Repotane Trust Limited v Hart
[2023] NZHC 1754
•18 December 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2023-419-000278
[2023] NZHC 1754
IN THE MATTER OF Enforcement of Covenant in Easement Instrument 10104470.2 BETWEEN
REPOTANE TRUST LIMITED
Applicant
AND
SHEREE ANN HART, MATTHEW NORMAN HART and BR LEGAL TRUSTEE COMPANY LIMITED as
trustees of the HART FAMILY TRUST NO. 2
Respondents
Hearing: 5 December 2023 Appearances:
D Shore and A Cox for the Applicant
T Braun and J Perry for the Respondents
Judgment:
18 December 2023
JUDGMENT OF WALKER J
This judgment was delivered by me on 18 December 2023 at 4 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors:
McCaw Lewis, Hamilton
Braun Bond & Lomas, Hamilton
REPOTANE TRUST LIMITED v HART [2023] NZHC 1754 [18 December 2023]
[1] Neighbours in a rural enclave in Tamahere are at odds over a home under construction by the respondents, trustees of the Hart Family Trust No 2. The applicant, Repotane Trust Limited (Repotane), is the owner of the lot next door which benefits from a restrictive covenant. It asserts that, in breach of that covenant, the respondents (the Harts), failed to obtain approval for the plans and colours to be used on the exterior of the dwelling. The Harts contend that Repotane unreasonably withheld approval and, in doing so, disqualified itself from relying on the covenant.
[2] Presently before this Court is an application by Repotane for an interlocutory injunction to halt construction until the substantive claim to enforce the covenant is determined.
[3] As relevant, the restrictive covenant recorded in the registered easement instrument (No 10104470.2) reads:
The Grantor and Grantee acknowledge and agree that the following land covenants will be registered on the titles for Lots 1,2 and 3 DPS 453154 so as to bind themselves and their respective successors and assigns as follows:
…
3.Not to construct any dwelling on Lots 1 and 3 DP453154 without first obtaining written approval as to the plans and colours to be used on the exterior of the dwelling of the registered proprietor of Lot 2 DPS453154. The registered proprietor of Lot 2 shall not unreasonably withhold their consent.
…
9.The Grantor covenants for the Grantor personally and their successors and assigns that should the Grantor fail to comply with, observe, perform, or complete any of the covenants and restrictions contained herein, and without prejudice to any other liability the Grantor may have to the Grantee or any other person the Grantor will:
(i)Immediately upon receipt of a written demand for payment from the vendor or dominant tenement or their solicitors pay to the Grantee as liquidated damages the sum of FIVE HUNDRED DOLLARS ($500.00) per day for each day the default continues unremediated such liquidated damages to be limited to a maximum value of $50,000.00 and
(ii)Shall immediately undertake such remedial action as may be required by the Grantee including but not limited to permanently removing or causing to be permanently removed from the property any improvement or structure so erected or
repaired or other cause of any breach or non-observance of the foregoing covenants;
(iii)Pay on demand the Grantee’s costs incurred in respect of the default and any enforcement or attempted enforcement of the Grantee rights such costs to include but not be limited to legal costs on a solicitor client basis;
(iv)Pay interest at the rate of 15% on any money which may be demanded and not paid, such interest to accrue from the date of the demand until the date it is finally received by the Grantee;
PROVIDED that:
Except for those defaults notified to the Grantor when it is a registered proprietor the Grantor shall only be liable while the Grantor is a registered proprietor of the land;
If a default is completely and finally remedied within one month of notice in writing requiring the removal or remedy of such cause of default and the payment by the defaulting party of all reasonable legal costs and other expenses incurred by the party enforcing the said covenants the sum payable under this clause shall abate to $1.00 per day.
[4] Andrea Waddell is the sole director and shareholder of Repotane. It is common ground that she has not approved the design. The Harts nonetheless commenced construction after unsuccessful efforts to obtain consent. They have completed earthworks, poured foundations, completed tanking, standing of precast panels, and poured all concrete floor slabs. In addition, the structural steel has been manufactured and (preliminary) electrical and plumbing work has been carried out. The builder expects this project to be his team’s main work over the next year.
[5] Repotane’s substantive claim is to enforce the covenant. It seeks the following substantive relief:
(a)A permanent injunction restraining construction until a design is approved;
(b)Removal of the construction undertaken or reinstatement of the land;
(c)Contractual damages of $50,000, interest and indemnity costs.1
1 The contractual damages corresponds to the maximum sum stipulated in the covenant.
Issues
[6] There is no suggestion that the Harts’ dwelling will devalue Repotane’s land or any other surrounding properties, interfere with light or obstruct views. The Harts’ dwelling is architecturally designed incorporating high quality materials at considerable cost. Ms Waddell’s objection to the dwelling is plainly on aesthetic grounds. The substantive claim will turn on whether Ms Waddell has unreasonably withheld consent. Reasonable does not necessarily mean right or even justifiable. A related issue may well be whether the objective requirement of reasonableness goes to both the ground or reason for refusing consent and the process of consideration.
[7] Those issues need not be determined in this judgment. The issue I must decide is whether the ongoing construction ought to be halted until determination of those substantive issues. In a perfect scenario, the construction would be halted for a period of weeks to permit an urgent determination. The practical reality is that any substantive court hearing would be some months away. This is the inconvenient backdrop to this application. I return to the question of timing later in this judgment.
[8]For present purposes then, the issues are:2
(a)Is there a serious question to be tried?
(b)Does the balance of convenience favour stopping work in the interim?
(c)Where does the overall justice lie?
Background
[9] Repotane is the registered proprietor of Lot 2, 420 Pencarrow Road, Hamilton. Ms Waddell has lived there in the former family homestead since 2001. It was originally part of a ten-acre family farm purchased by Ms Waddell’s parents in 1978. Understandably, Ms Waddell has a deep emotional connection to the property and area.
2 NZ Tax Refunds Ltd v Brooks Home Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].
[10] Ms Waddell decided to subdivide off two paddocks on either side of the driveway to her home to provide some financial stability for her future. These lifestyle blocks became Lot 1 (Record of Title 580089 being Lot 1 Deposited Plan 453154) known as 420A Pencarrow Road and Lot 3 (Record of Title 580091 being Lot 3 Deposited Plan 453154) known as 420B Pencarrow Road.3 She took legal advice about how to ensure what was built on those blocks would be sympathetic to the surroundings and rural setting. As she explained in her affidavit:
[14] Ultimately, I decided that it was not very sensible to prescribe specific design details from the outset. I looked at examples of existing design restrictions online, so that I could consider what would work best. The examples that I saw ranged from being quite simplistic, to exhaustive requirements in terms of design…
[15] Given that I was only dealing with 2 sections, and I wanted to afford flexibility, I decided the best approach would be that the covenant record a general obligation that my approval would be required for any house design that was to be built. Therefore, any potential purchaser could discuss their plans with me when the sections were ultimately marketed for sale. I also took this approach as I wanted to hold 1 of the sections for as long as I could, and I was conscious that design trends would change over time.
[16] The covenants were not drafted immediately, and I gave them considerable thought before they were eventually drafted in consultation with David Heald and Melanie Heald (the Healds), who later purchased 420B Pencarrow Road, Tamahere, Hamilton (420B). 420B is the section located on the right side of the driveway of my property as you enter from Pencarrow Road…
[17] It was also agreed between the Healds and I that a clause would be added that I could not unreasonably withhold my consent to their design. This was to assure the Healds, and the future owners of the remaining section, that I was open to a range of designs, and that I would provide feedback as to how any design presented to me might be amended to meet my approval, in a consultative and constructive manner. I believed this approach would encourage an exchange of ideas and points of view to arrive at a mutually agreeable exterior aesthetic, and for the parties to engage positively and reasonably to achieve this result.
[11] On 26 June 2015, the covenant over 420A Pencarrow Road and 420B Pencarrow Road was registered as Easement Instrument 10104470.2.
3 The subdivision was completed at a time when Repotane Investments Ltd was the registered proprietor of the original block. Ownership of 420A was transferred to Repotane in 2019. Nothing turns on that for present purposes.
[12] The first subdivided lot was sold to the Healds in May 2015. They provided Ms Waddell with the plans of the “contemporary but still country” home . Ms Waddell approved the build, apparently without difficulty. She also consented to a breach of the boundary setbacks as it did not materially impact how the new home sat in the landscape or Repotane’s property.
[13] In March 2022, Ms Waddell listed 420A Pencarrow Road with an agent for sale by “deadline treaty”. Ms Waddell deposed that she discussed the covenant with the agent, including that she was open to a range of designs, but specifically disliked “very modern houses with square/box like designs”.
[14] A copy of the covenant was provided as part of the information pack to potential purchasers but of course was registered on the title for all the world to see.
[15] Interest in the property was high. The deadline date was moved forward. Ms Waddell says that she was not particularly comfortable about doing so. Ms Hart made an offer. After a brief negotiation, Ms Hart entered into an agreement for sale and purchase with Repotane dated 11 March 2022 and the Harts settled the purchase as nominated purchasers on 25 March 2022.
[16] The Harts were well aware of the covenant before entering into the agreement for sale and purchase. Ms Hart deposes that she asked the agent what they should know about the vendor’s likes and dislikes and whether the covenant was likely to create any problems. She says that the agent told her that the vendor did not like “boxy homes”, examples of which were pointed out down the valley but was quite relaxed about the design process so the covenant would not present any impediment to building a modern home.
[17] In or around April 2022, the Harts engaged their longstanding architectural designers, Ink Architectural Design Ltd (Ink). At the preliminary briefing, Ms Hart took the images of the homes pointed out by the agent as representative of “boxy” designs and instructed the architectural designer to avoid a design in that vein. Ultimately, the design direction taken was inspired by the 2021 House of the Year.
[18] On 21 May 2022, the Harts visited Ms Waddell to discuss the possibility of renting Ms Waddell’s home during the build process. When departing, Ms Hart mentioned that concept plans were almost ready. She says that Ms Waddell responded that “as long as you don’t build a pink palace, all will be fine”. There was also some discussion about the potential to purchase Ms Waddell’s home in the future. Ms Hart says that Ms Waddell made it clear that she had no long-term intention to remain in her home. Ms Waddell confirms that she briefly mentioned intending to purchase a property in Hamilton as a “project” but that she always intended to retain 420 Pencarrow. She always intended to return there after the end of the project, potentially with her immediate family moving into the main house and to build a granny flat at the back for her retirement. As is common when trying to recall casual conversation some time ago, Ms Waddell and Ms Hart have different recollections of the import of what was said at that time. It is conceivable that a misinterpretation of this conversation added to the Harts’ impression that Ms Waddell was more relaxed about aesthetic style than actually transpired.
[19] On 7 July 2022, Ms Hart emailed concept plans for the proposed build to Ms Waddell. Although described as merely concept plans, they were fairly advanced and included a proposed floor plan, elevations, and software generated renderings of how the proposed dwelling would sit on the site.
[20] To an inexpert eye, the concept plans depicted a modern rather than traditional home with exposed roof lines and multiple different exterior angles. The roof did not appear flat in a “modern” sense but was not gabled either.
[21] Ms Waddell had immediate reservations. She responded on the same day expressing those reservations. She stated that the design is “very boxy”, does not “sit well with me” and that she would be happy to work toward something “less metro” and “softer on the landscape”. She also asked for more detail on the proposed exterior finishes to get a sense of the colour scheme and suggested getting together to review the plans to reach common ground.
[22] Ms Hart proposed a meeting with their architect in order to show Ms Waddell the concept plans on a computer screen so she could see that the design is “not flat
roof/boxy”. She felt that the elevations on the plans do not give a true representation. In the email, Ms Hart added that they were not interested in a pitched roofline to look like the neighbours and wrote:
If you had asked for potential purchasers of the section to spend thousands of dollars on a concept design, we would not have put in an offer. If you wanted a traditional country home for the section you probably should have stipulated that in the covenants. Again if it was, we would not have put in an offer.
[23] That meeting did not take place for various reasons but the architect did then make some changes to the roofline by increasing the pitch slightly. The new concept plans were dropped off in Ms Waddell’s letterbox as she was isolating at the time. From Ms Waddell’s perspective, the amended concept plans were not significantly different.
[24] Ms Hart advised that they had taken legal advice. The import of that advice (as it was communicated to Ms Waddell) was that the covenant was not specific as to design and it would be unreasonable to withhold consent on a design that has been “modelled off House of the Year 2021”.
[25] Seven months of silence followed. During that period, on 13 December 2022, the Harts lodged an application for building consent with the Waikāto District Council. As I understand it, the design submitted for building consent purposes was substantially the same as had been presented to Ms Waddell. I pause to note that the covenant did not expressly prohibit lodging an application for unapproved plans.
[26] The communication silence was broken when on 8 March 2023, Ms Hart sent an email to Ms Waddell “as a matter of courtesy” with a colour palette they had chosen. That email gave notice that excavation would begin within a few weeks and spelt out an intention to extensively landscape with trees. I assume that means a tree-lined boundary down the driveway which would have the effect of reducing visibility of the Harts’ property.
[27] Ms Waddell responded on the same day asking whether there were new plans or whether the Harts intended to breach the covenant and reiterating that the plan is not approved. She followed this up with a letter from her family solicitor confirming
that the plans had not been approved but that Ms Waddell was happy to consider alternative acceptable plans.
[28] It was thus abundantly clear that prior to starting construction, Ms Waddell had not approved the plans.
[29] The Harts’ solicitors responded on 27 March 2023 confirming the date of construction commencement and pointing out that Ms Waddell is not entitled to arbitrarily withhold approval on the basis that the house does not align with her “very personal and subjective design preferences”. Consequently, they contended that Ms Waddell is “prohibited” from relying on the terms of the covenant.
[30] Repotane’s solicitors responded on 3 April 2023. Among other things, they proposed a form of compromise where the Harts replace the proposed roof with a pitched roof of not less than 30 degrees “pavilion style” stretching across both wings of the design and perhaps a second roof profile across the central upper level with a pitch of not less than 30 degrees, along with provision of a planting plan to ameliorate the effects of the design.
[31] Repotane’s new solicitors wrote again on 19 April 2023 pointing out the breadth of the discretion in the covenant and that the Harts had accepted the responsibility of ensuring that Ms Waddell was satisfied with the design when they entered into the agreement for sale and purchase. That letter also included a without prejudice offer to resolve the dispute, redacted in the letter produced to the Court as is appropriate.
[32] On 9 May 2023, the Harts’ solicitors wrote asserting that Ms Waddell had refused to properly engage with the architect to review the plans to discuss options and asserted that the goal posts were moving through a growing and shifting list of design preferences and requirements. They proposed a face-to-face meeting to enable greater understanding of each party’s position, together with architects. The general tenor of that correspondence was a willingness to explore whether Ms Waddell’s concerns could be addressed to avoid litigation. At the same time, they reaffirmed
their right to proceed with construction of the home in the face of unreasonable withholding of consent.
[33] Further exchanges culminated in a ‘without prejudice’ meeting between Ms Waddell and the Harts’ architects and designers. Ms Waddell left with them a portfolio of house designs along the lines of what she would find acceptable. Again, to a non-expert eye, these designs reflected a very country aesthetic with gable-roof lines.
[34] On 1 June 2023, the Harts’ solicitors wrote setting out their view of the legal position and putting Ms Waddell on notice of their intention to recover any losses should they be prevented from carrying on the build. It appears, although it is not completely clear from the affidavits, that there was a building hiatus at this point. The Harts warned that unless an application for injunctive relief was filed and served by 23 June 2023, the builders would continue with construction.
[35] The respondents’ builder invited Ms Waddell to visit a home being constructed in Cambridge with a similar roof shape and design. She says that she disliked the aesthetic, remarking that it was “unattractive”.
[36] On 16 June 2023, Repotane’s solicitors wrote to the Harts. They maintained that it was for the Harts to seek specific performance and not for Repotane to issue injunctive proceedings but, if forced to do so, Repotane would seek indemnity costs. They put the Harts on formal notice to stop construction.
[37] On 25 July 2023, Repotane’s solicitors formally demanded that the Harts comply with the easement instrument number 10104470.2. They demanded payment of liquidated damages of $500 per day commencing from that date. That letter identified that Ms Waddell’s primary concern is that a gable roof be incorporated into the design, even with a reduced pitch, provided it is no less than 22.6 degrees.
[38] On 3 August 2023, in open correspondence, the Harts by their solicitors offered to pay $20,000 to resolve the issue of consent. On 29 August 2023, their solicitors proposed arbitration as an alternative resolution mechanism recognising that court
proceedings may take over a year to reach a conclusion. They offered to cease construction pending release of the arbitral award, provided certain conditions were met.
[39] Ms Waddell made a counterproposal on 5 September 2023 requiring the Harts to file a substantive claim within a month and provide a written undertaking that work would not proceed prior to a formal determination. She also invited again updated design plans for review.
[40] On 11 September 2023, the Harts’ solicitors wrote again asking for an answer to the arbitration proposal and setting out the benefits of arbitration in terms of risk mitigation for both parties by reducing delay. The letter put Ms Waddell on notice of compensation the Harts would seek if she were to be found to have unreasonably withheld consent. This was to include compensation payable to the builder or other contractors, costs associated with contact cancellation, holding costs and costs associated with rising construction costs.
[41] On 14 September 2023, Ms Waddell’s solicitors wrote advising, among other things, that an arbitral process could be agreed provided that work ceased until final resolution and the respondents reimbursed Repotane’s costs incurred to date.
[42] On 26 September 2023, the Harts’ solicitors confirmed a willingness to cease works on site on a strictly without prejudice basis but were not prepared to pay legal costs. Instead, they proposed that any entitlement to costs ought to be left over to the arbitrator to determine. They also noted that quantification of their entitlement to damages was not yet possible but estimated the cost of delay to be around $12,950 per week based on rising construction costs.
[43]In the meantime, I understand that construction on site continued.
[44]This application was then filed on 25 October 2023.
Evidence
[45] Numerous affidavits have been filed. Some of the affidavits filed by the Harts do not in my assessment take the issues very far. Instead, they canvass the views of neighbours about the Harts’ designs. Some might be described as an attempt at propensity evidence. I put that evidence to one side as not relevant to the issues at this stage or having no real heft, save in respect of the impact on neighbours of halting construction. Some spoke of the prospect of an eyesore of a partially constructed dwelling pending resolution.
[46] The Harts provided an affidavit from their builder, Marcus Grayling and from their architectural designer. Mr Grayling is a director of the building company engaged by the Harts. He deposes that his company entered into a build contract in March 2023 and that construction started later that month. He outlined the materials procured to date and the works completed as at 16 November 2023. He described Ms Waddell’s preference for a roof pitch of at least 22.6 degrees to be unusual, and out of step with the current design environment. He described the significant impact on his business, subcontractors and suppliers if an injunction were to be granted.
[47] The Harts’ architectural designer confirmed that he had been instructed to craft a home that did not have a boxy appearance but was modern with an earthy aesthetic harmonising seamlessly with the landscape. He describes the front façade of the home as showcasing two distinctive roof designs at pitches of 10 and 12 degrees offering a modern twist on the traditional gable roof. He also deposes that any alteration to the roof pitch would require a significant redesign due to extensive engineering requirements. He too says that a pitch of 22.6 degrees as Ms Waddell suggested is neither common nor practical.
Is there a serious question?
[48] The principles governing interim injunctions are well known. The first issue is whether the applicant has shown there is a serious question to be tried.
[49] It is not the role of any Court at an interim injunction stage to resolve conflicts of evidence in affidavits, if any. The litigation is at an early stage; more evidence from
the parties on the ultimate issues may be produced at the substantive stage and cross- examination is the mechanism to resolve any conflicts. Nothing I say on the facts is intended to be determinative or to tie the hands of the judge who deals with the substantive claim.4
[50] Mr Shore for Repotane submits that the desire to protect the feel of a rural landscape is legitimate and reasonable, and Ms Waddell approached the exercise responsibly; the Harts were on notice of the approval requirement and ought to have received advice as to its breadth. Therefore, they carried the risk, not Repotane. They were also provided with an indication from the real estate agent as to the type of designs which would and would not be approved.
[51] Mr Braun for the Harts submits, among other things, that subjective aesthetic grounds are not sufficient to withhold consent. The requirement to act reasonably must be considered in the context of the purpose of the covenant which can only be to ensure that any home is in keeping with the high-end nature of the subdivision and wider area, is not garish in nature, or made from anything other than high quality materials.
[52] A serious question to be tried is not a particularly exacting standard. Sensibly, and reflecting that low bar, the Harts elected not to contest that there is a serious issue although they maintain that Repotane will face serious difficulties in the substantive claim. Their opposition is focussed on the other requirements for an interim injunction
— balance of convenience and overall justice.
[53]That concession is warranted. I find that there is a serious issue to be tried.
[54] I say no more about the merits other than to observe that there is a line of authority in the English jurisdiction which suggest that aesthetic objections may be valid even where a covenant contains a provision that consent may not be unreasonably withheld. They suggest that to say that an aesthetic objection can only be relevant if tied to a detrimental effect on the value of the benefitting land is to take too narrow a view of the interest a covenant of this kind is intended to protect. And,
4 American Cyanamid Co v Ethicon Ltd [1975] AC 396, [1975] 2 WLR 316 (HL).
while to merely say that a proposed building is not to one’s taste would not be enough, an objection that a proposal is “out of keeping” or that it would have “a potential adverse effect upon the amenities” of the benefitting land may be enough.5
[55] It must also be relevant that on ordinary principles of construction, the covenant is expressly focused on the aesthetic given the reference to exterior colour. All of which suggests it will be a matter of degree along a spectrum and both parties in this case are on risk.
Balance of convenience
[56] This requires assessing which course of action (granting or refusing injunctive relief) is likely to involve the least risk of injustice if it turns out the course taken is wrong. It is a broad and flexible inquiry. It is also context sensitive.
[57] I turn first to the consideration of adequacy of damages for either party if the injunction is wrongly granted or refused.
[58] An injunction is a typical remedy in cases like these once a breach of a covenant is established.6 In this case, the covenant expressly provides for the remedy of mandatory injunction to remove any structure erected in breach of the covenant. However, this does not create any presumption at the interim stage before any breach has been established.
[59] Mr Shore submits that if an injunction is granted but Repotane does not succeed at trial the only consequence for the Harts is delayed construction. Construction delays are not unusual and are readily quantifiable. On the other hand, physical alteration of land and construction is difficult to compensate for by way of damages.7 Additionally, Ms Waddell’s emotional connection to the property is not
5 89 Holland Park Management Ltd v Hicks [2020] EWCA Civ 758 at [56].
6 Jonathan Gaunt and Paul Morgan Gale on Easements (21st ed, Sweet & Maxwell, London, 2020) at [14.63].
7 AC Rhodes Ltd v Bush Inn Shopping Centre Ltd [2019] NZHC 877 at [25]; McLeish v Rock Hill Ltd (2010) 12 NZCPR 409 at [26]; and Taylor v Small [2020] NZHC 2023; (2020) 21 NZCPR 337 at [136].
easily compensable in a situation which is not temporary and involves more than a small injury to Repotane’s legal rights.
[60] I see two potential difficulties with this submission. First, the applicant with the benefit of the covenant is not Ms Waddell but Repotane. While I appreciate that it might be said there are concurrent interests in the land to which the benefit of the covenant attaches, it is at least arguable that, as a corporate entity, ephemeral benefit or emotional amenity is not strictly suffered by Repotane. Repotane may be entitled to take into account the interests of affected persons in granting or withholding consent. Neither counsel addressed me on this point.
[61] Secondly, the covenant stipulates that the Harts must remove any structure built in breach of covenant. By proceeding without consent the Harts are on notice that they may be ordered to remove the construction following a substantive trial. Viewed that way, ongoing construction may be wasteful but not ultimately irremediable.
[62] Intangible loss is seldom adequately compensated by an award of damages but the line of authority relied on by Mr Shore is distinguishable. All but one did not involve interlocutory relief but substantive relief.8
[63] The case of AC Rhodes Ltd v Bush Inn Shopping Centre Limited,9 was an application for interlocutory relief but is also distinguishable. The claim was in nuisance by disturbing rights of way granted to the plaintiff under two registered easements. Although the defendant was entitled to relocate the rights of way to the commercial premises, they instead blocked them after commencing construction of a new retail outlet on the site and failed to put in place similar rights of way. Gendall J held that he was satisfied that in all the circumstances that it was not an appropriate case for an award of damages because the situation was not merely temporary in that
8 In Taylor v Small, above n 7, the plaintiffs sought a declaration that the neighbouring equestrian facilities building were in breach of the restrictive covenants and injunctive relief directing alteration to the extent necessary or removal of the building. The Court of Appeal said that the covenants were concerned with the quality of buildings and not a situation where damages would be an appropriate form of relief. However, this was about damages after a substantive hearing and not compensating for the wrongful grant of interlocutory relief. In McLeish v Rock Hill Limited, above n 7, the issue was the appropriateness of a mandatory injunction following a finding of breach of restrictive covenant in a “building scheme case”.
9 AC Rhodes Ltd v Bush Inn Shopping Centre Ltd, above n 8.
rights of way which the plaintiff and its tenants have enjoyed for over 22 years were permanently obstructed and unusable. Nor did it involve a small injury to the plaintiff’s legal rights.
[64] The judgment in Bush Inn also refers to the decision of Gault J in Knowles v Henderson in which he said:10
Refusal of an injunction where there is found to be a clear breach of an easement has the potential to encourage flagrant breaches followed by pleas of hardship, so as to effectively bulldoze away the rights of owners of a dominant tenement.
[65] While the plaintiff in Knowles sought an interlocutory injunction at a time when the dwelling said to breach a covenant was partially built, that application did not proceed. Instead, the defendants suspended building work and an early trial date was allocated. Thus, the Judge’s comments related to the availability of permanent or substantive injunctive relief and not interlocutory relief.
[66] Mr Braun submits that damages would be an adequate remedy for Repotane because the covenant itself suggests so by providing for liquidated damages up to a cap of $50,000. He says that the Harts are planning to plant mature trees along the boundary between the parties’ properties and down the driveway which will further reduce the already minimal visibility of their property. He points out that there is no negative impact on the value of Repotane’s property should construction continue and any loss of amenity would be slight.
[67] Mr Braun reasonably concedes that the costs associated with construction delays would be able to be quantified with reasonable precision but there are other adverse impacts to add to the mix:
(a)An impact on the Harts’ children including the need for their 12 year old son to attend boarding school for an unknown period of time until the dispute is determined;
10 Knowles v Henderson [1991] 1 NZ Convc 190,704 at 190,716.
(b)The impact on contractors and risk that they would not financially survive a long shut down;
(c)The effect of deterioration on building materials during a shutdown period; and
(d)The potential for health and safety issues on an unattended building site.
[68] I do not read the liquidated damages stipulation as informing the question because it needs to be read in the context of the whole covenant which also provides for mandatory removal of any structure. The purpose of the liquidated damages is to incentivise compliance with that removal stipulation.
[69] Although a prolongation claim might be quantifiable, it would also be a very significant claim if the substantive claim could not be determined in a reasonable time frame. The phenomenon of escalating building costs is well known. Mr Grayling deposes to the significant financial strain on his business should he have to stop work with the potential need to reduce the number of his employees/contractors. There is also the impact on subcontractors who are reliant on this build proceeding.
[70] The fact that construction has advanced without resolution of this issue is of the Harts’ making. They commenced construction in March 2023 at a time when it was clear that there was no approval to do so. I do not accept that the lack of response to the last communication from the Harts in July 2022 reasonably led to a belief that Ms Waddell’s objection had fallen away.
[71] Mr Shore forcefully relies on the principle that a defendant cannot create his own inconvenience and then have it taken into account in balancing the scales of inconvenience — at least not when he embarks on questionable conduct with his eyes open.11 While I accept that general proposition, it is also the case that a defendant is
11 New Zealand Farmers' Co-operative Association of Canterbury Ltd v Farmers Trading Co Ltd (1979) 1 TCLR 18 at 28.
permitted to take a stand when they consider that their conduct is not wrongful, even if there is some risk to that stand.12
[72] The impact on third parties is quite a different matter. Mr Shore suggests that the builder would have a claim against the Harts for any losses. That may or may not be so and depends on contractual arrangements and other matters not before the Court. Materially, the same cannot be said of the various subcontractors involved.
[73] Related to the question of adequacy of damages is the substance behind the undertaking as to damages. Ms Waddell executed an undertaking which was filed contemporaneously with the application for interlocutory injunction. However, no financial information was provided to support that undertaking. In response to questions as to whether the undertaking was given as a director of Repotane or in Ms Waddell’s personal capacity, Mr Shore sought further instructions. An amended undertaking was then filed amending the form of the undertaking so as to make it clear that it was for and on behalf of Repotane. An affidavit deposing to Repotane’s financial position was also filed. This affidavit does not completely assuage concern about Repotane’s ability to meet an award of damages on its undertaking as to damages although much depends on the timing of the substantive determination.
[74] In response the Harts filed a further affidavit from Christine Reynolds, a quantity surveyor who works with Grayling Builders Limited. Ms Reynolds estimated the costings associated with an 18 month delay.
[75] In the end, I do not place any weight on the issue of anticipated costings for the reason that an 18 month delay can be avoided.
[76] I accept that there are issues around warranties and deterioration of the precast panels on site if left exposed to weather elements for a longer period however those concerns are not specific enough to take into consideration. For instance, no period is referred to; I can safely assume that it is unlikely that work will carry on through the
12 Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Brookers Ltd, Wellington, 2011) at
6.3.4 citing Meat Services Ltd v Moses (1983) 1 TCLR 94 at 99.
December/January holiday period so that a period of exposure would arise in the ordinary course in any event and the summer months should present less risk overall.
[77] The health and safety concerns would need to be ameliorated in the event work is to cease for any period but I am not persuaded that would be impractical based on the evidence as it presently stands.
[78] The relative strength of the respective cases is a relevant factor in the balance of convenience only where it can appropriately be ascertained. Where other factors in the assessment of balance of convenience are clear, it is usually unnecessary to resort to the relative strength of the claim and defence bearing in mind the early stage of the proceedings.
[79] This is not one of those cases where it is necessary to delve into the merits. I consider that the balance of convenience favours declining to grant an interlocutory injunction, principally because of the adverse and significant impact on third parties in circumstances where infringement of Repotane’s rights found at trial is likely to be temporary in view of the obligation to reinstate the land. The Harts have proceeded on risk and continue to do so.
Overall justice
[80] My assessment of where the balance of convenience lies is not the whole answer however. The third stage of the Court’s assessment requires that I stand back to consider the overall justice. This is a check on the position earlier reached. As part of this consideration the conduct of the parties, including factors of delay may be taken into account. The same matters taken into account on the issue of balance of convenience are also engaged.
[81] I reject the submission of disqualifying delay on the part of Repotane. It is apparent that efforts were being made to avoid litigation over many months. The Harts had the option of seeking a declaration.
[82] I have considered the submission that a party with the burden of a covenant ought not to take it upon themselves to proceed knowing they had not obtained consent
but staking their position on the alleged unreasonableness of the failure to consent. This submission has heft. By a fine margin, I have decided that it does not outweigh the balance of convenience factors outlined above. It may however impact questions of costs on which I will invite submissions.
[83] It is readily apparent that the current situation between parties who remain neighbours must be pragmatically resolved in a timely fashion. The Harts’ proposal to go to arbitration to avoid the delays inherent in a court adjudication had merit. It is unfortunate that the proposal stumbled on the question of payment of costs incurred to date. It, or formal mediation, should be reconsidered.
[84] I consider that the overall justice is better served by declining to grant the interlocutory injunction but giving priority to a substantive fixture. While there was no consensus at the hearing as to the required hearing time, clearly it should not take up more than three days even if there is a counterclaim as signalled. The evidence of the potential counterclaim will largely be the same. Consideration should be given to practical steps such as relying on the filed affidavits as evidence in chief. I am directing allocation of a three day fixture commencing 22 April 2024. In doing so, this does not prevent the parties from agreeing instead to go to earlier arbitration or mediation to resolve the impasse.
Result
[85]I decline to grant an interlocutory injunction.
[86] I make the following timetabling directions to advance the claim to an urgent three day hearing commencing on 22 April 2024:
(a)A statement of defence and counterclaim, if any, to be filed and served no later than 19 January 2024;
(b)A reply and/or defence to counterclaim, if any, to be filed and served no later than 2 February 2024;
(c)The matter is to be listed on the first civil list for case management on
7 February at 9 am for further timetabling to trial.
(d)The parties are to file a joint memorandum two clear days beforehand with a view to agreeing a timetable to trial. I encourage agreement.
[87] I reserve the question of costs. If the parties are unable to agree on the issue of costs then they may file memoranda to be referred to me. If no party wishes to be heard on costs, I will determine costs on the papers.
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Walker J
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