Olo Ltd v KA No 3 Trustee Ltd
[2014] NZHC 1075
•22 May 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-532 [2014] NZHC 1075
UNDER Section 145A of the Land Transfer Act
1952
IN THE MATTER
of Caveat 9627106.1 North Auckland
Land Registration DistrictBETWEEN
OLO LIMITED Applicant
AND
KA NO. 3 TRUSTEE LIMITED Respondent
Hearing: 8 May 2014 Appearances:
B M Russell for applicant
D J Chisholm QC for respondentJudgment:
22 May 2014
JUDGMENT OF LANG J
[on application for order that caveat not lapse]
This judgment was delivered by me on 22 May 2014 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
OLO LTD v KA NO. 3 TRUSTEE LTD [2014] NZHC 1075 [22 May 2014]
[1] This proceeding concerns a dispute between the owners of two adjoining properties in Matapana Road on Waiheke Island. The applicant, Olo Limited (“Olo”), is the owner of the property at 34 Matapana Road. It wishes to demolish an existing dwelling and build a new dwelling on its property. Because of the physical contours of its property, Olo cannot obtain vehicular access to the building site from Matapana Road. It maintains, however, that it has acquired an equitable easement entitling it to gain vehicular access to the site through an adjoining property situated at 46A Matapana Road. That property is owned by the respondent, KA No. 3 Trustee Limited (“KA 3”).
[2] In order to protect its position, Olo has lodged a caveat over the property at
46A Matapana Road. It has now filed an originating application seeking an order under s 145A of the Land Transfer Act 1952 that the caveat not lapse.
[3] KA 3 opposes the application. It accepts that Olo has a right to use its property to gain vehicular access to 34 Matapana Road for the purpose of demolishing the existing dwelling and building a new dwelling. It contends, however, that the right is a contractual licence and not an equitable easement. It is common ground that a contractual licence would not be sufficient to provide Olo with an interest in KA 3’s land capable of supporting a caveat. KA 3 therefore argues that Olo has no right to sustain its caveat.
Relevant principles
[4] The principles to be applied in applications such as this are well established through decisions of the Court of Appeal in cases such as Sims v Lowe1 and Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd.2
[5] I propose to apply the following principles in reaching my decision:
1 Sims v Lowe [1988] 1 NZLR 656 (CA).
2 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).
(a) The onus is on Olo to demonstrate that it holds an interest in KA 3’s
land that is sufficient to support the caveat.
(b)Olo must put forward a reasonably arguable case to support the interest that it claims.
(c) An order for the removal of the caveat will only be made if it is clear that there was either no valid ground for lodging it in the first place or, alternatively, that such ground as then existed has now ceased to exist.
(d)The present proceeding is wholly unsuitable for the determination of disputed questions of fact.
Factual background
[6] Olo’s sole shareholder is Mr Stephen Casper. He is also a director of Olo, as is his partner, Ms Joanne Richmond. Mr Casper and Ms Richmond became interested in purchasing 34 Matapana Road in mid-2010. In early August 2010, they visited 34 Matapana Road along with their builder. At that point they became aware that it would not be possible to demolish the existing house on the property and to build a new house unless they had vehicular access to the site through one or more of the neighbouring properties.
[7] The owner of 34 Matapana Road at that time was a company called KA No. 4
Trustee Limited (“KA 4”). Mr Casper and Ms Richmond were aware through discussions with the real estate agent engaged to sell 34 Matapana Road Matapana Road that KA 4 was connected with KA 3, which owned the adjoining property at
46A Matapana Road. They then discussed with the real estate agent the possibility of obtaining access to the proposed building site through 46A Matapana Road. That property has a long driveway that begins on Matapana Road and finishes in a roundabout outside the residence. Access can be gained from the driveway to the property at 34 Matapana Road by travelling across a lawn on the left hand side of the driveway just prior to the point at which the roundabout begins.
[8] On or about 6 September 2010, Mr Casper entered into an agreement for the sale and purchase of the property at 34 Matapana Road from KA 4. The purchaser under the agreement was Mr Casper “and/or Nominee”. The agreement contained the following clause:
15.0 Access
The vendor will allow the purchaser:
a) Vehicle access over the Adjoining Land to the property for a three day period sometime within the month following settlement to allow the purchaser to move furniture into the property; and
b) The Vendor grants the purchaser, the purchaser’s agents, contractors and invitees access from the road through the vendor’s neighbouring property situated at 46a Matapana Road and which is adjacent to the land referred to in this Agreement for a period not exceeding six months. Access via the road to this property will be available from the date of confirmation of this Agreement and must be completed within 36 months from settlement date. Access will not be available on weekends, public holidays or between 24th December & 3rd January. It is acknowledged by the parties that the access is required to assist the Purchaser in the removal of the existing dwelling from the property and the building of a replacement dwelling. The Vendor warrants and undertakes to take all steps necessary to ensure that the Purchaser will continue to receive the benefit of this Agreement from any subsequent registered proprietor of its neighbouring land at 46a Matapana Road.
[9] Mr Casper deposes that neither he nor the real estate agent drew any distinction between KA 3 and KA 4 during their pre-contractual negotiations. Mr Casper says that it always appeared to him that KA 4 had the ability to grant the purchaser of 34 Matapana Road the right to have vehicular access over the property at 46A Matapana Road.
[10] Prior to settlement, Mr Casper nominated Olo to complete the purchase of the property. There is no dispute that Olo has the right as Mr Casper’s nominee to enforce any rights granted to the purchaser under the agreement for sale and purchase.
[11] Following settlement in October 2010, Olo exercised its rights under cl
15.0(a) to use the driveway on 46A Matapana Road as a means of access for vehicles
that transported furniture to the existing dwelling on the property at 34 Matapana Road. In early 2011, Olo was also permitted to use the driveway as a means of access to 34 Matapana Road when a large Norfolk pine needed to be removed from that property. Similarly, in July 2012 KA 3 gave permission for a truck owned by a contractor to enter 34 Matapana Road via the driveway on 46A Matapana Road in order to deal with an issue that had arisen in relation to the septic tank on 34
Matapana Road.
[12] In November and December 2012, Mr Casper and Ms Richmond began taking steps in preparation for the building work that they proposed to undertake on
34 Matapana Road. They removed the pedestrian access from Matapana Road in order to build a parking platform and the base for a cable car. The cable car will be used to transport items down to the building site from Matapana Road. Olo will still require vehicular access using the driveway on 46A Matapana Road, however, because the cable car will not be able to transport all the materials and equipment necessary to enable the existing house to be demolished and the new house constructed in its place.
[13] On 27 March 2013, KA 3 sought Olo’s consent to an extension of time within which KA 3 could use an existing resource consent relating to a proposed development on the property at 46A Matapana Road. Ms Richmond told KA 3’s agent that Olo would consent to the proposed extension provided KA 3 agreed to extend Olo’s access rights under the agreement for sale and purchase for a further two years. On 5 April 2013, KA 3’s agent responded to this proposal as follows:
Hi Jo,
I can confirm that I have spoken to Tony Thomas who is the director KA No.
3 Trustee Limited who own the property. Tony has agreed that an extension to the current building access right for an additional 2 years is not a problem.
I can arrange something in writing if required. Regarding the approval form,
if you are too committed elsewhere to sign the plans and get them scanned, then an email will suffice in the short term, as I am planning to lodge the application next week.
[14] On 8 April 2013, KA 3 sent the following letter to Olo on KA 3’s letterhead:
Dear Steve and Jo
46A MATAPANA ROAD
KA NO. 3 TRUSTEE LIMITED
Further to your correspondence with Wendy Baverstock of Isle Land Limited, we understand that you have requested a two year extension to the building access rights in consideration for supporting our application by KA No. 3 Trustee Limited to extend the resource consent for the proposed building at 46A Matapana Road.
I hereby confirm that KA No. 3 Trustee Limited will grant the requested two year extension to the building access rights. KA No. 3 Trustee Limited also undertakes to advise any future purchaser of 46A Matapana Road of this existing condition.
[15] Difficulties have now arisen in relation to the proposed exercise by Olo of its access rights over 46A Matapana Road. It is not necessary for present purposes to set out the issues that now confront the parties. It suffices to say that KA 3 still accepts that it is contractually obliged to provide Olo with vehicular access over its property at 46A Matapana Road so as to enable Olo to demolish the existing dwelling on 34 Matapana Road and to construct a new dwelling in its place. The difficulties that have arisen relate to the terms upon which Olo is entitled to exercise that right. Those issues have no direct bearing on the narrow question the Court is required to determine in this proceeding, which is whether the rights contained in cl 15.0(b) of the agreement for sale and purchase constitute an equitable easement capable of supporting Olo’s caveat.
Preliminary issue: Does the caveat correctly describe the nature of the interest claimed?
[16] Olo’s caveat describes the interest that it protects as follows:
Pursuant to an access agreement contained within an agreement for sale and purchase of real estate dated 6 September 2010 between KA 3 Trustee Limited and Olo Limited.
[17] Counsel for KA 3 points out that neither KA 3 nor Olo was a party to the agreement for sale and purchase dated 6 September 2010. On that basis he submits that the interest claimed in the caveat is plainly wrong. Furthermore, he submits that an access agreement does not of itself give rise to a caveatable interest over KA 3’s property. Rather, it is necessary for Olo to establish that it arguably has a claim to an equitable easement in respect of the property.
[18] I accept that neither KA 3 nor Olo was a party to the agreement for sale and purchase dated 6 September 2010. If the word “between” in the caveat relates to the agreement for sale and purchase, therefore, it would be factually wrong. It is possible, however, to read the caveat as claiming that the access agreement is between KA 3 and Olo, and that the terms of the access agreement are those contained in the agreement for sale and purchase dated 6 September 2010. Using that approach, the caveat would be factually correct. This is because KA 3 accepts that it remains bound to provide rights of access over its property to Olo. It also accepts that the rights are those described in cl 15.0(b) of the agreement for sale and purchase dated 6 September 2010. That fact is demonstrated by the letter that KA 3 sent to Olo on 8 April 2013 when the rights were extended for a further two year period. By using the words “existing condition” in the final sentence of that letter, KA 3 was obviously acknowledging that it considered itself bound to provide access rights in terms of cl 15.0(b) prior to 8 April 2013.
[19] I do not consider it material that KA 3 and Olo subsequently agreed that the duration of the access rights would be extended for a further two year period. The extension did not alter the nature of the rights that Olo was entitled to exercise. The only thing that changed was the length of time for which Olo was entitled to exercise those rights.
[20] Similarly, I do not consider the fact that the caveat does not refer expressly to Olo’s caveatable interest arising from an equitable easement is fatal to the validity of the caveat. The real issue is whether the rights of access contained within cl 15.0(b) arguably created an equitable easement. I therefore do not accept the submission for KA 3 that the wording of the caveat precludes Olo from obtaining an order sustaining the caveat.
[21] In case my conclusion in relation to these issues is incorrect, however, I consider that the position could have been remedied by granting Olo leave to lodge a second caveat against KA 3’s property claiming the following interest:
An equitable easement granting the caveator rights of way over the land in terms of Clause 15.0(b) of an agreement for sale and purchase of real estate dated 6 September 2010 between KA No. 4 Limited as vendor and Olo
Limited as nominated purchaser as extended for a period of two years in terms of a letter dated 8 April 2013 from KA No. 3 Limited to Olo Limited.
Issues
[22] As will by now be apparent, Olo’s application cannot succeed unless it establishes that the rights provided by cl 15.0(b) of the agreement for sale and purchase arguably created an equitable easement capable of being protected by a caveat. Counsel were in agreement regarding the matters that need to be established in order to prove the existence of an equitable easement. The learned authors of
Hinde McMorland and Sim Land Law in New Zealand summarise these as follows:3
(a) The right in question must possess the essential characteristics of an easement.
(b)The grantee of the right must provide valuable consideration for the grant.
(c) There must be a sufficient written record of the grant to satisfy s 24 of the Property Law Act 2007, or a sufficient act of part performance to obviate the need for such a record.
[23] The second and third of these requirements are directed at whether the easement in question is one that equity would enforce in the absence of compliance with the formal requirements of a registered easement. In the present case, there is no dispute that Mr Casper provided consideration for the rights he was granted in the sale and purchase agreement. Furthermore, although there has been some dispute as to whether the grant satisfies the requirements of the Property Law Act that it be in writing, I am satisfied that the terms of cl 15.0(b) are sufficient to comply with this requirement.
[24] Counsel for KA 3 also submitted that a failure by the parties to comply with the requirements of s 348(1) of the Local Government Act 1974 means that the
3 Hinde McMorland and Sim Land Law in New Zealand (online looseleaf ed, Lexis Nexis at
[16.035].
courts will not enforce the agreement that the parties reached. As a result, the following issues need to be determined:
(a) Do the access rights granted by cl 15.0(b) of the agreement for sale and purchase possess the essential characteristics of an easement?
(b) Did the parties intend to create an easement?
(c) Are the rights granted by cl 15.0(b) likely to be enforced by the courts?
Do the access rights granted by cl 15.0(b) of the agreement for sale and purchase possess the essential characteristics of an easement?
[25] The essential characteristics of an easement are summarised in the well known passage of the English Court of Appeal in Re Ellenborough Park:4
They are (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 a grant.
[26] The first and second requirements have largely been rendered irrelevant by s
291 of the Property Law Act 2007, which allows the creation of easements in gross. In the present case, however, those requirements would be satisfied in any event, because 34 Matapana Road is clearly the dominant tenement and 46A Matapana Road is the servient tenement. The latter “accommodates” the former in terms of the rights granted. The third requirement is also satisfied in this case, because KA 3 and Olo are different legal entities.
[27] The fourth requirement is the most controversial in the present case. In Re
Ellenborough Park, Lord Evershed MR expanded upon this requirement in the following terms:5
4 Re Ellenborough Park [1956] Ch 131 (CA) at 163, citing Geoffrey Cheshire’s The Modern Law of Real Property (7th ed, Butterworths, 1954).
5 At 164.
The exact significance of this fourth and last condition is, at first sight perhaps, not entirely clear. As between the original parties to the "grant," it is not in doubt that rights of this kind would be capable of taking effect by way of contract or licence. But for the purposes of the present case, as the arguments made clear, the cognate questions involved under this condition are: whether the rights purported to be given are expressed in terms of too wide and vague a character; whether, if and so far as effective, such rights would amount to rights of joint occupation or would substantially deprive the park owners of proprietorship or legal possession; whether, if and so far as effective, such rights constitute mere rights of recreation, possessing no quality of utility or benefit; and on such grounds cannot quality as easements.
[28] To summarise the principles to be taken from this passage, there are three requirements:
(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.
[29] Only the first of these requirements is in issue in the present case. KA 3 contends that the rights granted by cl 15.0(b) are too vague and uncertain to amount to a grant in the nature of an easement.
Is the easement defined in sufficient detail to be enforceable?
[30] Counsel for KA 3 emphasises that cl 15.0(b) does not define the area on 46A Matapana Road over which Olo is entitled to exercise its rights. He accepts that the rights obviously entitled Olo and its invitees to use the driveway of 46A Matapana Road. He points out, however, that the clause does not define the precise point at which those persons are required or permitted to leave the driveway and travel across the lawn to the boundary of 34 Matapana Road. He therefore submits that the clause is so vague and uncertain in relation to a critical factor that it cannot take on the character of an easement.
[31] This argument relies in part on the following passage from Hinde McMorland and Sim:6
The grant of a right of way normally defines the width and location of the way with precision, and should at least state the point of departure and the point of arrival of the way
[32] The following passage from Hinde McMorland and Sim is also relevant in the present context:7
(a) The act must be sufficiently defined
The first requirement is that the right granted must be sufficiently defined and certain. Discussion of this requirement frequently arises in connection with whether either a jus spatiandi, that is, a right to wander at large over the servient tenement, or a right of recreation and amusement, may be an easement. Although it had earlier been suggested that such rights are “not known to the law” as easements, there is now strong contrary authority in support of such rights which prevails, and the difficulty is rather to define the right sufficiently. Thus, if such a right were being claimed by prescription or by some means other than an express grant, it is doubtful if the extent and exact nature of the right would be sufficiently certain; but there is no reason why such a right could not be created by an express grant drawn with sufficient precision.
[33] Counsel for KA 3 also relied on Read v Read, in which Potter J observed:8
As to the first requirement, I accept that the right-of-way claimed by the plaintiffs has the essential characteristics of an easement. Halsbury at vol 14 para 144 defines a private right-of-way as —
“a right to utilise the servient tenement as a means of access to or egress from the dominant tenement for some purpose connected with the enjoyment of the dominant tenement according to the nature of that tenement. ”
The easement must also be sufficiently defined as to location, width, start and finish. The track over [the defendant’s] land was defined by use over many years, such that the essential characteristics of the easement may be regarded as sufficiently defined.
[34] Potter J did not cite any specific authority for the proposition that the easement should be sufficiently defined as to location, width, start and finish.
6 Hinde McMorland and Sim Land Law in New Zealand, above n 3 at [16.042] (footnotes omitted).
7 At [16.006] (footnotes omitted).
8 Read v Read HC Gisborne CP4/98, 12 August 1999 at 8. See also Hannah v Aitken (1911) 31
NZLR 90 (SC), where Williams J held that an agreement that did not define a specific departure and arrival point was not sufficiently clear to be specifically enforced.
Instead, her Honour appears to have treated it as a necessary component of the requirement that an easement cannot be defined in overly wide or vague terms.
[35] I am not convinced, however, that an easement in the nature of a right of access over land must necessarily have a precisely defined departure and arrival point. By way of example, the easement recognised in Re Ellenborough Park contained no specific point of departure or arrival point; rather it was a right to wander over a specified area of land.
[36] There is no suggestion in the present case that Olo and its contractors have a right to “wander at large” over KA 3’s property. Instead, the nature and parameters of the right are to be gleaned from the purpose for which it was granted, namely the demolition of the existing dwelling and the construction of the new dwelling. Olo can only use the right for those defined purposes. Implicitly, however, it can exercise the right in respect of all activities that are reasonably necessary to achieve those purposes.
[37] I draw some assistance in this context from Kennedy v Baldwin, in which Simon France J was prepared to find that an easement in the nature of a right of way existed notwithstanding the fact that there was no specified access point between the dominant and servient tenements.9 In that case a sale and purchase agreement had provided:10
The purchaser shall have a right of way over that part of Lot 2 as is coloured in yellow on the attached plan, with the vendor paying the legal and survey costs. The registered proprietor of Lot 2 shall legally create and form the said right of way over that portion coloured yellow on the attached plan within 24 months of the possession date …
[38] The right of way was not constructed within the time prescribed by the agreement, so the parties entered into further negotiations. These resulted in the vendors agreeing to take reasonable steps to ensure that the right of way was constructed within a specified period. The agreement did not, however, specify the precise point at which the purchasers would be entitled to gain access to the right of
way from their property. The vendors ultimately constructed the right of way in such
9 Kennedy v Baldwin HC Nelson CIV-2004-442-255, 15 June 2007.
a manner that the purchasers could only gain access to it by building a ramp leading from their property up to the right of way. The purchasers asked the Court for a direction requiring the vendors to re-configure the right of way so that they could gain access to it from a lower area on their section without the need for a ramp.
[39] Simon France J held that the vendors had complied with their obligations, and that they were not required to provide the purchasers with access to the right of way from the most convenient point on their property. He held that the right of way did not require a specified access point, and said:11
[27] In my view the obvious reading of the agreement is that access can be given at any point along the boundary so long as it has council approval. If the Kennedys wished the right of way to be at a particular point, they could have stipulated for that.
[40] The importance of the case for present purposes is that Simon France J does not appear to have regarded the absence of any defined point of access to the right of way as an obstacle to the validity of the easement.
[41] A similar situation occurred in Philpott v Noble Investments Ltd.12 In that case a caveat had been lodged to protect an equitable easement in the nature of a right of way that the caveators alleged they had obtained over a neighbouring property. Associate Judge Osborne sustained the caveat and said:13
[75] … it is arguable that the routes to be taken for the caveators' right of way and various services have been sufficiently defined to constitute a caveatable easement interest. It undoubtedly suited Noble in the early stages of the development to retain flexibility as to final routes of roads and services, while at the same time [undertaking] to the caveators that they would be provided with the development. This case is unlike NZI v Philpott where there was a further step yet to be taken before the caveators' interest in the specific land arose. (emphasis added)
[42] In the present case two further factors are relevant. The first is a practical consideration. Aerial photographs of the area surrounding the two properties demonstrate that there is only one route by which Olo can gain access to its property
through 46A Matapana Road without causing serious damage to trees on that
11 At [27].
12 Philpott v Noble Investments Ltd [2012] NZHC 1431.
property. This is along the driveway from the entrance on Matapana Road to a point just before the commencement of the roundabout near the house. At that point it is possible to turn left through a gap between two trees, and then travel across the lawn to the boundary of 34 Matapana Road. Although this route may require the lower branches of some trees to be trimmed, it is unlikely to cause any major damage. Mr Casper says that this is the route that he and the real estate agent discussed prior to the point at which the parties signed the agreement for sale and purchase.
[43] The second point is that this is the route that vehicles used when Mr Casper and Ms Richmond exercised their rights under cl 15.0(a) to deliver furniture to the dwelling at 34 Matapana Road after they purchased it. It is also the route that their contractors used, apparently without objection by KA 3, when the works in relation to the septic tank and the Norfolk pine tree were undertaken. These factors persuade me that the parties arguably intended the same route to be used when Olo exercised its rights under cl 15.0(b).
[44] Furthermore, the argument for KA 3 is inconsistent to the extent that it acknowledges that cl 15.0(b) gives Olo a contractual licence to have access across its land. It is difficult to see why alleged uncertainty as to the route to be taken when exercising the right should render the arrangement sufficiently uncertain to disqualify it from being an equitable easement, yet sufficiently certain to amount to an enforceable contractual licence. Ordinarily, uncertainty as to an essential term would render both forms of grant unenforceable.
[45] I am therefore satisfied that the route to be used by Olo and its invitees when exercising access rights under cl 15.0(b) is arguably not so vague and uncertain as to preclude Olo from maintaining a claim to an equitable easement.
Did the parties intend to create an easement?
[46] This is the most difficult issue that arises in the present case, because the rights granted under cl 15.0(b) could have been granted under either an easement or a licence. Either would be effective to achieve the intended object of the agreement.
The learned authors of Hinde McMorland and Sim summarise the issues that arise in such a situation as follows:14
If the nature of the act concerned does not determine in a particular case whether there is an easement or a licence, because it is an act which may be the subject of either, the mode of creation of the right must be considered next. Of the various possible ways by which an easement may be created, the need to distinguish between an easement and a licence can arise only in the case of a possible equitable easement. If the elements essential to the existence of an equitable easement, such as consideration, are not present, it can be only a licence.
But even if there is consideration, there might still in some circumstances be doubt whether there is an easement or a licence, a doubt which can be resolved only by reference to the intentions of the parties. Unless there are strong indications that the right was intended to be personal to the grantee, it will probably be construed as an equitable easement.
[47] For the proposition that grants will be presumed to be easements unless a contrary expression appears, the authors cite McDonald v Peddle.15 That case concerned the use of a tramway that had been created to carry timber over some land. Both the plaintiff and the defendant were successors in title to the original parties to the agreement. The plaintiff had bought a section of land for felling timber on the understanding that he would have the right to use the tramway to transport timber in the same manner as his predecessor. The defendant, who owned the land over which the tramway ran, disagreed and took steps to block and partially destroy
the tramway. The question was therefore whether the original parties to the agreement intended to create an easement or a licence. The agreement relevantly provided:16
"the grantors are the owners of Motu No 3 Block," and "the grantee is owner of Section No 16, Motu Block, and adjoining the property of the said grantors," and that "the grantee has applied to the grantors for permission to lay a tram-line through the said Motu No 3 Block," and that "the grantors have agreed to give such permission." Then follow the operative clauses:—
"1. The grantors hereby grant to the grantee, and the grantee hereby accepts, the right to lay down a tram-line through the Motu No 3 Block for the purpose of transporting logs and timber.
14 Hinde McMorland and Sim Land Law in New Zealand, above n 3 at [16.009] (footnotes omitted).
15 McDonald v Peddle [1923] NZLR 987(SC), affirmed [1924] NZLR 717 (CA), affirmed (1925) NZPCC 138.
16 At 990.
2. The width of the strip required for laying the line shall be 20 ft, and the course to be taken by such line shall be as shown on the plan attached hereto.
3. The grantee shall lay the line in such a manner as to do as little damage as possible to the property of the grantors.
4. The term for which the said grantee may use the line shall be for such time as shall allow the grantee to remove his logs and timber, but in no case shall it be longer than ten years from the 1st day of August, 1916.
5. The rent to be paid by the grantee to the grantors shall be a sum of 5s. per annum."
Clauses 6, 7, and 8 confer certain rights on the grantors in respect of the said tramway.
"9. Should the grantee cut or remove any trees in the construction of the line he will pay royalty for the same at the rate of 2s. per hundred superficial feet log measurement."
[48] One of the main issues was whether the references to “his logs and timber” in clause four meant that the grant was intended to be personal to the original party to the contract. Reed J held that this did not necessarily imply that the agreement was intended to be personal between the parties.
[49] In the present case, the wording used in both cl 15.0(b) and the extension letter that KA 3 sent to Olo on 8 April 2013 demonstrates that KA 3 was committed to ensuring that its successors in title would honour the access rights granted under the agreement for sale and purchase. Neither document, however, contains any suggestion that Olo’s successors in title would similarly be able to enjoy the same rights. It can therefore be argued that the rights were personal to Olo, and that they would not be available to subsequent owners of 34 Matapana Road.
[50] However, as McDonald v Peddle demonstrates, the failure to explicitly refer to Olo’s successors in title is not fatal. In that case, the references to transporting “his timber” and “the grantee” did not mean that the right was personal to the grantee. Similarly in this case, the references to “the purchaser” are not finally determinative of whether the rights in question amount to an easement or a licence.
[51] On the facts of this case, I do not consider that the failure to explicitly include
a reference to Olo’s successors in title means that the parties intended to create a
licence rather than an easement. First, there is no reason why KA 3 would restrict the exercise of the rights in that way. KA 4 had sold the property to Mr Casper or his nominee in circumstances where neither it nor KA 3 had any pre-existing connection or relationship with either Mr Casper or Olo. KA 3 and KA 4 were obviously prepared to include cl 15.0(b) in the agreement for sale and purchase in order to achieve the sale of 34 Matapana Road. They did not do so in order to reward Mr Casper for any previous favours he may have done for them. Moreover, they were also obviously prepared to allow the access rights to be exercised by Mr Casper’s nominee regardless of who that might be.
[52] Given that background, and in the absence of wording in cl 15.0 to suggest to the contrary, I am not prepared to say that the access rights under the clause were personal to Mr Casper and his nominee. Before the present dispute arose at any rate, I consider it arguable that KA 3 and KA 4 would also, if they had been asked, have been prepared to honour the agreement to subsequent purchasers of 34 Matapana Road.
[53] Counsel for KA 3 also emphasises that the parties did not use the term “easement” or “right of way” in cl 15.0, and it can therefore be inferred that they merely intended to grant personal rights. The language of the parties is certainly relevant. In IDC Group v Clark the English Court of Appeal held that where a professional conveyance had used the word licence, it must be intended to have its strict legal meaning, even where the parties to the contract were described as
including successors in title.17 In the present case, however the parties did not use the
word “licence”. I therefore consider this factor to be neutral in the present context.
[54] Counsel for KA 3 also submits that the final sentence of cl 15.0(b) would not have been necessary if the parties had intended to create an easement. In other words, if the parties intended to create an easement it would automatically bind third parties who purchased 46A Matapana Road. This submission overlooks the fact that there is no suggestion that the parties ever intended that the access rights would be registered on the title of 46A Matapana Road. Subsequent purchasers of that
property would therefore not be bound by any equitable interests that KA 3 might
17 IDC Group v Clark (1992) 65 P & CR 179 (CA).
have granted to third parties. They would therefore only be bound by the obligations contained in cl 15.0(b) if KA 3 ensured that that occurred. It must at least be arguable that this is why KA 4 agreed to the inclusion of the final sentence in the clause.
[55] Counsel for KA 3 also argues that the limited time within which Olo was entitled to exercise the access rights points towards an intention to create a licence rather than an easement. Again, I do not find this argument conclusive. There is no logical reason why rights granted for a limited period of time should not be able to form the basis of an easement. The easement that was recognised in McDonald v Peddle provides at least one example of an easement that did not exist indefinitely.
[56] These factors persuade me that it is arguable that the parties intended the rights granted under cl 15.0(b) to be in the nature of an equitable easement rather than a contractual licence.
Should the Court enforce the rights granted under cl 15.0(b)?
[57] The final question is whether the Court should enforce the rights granted under cl 15.0(b).
[58] Counsel for KA 3 submits that s 348(1) of the Local Government Act 1974 is relevant in this context. Section 348(1) provides:
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.
[59] The term “private way” is defined in s 315 as follows:
Private way means any way or passage whatsoever over private land within a district, the right to use which is confined or intended to be confined to certain persons or classes of persons, and which is not thrown open or intended to be open to the use of the public generally; and includes any such way or passage as aforesaid which at the commencement of this Part of this Act exists within any district
[60] It is common ground in the present case that neither party obtained the prior permission of the Auckland Council to the arrangement created by cl 15.0(b). For
that reason counsel for KA 3 argues that the arrangement constitutes an illegal contract and has no effect by virtue of s 6 of the Illegal Contracts Act 1970.
[61] There is no direct authority as to whether s 348(1) would prevent an equitable easement coming into existence in circumstances such as the present. I consider, however, that several points can be made in response to this submission. The first is that KA 3 and KA 4 were the entities that granted the access rights under cl 15.0(b). As grantors, they were therefore responsible in terms of s 348(1) for obtaining permission from the Council before KA 4 entered into an agreement for sale and purchase containing that clause. The courts would obviously be reluctant to penalise Olo in respect of an omission for which it was not responsible.
[62] Secondly, Olo has not yet begun to exercise the access rights under cl 15.0(b). For that reason it may still be possible for KA 3 to seek permission from the Council for Olo to exercise those rights.
[63] Thirdly, to the extent that the inclusion of cl 15.0(b) may have rendered the agreement for sale and purchase an illegal contract, the Court has wide remedial powers under s 7 of the Illegal Contracts Act 1970. These include the power to validate the contract.18 Olo has signalled that it proposes to issue a substantive proceeding seeking an order requiring KA 3 to perform its obligations under cl 15.0(b). That proceeding would provide a convenient means by which to seek a preliminary order that the agreement be validated under s 8. There are numerous examples of cases in which the courts in New Zealand have ordered specific
performance of illegal contracts by first validating them under the Illegal Contracts Act.19 The arrangement between KA 3 and Olo does not affect any public roadway or other public work or amenity. For that reason it is difficult to see why the Council would object to it. In the absence of any objection by the Council, the Court would probably validate the contract. That being the case, it is arguable for present purposes that the Court would be prepared to enforce KA 3’s obligations under
cl 15.0(b).
18 Illegal Contracts Act 1970, s 7(1)(c).
19 See Terry Sissions “Specific Performance” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 735 at [24.4.16] and the cases cited therein.
Conclusion: Order
[64] For the reasons set out above I have concluded that the rights granted under cl 15.0(b) arguably constitute an equitable easement sufficient to support a caveat.
[65] The application is therefore granted. I make an order under s 145A of the Land Transfer Act 1952 that Caveat 9627106.1 shall not lapse. The order is conditional upon Olo issuing proceedings seeking specific performance of its rights under cl 15.0(b) within one month from the date of delivery of this judgment. In the event that it does not do so, the caveat will lapse at that point.
Costs
[66] Olo has succeeded and is entitled to an award of costs and disbursements in its favour. Costs would ordinarily be awarded on a Category 2B basis. If counsel cannot reach agreement regarding costs they should file brief memoranda (no more
than 5 pages in length) and I will determine the issue on the papers.
Lang J
Solicitors:
Lane Neave, Auckland
Macky Roberton, AucklandCounsel:
D Chisholm QC
6