Re Avlis Ltd

[2022] NZHC 1157

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-000184

[2022] NZHC 1157

UNDER

Sections 316 and 317 of the Property Law Act 2007 and pts 7 and 19 of the High Court Rules 2016

IN THE MATTER

of an application for an order by Avlis

Limited that covenants be modified under s 317 of the Property Law Act 2007

BETWEEN

AVLIS LIMITED

Applicant

Hearing:	On the papers
Counsel:	P J Woods and M J McConway for the Applicant
Judgment:	24 May 2022

JUDGMENT OF NATION J

[1]    Avlis Limited (Avlis) wishes to progress a significant residential subdivision in Twizel. To do that, they need to vest certain areas in the Mackenzie District Council as a road. The areas are currently subject to a covenant not to erect a motel on that land and another covenant not to grow trees or plants that would exceed two metres in height which might damage services over the land.

[2]    For earlier stages of the development, Avlis had been able to transfer other lots subject to such covenants to the Mackenzie District Council by a process called “dedication and transfer” so that roading and services could be put through. The Registrar General of Land has now advised that this procedure is not permitted for road creation done as part of a subdivision undertaken under the Resource Management Act 1991. Because of this, Avlis says they now need to be able to auto-

Re Avlis Ltd [2022] NZHC 1157 (24 May 2022)

extinguish covenants over the proposed roading area in the subdivision as soon as a piece of land becomes irreversibly earmarked to become a road. They will then be able to vest the roads in the Mackenzie District Council and finish the development.

[3]    Avlis seeks to modify the relevant covenants to achieve this through an originating application under ss 316 and 317 of the Property Law Act 2007 with orders to be made on a without notice basis.

The background in detail

[4]    Avlis’ subdivision is called Tussock Bend. Some stages of the subdivision have already been subdivided and sold. The current head title, that is still to be subdivided and which is the subject of this application, is Lot 400 Deposited Plan 550232 contained in record of title 947911 (Avlis’ land).

[5]    Avlis’ land is subject to “the motel covenant”, being the land covenant in transfer 5420545.4, registered on 3 December 2002. The motel covenant is “not to erect or permit to be erected any motels on the servient lots”. The covenant was created by a number of parties. It affected 19 titles they owned, including the predecessor title to Avlis’ land.

[6]    Avlis’ land is also subject to “the tree covenant” which was in transfer 5420545.5 and registered on 3 December 2002 in the same way as the motel covenant. It affected 18 titles owned by the then parties.

[7]The tree covenant provides:

1.     The Transferors will not plant or grow any trees, plants or shrubs which shall exceed 2 metres in height on those parts of the land in Schedule A shown as “The Effective Area” which will or might in any way damage or effect whether now or in the future, services laid in the land whether such services are owned by the Transferee or the Mackenzie District Council or any other utility service provider (referred to as “the services”).

2.     The Transferee and the Mackenzie District Council will be the sole judge as to whether any such planting may cause such damage as is referred to in Clause 1.

[8]    The covenants were made before Avlis’ Tussock Bend development was contemplated and prior to various subdivisions that have created the head title for Avlis’ land. Many of the original titles against which the covenants were originally noted have been subdivided, sometimes more than once. There are now 148 titles affected by the tree covenant and 197 titles affected by the motel covenant.

[9]    Avlis needs to be able to vest the relevant parts of the land in the Mackenzie District Council as a road so titles can be issued for sections in stage six of its subdivision. It can then settle the sale of those sections and the purchasers can start building their houses. Avlis has 18 sales pending for stage six. It wishes to use the sale proceeds from those sales to repay debt and finance the construction work needed on the remaining stages of Tussock Bend. The sale contracts are conditional on new titles for the relevant property issuing by 22 December 2022.

[10]   The Mackenzie District Council are collaborating with Avlis over the way in which Avlis is proceeding. In correspondence, the Council confirmed they did not need to be served with court documents and did not wish to take part in any court hearing over the application, but counsel advises the position over this has now changed.

Leave to bring the application as an originating application

[11]   This is not a proceeding which may, as of right, be brought as an originating application under rr 19.2 to 19.4 of the High Court Rules 2016. However, there is jurisdiction under r 19.5 for the proceeding to be brought as an originating application.

[12]   The Court may grant leave if to do so is in the interests of justice. It is in the interests of justice if leave would secure the just, speedy and inexpensive determination of a proceeding.1

[13]   I consider it is appropriate for these proceedings, under ss 316 and 317 of the Property Law Act, to be brought by way of originating application. The context for the application is factually straightforward. It involves the modification of two

1      Solar Bright Ltd v Martin [2019] NZHC 300 at [18] and [26]; High Court Rules 2016, r 1.2.

covenants so Avlis may proceed with the remaining stages of its development in a similar manner to how it had in the previous five stages of the development. There is no need for particularised pleadings, nor is there likely any need for interlocutory applications. The issues are covered fully in the originating application and the supporting documentation. The High Court has, in several instances, said the omission of applications such as this from the list of applications that can be brought as an originating application was probably an oversight.2

[14]   The legal context is straightforward. Such covenants, as are at issue here, have been routinely removed or modified by the Courts to allow for the construction and insertion of roads, recently most often by way of originating application.3 There have been a significant number of cases where the courts have allowed applications under ss 316 and 317 to be brought by originating application.4

[15]   The Court grants leave for these proceedings to be brought by originating application.

The without notice substantive application

[16]   I accept it would be impractical and unreasonable to require the originating application to be served on all adjacent owners. There are a considerable number of titles benefiting from both the tree covenant and the motel covenant. The information provided to this Court shows that, in a number of instances, there are several people on the title as registered proprietors. Although individual titles have not been put before the Court, it is reasonable to assume there would be a significant number of mortgagees who would have an interest in those properties. As a result of subdivision, there are many more lots than were in existence when the covenants were first created.

2      Per Doogue J in Re Marriner Property Ltd [2020] NZHC 1747 at [31]; and per Toogood J in Wang v Auckland Council [2021] NZHC 499 at [8].

3      For example, Re Templeton Pegasus Ltd [2022] NZHC 424.

4      See LMM Investments 2012 Ltd v Cumming [2021] NZHC 2639 at [10]-[14]; Taurikura Holdings Ltd v Tauranga City Council [2022] NZHC 994; Re Baigent [2021] NZHC 2478; Fair v Fair [2019] NZHC 2349; Land Depot v Friese [2020] NZHC 1085; Re Marriner Property Ltd, above n 2; Wang v Auckland Council, above n 2.

[17]   Requiring the proceedings to be served on landowners who have the benefit of the covenants would result in significant costs and delay. With the number of affected lots, there is a considerable risk that it would be difficult to serve the proceedings on all those who have an interest in adjoining lots.

[18]   There is a reasonable explanation for Avlis having now to proceed with urgency given that a number of lots in stage six of the Tussock Bend development are conditional on titles issuing by 22 December 2022. At previous stages of the development, it had been able to vest land in the Mackenzie District Council for use as a road through the dedication and transfer process. The Registrar of Lands has said that procedure cannot now be used. However, it was not irresponsible of Avlis to have proceeded on the assumption that the dedication and transfer process could be used with stage six of the development.

[19]   Mr G P McLachlan is a licenced and experienced cadastral surveyor with Davis Ogilvie (Aoraki) Ltd. He has undertaken the survey work for the land Avlis owns and is developing at Tussock Bend.

[20]   Mr McLachlan has explained, and on the basis of his evidence the Court accepts, that the motel covenant applies to the whole of the remaining Avlis land which is currently all of lot 400 DP 550323. The exact position of the road for stages seven and eight of the subdivision has not yet been surveyed. He accepts it would not be appropriate to merely extinguish the covenant as to all of Avlis’ land. Theoretically at least, Avlis could decide not to proceed with the later stages and try to build a motel on part of the Avlis land that ultimately might not be used for a road. The wording of the modification sought has the advantage of stopping this scenario occurring and only removing the covenant from areas which do actually become road, even though those areas are not yet defined on a survey plan. The wording would do this by providing that the removal of the covenants only becomes effective from the point a compliant title dealing is within LINZ’s control and has been accepted by LINZ for registration.

[21]   Mr McLachlan explains, and the Court can see, that the tree covenant is different. Avlis’ only land actually affected by the covenant is a thin strip of land on the road frontages with two other roads. He explains, and the Court would accept, the

proposed modification wording for the tree covenant protects that covenant over that area where the covenant has an effect. The proposed modification allows for the tree covenant to be removed over any other areas of Avlis’ land that are to become road by vesting on deposit of a survey plan under the Resource Management Act.

[22]   It is unlikely that modification of the covenants as sought would detrimentally affect those lots that have the benefit of the covenants. The motel covenant was obviously intended to ensure a certain aesthetic in a residential setting. Modification of the motel covenant, as sought by Avlis, is not going to create the potential for a motel or motels to be built on parts of the Avlis land that are to be used as a road.

[23]   The trees covenant was to ensure that trees, plants or shrubs would not be planted where that might interfere with utilities. Under the trees covenant, the council could determine whether particular planting might interfere with utilities. The purpose of the proposed modification is to allow land to vest in the council for use as a road. As the owner of the road area, the council will still be able to control what, if any, planting might take place on the road area so as not to interfere with utilities.

[24]   The Court agrees it is appropriate for the application to be heard without notice to those who have an interest in lots that have the benefit of these covenants.

[25]   Section 316(3) of the Property Law Act says that an application for orders under s 317 must be served on the territorial authority unless the Court directs otherwise on an application for that purpose. Through correspondence before the Court, the Mackenzie District Council had indicated it did not wish to be heard on the application. Counsel for Avlis has however said there has been a change in circumstances and the application should be served on the Mackenzie District Council.

[26]   I accordingly direct that Avlis is to serve on the Mackenzie District Council copies of all documents filed in these proceedings, together with a copy of this judgment.

Progressing these proceedings

[27]   It would not be appropriate for the Court to deal with the substance of the applications before giving the Mackenzie District Council the opportunity to be heard in respect of them.

[28]   The proceedings are accordingly adjourned for a telephone conference with counsel on 10 June 2022 at 9.00 am. I make the following directions:

(a)        the proceedings and a copy of this judgment are to be served on the Mackenzie District Council forthwith;

(b)        the Mackenzie District Council are to file with the High Court within two weeks of service of the documents a memorandum advising the Court as to:

(i)whether they wish to be involved further in the proceedings;

(ii)whether they consent to the modification of the covenants as sought by Avlis; and

(iii)contact details for either the Council or their legal representatives with regards to the proceedings.

Solicitors:

Anthony Harper, Christchurch