modification of the terms of the easement to limit the appellants’ use or to require them to shoulder the financial costs would have sufficed to ameliorate any harm to the respondents while limiting the impact on the appellants. But that was not advanced by the respondents and we say no more about it.
Cost distribution
[15]Davey v Baker, above n 12, at [75].
[16]Waikauri Bay Reserve Ltd v Jamieson HC Auckland CP81/87, 12 February 1990 at 11.
In their statement of claim the respondents sought an order that the appellants pay for the total repair and upgrade costs of the right of way in the instance that their claim for extinguishment of the easement was unsuccessful. Given her decision on the validity of the easement, the Judge did not address the issue about the reconstruction or repair of the roadway. We think it unnecessary that the matter be referred back to the Judge and so have embarked on an analysis of the evidence in relation to the use of the roadway.
Under s 313(1)(e) of the Property Law Act, the Court is entitled to make an order concerning division of costs of any required work for a right of way. The section relevantly provides:
(1)In determining a question or dispute concerning the existence or effect of an easement, positive covenant, or restrictive covenant, a court may make an order, on any conditions the court thinks fit, concerning all or any of the following matters:
…
(e) the person or persons by whom the cost of any required work is to be borne and, if the cost is to be shared among 2 or more persons, the shares to be borne by each of them:
…
Required work is defined as work required to be done under the terms of an easement.[17] The bare terms of the current easement do not specify the standard to which Cessna Place is to be maintained, nor whether upgrades are required to adjust to increased use. However, covenants are implied in grants of vehicular rights of way, including equitable vehicular rights of way.[18] These include the right of the dominant user to construct a driveway, make necessary repairs to any existing driveway, and to carry out any necessary maintenance or upkeep, including altering if necessary the state of that land. The level of work required falls outside the ordinary definition of maintenance. It is not a matter of simply maintaining the driveway in its current repair, but of substantially rebuilding it to a considerably different standard. Nonetheless, we consider the right to undertake this work falls within the implied rights of the dominant user given these extend so far as construction of a driveway and alteration of the state of the land. It is clear that considerable work to the substratum of the road is required for the current road to be useable. We consider the appellants are entitled to carry out that work, and this Court can make a s 313 order concerning cost division.
[17]Property Law Act, s 313(c).
[18]Sections 297 and 4.
Section 314 then relevantly provides:
314Duties of court making order under section 313(1)(e) on sharing of cost of work under vehicular right of way
(1)This section applies to a court making an order under section 313(1) (e) in relation to the sharing among 2 or more persons of the cost of work that is required under the terms of a vehicular right of way.
(2)The court must assume, in the absence of evidence to the contrary, that every person entitled makes full and reasonable use of the right of way.
(3)However, the court must also take into account any disproportionate (though still reasonable) use of the right of way by any person entitled.
The appellants submit that the starting point for apportionment of costs ought to be an equal split based on the presumption in s 314(2) that every person entitled makes full and reasonable use of the right of way. However, s 314(3) makes it clear that whether the appellants’ use of the driveway is disproportionate (even if reasonable) is relevant to the question of how costs should be borne. Although the two properties and the buildings on them are of similar size,[19] it is accepted by both parties that the Okey interests use the private way significantly more both for general vehicles and for vehicles classified as Class 3 and above.
[19]The respondents’ land is 6,391 m2 and the appellants’ 6,844 m2.
We are conscious of the agreements in the 1986 and 2009 grants that the appellant was to pay 56.9 per cent of the cost of roadway maintenance (in the 1986 grant), and subsequently that the parties were to share equally the costs of roadway maintenance (in the 2009 grant). We do not consider these allocations determinative for two reasons. First, as set out above we do not consider that the upgrade of the road amounts to maintenance on its plain and ordinary meaning. The work proposed is substantial and will fundamentally change the nature of the roadway. It cannot be considered mere maintenance of the road. Secondly, for reasons that will become clear we consider that there has been a significant change in patterns of use of the roadway since the construction of a new warehouse on the appellants’ property.
The respondents’ evidence in the High Court demonstrates the disproportionate use of the right of way. Ms Kingsbeer provided a series of 1,522 photographs showing all the vehicles that used the driveway in November 2013 as an example of use in a normal month. She marked those photographs to show which were vehicles travelling to the appellants’ land, and which to the respondents’ land. Her analysis of the photographs attributes 74.3 per cent of the total traffic across the course of a month to the appellants’ interests and 25.7 per cent to the respondents’.[20] In cross-examination, Mr Toebes, counsel for the appellants challenged a small number of Ms Kingsbeer’s allocations but it appears her evidence is broadly accepted.
[20]This amounts to 1,522 individual trips across the right of way, 1,131 of which are attributed to the appellants’ interests, and 391 to the respondent’s interests.
As to use by trucks, Ms Kingsbeer gave evidence that none of the tenants or occupiers of the properties on the respondents’ land regularly use trucks at present, nor have they in the past. She says that the need for the buildings to use large trucks has “never happened in history”. Notably, she gave evidence that the buildings on the respondents’ property are not equipped to allow use of trucks as their entranceways are not high enough and their parking and loading facilities are insufficient to allow for loading or unloading of goods from trucks, a point supported by the 2012 Young Consulting Report and the respondents’ expert witness, Mr Martin Gribble. Ms Kingsbeer added that this affected the income earned from the property, with the income on the appellants’ property in a higher bracket than the leased properties on the respondents’ land.
Some trucks relating to the respondents do, however, use the driveway. In cross-examination at trial, Mr Toebes identified three examples of trucks in Ms Kingsbeer’s photographs. The photographs in fact appear to show up to seven return trips by trucks attributed to the respondents across the course of a month. Ms Kingsbeer emphasised that these are light commercial vehicles or non-articulated lorries, and so are lighter than the articulated trucks used by the appellants. However, Mr Gribble accepted in cross-examination that pavement designed for Class 2 vehicles is not designed to take Class 3 trucks even if they are lighter than articulated lorries. In that sense there is no difference between the pavement required for non-articulated vehicles and heavy commercial vehicles. Mr Gribble’s evidence was that trucks could use a roadway constructed for Class 1 and 2 vehicles “from time to time” without significant impact, but that he would not be comfortable with trucks doing so more often than about once a month.
The disproportionate use of the driveway does not seem likely to change significantly in the medium-term. Ms Kingsbeer gave evidence that she had no intention to significantly change her use of the right of way. Given the nature of the buildings on the land, truck use is likely to remain incidental unless there are major changes to development of the land. By contrast, trucks are integral to the businesses on the appellants’ land; they are used to transport concrete slabs, cranes are brought on and off the property, and rubbish trucks travel to the buildings.
Given the appellants are responsible for the vast majority of the trucks using the right of way, the expert evidence demonstrates they are also largely responsible for the damage to the right of way. Mr Gribble noted in his oral evidence at trial that one truck will do the same damage as 10,000 Class 1 or 2 vehicles passing over the same surface. The report Mr Gribble authored in 2013 (the GHD Report) notes:
The poor pavement condition is due to trafficking by heavy vehicles. For pavement design purposes Austroads defines a heavy vehicle as a vehicle Class 3 or above, that is a two axle truck or heavier. Class 1 and Class 2 vehicles, which includes sedans, wagons, four wheel drives, utilities, vans, bicycles, motorcycles, trailers and caravans, boats etc. are not considered to contribute significantly to pavement deterioration and failure.
The GHD Report adds that the parts of the roadway that have not been used by trucks do not suffer the same damage. Outside of the main wheel paths the asphalt is typically in good condition. Mr Gribble added, in evidence, that the pavement outside the buildings he refers to as “little sheds” on the respondents’ land has not deteriorated in the same way as that in the main wheel paths. He states that he understands the little sheds have been used for “light industrial” traffic, and that they cannot be used for big trucks as the doors are too small.
Given the disproportionate use of, and impact on, the right of way, any presumption of equal division under s 314 is displaced. The extent of a reasonable contribution from each party is a question for the Court. In such a situation, courts have taken an holistic view of the use of the shared vehicular passage to establish a fair figure in light of the evidence.[21] In Williams-Elliot v McManaway Gallen J summarised the test under s 314 as follows:[22]
In my view the Court has a discretion to arrive at a figure which not only reflects the benefit derived by various persons from the right of way as constructed, but which also takes into account all relevant factors which I interpret as being sufficiently wide to take into account the whole of the background relating to the need to construct the right of way concerned, as well as the cost of construction.
[21]See for example Williams-Elliott v McManaway HC Wellington CP314/98, 30 July 1999; and Oddtree Hill Ltd v Dryden HC Whangarei CIV-2008-488-11, 25 July 2008.
[22]Williams-Elliot v McManaway, above n 21, at 8.
The appellants submit that the respondents should have constructed the whole of the right of way to Council standards as suitable for use by trucks at the time of the grant of the equitable easement in 1986. On this basis they submit that the respondents ought to pay at least a half share of the cost of the upgrade of the right of way regardless of disproportionate use. They say that were the right of way constructed to the appropriate standard at the time of grant, their vehicles would not have caused the damage.
We do not consider this argument helps the appellants’ case. It appears that neither party intended at the time of either the 1986 or 2009 grant for the right of way to be upgraded for use by trucks. The grants provide for division of maintenance costs, but not formation costs. There is nothing to indicate that, if Mr Kingsbeer and Mr Okey had been aware of (and heeded) the requirements at the time of the 1986 discussions, Mr Kingsbeer would have agreed to bear the entire cost of upgrading the right of way. It seems highly unlikely that Mr Kingsbeer would have agreed to grant an easement on the same terms at large additional cost to himself. If this had been a known consequence, Mr Kingsbeer may not have agreed to grant the easement at all. The appellants’ argument is thus not determinative, nor particularly helpful.
On the other hand, the respondents submit the PAK Trust should bear none of the costs of upgrading the right of way. This cannot be the correct position either. The respondents also use the private way and gain benefit from it. The 2013 GHD Report states that the expected life of the existing pavement would normally be around 20 years due to environmental factors even without trafficking by trucks. The right of way was sealed more than 20 years ago. The respondents could expect to contribute 50 per cent to such routine maintenance under the 2009 agreement. The respondents will also derive some minor benefit from the upgrade of the road to the standard required to bear Class 3 vehicles. Some trucks relating to the respondents do use the private way, albeit far fewer than those relating to the appellants’ interests. Nonetheless, those trucks contribute to degradation. In short, having the right of way constructed to a standard suitable for trucks rather than a standard for Class 1 and 2 vehicles provides substantial advantage to the appellants and comparably little advantage to the respondents. It is reasonable that the appellants be required to bear a larger burden of the maintenance costs.
The respondents provide estimates from Higgins Contractors Ltd from two different dates for the upgrade of the private way to two different standards: to the standard required for Class 3 vehicle use, and to the standard required for Class 1 and 2 vehicle use (as currently).
The first set of quotations, from November 2013, quote a price of $108,117 for the upgrade of the road from the current standard to Class 3 vehicle use, and a total price of $73,297.10 to upgrade the road to the standard it currently provides. If the respondents were to contribute the equivalent of 50 per cent of the cost of upgrading the road to its current standard, that would amount to $36,648.55 or around 34 per cent of the total cost of upgrading the private way for Class 3 vehicle use as required.
However, more recent quotations from January 2015 demonstrate that the situation is changing over time with increased degradation to the road. The revised quotation provides a price of $139,303.70 to upgrade to Class 3 vehicle use, and $93,831.20 to return the driveway for use for Class 1 and 2 vehicles. If the respondents were to contribute the equivalent of 50 per cent of the latter cost, that would be $46,915.60, also around 34 per cent of the total cost of upgrading the private way for Class 3 vehicle use as required.
We do not consider that there is a precise way to determine the appropriate contributions of the parties in the absence of current quotations. The best approach for this Court is to arrive at a general impression of the appropriate proportion each party should bear. In our view, taking into account the estimates so far as possible, the appellants should bear 75 per cent of the cost of upgrading the right of way for use by Class 3 vehicle, and the respondents 25 per cent. This represents a contribution by the respondents of less than 50 per cent of the cost to return the right of way to its original standard (which is likely what they would have chosen in the absence of the appellants’ use) and a small contribution to the additional cost to upgrade it to Class 3 vehicle use.
The appellants suggest in their submissions on appeal that we should make an order that the easement be registered against the respondents’ certificate of title. This would not be appropriate given neither party claimed this relief in the pleadings in the High Court. Nor do we consider it necessary. The orders we make now are sufficient to allow the appellants to enjoy the use of the right of way. Registration is a matter for the parties.
Result
The appeal is allowed. We conclude that there is an equitable easement in the form of a vehicular right of way over Cessna Place on the respondents’ property in favour of the appellants. This easement is not invalid as a result of s 348 of the Local Government Act.
We also find as a matter of discretion under s 313 of the Property Law Act that the appellants should pay 75 per cent of the costs of upgrading Cessna Place to the standard required for use by trucks to the satisfaction of the Council, and that the respondents should pay the remaining 25 per cent.
The respondents must pay the appellants costs for a standard appeal on a band A basis and usual disbursements. We certify for two counsel.
Solicitors:
Brittens, Palmerston North for Appellants
Strachan O’Connor, Upper Hutt for Respondents
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