Round v Palmerston North City Council
[2022] NZHC 302
•28 February 2022
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2021-454-61
[2022] NZHC 302
UNDER Parts 7 and 19 of the High Court Rules 2016 and ss 316 and 317 of the Property Law Act 2007 IN THE MATTER OF
an application for an order modifying land covenants
BETWEEN
DIANE ROUND, PHILLIP ARTHUR ROUND and McKENZIE HOLMES TRUSTEE LIMITED
Applicants
AND
PALMERSTON NORTH CITY COUNCIL
First Respondent
REGISTERED PROPRIETORS OF LAND WITH THE BENEFIT OF A COVENANT
Second Respondents
Hearing (by AVL): 25 February 2022 Counsel:
T G A Mankeltow and J G Mills for the Applicants Appearance excused for First Respondent
Judgment:
28 February 2022
JUDGMENT OF GWYN J
Solicitors:
Innes Dean Lawyers, Palmerston North Simpson Grierson, Wellington
ROUND v PALMERSTON NORTH CITY COUNCIL [2022] NZHC 302 [28 February 2022]
[1] By amended originated application dated 28 October 2021 the applicants seek orders extinguishing covenants over land to be vested in the Palmerston North City Council as a road and as reserve land.
[2] In a judgment dated 30 September 2021, Churchman J dispensed with service on the second respondents, who are registered proprietors of land which have the benefit of the Covenants.1
[3] The first respondent, the Palmerston North City Council (the Council), consents to the orders sought in the amended Originating Application, but notes that the proposed subdivision plan is still to be consented and that the amended Application is for the orders to lie in Court until the certificate under s 224 of the Resource Management Act 1991 has been presented to the Registrar. On that basis, Palmer J earlier excused the Council’s future appearances.2
Background
[4] The applicants are the owners of the Land, which is mainly rough pasture land and is within the Palmerston North residential suburb called Kelvin Grove. The Land is zoned residential land in the Council’s District Plan. The applicants have contracted to sell the land to L C Builders Limited (LCB), for development into residential sections.
[5] The proposed subdivision and development on the Land contemplates parts of the Land being vested in the relevant territorial authority, the Council, as a road and part as reserve land.
[6]The Land is burdened by the Covenants, which in summary provide for:
(a)The manner of use of a nearby private road, Schnell Drive, lying to the west and northwest of the proposed subdivision.
1 Round v Palmerston North City Council [2021] NZHC 2609.
2 Round v Palmerston North City Council CIV-2021-454-61 Minute of Palmer J, 8 December 2021.
(b)Obligations to pay for the costs of maintenance and repairs to Schnell Drive.
(c)An obligation not to obstruct Schnell Drive and not to damage pipes, poles etc. on Schnell Drive.
(d)Certain building standards to prevent old buildings and temporary dwellings being placed on the land, the use of second-hand materials and obligations regarding the time taken to complete any construction.
[7] It is those Covenants which the applicants seek to have extinguished. The application is not intended to affect any of the other encumbrances on the applicants’ title.
Statutory framework
Resource Management Act 1991
[8] Sections 224(b), 238 and 239 of the Resource Management Act 1991 (the RMA) are relevant.
[9] Section 238 of the RMA requires that land vested for roads be free of all interests including covenants:
238Vesting of roads
(1)When the Registrar-General of Land deposits a survey plan, or a Chief Surveyor approves a survey plan to which section 228 applies, the land shown on the survey plan as road to be vested in a local authority or the Crown vests, free from all interests in land including any encumbrances (without the necessity of any instrument of release or discharge or otherwise),—
(a)in the case of a regional road, in the territorial authority or regional council, as the case may be:
(b)in the case of a Government road declared as such under any Act, in the Crown:
(c)in the case of a State highway, in the Crown or the territorial authority, as the case may be:
(d)in the case of any other road, in the territorial authority.
[10] Similarly, s 239 of the RMA, which relates to land to be vested as reserve, is in similar terms:
239Vesting of reserves or other land
(1)When the Registrar-General of Land deposits a survey plan, or a Chief Surveyor approves a survey plan to which section 228 applies,—
(a)any land shown on the survey plan as reserve to be vested in the territorial authority or the Crown, vests in the territorial authority or the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of any instrument of release or discharge or otherwise) for the purposes shown on the survey plan, and subject to the Reserves Act 1977; and
(b)any land shown on the survey plan as land to be vested in the territorial authority or in the Crown in lieu of reserves, shall vest in the territorial authority or in the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of an instrument of release or discharge or otherwise); and
(c)any land or any part of the bed of a river (not being part of the coastal marine area) or lake, shown on the survey plan as land to be vested in the territorial authority or the Crown, shall vest in the territorial authority or the Crown, as the case may be, free from all interests in land, including any encumbrances (without the necessity of an instrument of release or discharge or otherwise); and
(d)to avoid doubt, any land shown on the survey plan as land in the coastal marine area becomes part of the marine and coastal area.
(2)Notwithstanding subsection (1), the land may be vested subject to any specified interest which the territorial authority has certified, on the survey plan, shall remain with the land.
(3)Any land vested in the Crown vests under the Land Act 1948 unless this Act provides otherwise.
[11] Subsection 239(2) of the RMA gives a discretion to the Council to agree to take land for a reserve subject to a specified interest, but the Council has declined to do so here. There is no similar discretion available to a territorial authority in relation to the vesting of a road, under s 238 of the RMA.
[12]Section 224(b) of the RMA provides:
224 Restrictions upon deposit of survey plan
No survey plan shall be deposited for the purposes of section 11(1)(a)(i) or (iii) unless—
…
(b)where land shown on the survey plan will vest in the Crown or a territorial authority, there is endorsed on the survey plan or deposited with the Registrar-General of Land, written consent to the subdivision given by—
(i)in the case of land subject to the Land Transfer Act 2017, every registered owner of an interest, including any encumbrance, in the land; or
(ii)in the case of land not subject to that Act, every person having an interest, including any encumbrance, in the land that is evidenced by an instrument registered under the Deeds Registration Act 1908; and
…
[13] Under s 224(b) of the RMA, the consent of every registered owner of the benefited titles is required to the deposit of the survey plan for the proposed subdivision because of their interest in the land that is intended to vest in the Council.
[14] In consequence, the absence of consents from the owners of all benefited titles requires that encumbrances be extinguished by the Court before the survey plan for the proposed subdivision can be deposited.
Property Law Act 2007
[15] The applicants, being persons bound by the existing Covenants, are entitled to apply to the Court to modify or extinguish the Covenants, under s 316 of the Property Law Act 2007 (PLA).
[16] The orders sought are set out in the Applicants’ Amended Originating Application for Orders Extinguishing a Covenant over Land to be Vested in the Local Authority as a Road and as Reserve, dated 28 October 2021. The application is supported by affidavits from:
(a)Phillip Arthur Round, one of the applicants.
(b)Lyndon John Currie, a director of L C Builders Limited.
[17] Section 317 of the PLA sets out the circumstances in which the Court may order modification or extinguishment of the Covenant, wholly or in part:
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.
Grounds for the application
[18] The application under s 316 of the PLA seeks extinguishment of the Covenants on the grounds that:
(a)there has been a change since the creation of the Covenants in the nature and extent of the use being made of the burdened land (s 317(1)(a)(i));
(b)the Covenants impede the reasonable use of the burdened land in a way that is different from what could have been foreseen by the original parties to the Covenants (s 317(1)(b)).
(c)the proposed extinguishment of the Covenants will not substantially injure any person entitled (s 317(1)(d)); and
(d)it is just and equitable to extinguish the Covenants.
[19] In this case, since the Covenants were drafted, in 1990, the intensity of use and mode of access to much of the burdened and benefited land has radically altered. When the Covenants were signed in 1990, only eight properties were in contemplation, but there are now 50 titles.
[20] In 1990, the Covenants contemplated a subdivision (of lifestyle blocks) accessing the main thoroughfare, James Line, via Schnell Drive. Subsequently, developments have created more intensive housing in streets with independent access to the main thoroughfare.
[21] In addition, the law has changed since the Covenants were drafted in 1990. As the applicants’ submissions explain, applications such as the present one were not historically necessary but are now required because Land Information New Zealand (LINZ) has, in recent years, taken a view (contrary to earlier practice) that the Privy Council decision in Man O’War Station Limited v Auckland City Council (No.2)3 and the common law rule of “dedication” could no longer be used to vest road or reserve in a territorial authority free from all interests of land, without the benefit of all owners of those interests or a court order.
3 Man O’War Station Limited v Auckland City Council (No.2) [2002] UKPC 267, [2002] 3 NZLR 584.
[22] As the applicants note, the building standards contained in the Covenants4 do not have any practical application to that part of the Land to be vested in the Council as a road or reserve and there is no further need for the Covenant to apply to that part of the Land.
[23] In addition, the orders sought contemplate the remaining part of the Land in the subdivision (where dwellings will be built) will continue to be subject to the Covenants and the building restrictions in the Covenants.
[24] The Land does not include any part of Schnell Drive. Both LCB and any subsequent owners of the subdivided land will have no right to use Schnell Drive, which is a private road. It follows that any restriction and obligations relating to the use of Schnell Drive created by the Covenants are of no practical effect.
[25] There will be no practical need for any owner of part of the Land to use Schnell Drive, because their access will be from James Line, via the road in respect to which orders are sought.
[26] Extinguishing the Covenants from the road and reserve land will have no effect on the obligations of the owners of the benefited land in respect of maintenance, because their respective contributions are fixed.
[27] The applicants will continue to be responsible for their 3/32nd share of the Schnell Drive maintenance and the title(s) to the balance of the Land not being vested in the Council will assume any obligations that might otherwise have attached to the land vested as road and reserve.
[28] The applicants also submit that the Covenants impede the vesting of land in reserve and road, a reasonable use of the land which was not foreseen (and could not reasonably have been foreseen in 1990) because a drafter of the Covenant would have expected the common law rule of dedication to apply.
4 Summarised above at [6].
Discussion
[29] It is for the owner of the servient land to show that reasons exist for the orders sought and that the orders sought are appropriate.5
[30] As the Court of Appeal said in New Zealand Industrial Park Limited:6 “The courts are reluctant to allow contractual property rights to be swept aside in the absence of strong reasons.”
[31] I am satisfied from the evidence filed and the submissions on behalf of the applicants that the grounds they rely on under s 317 of the PLA have been made out and the overall justice of the case favours the orders sought. The applicants have provided a clear proposal for extinguishment in the amended originating application and those orders are made accordingly.
Result
[32] Accordingly, I make the orders sought in the Applicants’ Amended Originating Application for Orders Extinguishing a Covenant over Land to be Vested in the Local Authority as a Road and as Reserve, dated 28 October 2021, in the following terms:
(a)The land covenants created by Schedules 1 and 2 of the “Memorandum of Transfer Grant of Easement” Instrument No B083686.3 TE (the “Covenants”) be extinguished from that part of the land, presently contained in Lot 1 Deposited Plan 560192 (the “Land”), that is to be vested in the First Respondent as a road and/or as reserve land as part of the subdivision of the land.
(b)The Registrar-General of Land shall make entries under s 318 of the Property Law Act 2007 on the record of title to the effect that the Covenants are extinguished as per (a) by order of this Court.
5 Industrial Park Limited v Stonehill Trustee Limited [2019] NZCA 147 at [72].
6 At [73].
(c)Reserving leave to the Applicants to apply by interlocutory application in the present proceeding for such further orders as may be necessary to give effect to orders (a) and (b).
(d)A direction that orders (a) and (b) lie in Court until the Applicants present to the Registrar a true copy of the s 224 Resource Management Act 1991 certificate given by the Palmerston North City Council for the subdivision of the Land.
(e)Such further or other orders as the Court deems fit.
Gwyn J
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