Pollard v Williams

[2019] NZHC 2029

IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY

I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE

CIV-2019-416-1

[2019] NZHC 2029

UNDER THE

Property Law Act 2007

IN THE MATTER OF

an application to vary a land covenant

BETWEEN

KIERAN PATRICK POLLARD

Appellant

AND

GRAEME DENYS WILLIAMS AND DERRY STOVELL

Respondents

Hearing:

30 July 2019

Appearances:

D Jenkin for Appellant

N Witters for Respondents

Judgment:

16 August 2019

JUDGMENT OF COOKE J

Table of Contents

Background[3]

Approach on appeal[11]

Appellant’s key point on appeal[13]

Assessment[16]

Substantial injury[20]

Purpose of the covenant[21]

Injury[28]

Precedent effect[31]

Application in the present case[35]

Terms of the variation[38]

Conclusion and costs[49]

POLLARD v WILLIAMS [2019] NZHC 2029 [16 August 2019]

[1]    Mr Pollard appeals from the decision of the District Court granting an application under s 317 of the Property Law Act 2007 (the Act) by Mr Williams and Ms Stovell for variation to a restriction contained in covenants over their land.1 Broadly speaking, the covenants required property owners of a development to construct only new dwellings on the development, and not relocate existing housing or use second hand materials. Mr Williams and Ms Stovell want to relocate a historic homestead onto the site. All other property owners in the development have agreed to them varying the covenants to allow them to do so apart from Mr Pollard. Judge Cathcart agreed it was a case where it was appropriate to modify the covenants on the basis that, under s 317(1)(d) of the Act, the proposal “would not substantially injure any person entitled”.

[2]    Mr Pollard now appeals on the basis that the District Court did not correctly interpret and apply the relevant provisions, and on a number of related grounds.

Background

[3]    The subdivision is at the top of Winifred Street, Wainui Beach, Gisborne. It comprises 10 main lots varying in size from 3409m2 to over two hectares. I understand the relevant zoning under the District Plan is “rural residential”, and that there is presently a minimum lot size of one hectare. The developer sold the last of the lots in 1998 and no longer has an interest. Five of the lots have established houses on them. Mr Pollard’s lot is next door to the lot owned by Mr Williams and Ms Stovell. His trust purchased the land in 2013 and he is in the process of building a new home on his site.

[4]    Each of the titles in the subdivision have covenants registered against the title as part of the original development. The covenants provide as follows:

1.   Not to erect any temporary buildings or structures on the land except such buildings or structures as are to be used in conjunction with the construction of permanent buildings on the land and which will be removed from the land upon the completion of works.

1      Williams and Stovell v Pollard [2018] NZDC 26379.

2.   Not to permit any building or associated works in the course of constructions to be left without substantial work being carried out for a period exceeding three months.

3.   Not to permit the land to be used for residential purposes unless a dwelling house on the land has been substantially completed.

4.   Not to erect on the land any dwelling or other building which has previously been used or occupied.

5.   Not to use pre-used or second hand materials for the erection of fences or on the exterior of any building erected or placed on the land.

6.   Not to erect any dwelling on the land with a value of less than $150,000.

7.   To provide garaging as part of the dwelling on the land

[5]    Mr Williams and Ms Stovell want to move the homestead known as Waiau onto the lot they have purchased. It is a single storey villa originally built in 1911 from native timber. It is presently located at Waiau Forest. Ms Stovell has a personal association with the villa. They intend to completely re-roof and re-clad the exterior, but want to preserve the other features of the building, including the interior, to the extent that they can.

[6]    The District Court recorded that Mr Williams and Ms Stovell’s intention to re- roof and re-clad the exterior meant that the building “will look like a brand-new house”. The Judge stated:

[8] This general design proposal is confirmed  in  the affidavit  of  Ms Pamela Hall, an architectural consultant instructed by the applicants. Ms Hall stated that Waiau will be finished to a high standard with high-quality detailing including: a new colour steel roof; new exterior cladding consisting of rough sawn wood and batten; eight sets of new French doors; existing sash windows refurbished and new condition; and new timber verandas. The only used materials on the exterior of the building will be the sash window frames which are to be refurbished in new condition. In short, the applicants’ case suggests the building will appear new from the outside.

[7]Section 317 of the Act provides:

317 Court may modify or extinguish easement or covenant

(1)On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish (wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that—

(a)      the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:

(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:

(ii)the character of the neighbourhood:

(iii)any other circumstance the court considers relevant; or

(b)      the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or

(c)      every person entitled who is of full age and capacity—

(i)has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or

(ii)may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or

(d)      the proposed modification or extinguishment will not substantially injure any person entitled; or

(e)      in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or

(f)      in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.

(2)An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.

[8]    Whilst the other potentially affected landowners have consented to the proposal Mr Pollard does not, and accordingly s 317(1)(c) does not apply. Rather the application was made on the basis that s 317(1)(d) applies.

[9]    In a carefully reasoned decision the District Court granted the application. The Judge  held  that  Mr Pollard  was  not  substantially  injured  in  accordance  with     s 317(1)(d). The Judge concluded that the covenant should be varied in the exercise of the discretion. He modified the covenants in the following way:

[118]    Accordingly, the application is granted. I make an order under s 317(1) that the land covenant is to be modified as follows:

(a)The provisions of restrictive covenant 4 shall be varied by adding the following proviso: “Provided that such prohibition shall be waived in respect to Lot 10 to permit the moving on to Lot 10 a dwelling that would otherwise would be in breach of this covenant.”

(b)The provisions of restrictive covenant 5 shall be varied by adding the following provisions: “Provided that such prohibition shall be waived in respect of Lot 10 to permit the use of:

(i)   Hardwood beams on veranda poles and for the construction of pergolas;

(ii)     Hardwood pole railings on the tops of fences on the boundary of Lot 10 with Lot 9 and the road and access– way frontage.”

[10]   The Judge held that any impact on the value of Mr Pollard’s property was minimal. But he ordered that Mr Williams and Ms Stovell pay Mr Pollard $15,000 as compensation to him under s 317(2). In doing so the Judge took into account intangible factors including the “subjective taste, preferences or beliefs of an individual”.2

Approach on appeal

[11]   Both parties advanced submissions on the approach to be adopted by the High Court on appeal. As the Supreme Court held in Austin, Nichols & Co Inc v Stichting Lodestar on a general appeal such as this the appellant court has the responsibility of considering the merits of the case afresh.3 If the challenge is a challenge to the exercise of a discretion the criteria for a successful appeal are stricter. The appellant must demonstrate an error of law or principle, that irrelevant considerations were taken into account, relevant consideration accounts were not taken into account or the decision is plainly wrong.4 That distinction has some relevance in the present case as the District Court’s conclusion that s 317(1)(d) applied on the facts of the case comes

2      Williams and Stovell v Pollard, above n 1, at [102].

3     Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3].

4      Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32], citing May v May (1982) 1 NZFLR 165 (CA) at 170; and Blackstone v Blackstone [2008] NZCA 312, (2009) 19 PRNZ 40 at [8].

within the first category of decision, but the exercise of the Court’s  discretion once  s 317(1)(d) of the Act applied involves the exercise of a discretion.

[12]   Mr Witters for the respondents also referred to the latitude that is allowed in relation to factual findings of a lower court, relying on the decision of the Court of Appeal in Rae v International Insurance Brokers (Nelson Marlborough) Limited.5 I do not apprehend that this is relevant to the present case as there is not, in reality, any dispute as to the facts leading to factual findings. The real questions are the correct interpretation and approach under s 317, and the exercise of the discretion under that section by the District Court.

Appellant’s key point on appeal

[13]   Mr Jenkin for Mr Pollard advanced a first key point, which was that the District Court had not properly interpreted and applied s 317. He said the Court had failed to apply a key point of principle arising under the section, which had been referred to by the Court of Appeal in Okey v Kingsbeer in the following terms:6

[52]  The courts have traditionally taken a conservative approach towards  the exercise of discretion under s 317 and its predecessors. This is for good reason: applications to modify or extinguish an easement generally impact adversely on existing property interests. However, there has been a progressive broadening of the statutory power granted to the courts, and a commensurate relaxation of the approach the courts have adopted.7 This is especially so given an award of compensation is now available under s 317(2). But s 317 still cannot be used to free a servient tenement owner from an easement simply to improve the enjoyment of his or her property or for his or her private purposes.8 The courts should be hesitant to allow contractual property rights to be swept aside in the absence of strong reasons.

[14]   A number of decisions have referred to this principle. Mr Jenkin contended that, in the end, that the proposal here amounted to no more than an attempt  by     Mr Williams and Ms Stovell to improve their enjoyment of their own property. As such he argued there was no jurisdiction to grant the application.

5      Rae v International Insurance Brokers (Nelson Marlborough) Limited [1998] 3 NZLR 190 (CA).

6      Okey v Kingsbeer [2017] NZCA 625, (2017) 19 NZCPR 25 per Woolford J for the Court (emphasis added).

7      Harnden v Collins [2010] 2 NZLR 273 (HC) at [25], cited in Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776 at [64]. See also Manuka Enterprises Ltd v Eden Studios Ltd [1995] 3 NZLR 230 (HC) at 233.

8      Manuka Enterprises Ltd v Eden Studios Ltd, above n 7, at 234.

[15]   Mr Jenkin elaborated on the argument by contending that Mr Williams and Ms Stovell had not satisfied the burden of proof to demonstrate a compelling case why modification of the covenant was appropriate, and that they had not set out clearly and precisely what was being sought, or addressed what he described as a “host of practical issues” involved in the relocation of the 1911 villa. He also argued that the District Court had erred on the basis that injury under s 317(1)(d) might be substantial, even though the value of land was not affected, and it had failed to properly take into account the precedent effect of the development. He argued that s 317 was only a remedial provision, and insufficient consideration had been given to the importance of a covenant that had bound all purchases of land in the development. Finally, the Court had erred in referring to the views of other property owners in that context.

Assessment

[16]   The dicta in Okey v Kingsbeer highlighted above was first articulated in Re Henderson’s Conveyance.9 It was adopted in New Zealand by Thorp J in Manuka Enterprises Ltd v Eden Studios Ltd.10 In doing so Thorp J said that only limited assistance was available from the English authorities because the equivalent English provisions were in different terms,11 but he adopted the dicta as the New Zealand provisions did not suggest the discretion should be available on a more generalised basis, particularly given there was no power to award compensation.12

[17]   As has been noted by the authorities, including in Okey v Kingsbeer itself, the New Zealand provisions have since been amended.13 A power to award compensation is now included in s 317(2). Moreover, the grounds upon which an easement or covenant may be modified or extinguished have been expanded to include the grounds set out in s 317(1)(b), (e) and (f). This seems to me to reduce the significance of the dicta, even though the Courts continued to make reference to it.14

9      Re Henderson’s Conveyance [1940] 1 Ch 835 at 846 per Farwell J.

10     Manuka Enterprises Ltd v Eden Studios Ltd [1995] 3 NZLR 230.

11     At 233.

12     At 234.

13     Okey v Kingsbeer, above n 6 at [52].

14     Okey v Kingsbeer, above n 6, and see North Holdings Development Ltd & Anor v WGB Investments Ltd [2014] NZHC 670 at [58].

[18]   Section 317 involves a balancing of policy considerations. It recognises the importance of property rights, and the sanctity of contract. But it also recognises other public policy considerations associated with the efficient utilisation of land resources. Parliament empowers the Court to act across contractual and property rights in light of the other policy considerations. Some restrictions can reasonably be removed, or relaxed. The balance struck by the section overall has changed in significant, but not necessarily profound, ways by the amendments made to the provision over time.

[19]   In the end, however, it is necessary to address the specific provision, and the particular grounds contemplated in the facts of specific cases. General statements about the provision can only be taken so far. The appropriate function of the Court is to identify whether any of the grounds set out in s 317(1) are established. The dicta relied upon by Mr Jenkin does not create a further pre-requisite. In many ways it might be thought to be stating what is apparent from a reading s 317(1) — an applicant cannot get relief under the section simply by saying his or her property would be more beneficial without the covenant or easement. One of the prerequisites listed in s 317(1) must still be established. But it does not create an additional rule that an application cannot be granted when this is the effect of granting it. All applicants to vary an easement or a covenant are no doubt seeking to improve the enjoyment of their own property. There may be some force in the suggestion made by Mr Witters that the dicta is normally referred to by the Court whenever an application is unsuccessful, but where the lack of success is attributable to a failure to establish the statutory grounds. But it is the precise statutory grounds that are relevant, particularly given the Court can now award compensation. Overall, it is necessary to focus on the particular ground being advanced, as the Court of Appeal itself did in Okey v Kingsbeer.15

Substantial injury

[20]   In the present case the material question is whether the proposed modification or extinguishment of the covenant will substantially injure a party entitled in accordance with s 317(1)(d).

15     Okey v Kingsbeer, above n 6. See paragraph [53]–[57] in particular, where the Court held that the grounds were not established.

Purpose of the covenant

[21]   It is first important to identify what the purpose of the covenant is. Only then can the Court assess whether removal or modification will “substantially injure” any entitled person.

[22]   I apply the standard approach to contractual interpretation,16 but with the necessary allowances taking into account the covenant recorded is a registered instrument.17

[23]   It is plain that covenant four prevents relocation of any used dwelling onto the land. The relevant question is what benefit that was intended to create for the property owners.

[24]   It is apparent that the covenants as a whole are directed to visual appearance. Covenant five prohibits used building materials, and it concerns only the exterior of a building. It does not matter if second hand materials are used in the interior. The other covenants also seem to be directed at preventing anything that may become an eyesore, such as covenant one against temporary buildings (except for construction purposes), the requirement that building works not cease for longer than three months (covenant two) and the requirement that the property not be lived in before completion (covenant three).

[25]   It also seems to me to be important that covenants are not addressed to buildings of a particular style. A complete replica of an old villa is permitted. So the style of the building is not the subject of the protective purpose of covenant four. Neither it is necessarily addressed to buildings of a particular quality, as even in 2001 when the covenants were registered a building worth $150,000 would be modest, especially for a section of up to two hectares in size.

16     Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]– [63].

17     Green Growth No 2 Ltd v Queen Elizabeth The Second National Trust [2018] NZSC 75, [2019] 1 NZLR 161 at [73]–[74] and footnote 100; compare [133] and [161].

[26]   For these reasons it seems to me that covenant four is directed at preserving visual appearance, and to benefit all owners of a subdivision by such means.

[27]   Whilst the District Court Judge did not expressly engage in this analysis, the conclusions I have reached appear consistent with his approach.

Injury

[28]   Against that background, it can be assessed whether the proposed variation involves substantial injury to those entitled to benefit from the covenant. The approach to substantial injury means real, considerable or significant injury.18 The District Court concluded there was no such injury. The primary, albeit not exclusive, focus is on the position of Mr Pollard who is an entitled person. In this context the Judge relied on Mr Pollard’s evidence who said in cross-examination:

Q. It’s very hard to see how you will really suffer any injury from a new building, a building that looks new 220 metres away from you screened by trees?

A.       But that’s not what the covenant says Mr Witters.

Q.       So the covenants can never be modified is that correct?

A.       Well if I’m to place trust on the sanctity of the covenants - THE COURT:

Q. Yes but the law by this provision allows modification so you’re being asked questions on the premise that modification is to be made so this is a line of enquiry that the applicants are entitled to ask you to comment on.

A.     Okay.

CROSS-EXAMINATION CONTINUES: MR WITTERS

Q. Yes I’m starting to think that it's not about the – you’re not concerned about any injury you will suffer you just want the covenants to remain, is that?

A.     Correct.

Q. Right so your objection is solely on the modification of the covenant itself?

18     Plato v Ashton (1984) 2 NZCPR 191 (CA); Jansen v Mansor (1994) ANZ ConvR 266, (1995) 3 NZ ConvC 192,111 (CA).

A.     I want the covenant to remain.

Q.     So you’re not concerned about any particular injury to you?

A.No that injury could have a downside effect by modifying the covenant as Mr Jenkins pointed out, it will create precedent.

Q.Well you’re that anyone else wanting to modify it without consent would have to make an application like this one?

A.     Well I presume so yes.

Q.And then the Court would then consider the information before it and make a decision?

A.     Its creating a lot of issue isn’t it?

Q.     Well it’s what we’re here to resolve today?

A.     What create a precedent?

Q.     No to decide whether this will be modified or not.

A.     Right.

Q.And so what I’m saying is you understand anyone else who wanted to do something like that this would have to apply to the Court?

A.     Possibly I’m not aware of the full extent of the law but.

[29]   Mr Jenkin objected to the Judge referring to this as a concession. But I do not think there is validity in that objection. Mr Pollard was accepting that there was no specific adverse visual effect from what the applicants were proposing. That is not surprising given the factors I refer to in paragraph [35] below. I agree with the District Court Judge that Mr Pollard’s acceptance of this was significant, but I also accept  Mr Jenkin’s submission that the point of real significance is the underlying situation, rather than Mr Pollard’s evidence accepting it.

[30]   But I do think there is a further important dimension that is particularly relevant in relation to covenants affecting a group of landholdings, especially those established as part of a new development. That is the matter referred to in Mr Pollard’s answer referred to above — the precedent effect. There is also an inter-related concept concerning the integrity of a development scheme protected by covenants covering all titles in a new subdivision.

Precedent effect

[31]   In  elaborating  upon  his  submissions  concerning  the   precedent   effect, Mr Jenkin referred to the decision of the Privy Council in McMorris v Brown.19 That case involved a suburban subdivision of 17 lots in Jamaica. The covenant prevented further subdivision. Whilst the Jamaican  statute  has  different  terms  from  the  New Zealand statute (as did the English statute referred to by their Lordships), the particular ground for relief against the covenant being relied upon was “that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction” — which is essentially the same terms as s 317(1)(d). The Privy Council referred to the precedent effect in granting such applications, recording that they involved the “thin edge of the wedge” and “the first is the worst” arguments.20 In dealing with those arguments the Privy Council referred to, and adopted, the approach of the Lands Tribunal in England who had said:21

… Any application under [the provision] must be determined upon the facts and merits of the particular case, and the tribunal is unable to bind itself to a particular course of action in the future in a case which is not before it: … It is, however, legitimate in considering a particular application to have regard to the scheme of covenants as a whole and to assess the importance to the beneficiaries of maintaining the integrity of the scheme. The tribunal has frequently adopted this approach. … In so far as this application would have the effect if granted of opening a breach in a carefully maintained and outstandingly successful scheme of development, to grant the application would in my view deprive the objectors of a substantial practical benefit, namely the assurance of the integrity of the building scheme. Furthermore I see the force of the argument that erection of this house could materially alter the context in which possible future applications would be considered.

[32]   In delivering the judgment of the Privy Council adopting this approach, Lord Cooke of Thorndon also then said:22

… The onus is on the applicants to show that a first relaxation of that covenant would not constitute a real risk as a precedent, so disturbing the pattern of a block of family homes in exceptionally extensive grounds. …

[33]The Privy Council held that the onus had not been discharged in that case.

19     McMorris v Brown [1999] 1 AC 142 (PC).

20     At 151.

21     At 151, citing In Re Snaith and Dolding's Application (1995) 71 P & CR 104 (Lands Tribunal) at 118.

22     At 152.

[34]   This approach seems to me to be correct as a matter of principle, and I adopt it as the standard that should be applied to the current application under s 317(1)(d).

Application in the present case

[35]   In the present case I agree with the District Court that the particular circumstances of the present case do not create any material adverse precedent, and that the application does not otherwise cause substantial injury to any entitled person. Neither is the integrity of the scheme protected by the covenants materially affected. I say that for the following reasons:

(a)Most of the properties to which the covenants apply already have dwellings constructed upon them. Whilst there remains a prospect of future buildings, the landowners of the remaining vacant lots have indicated that they have no intention of relocating a pre-used dwelling. There remains a prospect of future buildings on all of the titles, but the primary function of the covenant has already been substantially complied with.

(b)The current proposal is strikingly unusual because almost the entire exterior of the relocated villa is to be in new materials, including a new roof and cladding. It is an unusual villa relocation proposal. The only precedent arises from the possibility that someone else would want to do substantially the same thing again, which strikes me as being highly unlikely.

(c)Even if one of the nine other main lots wanted to do so, the steps taken by the applicants to obtain consent from almost all other landowners, and then the need for contested court proceedings, demonstrates that any future applicant would similarly face a difficult task from a practical perspective. It would also ultimately still depend on Court approval.

(d)These are large sections that where the dwellings are a substantial distance from one another. The visual impact of each dwelling on the

others is low. Any residual visual impact arising from the window frames and french doors not being made from new materials on such a dwelling would be inconsequential.

(e)Finally, as the evidence demonstrates, the visual appearance of the new dwelling will be substantially similar to building a new house in the same style. So even if a precedent was created and followed, the further example would also cause no real injury in terms of the purpose of the covenant.

[36]   The reality is that those who prepared and initially agreed to the covenant would not likely have foreseen the possibility of a landowner wishing to relocate an old building with a substantially new exterior. It is a very unusual proposal. The parties did consider the possibility of the use of second-hand material for fences and other buildings, and agreed that they could use such materials on the interior (covenant five). It seems to me that in these circumstances, in substantive terms, the purpose of covenant four is still being adhered to.

[37]   The realities of the situation were reflected in Mr Jenkin’s submission that what the respondents should actually do is construct a replica of the exterior of the Waiau Homestead, and then salvage as much of the interior of the existing homestead as possible for use as the interior of the new building. As Mr Jenkin says, that would comply with the covenant. But that seems to me to be very close to what the respondents actually propose, at least in terms of visual appearance. It would presumably be more costly given the inability to use the existing framing, and it prevents the respondents preserving as much as they can of the old homestead. It would also unjustifiably deprive the respondents of the satisfaction of actually using the 1911 homestead with which they have an association. With respect, the submission rather demonstrates the lack of real significance in the suggestion that this proposal involves substantial injury.

Terms of the variation

[38]   Once the grounds in s 317 are made out, the Court then applies a discretion.23 The appellant is accordingly challenging the exercise of a discretion by the lower court. As I have said, this involves a different test on appeal. But whatever approach is adopted on appeal, and subject to the terms of the variation which I address below, I agree with the District Court that the variation of the covenant was appropriately granted for the reasons outlined above.

[39]   As I indicated to the parties at the hearing, however, there seemed to me to be a problem with the form of the variation to the covenant that had been approved by the District Court. It was not directly raised by the appellant as part of his appeal, but is associated with his criticisms, and it falls within the function of the Court to ensure the decision under appeal does not involve an error in principle. In its terms the permitted variation effectively removes covenant four from lot 10 completely. This means that covenant four will not apply to lot 10 at all, relieving not only the present owners, but any future owners of the lot. Removing that covenant in its entirety will allow the relocation of any kind of used building onto the title, and irrespective of the applicant’s current proposal. On its face it is obviously too broad.

[40]   At the hearing of the appeal I indicated to Mr Witters that the respondent needed to put forward a proposal for the variation of the covenant that more accurately corresponded to the circumstances, and the District Court Judge’s findings. What was required was a variation that allowed the specific proposal the respondents made to be allowed, but where the covenant otherwise remained.

[41]   Mr Witters put forward the following specific proposal for the replacement covenant by way of memorandum which I gave him leave to file:

4.Not to erect on the land any dwelling or other building which has been previously used or occupied. Such prohibition shall be waived in respect of Lot 10 to permit the moving onto Lot 10 of a dwelling, known as Waiau Homestead, that would otherwise be in breach of this covenant provided that the only pre-used materials visible from the exterior of such dwelling shall be:

23     Okey v Kingsbeer, above n 6, at [58].

(a)      Sash windows including window framing; and

(b)      Bay windows including window framing.

5.Not to use pre-used or second hand materials for the erection of fences or on the exterior of any building erected on the land other than:

(a)      in accordance with covenant 4 above; and

(b)      sound pre-used hardwood posts and rails to fence the access drive-way beyond the front entrance to Lot 10.

[42]   In response Mr Jenkin filed an eight page memorandum in accordance with the leave I had reserved. It raised a series of issues in relation to this proposal similar in kind to the arguments advanced at the hearing.

[43]   I do not accept the criticisms made in the further memorandum, which I do not think have substantive merit. For example, I do not think there is merit in the complaint that the proposal could allow the respondents to proceed in a different way from the architectural plans puts before the Court. I accept that is technically so, but given that the varied covenant will only allow relocation of the Waiau Homestead onto lot 10, with the only used material being on the sash or bay windows, I cannot see how any such variations could be material. It is further argued that it is not clear what is meant by bay or sash windows including framing and that there is a “potential for argument”. The suggestion that there could be argument over such readily understandable words is troubling — it could only arise from an unnecessarily pedantic approach.

[44]   There is perhaps more substance in the criticism that these windows not be in a “refurbished” state as was suggested in the materials before the Court at the hearing. In the end I have decided not to introduce such wording into the variation to the covenant precisely because I do not want to open up any room for unnecessary argument over what refurbishment means. My expectation is that the bay and sash windows will be restored to a neat and tidy condition. I cannot imagine the respondents wanting their home to look in any other way. But to ask that the covenant precisely regulate matters in such detail expects too much.

[45]   I see no reason to add a timeframe as suggested. It does not seem to me to matter when the Waiau Homestead is moved onto the lot. This will be a significant undertaking, which has presumably been delayed by the need to address the defended application in the District Court, and then defend this appeal. To seek a time limit after such delay is not justified.

[46]   The associated proposed variation to covenant five seems to me to involve a limited use of used materials in a way that does not substantially offend the purpose of the covenant, or create any substantial injury. It is a proposal to use materials that are befitting for the design of a house that is being relocated. Accordingly, this proposed variation of this covenant also seems appropriate.

[47]   The District Court Judge awarded Mr Pollard compensation of $15,000 under s 317(2). The award of that compensation is not directly in issue in this appeal. In some ways it might be thought of as a somewhat unusual step given that the covenants benefit all landowners, and the approach usually adopted.24 It can potentially be justified on the basis that Mr Pollard was being compensated for the intangible benefits associated with the covenant which were being removed over his objection.

[48]   For these reasons I accept the proposed variation to the covenants are appropriate.

Conclusion and costs

[49] For the above reasons I agree that the District Court was substantially correct in its decision, although it erred in terms of the precise variation of the covenants. For those reasons the appeal is substantially dismissed, but is allowed in part so that the variations to the covenants are as expressed at [41] above.

[50]   On the question of costs, I understand that memoranda have been filed with the District Court in relation to costs, but no decision has yet been reached. Whilst it is only my function to decide costs in this Court, the approach that I propose to adopt

24     See MacRae v Walshe [2013] NZCA 664, (2013) 15 NZCPR 254 at [52]–[60].

involves assessment of the appropriate approach to costs for the case generally, which will affect the approach that should be adopted in the District Court.

[51]   In terms of the hearing in the District Court, the applicants were required to apply to that Court for a variation of the covenants in any event. They were, in a sense, seeking to benefit from an indulgence. Mr Pollard was not obliged to consent to the application, and was within his rights to advise the District Court why he did not consent to that application. For that reason there seems to me to be good reason to depart from the usual principle that a successful applicant is entitled to costs, and that the costs of the initial application should lie where they fall.

[52]   On appeal the position is different, however. Mr Pollard has pursued an appeal, and put the respondents to the cost of defending it. He has done so unsuccessfully. In those circumstances he should be liable for costs to the defendants in the usual way.

[53]   My preliminary view is that the respondents are entitled to costs for a standard appeal on a 2B basis. The fact that the appeal has succeeded in part given the need to change the terms of the varied covenant would normally result in some reduction in the costs award otherwise granted to the respondents. But I think it should be a modest one. My preliminary view is that the respondents should be entitled to 80 per cent of a costs award on a 2B basis.

[54]   In any event these preliminary views may be affected by any proposals made on a without prejudice accept as a costs basis. So I formally reserve costs. If costs cannot be agreed given what I say above, I will receive memoranda (no more than five pages each).

Cooke J

Solicitors:

Woodward Chrisp, Gisborne for Appellant

Grey Street Legal Ltd, Gisborne for Respondent