Philpott v Noble Investments Ltd

IN THE COURT OF APPEAL OF NEW ZEALAND

CA274/2013
[2015] NZCA 342

BETWEEN	SHAYNE PHILPOTT, NEW ZEALAND TRUSTEE SERVICES LIMITED, COLIN PETER STOKES, FAY EUNICE RICHARDSON, BURNSIDE TRUSTEES LIMITED AND GREGORY ROBERT SMITH Appellants
AND	NOBLE INVESTMENTS LIMITED Respondent

Hearing:	3 June 2015
Court:	Ellen France P, Stevens and Winkelmann JJ
Counsel:	W J Palmer and S A Brookes for Appellants P B McMenamin for Respondent
Judgment:	30 July 2015 at 12.30 pm

JUDGMENT OF THE COURT

A The application for leave to adduce further evidence is granted.
BThe appeal is allowed.
CThe respondent’s cross-appeal is dismissed.
DThe Judge’s orders that caveat numbers 8322656.1 (caveat 1) and 8003770.1 (caveat 2) not lapse are confirmed.
EThe condition set out at [118](d) of the first High Court judgment that caveat 1 should lapse insofar as it affects Lot 11 is quashed.
FThe condition set out at [118](e) of the first High Court judgment reserving leave to the respondent to apply for lapse of the caveat if it met certain conditions, is quashed. We replace it with the condition that leave is reserved to the respondent to apply for an order that caveat 1 lapse. Such application may be brought on the grounds that the caveatable interest has been satisfied or will be satisfied on registration of documents.
GThe respondent must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Winkelmann J)

Introduction

In 2002 the appellants bought part of a large piece of rural land, owned by the respondent, Noble Investments Limited (Noble). Noble planned to subdivide its land but in advance of the subdivision sold lots within it, including to the appellants. These sales occurred on the basis that the on-sold lots would be included within Noble’s scheme for the subdivision if it proceeded. As part of its agreement with the appellants in 2002 (the 2002 agreement), Noble undertook that if the subdivision went ahead it would provide roading and services to the appellants’ land in keeping with the subdivisional scheme.
Noble has gone ahead with the subdivision, although progress has been slow and intermittent. Disputes have arisen between Noble and the appellants, including a dispute as to the performance of Noble’s obligations to provide roading and services. The appellants lodged two caveats, the first (referred to as caveat 1) in reliance upon the obligations that Noble undertook to provide roading and services to the appellants’ land, and the second (caveat 2) in reliance upon a further agreement that the appellants say they reached with Noble to grant a right of way over land owned by Noble.
Noble challenged the appellants’ claim for caveatable interests in respect of both caveats 1 and 2. These challenges have been subject to two judgments by Associate Judge Osborne.[1] In the first, the Associate Judge found that the appellants had caveatable interests sufficient to sustain both caveats but made orders that caveat 1 should lapse in respect of one of the lots to which it applied, Lot 11. He also imposed conditions that would enable Noble to apply to the Court to have the caveats discharged in certain circumstances. The appellants say the order that caveat 1 lapse in respect of Lot 11 was based on a mistaken view of the facts, and also challenge the imposition of the particular conditions. Noble cross-appeals the finding that the appellants had caveatable interests to support either caveats 1 or 2.
[1]Philpott v Noble Investments Ltd [2012] NZHC 1431 [first High Court judgment]; Philpott v Noble Investments Ltd [2013] NZHC 400 [second High Court judgment]. The two appeals were heard together.
In the first High Court judgment, the Associate Judge reserved leave to the parties to apply for further directions, which they subsequently did. The Judge then made various further orders in the second High Court judgment which are now also the subject of this appeal.
Determination of this appeal involves resolution of the following issues:
(a)Was the Judge in error in finding that the appellants had a reasonably arguable case that they had an interest in the Noble land issue sufficient to sustain each of caveats 1 and 2?
(b)Did the Associate Judge err in making his orders sustaining the caveats subject to the particular conditions?

Factual background

In 2002, the appellants and Noble entered into an agreement for sale and purchase pursuant to which the appellants purchased rural Lots 9, 19 and an undivided one-tenth share of an access way, Lot 22. That access lot describes a right angle, the first portion travelling south from a road bordering the Noble land, Yaldhurst Road, and the second portion, travelling east to west where it abuts Lot 9.
The lots purchased by the appellants totalled approximately four hectares, and were part of a 41.49 hectare area owned at that time by Noble. At the time of the agreement the lots were yet to be formed, but were marked out on a plan annexed to the agreement for sale and purchase, and which we annex to this judgment as Appendix A. The agreement contemplated two subdivisions. The first in time, the “initial subdivision”, would create lots including the three lots the subject of the agreement. Appendix A records that proposed subdivision. The second in time was the “further subdivision”, intended to allow the entire large block of land, which we refer to as the Noble land, to be used for more intensive residential purposes. The Noble land included land sold by Noble to the appellants and to other parties in advance of the subdivision. These purchasers are referred to collectively as “Noble Owners” in the agreement.
The agreement included the grant of an option in favour of Noble to buy back Lot 19 once the initial subdivision was completed.
The agreement imposed quite detailed obligations on Noble in respect of the further subdivision. The three critical clauses of the agreement for sale and purchase are best understood out of numeric order, and are as follows:
21.1.    … the Vendor [Noble] will at its own cost pursue on behalf of all Noble Owners with the Relevant Authority district plan changes(s) and/or resource consent(s) (the “Further Consent”) which will enable Noble to be subdivided for more intensive residential purposes (and for any activities which are compatible with residential purposes) (the “Further Subdivision”). The timing and content of such applications will be at the absolute discretion of the Vendor, however the Vendor will act in good faith in seeking to achieve the Further Consent.
14.      … [the Vendor] shall not agree to a lesser zoning for Lot 9 than for any other lot where it is seeking L1A zoning or it’s equivalent (unless previously agreed in writing with the Purchaser).
15.      … the Vendor undertakes to provide full width roading to L1A zoning standard at its cost, together with sewer, power, telephone, water and stormwater connection for this zone’s standard to Lot 9. This work is to be completed within TWO YEARS of residential zoning being granted or when development of the Vendors adjoining land is undertaken, whichever comes first.
Access to the appellants’ land was at least initially to be through Lot 22. The agreement provided that prior to settlement Noble would seal that lot to at least a 4.5 metre width. It contemplated that as part of Noble pursuing the further consent and undertaking the further subdivision, Noble would apply on behalf of the appellants and other Noble owners for the vesting in the “Relevant Authority” (here the Christchurch City Council) of Lot 22 together with strips of land that ran alongside the east-west portion of Lot 22 (the “road-widening area”). Because the road-widening area lay inside lots that Noble intended to sell prior to the further subdivision, the agreement provided a form of covenant Noble owners would be required to enter into to preserve Noble’s ability to widen the road.
At some point Noble involved a company, Apple Fields, as the manager of the subdivision development. In 2006 residential zoning was granted for the land. In 2009 consent was granted for the further subdivision as contemplated in the agreement. The grant of that consent activated clauses 14 and 15.
Over time, various disputes have arisen between the parties to this proceeding. In 2008 a resolution of one of those disputes involved the appellants agreeing to transfer Lot 19 back to Noble, but with an agreement that the appellants would be granted an access easement over the lot (the 2008 agreement).
On 12 December 2008, the appellants lodged a caveat, caveat 2, in respect of Lot 19 to protect “a right of way easement” over it. The caveatable interest expressed in caveat 2 was simply an agreement “to create a right of way easement over the … land.”
On 28 October 2009, the appellants lodged a further caveat, caveat 1, over eight titles, which are Lots 11 to 18 inclusive in the initial subdivision.
The caveatable interest expressed in caveat 1 is as follows:
Pursuant to an Agreement for Sale and Purchase … whereby the Registered Proprietor agreed to provide services for sewer, stormwater, water supply, power and telecommunications for the benefit of the land owned by the Caveators … and which of necessity may require the registration of easements by the Registered Proprietor as Grantor over parts of the Registered Proprietor’s land … and which agreement also provided for the Registered Proprietor to vest parts of the land … as road for the benefit of the caveator’s land.
Noble initiated caveat lapse in proceedings in December 2010.[2] The appellants made an application to sustain the caveats, opposed by Noble.[3] However the hearing of that application was significantly delayed both by the intervening Canterbury earthquakes, and by various attempts at settlement.

Application for leave to adduce further evidence

[2]Land Transfer Act 1952, s 145A(1).

[3]Land Transfer Act 1952, s 145A(3).

The appellants seek leave to adduce further evidence in the form of an affidavit of Mr Colin Stokes, one of the appellants. The affidavit details progress with the subdivision since the High Court judgments. There is no opposition to the application.
Under r 45 of the Court of Appeal (Civil) Rules 2005, the Court may grant leave for the admission of further evidence, but the evidence must be fresh, credible and cogent.[4] The evidence is fresh — it is updating evidence. The evidence is credible. It is also cogent in the sense that both parties elected to present their argument at least in part by reference to what is presently planned for the subdivision. We therefore grant leave to the appellants to adduce the affidavit of Mr Stokes dated 2 May 2015.

Was the Associate Judge in error in finding the appellants had a reasonably arguable case they had an interest in the Noble land issue sufficient to sustain caveat 1?

The parties’ contentions

[4]Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR (CA) at 192; Aotearoa International Ltd v Paper Reclaim Ltd [2006] NZSC 59, [2007] 2 NZLR 1 at [6], n 1; and Erceg v Balenia Ltd [2008] NZCA 535 at [15].

The appellants say Noble has a contractual obligation under the 2002 agreement to permit ongoing use of its land to enable Lot 9 to be part of the further subdivision of the Noble land. Caveat 1 protects Lot 9’s access to the necessary roading and services, and in particular stormwater services for that subdivision. The interest created under the 2002 agreement is caveatable, either because it amounts to an agreement to create an easement, or on the broader equitable basis that Noble has undertaken to use its land to enable and give effect to the subdivision of Lot 9, the fulfilment of which may require more than simple easement protection. Alternatively, the appellants submit the 2002 and 2008 agreements give rise to a constructive trust where Noble holds the caveated land for its own benefit and for the benefit of the Lot 9 owners, to whom Noble promised to use that land to improve Lot 9.
Noble says there is no caveatable interest arising from the 2002 agreement. The arrangements between the parties did not contain a contractual provision to create an easement or to convey an interest in Noble’s land to the appellants. All cl 15 required of Noble was that it undertake works, including laying sewage pipes, electricity cabling, stormwater pipes and a road. It was simply a contract, enforceable against Noble, to undertake these works. Noble refers to affidavits filed in the High Court to support its argument that no easement was intended to be granted in the 2002 agreement. It says that there is no statement in these affidavits that easements were necessary for the performance of cl 15 or intended by the parties.

The Associate Judge’s findings

The Associate Judge accepted the appellants’ argument. He found in the first High Court judgment that in 2002 this was a rural subdivision with some prospect of becoming an urban subdivision. The appellants were purchasing a rural block of land a substantial distance from a road, Yaldhurst Road, which was at that time the land’s only road access. The right of residents of Lot 9 for the time being to travel over Noble’s land to reach that road, and the Lot 19 right of way, were the classic subject matter for the grant of an easement. The right to access for services was closely similar. He said that the absence of express words describing a formal obligation to grant a registered right of way was not definitive.[5] Where it can be shown that the alleged easement was the common intention of the parties, that is enough for an implied grant. It was a matter of both common sense and commercial necessity that the parties must have intended that Noble was making a grant to the appellants that would bind both Noble and successors in title.
[5]First High Court judgment, above n 1, at [59], citing Hart v Mitchell (2006) 7 NZCPR 588 (HC).
The Associate Judge considered whether the route of the proposed roading was sufficiently defined, since the 2002 agreement did not stipulate that the roading and services were to be provided over a specified piece of land. He said there was an arguable contractual intention that Lot 22, which runs from Yaldhurst Road to and past Lot 9, would provide both the roading and the route for services to Lot 9. It was also arguable however that the contract permitted Noble to route the right of way and services over another part or parts of its land, as long as they connected with Lot 22.
The Associate Judge referred to some of the extensive evidence filed by the parties and noted that in accordance with the arguable intention of the parties in the 2002 agreement, Noble had now identified routes by which it proposed to deliver roading and other services to Lot 9. Those routes included one which followed a “spine road” from Yaldhurst Road to Lot 22 in its east-west portion.
Another scheme that Noble had offered to the appellants was the widening of the north-south portion of Lot 22, which would involve the creation of new lots on the road side of that part of Lot 22 to achieve a wider roadway. That offer was not accepted by the appellants.
The Associate Judge therefore concluded that the routes to be taken for the appellants’ right of way and various services had been sufficiently defined to constitute a caveatable easement interest. However, since none of these routes passed over Lot 11, the caveat should lapse in respect of Lot 11.

Applicable legal principles

The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:
(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained — either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists;[6] and
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.[7]
[6]Sims v Lowe [1988] 1 NZLR 656 at 660 (CA); Zwarst v Saxton [2012] NZHC 448 at [12].
[7]Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].
Section 137 of the Land Transfer Act 1952 regulates the entitlement to lodge a caveat. It provides in material part:
137 Caveat against dealings with land under Act
(1)Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—
(a)claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or
…
A caveatable interest is therefore an interest in land. A personal or contractual right is not enough unless it creates or carries with it an interest in land. The class of caveatable interests for the purpose of s 137 is not closed and is capable of expansion, provided there is shown to be a legal or beneficial interest in the land.[8] There is some uncertainty in the law at present as to whether only those interests capable of registration are caveatable, or whether the category of caveatable interests extends to non-registrable equitable interests which are nevertheless proprietary in nature. Commentators favour the latter view, and there is some authority to support that analysis.[9] On the view we take of the facts of this case, this distinction is not determinative.
[8]Tom Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at 259.
[9]Wellesley Club Inc v Wellesley Property Holdings Ltd (2007) 8 NZCPR 421 (HC). See also Hinde, McMorland & Sim Land Law in New Zealand (online looseleaf ed, Lexis Nexis) at [10.020].
It is nevertheless clear that an equitable interest in land can be a sufficient interest to sustain a caveat; equitable easements and some equitable interests created under agreements for sale and purchase are capable of sustaining a caveat.[10] An equitable easement is usually created by an agreement to grant an easement or the implied grant of an easement.
[10]Bevin v Smith [1994] 3 NZLR 648 (CA); Motorworks Limited v Westminster Auto Services Limited [1997] 1 NZLR 762 (HC).
The Associate Judge found that the obligation to provide roading and services was to be construed as the implied grant of an easement, since the clear intent was that the roading and the services would be available for use by Lot 9 owners, whoever they might be. It is common ground that the Associate Judge stated the test for the creation of an equitable easement correctly when he cited the following passage from the judgment of Reed J in McDonald v Peddle:[11]
In all such cases the question would appear (without regarding the particular form of words used) to be –
(i)Does an intention appear to confer a right to affect the land of the grantor or the covenantor?
(ii)Is this right one of those as to which, either from decided cases or by analogy, it can be said it is a right capable of being made the subject of a grant as an easement?
[11]McDonald v Peddle [1923] NZLR 987 (SC), affirmed [1924] NZLR 717 (CA), affirmed [1925] NZPCC 138. Reed J adopted the test from the then current edition of Gale on Easements (9^th ed, Sweet & Maxwell, London, 1916) at 51.

An easement has the characteristic that it affects the servient land for the benefit of the dominant land, in a way that benefits the dominant land, not just the owner of that land for the time being. The servient and dominant land need not be contiguous but they need to be sufficiently close that the dominant land receives a benefit from the grant of the easement. The grantor (servient owner) and the grantee (dominant owner) must be different persons. The right must also be capable of being the subject matter of a grant, so that most easements are either the same as or close to existing grants. Another aspect of this requirement is that there must be clarity as to the nature of the right granted by the easement, so that it is possible to determine both whether the right exists, and whether it has been breached.[12] The claimed easement cannot be vague, ill-defined or over-broad.[13]

Analysis

[12]Webb v Bird (1861) 10 CB (NS) 268 at 282, 142 ER 455 at 460.

[13]Cable v Bryant [1908] 1 Ch 259.

As both counsel submitted, whether or not a caveatable interest exists in terms of s 137 depends upon the construction of the contract. The inquiry in relation to the meaning of clauses 14 and 15 is to be determined by ascertaining the meaning that those clauses, within the context of the document as a whole, would convey to a reasonable person having all the background knowledge reasonably available to the parties in the situation in which they were at the time of the contract.[14]
[14]Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28, [1998] 1 WLR 896 at 912–913; Firm PI 1 Ltd v Zurich Australian Insurance Ltd T/A Zurich New Zealand [2014] NZSC 147, [2015] NZLR 432 at [60]–[63].
A great deal of evidence has been filed in this proceeding as to the commercial context operating both at the time that the 2002 agreement was formed, and subsequently. The evidence also encompasses what the parties understood or intended for the contract to mean. As he observed, much of this latter category of evidence was of no assistance to the Associate Judge. It is also of no assistance to us.
In Vector Gas Ltd v Bay of Plenty Energy Ltd, Tipping J observed that the court embodies the third party “reasonable person”. He said:[15]
… To be properly informed the court must be aware of the commercial or other context in which the contract was made and of all the facts and circumstances known to and likely to be operating on the parties’ minds. Evidence is not relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean, or what their negotiating stance was at any particular time.
[15]Vector Gas Limited v Bay of Plenty Energy Limited [2010] 2 NZLR 444 (SC) at [19].
The context here was that the appellants were buying a piece of land that sat within a larger piece of land owned by Noble. Noble had the intention to develop a very large subdivision and undertook to the appellants that it would include the Lot 9 land within the broader subdivision scheme. By cl 14 it undertook that it would use its best endeavours to obtain the same level of zoning for Lot 9 as for any other lot where it was seeking L1A zoning or its equivalent.
The agreement included a provision that at its own cost Noble would pursue on behalf of all Noble owners district plan changes and/or resource consents that would enable the land to be subdivided for more intensive residential purposes. Clause 15 is to be read in that context. If the further subdivision went ahead, Noble would provide services and roading to Lot 9 sufficient to support the intensive development of the lot as part of the subdivision.
The appellants undertook various corresponding obligations including obligations to take all necessary reasonable steps to assist the vendor with obtaining the further consent. Clause 21.5 provides:
If the Vendor obtains the Further Consent, the Purchaser agrees:
21.5.1 to execute and deliver any plans and documents, including transfers of title, releases of covenants and surrenders of easements, and to do all things which may be reasonably required by the Vendor for the purposes of the Further Consent; and
21.5.2 to execute and deliver all documents required to grant, create or receive whatever easements, covenants, restrictions, or other encumbrances, rights or obligations that may be imposed by the Relevant Authority or that may reasonably be required by the Vendor in order to effect the Further Subdivision and to provide for access and services to the lots within the Further Subdivision, and to enable the Vendor to register all such documents against the relevant certificates of title; and
…
It is also part of the relevant commercial context that Noble was entering into similar agreements with other purchasers so that when it obtained the further consent and carried the subdivision into effect, there would in substance be a number of co‑venturers in respect of the subdivision. Each owner understandably had an interest in how they would gain access to their property and how necessary roading and other services were to be provided.
(a) Services
The first obstacle to the construction Noble seeks to place upon cl 15 is the ordinary meaning of the words used. Noble did not agree to construct the road and services. Rather, it agreed to provide them. This reading is consistent with the commercial context.
It is true, as Noble observes, there is no express provision in the contract that an easement would be granted, but no particular form of words is necessary for an implied grant of an easement. We consider that the intention to confer a right to an easement is implicit in cl 15 read in the context of the whole of the agreement. Noble agreed to provide services and stormwater facilities as part of the subdivision plan, the benefit of which would pass with the titles into which the Lot 9 land was subdivided. More than personal rights were intended to be created in respect of the Noble land. These were rights that had to attach to the Lot 9 land (the dominant land), in respect of the (servient) land over which these various services passed. The servient land could be any of the Noble land, including land that Noble had on‑sold to other Noble owners. This was, as the Associate Judge said, a classic easement situation.
The fact the provision of the services was intended to be protected by the grant of necessary easements is reinforced by the provisions in cl 21.5, set out above. Noble preserved to itself the ability to ensure that the necessary easements were granted and registered to meet its obligations to the Noble owners to provide these services.
For these reasons, we consider it reasonably arguable that Noble possessed an intention to confer on the appellants a right to affect the land and that this right is capable of being made the subject of the grant of an easement.
Next, Noble says that the easements the appellants argue for are too ill‑defined to constitute caveats. We disagree. As the Associate Judge observed, the agreement reserves to Noble the right to determine where the services will pass. The obligations are certainly not as well defined as they could be. The parties could have attached detailed site plans to the initial agreement for sale and purchase. But given the commercial context that was not realistic, because at that point the subdivision was at the concept stage only. Nevertheless, the proposed easements are not so ill‑defined that they are incapable of enforcement. The subdivision plan settled upon will determine the location of the services and thereby define the easements. The agreement therefore contains in substance the mechanism for the definition of the easements.
Noble further argues that even if the contract is construed as more than a contract to undertake works, it does not amount to an agreement to grant an easement, as in reality, most services will pass along the pathway of the new roading which is provided pursuant to cl 15. Noble’s present plan is for all of the services, with the exception of stormwater, to run along the spine road. Most of this work has already been done. That will be a public road in the subdivision and no easement is required for those services to pass along a public roadway.
However we are not concerned with how Noble has chosen to provide the services, but rather with what the parties contracted to do. Moreover, even at the date of the hearing of the appeal there was no certainty that Noble would provide or be able to provide the services in that way, as the exact route of the public road had not yet been finalised. It certainly cannot provide stormwater services along the course of the spine road. Provision of stormwater services requires not just piping to conduct the stormwater, but also the creation of stormwater reservoirs, a fact conceded by Noble. The current plan for the subdivision does not provide stormwater facilities for Lot 9.
(b) Roading
The position in respect of the roading is more complex. Noble says that all it has undertaken to do is construct the roads, and then vest them in the Christchurch City Council. Until the land vests in the Council, the land will remain in the ownership of Noble and the appellants will have no right to pass over it.[16] There is no transitional stage where an easement is required. No right of way is necessary for travel along a public road, and a caveat is not available to secure performance of Noble’s obligation to vest the road.
[16]Resource Management Act 1991, s 238.
It is common ground that Noble can elect where it places the cl 15 roading. It may provide it either along the Lot 22 access way or along some other route.
If Noble provides the roading along Lot 22 it is also contractually obliged to seek vesting of that road in the Christchurch City Council. Much of a widened Lot 22 road will sit on land already owned by the appellants. Although Lot 9 residents do not need a right of way to travel over their own land, Lot 22 is not wide enough for a full-width road. Noble will need to add land to the road along the north-south arm of Lot 22 to bring it up to width.[17] If Noble is successful in vesting the Lot 22 road in the Christchurch City Council then again Lot 9 residents will not need a right of way to travel along the road, as it will be a public road.
[17]It has already preserved the ability to widen the road along the east-west arm. There is no caveat lodged in respect of the road widening area on the east-west arm as that land is owned by other owners.
If Noble elects to provide the roading along a new access way, there is no contractual obligation upon it to seek vesting of the road in the Christchurch City Council, although the commercial logic is that it would seek to do this. Unless it is vested as a public road, Lot 9 residents will require a right of way to travel over that road, as it will be on land owned by Noble.
It is reasonably arguable that Noble and the appellants intended that the appellants would have an interest in that part of the full-width roading not already owned by the appellants until such time as the road was vested in the Christchurch City Council. If it was not vested in the Council but the further subdivision nevertheless proceeded, then residents of Lot 9 would continue to have a right of way to travel over Noble’s land (or the land of other Noble owners) along the cl 15 roading. In the case of Lot 22, that right of way would extend over the contiguous land required for road widening. Clearly, a right of way can also be the subject of an easement.
To conclude on this point, although the case for a caveatable interest in respect of the obligation to provide roading arising by way of an equitable easement is not as strong as that in respect of the other services, we nevertheless consider it meets the threshold of a reasonably arguable case.
(c) Scope of caveatable interest
As to the extent of the caveatable interest arising out of cl 15, we consider that interest extends to such part of Noble land registered in the name of the respondents which is necessary to protect the appellants’ caveatable interest in the roads and services, supported by corresponding easements, to allow Lot 9 to be incorporated into the further subdivision. The evidence establishes that is all the land against which caveat 1 is lodged, which is land that will be required for the spine road, Lot 22 road widening and for the provision of services.
In the High Court the Associate Judge held that the caveatable interest did not extend to Lot 11 because that lot was not required for either of the alternative roading routes protected by caveat 1. However the evidence is that at least part of Lot 11 is required for the spine road. It appears the Associate Judge proceeded on a mistaken factual basis in excluding Lot 11 from his orders sustaining caveat 1. It follows that Lot 11 was properly included within the terms of caveat 1.
(d) Clause 21.5 of the 2002 agreement
Finally, Noble says that cl 21.5 is an insurmountable obstacle in the way of the appellants’ claim to a caveatable interest in connection with either caveat. This is because maintaining the caveat is in breach of cl 21.5, and because Noble is entitled to call upon the appellants to release both any caveat and any easement.
The critical words in cl 21.5 for these purposes are “may be reasonably required”. Requiring the appellants to surrender easements to which they are contractually entitled to is not a reasonable requirement, at least not at this point in time when it is possible that the caveators’ legitimate interest will be prejudiced by removal.
(e) Other arguments raised by the appellants
In light of these findings it is not necessary to consider alternative arguments advanced by the appellants to sustain the caveat based on allegations of constructive trusts or some broader concept that the caveat could secure performance of contractual obligations if they were to be undertaken on the servient land.
The appellants also relied on a line of Australian authorities which they said stood for the broad proposition that a caveat over land to be subdivided could be lodged over the whole of the pre-subdivision land.[18] However those authorities deal with a different situation to the present. Where a purchaser’s land is not yet the subject of a separate title, the purchaser has a caveatable interest in the broader piece of land, until such time as the land it contracted to purchase can be carved out into a separate title. That is not the issue with which this proceeding is concerned.

Was the Associate Judge in error in finding the appellants had a reasonably arguable case they had an interest in the Noble land issue sufficient to sustain caveat 2?

[18]See for example Locke v Yogoat Pty Ltd (1992) 5 BPR 11, 687 (NSWSC); Re Henderson’s Caveat [1998] 1 Qd R 263 (QSC). See also, Hinde, McMorland and Sim, above n 9, at [10.013].

The appellants lodged caveat 2 in reliance upon the 2008 agreement. The evidence of this agreement is a letter dated 8 August 2008 from the solicitors for the appellants to the solicitors acting for Noble. That letter records an agreement already reached between Noble, Apple Fields and the appellants in which each assumed various obligations. Clause 2.5 records:
Apple Fields Limited will use all reasonable endeavours to ensure sufficient funds are committed from the proceeds of the pre-sales towards construction of the further subdivision, and will otherwise use all reasonable endeavours to implement roading for the spine road and the roading and sealed and serviced right of way required for and to Lot 9 at its expense and to use all reasonable endeavours to complete such as soon as possible.
A director of Apple Fields, Mr Kain, signed the letter to signify his acceptance of the terms on behalf of Noble and Apple Fields.
Noble says that the agreement does not create a caveatable interest. Clause 2.5 records the agreement of Apple Fields, not Noble. Noble contends the 2008 agreement drew express and clear distinctions between the obligations of Noble and of Apple Fields, and the particular obligation was that of Apple Fields. Apple Fields is not the registered proprietor of the Noble land. Moreover, cl 2.5 records no more than an undertaking to do work; Apple Fields agrees to “implement” the sealed and serviced right of way required to and for Lot 9. This is not an agreement to grant an easement.

High Court judgment

The Associate Judge noted the difficulty with the argument that the letter was simply recording the parties’ agreement already reached. He also observed that the summary procedure was not suited to the exploration of the background to the letter, needed to understand the agreement reached. He found there was a reasonably arguable case that Noble was bound by the agreement to provide a right of way

Analysis

We have no doubt it is reasonably arguable that the letter of 2008 evidences an agreement on the part of Noble to grant a right of way easement over Lot 19 in favour of the appellants. Apple Fields’ role was simply that of a manager of the subdivision working with Noble. Given this context it would be a strange thing in an agreement between Noble, Apple Fields and the appellants for Apple Fields to agree to use best endeavours to implement and seal the right of way, if Noble had not agreed to provide that right of way. Accordingly, Noble’s challenge to the Associate Judge’s finding in respect of caveat 2 must fail.

Did the Associate Judge err in making orders sustaining the caveats subject to the particular conditions?

The appellants concede that the Associate Judge had jurisdiction to impose conditions upon his orders sustaining the caveats. However they argue that the Associate Judge was wrong to impose the following condition, using the paragraph reference from the judgment:
[118](e) In the event and at the time that the “spine road” as shown on Schedules 2 and 3 to this judgment is vested in the Christchurch City Council both as a road and with the services that are to be provided off Yaldhurst Road running through it, and Noble Investments Limited has caused an easement for right of way and other services to be registered over Lots 514 and 510 (as they appear on Schedule 4 to this judgment) in favour of the registered proprietors of Lot 9 in Deposited Plan 323203, Identifier 440793 (of any subdivided lot thereof), then Noble Investments Limited may on three working days’ notice have this proceeding brought on for the making of orders that the balance of land in Lots 12, 13, 14, 15 should lapse.
We attach as Appendix B to this judgment Schedule 2 referred to by the Associate Judge. . This is the 2008 scheme for the subdivision and remains the current plan.
The appellants argue that, having found an arguable beneficial interest over Noble’s land, the Associate Judge should not have imposed such a prescriptive and uncertain condition. It gave scope for Noble to seek the lapsing of the caveat in circumstances where the services and roading are not secured for the long-term benefit of Lot 9. The appellants submit that the only appropriate type of condition that can be imposed where a caveat is upheld is a condition of a purely mechanical nature, such as a condition requiring the issue of proceedings by the caveator for the purpose of having the claimed right adjudicated.
Noble replies that the Associate Judge had discretion to impose such conditions, and unless he proceeded upon a wrong principle or there is a miscarriage of justice, his decision to impose the condition should stand.
We are satisfied that the condition set out at [118](e) should not have been imposed. As the appellants submit, the effect and operation of the condition is uncertain. It does not link to the contractual language, so that the condition may be fulfilled even where the provision of the cl 15 roading and services are not secured for the long-term benefit of occupiers of Lot 9. The evidence makes it clear that there is an ongoing issue between the parties as to whether the spine road is full‑width roading for the purposes of cl 15. It is 18.8 metres in width, whereas the appellants say that the minimum width under the relevant standard is 25 metres. Further, on the current plans it does not link to Lot 22. There is also an issue between them as to whether it is enough if the spine road links to Lot 22, or whether Noble is obliged to ensure it links to Lot 9.

It seems likely that the Associate Judge was seeking to encourage the parties toward a resolution of what seems to have been a long-running dispute through the imposition of these conditions. He also added a condition requiring the parties to meet to try and define the issues between them more closely. However, the imposition of that condition was inconsistent with the requirement that an order upholding a caveat should be made unless satisfied that the caveator’s legitimate interest would not be prejudiced by the refusal to make such an order. If there is a concern that the caveatable interest has been satisfied or will be satisfied on registration of documents, leave may be reserved to Noble to apply for an order that the caveat lapse in light of this change in circumstances.
These caveats are upheld on the basis that it is reasonably arguable that the appellants have a caveatable interest. Whether the appellants are ultimately able to establish a caveatable interest remains at issue. We therefore expect that the appellants will prosecute with expedition, proceedings in which the appellants seek to establish the existence of the caveatable interests.

Result

The application for leave to adduce further evidence is granted.
The appeal is allowed.
Noble’s cross appeal is dismissed.
The Judge’s orders that Caveat numbers 8322656.1 (caveat 1) and 8003770.1 (caveat 2) not lapse are confirmed.
The condition set out at [118](d) of the first High Court judgment that caveat 1 should lapse insofar as it affects Lot 11, is quashed.
The condition set out at [118](e) of the first High Court judgment reserving leave to Noble to apply for lapse of the caveat if it met certain conditions, is quashed. We replace it with the condition that leave is reserved to Noble to apply for an order that caveat 1 lapse. Such application may be brought on the grounds that the caveatable interest has been satisfied or will be satisfied on registration of documents.

Costs

We consider, as the parties accepted before us, that costs should follow the event. The respondent must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Buddle Findlay, Christchurch for Appellants
K J McMenamin & Sons, Christchurch for Respondent

Appendix A

Appendix B

[2015] NZCA 342

30 July 2015 at 12.30 pm