Park Lane Builds Limited v Shiva Eco Homes Limited
[2022] NZHC 2743
•21 October 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-000156
[2022] NZHC 2743
BETWEEN PARK LANE BUILDS LIMITED
First Plaintiff
AND
PARKLANE INFRASTRUCT LIMITED
Second Plaintiff
AND
SHIVA ECO HOMES LIMITED
Defendant
Hearing: 30 September 2022 Appearances:
C Matsis for the Plaintiffs
J B Orpin-Dowell for the Defendant
Judgment:
21 October 2022
JUDGMENT OF GENDALL J
Introduction
[1] The first plaintiff is the developer of a residential subdivision in Crofton Downs, Wellington. The second plaintiff is connected to the first plaintiff. In this judgment I will refer to the plaintiffs together as “Park Lane”.
[2] The defendant (Shiva) purchased one of the sections (the section) in a subdivision development undertaken by Park Lane under an Agreement for Sale and Purchase dated 26 April 2019 for $382,608.70. Shiva purchased the section to build a home on it for sale to a third party. It is now seeking to on-sell the section and the residential dwelling it has constructed on it under a sale agreement it signed on 18 September 2020 with Paul and Natasha Brown (the Browns) as purchasers.
PARK LANE BUILDS LIMITED v PARKLANE INFRASTRUCT LIMITED [2022] NZHC 2743 [21 October 2022]
[3] The original 26 April 2019 Agreement for Sale and Purchase for the section made between Park Lane and Shiva (the contract) contained two provisions of particular relevance here. The first, cl 38, provided that:
[38] Consent to Vendor to on-sell or re-sale
[38.1] The Purchaser shall not, without the prior written consent of the Vendor, enter into any agreement to on-sell or assign, transfer, charge, encumber or otherwise deal with the purchaser’s interest under this Agreement, or re-sell the Property, before the construction of the dwelling is complete. Subject to the Purchaser granting the Vendor, or their nominated real estate agent, first right of refusal to market and sell the property on their behalf on standard market agency terms, the Vendor’s consent will not be unreasonably withheld. The Vendor’s reasonable legal costs in respect to consent are costs of the Purchaser.
[38.2] In the event that the Purchaser fails to obtain written consent, the Vendor may cancel the Agreement and the Purchasers forfeit any deposit paid as liquidated damages.
[4]The second of these provisions in the contract is cl 25.1, which provides that:
The Purchaser acknowledges that the property will be transferred to the Purchaser, subject to various land covenants, to ensure a high standard of subdivision is maintained. A copy of the land covenants are attached and the Purchaser acknowledges that it will take title to the property subject to such covenants. If the Vendor is not in a position to register these covenants prior to settlement, the Purchaser undertakes to provide the Vendor on settlement the necessary documentation to allow the Vendor’s solicitor to attend to registration following settlement.
[5] The covenants referred to in cl 25.1 of the contract were attached to that contract. They were to be noted on the titles to the section and four neighbouring lots in stage 2 of Park Lane’s subdivision. If registered, they were only for the benefit of those five neighbouring properties (none of which now are owned by Park Lane). It appears this was to be a reciprocal arrangement and that each of the neighbours would be able to enforce the covenants against one another.
[6] It seems that in accordance with instructions it received from Park Lane, Shiva returned the authority instruction form necessary to register the covenants on the title to the section as drafted by Park Lane prior to settlement of Shiva’s purchase under the contract. Park Lane acknowledges, however, that it never arranged for the covenants to be noted on the titles. The principals of Shiva contend that they only became aware of this in December 2021.
[7] Park Lane applied for an injunction to prevent Shiva from selling the section and the completed house. This was granted on an interim basis without notice by this Court on 1 April 2022. It was granted on the basis that the interim injunction would hold the position until such time that an on-notice injunction application was able to be heard by this Court.
[8] An on-notice application followed. On 17 June 2022, Cooke J in this Court gave a decision on that on-notice application granting to Park Lane the interim injunction to prevent Shiva from selling or otherwise dealing with the section and the completed house until further order of this Court on certain conditions. This was granted on the basis that Shiva had failed to comply with cl 38 of the contract, although the allegation that it had failed to comply with the restrictive covenants provided for in cl 25.1 (including covenants first, in relation to the standard of the dwelling constructed and secondly, for pre-approval of any plans) was dismissed.
[9] So far as that requirement in the restrictive covenants to obtain pre-approval for its design and plans of the new dwelling is concerned, Shiva maintains that from June 2019 it took steps to obtain this approval from Park Lane. It says that officers of Park Lane (and in particular its general manager Trent Cary (Mr Cary)) were entirely obstructive, they did not constructively engage with Shiva at any time, there were continual delays and formal approval was never obtained. On that aspect, Cooke J in his 17 June 2022 judgment declined to make findings on the detail of the exchanges between Shiva and Park Lane but he concluded that both sides could be criticised for the approaches they had adopted. At para 16 of his decision, Cooke J stated:
[16] Shiva sought to comply with this (the pre-approval of building plans) requirement when it went about constructing a house on the section which it intended to sell. Between 2019 and 2021 there were exchanges between Mr Bhargava (of Shiva) and Mr Cary (of Park Lane) about this. I refrain from making findings on the details of these exchanges, but it is fair to say that both sides can be criticised for the approach adopted. Mr Cary can be criticised for a failure to respond appropriately to communications from Mr Bhargava, and Mr Bhargava can be criticised for pressing on with construction of a house without having a clear communication from Mr Cary granting approval, in accordance with cl [1.3]. Both can be criticised for periods of delay.
[10] As construction by Shiva of the house on the section proceeded, on 18 September 2020 it entered into the agreement to sell the completed house and section to the Browns, as I have noted above. Settlement under that agreement was to take place 10 working days after the date a council certificate of compliance (the CCC) was obtained and sent to the Browns. As I understand the position, that CCC has not as yet been obtained, although, given the house appears to be completed, it is imminent.
[11] In Cooke J’s 17 June 2022 decision, he also required Park Lane to file an amended statement of claim in this proceeding. This occurred on 27 June 2022. The amended pleading alleged that Shiva had breached the requirements “set out in cl 38 and in the land covenants.” Issues may well arise, as Cooke J had signalled in his judgment, over whether Park Lane may lack standing to bring proceedings relating to the restrictive covenants as it was not a covenantee, but I leave that aspect on one side. Cooke J in his decision considered that cl 38, noted above, was relevant. In his judgment at [48] – [50] he suggested that an arguable case existed that Shiva had failed to comply with cl 38.1 of the contract, which was sufficient to obtain an injunction, at least until construction of the house on Shiva’s property was physically complete.1 Issues were also raised by Cooke J in his judgment that as far as the words in cl 38.1 “before construction of the dwelling is complete” are concerned, it is possible these were not simply referring to completion of a dwelling on the section in a physical sense but that “construction [must] also meet the building standards contemplated by the contract, and therefore the covenants.” On this basis, Cooke J went on to note at paragraph [38] that: “A physically complete building that is not in conformity with the standards set by the covenants would not be completed for the purposes of cl 38.1.”
[12] Although it appears Cooke J’s conclusion on these matters was somewhat tentative, nevertheless I accept it does present a reasonably arguable position for Park Lane.
1 See also [51].
Application to discharge the injunction
[13] The first of the applications before me was one by Shiva to discharge the interim injunction.
[14] On this, it is accepted here that in addressing an application for an interim injunction, the Court is to consider three issues:
(a)whether there is a serious question to be tried;
(b)where the balance of convenience lies; and
(c)where the overall justice lies.2
[15] For the purposes of this application before me, Shiva’s counsel, Mr Orpin-Dowell, notes that it is prepared to assume that there is a serious question to be tried in this case that there has been an arguable breach of cl 38 of the contract. I proceed on this basis, although further arguments were advanced by Mr Orpin-Dowell before me as to why this may not be the case.
[16] That said, and assuming there is a serious question to be tried here, Shiva’s position is that it is clear there is no basis for the current injunction to remain in place until substantive trial in terms of the balance of convenience and the overall justice in this case. Shiva maintains that in light of further developments which have occurred since the date of Cooke J’s judgment on 17 June 2022, the balance of convenience and the overall justice here are firmly tilted in Shiva’s favour and support the discharge of the interim injunction.
Balance of convenience – adequacy of damages
[17] Park Lane’s position before me is that the interim injunction should not be discharged as damages are not an adequate remedy in this case. In supporting that position, Mr Matsis, counsel for Park Lane, refers to a range of matters which he
2 Intellihub v Genesis Energy Ltd [2020] NZCA 344, at [34] citing Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at [142].
contends flow from the affidavit of its General Manager, Mr Cary, dated 9 September 2022 filed in this matter:
(a)Park Lane, he says, has always wanted a high standard of houses in its overall development and intended that the restrictive covenants would reflect that wish.
(b)Park Lane would hold owners in the subdivision to these standards.
(c)It is Park Lane’s belief that the house constructed by Shiva on the section is not built to those standards. Rather, Mr Cary maintains that in his view the cladding to the dwelling looks cheap and lacks “street appeal”.
(d)Mr Cary contends that three of the immediate neighbours to this property also have concerns about the cladding Shiva has installed.
(e)It is Mr Cary’s belief that the Shiva property will have a negative impact upon the value of neighbouring properties and on the value of as yet unsold sections in the wider subdivision.
(f)Mr Cary also expresses the belief that it will be harder to hold future purchasers of sections in the overall subdivision to intended building standards if Shiva’s property is able to remain as it is.
(g)Mr Cary believes, too, that this will also in turn affect the value of as- yet unsold sections in Park Lane’s wider subdivision.
(h)And finally, Mr Cary maintains it would be very difficult to quantify Park Lane’s losses here.
[18] In addition, it is Park Lane’s position here that, if its injunction is wrongly discharged now, the sale by Shiva of the section and new house on it to the Browns would proceed. Park Lane would then be forced to seek damages from Shiva which it claims would be inadequate, even if awarded, and would possibly be unable to be recovered from Shiva.
[19] Park Lane maintains, therefore, that damages would not be an adequate remedy at this stage of the proceeding, and this inadequacy must meant the balance of convenience favours Park Lane in this case.
[20]With respect, I disagree.
[21] At the outset, I note that Park Lane’s amended statement of claim does not identify what losses the companies say they will suffer as a result of the alleged breaches of cls 38 and 25.1 of the contract. The pleading merely contends that “damages are inadequate to remedy the defendant’s breaches”. Instead, in Mr Cary’s affidavits before the Court, he says only that he believes the alleged breach of cl 38 will cause “a negative impact on values of the neighbouring properties and on the value of the as yet unsold sections.”3
[22] It seems, therefore, that Park Lane is maintaining its loss is simply a diminution in the value of its as yet unsold sections in the wider subdivision. Also, the only evidence as to this seems to be Mr Cary’s subjective belief in his affidavits which I outline above. No indication is provided that Mr Cary is a valuer or has any valuation experience. Nor is there any independent or expert verification of Park Lane’s loss in value claim as a result of the aesthetic appearance of Shiva’s property.
[23] Further, the as yet unsold sections in the wider subdivision do not neighbour Shiva’s section. As I understand the position, they are in geographically different parts of the overall subdivision. On its face, therefore, it seems surprising that Park Lane is alleging the street appeal of the Shiva property will have a material impact on the value of those other somewhat distant sections.
3 Cary affidavit sworn 9 September 2022 at [9].
[24] Overall, in my view, the limited evidence provided by Park Lane in this area falls well short of showing it has any position here that needs to be preserved by way of injunction, particularly as a result of Shiva’s alleged breach of cl 38 or cl 25.1 of the contract.
[25] In addition, even if it was established the value of other distant sections in the Park Lane subdivision was diminished as a result of the appearance of the Shiva property, there is a reasonable argument this would not be a legally-recoverable loss to Park Lane. Neighbouring properties are no longer owned by Park Lane. Despite being made aware of this proceeding, it appears that none of those other neighbours have taken any steps to join this proceeding to seek injunctive relief or, indeed, to recover any alleged losses.
[26] Further, the restrictive covenants relating to the Shiva property, as I have noted above, were expressed only for the benefit of those four neighbouring sections. A possible argument must follow that, any alleged drop in the value of Park Lane’s as yet unsold sections, because Shiva may not have complied with the land covenants, is not a loss recoverable by Park Lane. If Park Lane wanted to enjoy the benefits of the restrictive covenants for other lots in the subdivision, it could have sought and contracted with Shiva for covenants in gross, but they did not do so.
[27] Given, therefore, a possible argument exists that Park Lane here might not be entitled to damages from Shiva for any reduction in value of other sections in the subdivision, arguably the loss that is alleged might not support an injunction in any event.
[28] I leave these aspects on one side, however. Even if Park Lane has suffered or will suffer a loss, damages in my view would be an adequate remedy here. The balance of convenience, therefore, does not require the present injunction to remain. This is because any reduction in value of Park Lane’s as yet unsold sections is precisely the type of loss that is able to be remedied by an award of damages. From the authorities it is clear that diminution in the economic value of property is a classic measure of damages for property development companies in particular. The interest in the land in question property development companies have generally relates to its economic
value. As I see the position, this also supports the view that there is no need for any injunction to continue here.
[29] So far as the position of those neighbours immediately adjoining the Shiva section is concerned, in his decision, an overriding consideration for Cooke J to justify the limited continuation of the injunction was that the actual beneficiaries of the covenants, who might have standing to enforce those covenants, at that point did not have notice of the proceeding. The injunction was continued on a limited basis to give those owners an opportunity to take steps. They have now all been served. Although it seems, from material before the Court, they have expressed a range of different views about the aesthetics of the house Shiva has constructed on the section, none of them have applied to participate in this proceeding or taken any steps to enforce the covenants. It is clear these neighbouring property owners are the parties who might conceivably have had standing to enforce the covenants as the intended beneficiaries. They have not done so, however.
[30] Finally, as to those factors I have outlined above, I understand construction by Shiva of the new dwelling on the section has now been completed and an application is about to be made for a CCC. That certificate, it seems from evidence before the Court, is expect to issue shortly.
[31] If the interim injunction is to be continued at this point, it would prevent Shiva from completing performance and settlement under its long-standing agreement to sell the completed property to the Browns. Clearly, this would prejudice the interests of the Browns who, I am told, clearly want their purchase of the property to proceed.4 This could result in the Browns walking away from their purchase agreement. But, even if this was not to occur, it would further delay completion of the sale to the Browns. This, it is said, would cause Shiva additional financing costs until it received final settlement of sale proceeds.
4 Indeed, Mr Brown was present in court throughout the hearing before me. And as I understand it, he has expressed a strong preference for their agreement to purchase the property to be completed and settled.
[32] Finally, Shiva complains that the evidence before this Court of Park Lane’s ability to meet its undertaking as to damages here is of little value. What is clear is that Park Lane has provided to the Court financial accounts for the year ending March 2019 but understandably it is not possible to ascertain the company’s current financial position from those accounts due to their historic nature.
[33] In response to a further request, certain draft accounts for Park Lane have been provided to Shiva for the financial year ending March 2021. Again, however, the adequacy of the financial information provided according to Shiva must be the subject of some question.
[34] These points advanced by Mr Orpin-Dowell for Shiva are noted. But, at this point, I simply leave that aspect relating to Park Lane’s ability to meet a damages undertaking on one side here.
Where does the overall justice lie?
[35] On balance, justice in this case in my view, but only by a reasonably small margin, lies with Shiva. Although to some extent the overall situation Shiva faces was one of its own making when it commenced contraction of the dwelling on the section knowing it did not have Park Lane’s approval, nevertheless it seems it made many efforts to get approval for its new eco-friendly form of cladding and construction generally, and Park Lane proved uncooperative and obstructive throughout. Construction delays occurred. Council building consent was properly obtained and on its face no vehement objections to the cladding and aesthetics of the new dwelling (despite one or two modest concerns expressed) have come from the four immediately concerned neighbours.
[36] In conclusion, and for all the reasons I have outlined above, the limited injunction in this proceeding, granted by Cooke J in his 17 June 2022 judgment, must be discharged. Even if there is a serious question to be tried in this case, there is some question as to whether evidence is available to show Park Lane will itself suffer any recoverable loss as a result of the alleged breach. But even to the extent that Shiva might be so liable, I am satisfied this would be a financial loss of a kind that can be adequately addressed by an award of damages in this case.
[37] There is no basis, as I see it, for ongoing injunctive relief. Indeed, continuation of the interim injunction it seems is likely to have serious consequences and cause significant prejudice here to Shiva and to the Browns.
[38]Shiva’s application before me to discharge the injunction succeeds.
[39] An order is made that the injunction granted by Cooke J in his 17 June 2022 judgment is now discharged.
Strikeout application
[40] Although the primary order sought by Shiva here was one to discharge the interim injunction which was potentially preventing Shiva’s sale to the Browns, Shiva goes further and says this proceeding should also be struck out.
[41]Rule 15.1 of the High Court Rules 2016 addresses strikeout and states:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
……
[42]Relevant settled principles relating to strikeout, as established in
Attorney-General v Prince and Attorney-General v McVeagh5 are:
(a)The application is to proceed on the assumption that the facts pleaded in the statement of claim are true;
(b)Before the Court may strike out a claim, the causes of action must be so clearly untenable that they cannot possibly succeed;
5 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at [267] and Attorney-General v McVeagh [1995]
1 NZLR 558 (CA).
(c)This jurisdiction is one to be exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material and:
(d)The fact that the application raises difficult questions of law and may require extensive argument, does not exclude the strikeout jurisdiction.
[43] An issue does arise here as to whether Shiva requires leave to bring its strikeout application but I leave this aspect on one side. For present purposes, I will grant any such leave as may be required. But, in any event, I dismiss the strikeout application. I find that the Court cannot be certain here that Park Lane’s claim that Shiva has breached cl 38 of the contract cannot succeed. What is a proper interpretation of cl 38.1 here is a matter for proper consideration at a substantive hearing. Issues might also arise, as I see it, concerning possible interests Park Lane may be able to establish over registration requirements for its restrictive covenants and, in any event, compliance with construction standards and approvals, as outlined in cl 25.1 of the contract.
[44] I conclude that a reasonably arguable cause of action concerning a possible breach of cl 38.1 at least might be regarded as existing here. This could not be said to be so clearly untenable that it could not possibly succeed. Given, too, that the strikeout jurisdiction is always one to be exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material, there is no doubt in my mind that strikeout is inappropriate here.
[45]Shiva’s strikeout application, therefore, must fail. It is dismissed.
Costs
[46] As to costs, I received no submissions from counsel as to costs. They are reserved at this point.
[47] Counsel are urged to liaise with a view to settling any issues of costs that may arise (given particularly that Shiva has succeeded in having the interim injunction discharged, but failed with its strikeout application). In the event that any costs issues exist and cannot be resolved between the parties, then memoranda may be filed
sequentially (five pages maximum) which are to be referred to me and I will decide any outstanding issue of costs based upon the material then filed.
Gendall J
Solicitors:
Gault Mitchell Law for the Plaintiffs
Jonathan Orpin-Dowell Barrister for the Defendant
0