Street v Fountaine
[2016] NZHC 2343
•3 October 2016
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
CIV-2014-435-6 [2016] NZHC 2343
UNDER section 313 of the Property Law Act 2007 IN THE MATTER
of an application for relief concerning principally the land comprised in computer freehold registers WN40A/853 and WN564/201
BETWEEN
CHRISTOPHER JOHN STREET, PHILIP JOHN ENGLAND, MICHAEL JOHN STREET AND JOAN ISABELLA STREET
Plaintiffs
AND
REX ALISTAIR FOUNTAINE First Defendant
ASHBY DOWNS LIMITED Second Defendant
ANZ BANK NEW ZEALAND LIMITED Third Defendant
MARGARET ELIZABETH FOUNTAINE Fourth Defendant
Hearing: 29 February-4 March, 7-8 March 2016 Counsel:
R K Macdonald for Plaintiffs
T G Stapleton QC for DefendantsJudgment:
3 October 2016
JUDGMENT OF CLIFFORD J
Introduction ..............................................................................................................[1] The law – equitable easements ................................................................................[7] Facts.........................................................................................................................[14] Analysis ...................................................................................................................[63] Agreement to grant easement ...............................................................................[63] Equitable estoppel ................................................................................................[85]
STREET v FOUNTAINE [2016] NZHC 2343 [3 October 2016]
Result ..................................................................................................................... [111] Final observations ................................................................................................ [112] Costs ...................................................................................................................... [116]
Introduction
[1] This is a dispute about a private water scheme (the Lower Scheme) serving land adjacent to Ponatahi and Millars Roads in the eastern Wairarapa.
[2] The Lower Scheme draws its water from the Ahiaruhe stream. The Ahiaruhe rises on a property known as Aranui (owned by the second defendant Ashby Downs Limited (Ashby Downs)).1 The Lower Scheme’s infrastructure is principally located on adjoining properties: Waikaramu and Maungahuia owned by the first and fourth defendants, Rex and Margaret Fountaine (the Fountaines) individually or as trustees and The Downs, also owned by Ashby Downs. Waikaramu, Maungahuia and The Downs are all located to the west of Millars Road.
[3] One of the properties served by the Lower Scheme is owned by the plaintiffs, the trustees of Christopher and Joan Street’s family trust (the Street Trustees). The Street property is on the eastern side of Millars Road.
[4] The Street Trustees say that their rights under the Lower Scheme constitute an equitable easement over Aranui, Waikaramu and The Downs.2 They say that easement arises by agreement or equitable estoppel. The Fountaines and Ashby Downs deny that.
[5] By way of relief, the Street Trustees ask this Court to order that equitable easement be registered over Aranui, Waikaramu and The Downs.3 That easement would be effected under Part 5 of the Land Transfer Act 1952 and comprise the
rights and powers implied under s 90D(1) of the Land Transfer Act 1952, reg 10 of
1 Ashby Downs is the company through which the Ashby family have farmed for some time in the area. Brothers Richard and Michael Ashby are the current farming generation. It was their father, Mr J F Ashby, who was farming The Downs at the time the Scheme was established.
2 The Street property already has a benefit of an easement over Maungahuia relating to the
Scheme. That is why no claim is made in these proceedings for an easement over that property.
3 Whilst the Street Trustees’ principal concern was to obtain an easement over Waikaramu, they included Ashby Downs as second defendant to ensure, if they succeeded, that there were no “gaps” in the easement rights they obtained.
the Land Transfer Regulations 2002 and sch 4 of the Land Transfer Regulations
2002. An easement on those terms would not only provide rights to take and convey water, but would also permit the Street Trustees to access Waikaramu, and Aranui and The Downs as necessary, for inspection and maintenance, by a reasonable route and for a reasonable time. The Street Trustees would be subject to obligations to act in what can be summarised as a reasonable manner, including to ensure as little damage or disturbance as possible was caused to the land, or its owners.
[6] In the alternative, the Street Trustees ask the Court to give such relief as it thinks fit to give effect to and permanently preserve their “equitable rights and interests under the Millars Road water scheme to the extent they touch on or otherwise affect Waikaramu, Aranui and The Downs”.
The law – equitable easements
[7] The law in this area is clear. I quote from McMorland on Easements, Covenants and Licences:4
2.3 Creation of equitable easements
2.3.1 The general principles
As with other interests in land, easements may be either legal or
equitable. …
The most common way in which an equitable easement is created is by a contract to grant an easement. Three elements are essential:
(1) The right to be granted must possess the essential characteristics of an easement;
(2) Valuable consideration (necessary for the existence of a contract);
(3) Either a sufficient record in writing to satisfy s 24 of the Property Law Act 2007, or a sufficient act of part performance.
On appropriate facts, a term to grant an easement may be implied into an agreement for sale and purchase, but the normal principles for the implication of a term into a contract must be met.
4 D W McMorland McMorland on Easements Covenants and Licenses (2nd ed, LexisNexis, Wellington, 2014).
Even where an enforceable contract exists, there must be an intention to create an easement, that is, an interest binding third party successors in title to the grantor (probably the registered proprietor of the servient tenement), to distinguish the arrangement from a contract licence.
Where these requirements are met, the Court may order specific performance by directing the execution of a registrable transfer instrument or easement instrument. Even though no such order is sought or made, where the criteria are met to give a prospective grantee a claim for such an order, the grantee under the specifically enforceable contract to grant an easement has an equitable interest, in the form of an easement, in the land.
[8] In T A Dellaca Ltd v PDL Industries Ltd Tipping J outlined the three considerations relevant to establish a sufficient part performance:5
(1) Was there a sufficient oral agreement such as would have been enforceable but for the [Property Law] Act?
(2) Has there been part performance of that oral agreement by the doing of something which:
(a) clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract;
(b) when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.
(3) Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?
[9] I will assess the Trust’s claim to an equitable easement by agreement by
reference to those three essential elements.
[10] As regards estoppel, McMorland goes on to observe:6
In the absence of a contract for the grant of an easement, an equitable easement, or some similar right, may occasionally arise under the doctrine of equitable estoppel. When an “equity arising out of acquiescence” is established, it is for the Court in each case to decide in what way the equity can be satisfied; and, if the circumstances are appropriate, the Court may, in its discretion, satisfy the equity by ordering the execution of a registrable transfer instrument or easement instrument granting an easement.
5 T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109.
6 McMorland, above n 4, at 2.3.1.
In accordance with general principles, equitable easements over Land Transfer land do not bind a purchaser or mortgagee for value who has taken legal title without fraud within the meaning of the Land Transfer Act 1952. As an equitable easement is an interest in land, it may, be however, protected by lodging a caveat.
[11] The occasional circumstances in which “an equitable easement, or some similar right” may arise by estoppel are impossible to define with precision. McMorland comments:7
The modern doctrine of equitable estoppel in New Zealand has been created through a rationalisation and unification of three formerly recognised separate types of estoppel: estoppel by representation (or common law estoppel), promissory estoppel and proprietary estoppel (sometimes also known as estoppel by acquiescence). This unification has been achieved by a recognition of unconscionability as the common factor in these three forms of estoppel and basing equitable estoppel on that principle. …
[12] Butler summarises the modern doctrine thus:8
Although the modern approach is “to depart from strict criteria and to direct attention to overall unconscionable behaviour” it is nevertheless clear that the party alleging an estoppel must show that.
The party alleging an estoppel must show that:
(1) A belief or expectation has been created or encouraged through some action, representation, or omission to act by the party against whom the estoppel is alleged;
(2) The belief or expectation has been relied on by the party alleging the estoppel;
(3) Detriment will be suffered if the belief or expectation is departed from; and
(4) It would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.
[13] Section 313 of the Property Law Act 2007, as relevant, provides:
313Court may enforce easements and positive or restrictive covenants
(1) In determining a question or dispute concerning the existence or effect of an easement, positive covenant, or restrictive covenant, a
7 McMorland, above n 4, at 22.1.1.
8 Andrew Butler and Ors, Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at 19.2.
court may make an order, on any conditions the court thinks fit, concerning all or any of the following matters:
(a) the existence of an easement, positive covenant, or restrictive covenant benefiting or burdening land:
(b) the enforceability of an easement, positive covenant, or restrictive covenant by or against any person, and whether under this Act or otherwise:
…
(h) any other matters arising in relation to a question or dispute concerning the existence or effect of an easement, positive covenant, or restrictive covenant.
Facts
[14] Aranui is located in the limestone hills that lie between Ponatahi and Millars Roads. From its source on Aranui, the Ahiaruhe flows in a roughly northerly direction across The Downs, Waikaramu, Maungahuia and a number of other properties until it joins the Ruamahanga River.
[15] Aranui, as well as comprising land forming part of the Ahiaruhe’s watershed, includes land outside that watershed. In the 1970s Aranui was owned by a Mr Burns. Mr Burns, together with a number of other farmers with land outside that watershed, proposed a scheme to collect water from the Ahiaruhe and pump it over the intervening higher ground to irrigate that land. That proposal became known as the “Upper Scheme”. I refer to Mr Burns and his fellow proponents as “the Upper Owners”.
[16] The enactment of the Water and Soil Conservation Act would appear to have played a part in the proposal for the Upper Scheme. Up until 1967, riparian owners (such as the Fountaines and Ashby Downs) had enjoyed a common law right to take water flowing through their land. The position was altered quite dramatically by s 21 of the 1967 Act. It provided, in subs (1), as follows:
Rights in Respect of Natural Water
21 Rights in respect of natural water
(1) Except as expressly authorised by or under this Act or any other Act, the sole right to dam any river or stream, or to divert or take natural
water, or discharge natural water or waste into any natural water, or to use natural water, is hereby vested in the Crown subject to the provisions of this Act:
Provided that nothing in this section shall restrict the right to divert, take, or use sea water:
Provided also that it shall be lawful for any person to take or use any natural water that is reasonably required for his domestic needs and the needs of animals for which he has any responsibility and for or in connection with fire-fighting purposes.
[17] There is evidence of legal advice to the Upper Owners that the new law had weakened the rights of riparian owners.
[18] The Ahiaruhe has always been a valuable source of water for farms between Ponatahi and Millars Road through which it flows. A number of those farmers objected to the Upper Scheme. They were concerned that the implementation of the Upper Scheme could adversely impact on their use of the Ahiaruhe’s waters lower down, particularly as they developed their land in the future.
[19] Mr J F Ashby kept a daily diary. Notes he made record the names of the objectors to the Upper Scheme as being Messrs Fountaine Senior (Waikaramu), Mr Riddell (Maungahuia), Mr Neligan (who farmed on the eastern side of Millars Road), Mr McGrath (who farmed on the northern side of Ponatahi Road) and himself (The Downs). In notes of a meeting on Friday 14 May 1971 he summarised the concerns of the Lower Owners in the following terms:
In other words, can Mr Burns prove that the people who have first claim to the water from the Ahiaruhe Stream will be safeguarded in every way now and in the future, before water is supplied to those outside for some consideration we presume.
[20] The Catchment Board became involved. A committee was formed. On
24 December 1971 a letter was circulated by the Catchment Board recording the outcome of discussions (the Catchment Board 12/71 letter).
[21] By that time, the Lower Owners had developed a proposal for their own gravity scheme, that is the Lower Scheme. Some of the original details were changed, or have become murky over time. But the Lower Scheme was described in
a feasibility report provided by a MAF adviser, Mr Heveldt, sometime between
August and October 1971 as involving:
(a) A pipeline from the source of the Ahiaruhe on Aranui to a point
(Point B) on the boundary between Aranui and The Downs. (b) From Point B separate pipelines were to go:
(i) over The Downs and onwards, under Ponatahi Road, to the
McGraths; and
(ii)over The Downs, onto the Riddells’ Maungahuia land and onwards, under Millars Road, onto the Riddells’ land on the eastern side of Millars Road and, from there, to be pumped to a new holding tank, and thence by gravity to land then owned by the Neligans on the eastern side of Millars Road.
[22] As thus proposed, the Scheme was not on, nor did it service, Waikaramu. Waikaramu did not then, and does not now, draw water from the Ahiaruhe. The Ahiaruhe flows along Waikaramu’s western boundary, which generally lies in low ground on that side of the farm. Waikaramu draws its water from a bore on higher ground to the east. But installing the Scheme would involve use of a Waikaramu four wheel drive access road, at the time the most convenient way both to where the Ahiaruhe rose and Point B in what were then undeveloped parts of Aranui and The Downs. Similarly, maintenance of the Scheme, particularly prior to the development of those parts of Aranui and The Downs, could most conveniently be undertaken using that access road.
[23] The Catchment Board 12/71 letter was written against that background. That letter is central to the Street Trustees’ claims in these proceedings. Accordingly, I set it out in full:
This letter is to record the mutual agreement reached between the upstream and downstream owners in the Ahiaruhe Valley with regard to water use for stock purposes.
The original difference arose when the upstream owners planned to take water from a spring on Mr Burns’ property and pump it outside the catchment to other properties by easement for stock and domestic use, and the downstream owners were concerned that this action would jeopardise their existing supply derived from the stream bed. Both parties felt they had legal rights to their contentions, but rather than have these argued at law the upstream owners agreed to assist without prejudice the downstream owners to establish a communal supply to their properties and thus ensure a compromise that provided for all.
A committee was set up to finalise details, and it has now been agreed that the upstream owners will contribute $900 towards a communal supply plus to take the form of supplying and laying a 2” pipe from an agreed point in the stream on Mr Burns propert to an agreed point on Messrs Ashby’s and Burn’s boundary. The pipe is to be buried a minimum of 18” in the ground and a simple inlet constructed to tap the stream and provide a full pipe flow.
Messrs Fountaine and Burns have agreed to an easement over their land for the pipe, and the survey for the easement shall be financed or partly financed by the upstream owners to the extent their costs of establishing the pipe falls short of $900.
The Board shall be the arbiter as to the reasonableness of the costs incurred in installing the supply and the easement shall be instituted by the upstream owners.
The easement shall be finally legalised by and to the benefit of the users who shall also be responsible for maintenance in a manner to be prescribed.
The Board shall also arbitrate as to reasonable water withdrawals by all parties in the future bearing in mind the total surface flows available to ensure an equitable allocation.
In turn, the downstream owners will allow the listed upstream owners to draw up to 30.1 gallons per minute from the spring referred to.
The Board will act as general arbiter in all cases of lack of agreement, and its decision will be binding on all parties.
The following are the parties to and areas contemplated as being served with water in terms of this agreement.
UPSTREAM OWNERS: Property Area Served
Aranui 1,200 acres Tokoroa 1,300 acres Mr Ellis 200 acres Messrs Snell Bros. 450 acres Mr Paton 450 acres
3,600 acres
DOWNSTREAM OWNERS:
Mr Ashby 30 acres
Mr McGrath 80 acres
Mr Riddell 840 acres Mr Nelligan 370 acres Mr Andrews 180 acres
2,200 acres
This mutual agreement was made to cover the above parties and areas and the mentioned draw-offs but otherwise without prejudice to any group or individual’s rights and does not purport to be an interpretation of the law with respect to water rights.
Yours faithfully, P.G. MAHONEY,
CHIEF ENGINEER.
[24] The reference to the upstream owners registering an easement prompted a response from their solicitors, dated 17 January 1972. Given the competing positions, the terms of that letter are also significant. The solicitors for those owners questioned the accuracy of the references to easements in Catchment Board 12/71 letter and, in particular, to the upstream owners having some responsibility for any easements in connection with the downstream owners. They wrote:
The writer’s clear impression of the discussion was
1.That the upstream owners were to install the pipeline and if there is any change out of $900 the downstream owners could have it towards their other expenses.
2.Whether or not the downstream owners desire a registered easement is of no concern to any of the upstream owners except that “Aranui” Station will grant an easement if so requested.
3.If any easement is desired the downstream owners were advised to instruct the same surveyor to carry out the necessary surveys in conjunction with the surveys he will be undertaking for the upstream owners. In this way costs can be minimised.
[25] The Board replied, saying its intent was only to provide for coordination as
regards “the survey for easement on both projects”.
[26] The Lower Scheme was installed over time: the work was completed around the middle of 1973. Although generally completed in terms of the feasibility plan, one variation was required. The original proposal was for the pipe taking water from the source to Point B to be located on Aranui. Although Point B was, as it needed to
be, lower down than the access point, the land did not slope uniformly down from one point to the other. There was some intermediate higher ground forming part of a spur. In order to achieve an adequate flow to Point B, the line avoided that higher ground by going around the eastern end of the spur: to do so, it briefly crossed over Waikaramu.
[27] Those involved in installing, and paying for, the Lower Scheme were Messrs Ashby, McGrath, Riddell, Neligan and Andrews. Mr Fountaine was not involved in carrying out any work: nor did he contribute any part of the costs. No easements were either prepared or registered for the Lower Scheme. Easements were, however, prepared and ultimately registered as regards the Upper Scheme: DP35275.
[28] From the outset, the Lower Scheme did not perform as well as had been hoped. Mr Heveldt continued to be involved, making detailed suggestions in 1977 and 1978 as to the causes of the problem and remediation.
[29] In 1993-1994 the Lower Scheme was upgraded. The intake was moved down the Ahiaruhe by a relatively short distance, to a new weir on Waikaramu. A settling and header tank, with associated pipe work, were installed just downstream of the weir also on Waikaramu. New twin 40 mm and 50 mm pipelines were laid from that point across Waikaramu to meet the then existing branch lines serving The Downs on the one hand and Maungahuia and the far side of Millars Road on the other.
[30] At that time, the farms and respective owners involved in the Lower Scheme were:
TheDowns: Ashby Downs Maungahuia:
Mr D McPhail (or trust)
Riddell land on eastern side of Millars Road:
Mr D McPhail (or trust)
Others:
(Not relevant)
[31] It is to be noted, however, that prior to that upgrade Mr McPhail had disconnected much of his land on the eastern side of Millars Road from the Lower Scheme. In circumstances that were never fully explained to me, in 1998 and after
he had sold Maungahuia to the Fountaines, Mr McPhail also removed Maungahuia’s ability to use the Lower Scheme by laying a new 40 mm pipeline parallel with the old pipeline, effectively cutting off the water supply to Maungahuia’s water troughs.
[32] As time passed, Mr McPhail subdivided and sold off parts of his land on the eastern side of Millars Road. In December 1996, as part of that ongoing project, he created three new titles on the eastern side of Millars Road (CTs 49C/460, 467 and
468). At the same time he granted water supply rights over Maungahuia to, and as between, those titles: DP9785682 That put Mr McPhail in a position to sell Maungahuia, whilst retaining land on the eastern side of Millars Road with legal water rights over Maungahuia. That easement did not follow the layout of the Lower Scheme: rather it ran from a point on Maungahuia’s boundary with The Downs to the west of the Ahiaruhe and from there more or less directly across Maungahuia to Millars Road.
[33] In May 1997 the Fountaines acquired Maungahuia from Mr McPhail. It was at that point they became aware of the easement that Mr McPhail had created.
[34] The Street Trustees acquired their first block of land on Millars Road (CT 47C/453 – subdivided by Mr McPhail in November 1995) in May 1998. CT 47C/453 is a reasonably hilly 85 hectare block at the south eastern end of Mr McPhail’s Millars Road land. Mr Street bought the block for lifestyle purposes: he did not have any serious farming intentions at that time. When he purchased it, the block was no longer connected to the Lower Scheme. Moreover, and unlike CTs 49C/460, 467 and 468, it did not then (and does not now) itself have the benefit of any water rights over Maungahuia.
[35] Mr Street became more interested in farming. He developed a relationship with Mr McPhail. Mr Street’s evidence was that from about 2004 onwards he made it very clear to Mr McPhail that the Street Trustees would be interested in acquiring Mr McPhail’s Millars Road land.
[36] The Street Trustees acquired that land (CTs 49C/466 and 33C/530) on
7 December 2006.
[37] Mr McPhail continued, nevertheless, to maintain the Lower Scheme as it served his house, as well as the land on the eastern side of Millars Road. Mr McPhail had by then described the Scheme to Mr Street and how the users of the Lower Scheme undertook periodic maintenance. Thereafter, Mr McPhail took Mr Street onto Waikaramu and Maungahuia when he went to service and maintain
the Lower Scheme.9
[38] Around this time Mr Street became aware of difficulties that existed between Mr McPhail and the Fountaines relating to the Lower Scheme.10 In October 2007, he was party to a lawyers’ letter sent on behalf of Mr McPhail and other users to the Fountaines (the McPhail 10/07 letter). Mr Street understood that the purpose of that letter was to address concerns the Fountaines had relating to the way Mr McPhail accessed Maungahuia and Waikaramu. The McPhail 10/07 letter acknowledged the concerns the Fountaines had, particularly regarding safety issues with the use of the
Waikaramu farm track. Mr McPhail gave an assurance that he would give not less than 12 hours’ notice if he wished to organise maintenance work to be undertaken on the “Millars Road water scheme pipelines”. When the Lower Scheme failed, and urgent repairs were necessary, he would give as much formal notice as possible and would, in any event, not go onto the Fountaines’ farm without having contacted them. He was to be the point of contact.
[39] The McPhail 10/07 letter, written by a local solicitor on behalf of the various land owners, concluded:
Doug and the undersigned users [which included Mr Street] trust that the assurances given in this letter meet with your approval and do address your concerns.
9 The Ashbys aknowledge that Mr McPhail maintained the Maungahuia/Millars Road pipeline.
They say, however, that Mr McPhail never contributed to the major maintenance work that was required relating to the weir, the settling and header tank and the associated pipe work.
10 Mr Street tended to refer to the Lower Scheme as it serviced his property as the “Millars Road Scheme”. The Fountaines and the Ashbys denied the existence of such a separate scheme: they categorised the position as being that the Lower Scheme had two branches: one serving The Downs and onwards; one serving Maungahuia and onwards. What is clear, is that both branches
shared common intake infrastructure that was crucial to the Lower Scheme as a whole. Further,
and as the Ashbys pointed out, there were many “branch lines” which ran on individual farmers’ lands from the two, principal, delivery branch lines. Given the common intake facilities, and those other matters, I consider the more accurate categorisation is to see the Lower Scheme as one scheme, involving two “branch lines”, as stated. But I do not think that matters much for these proceedings.
The stage was effectively set for the events which are the origin of this dispute.
[40] In the first half of 2008 the Street Trustees carried out significant works on the Trust’s property to improve their ability to store, distribute and use the flow of water from the Lower Scheme. At a relatively late stage in that process Mr Street, at the recommendation of his local plumbing contractor, visited the Ashbys to brief them on work that was by then virtually finished. It was the Ashbys’ view that Mr Street should not have embarked on that upgrade work without consulting other Lower Scheme users and the Fountaines. The Fountaines shared that view. Tension rose.
[41] In the second half of 2008 Mr McPhail told Mr Street he intended withdrawing from the management of the Lower Scheme, referring to the tensions that had arisen between him and the Fountaines. By that time, the Fountaines had become concerned that Mr McPhail, and other users of the Millars Road “branch”, were not complying with the arrangements recorded in the McPhail 10/07 letter.
[42] In December 2008 the Fountaines addressed a letter to “the members of the Millars Road Scheme” (the Fountaines 12/08 letter). That letter noted Mr McPhail had told the Fountaines of his intentions to retire from what they called “his position of ‘caretaker manager’ of the water scheme”, and that a plumbing contractor would be taking his place. The Fountaines said initially their reply to that had been positive. Following a conversation with Richard Ashby, the Fountaines realised there was concern over communications. The Fountaines referred to the “gentlemen’s agreement” they had with their boundary neighbours on Aranui and The Downs. They were disappointed that the Ashbys had not been communicated with when the McPhail 10/07 letter had been sent to them. They were also disappointed when the latest changes were made to the Lower Scheme and they were neither consulted nor acknowledged. They suggested that any further changes to be made should be finalised with a written signed agreement before they took place.
[43] In August 2009, the Street Trustees acquired (not from Mr McPhail) the balance of the land, once owned by the Riddells/Mr McPhail on the eastern side of Millars Road, that had traditionally drawn water from the Lower Scheme.
[44] In November 2009 Mr McPhail told the Fountaines he was withdrawing from his involvement in the Millars Road branch of the Lower Scheme. He introduced Mr Mouldy of GV Electrical, who by then was working for Mr Street on Maungahuia and Waikaramu to maintain the Lower Scheme. Mr Mouldy was able to develop a good relationship with the Fountaines, and encountered no problems in accessing the Lower Scheme. Mr Fountaine gave evidence of a meeting in November 2009 at which Mr McPhail introduced him to Mr Mouldy (as it happened Mr Street’s contractor). As far as Mr Fountaine was aware, it was Mr Mouldy who was maintaining the Scheme.
[45] That was, indeed, the case: however, Mr Mouldy was doing that work on Mr Street’s instructions and at the Street Trustees’ cost – the Street Trustees property by then being the only user of the Lower Scheme on the eastern side of Millars Road. Moreover, unbeknownst to the Fountaines, Mr Street was with increasing frequency not only assisting Mr Mouldy to service the Lower Scheme, but himself undertaking that work.
[46] On 23 March 2011 Mr Mouldy wrote to the Fountaines, recording the arrangements he had with them. Those arrangements were:
GV Electrical and Pumping undertakes to in future contact either yourself or Rex to gain permission to enter the property (prior to entering the property), so you may identify any hazards that may be present during the course of our travel through the farm. This will ensure every safety is observed at all times to yourselves and your farm staff, as well as to our plumbing/pumping tradesmen.
Also for the safety of all concerned we undertake to contact you either by phone or in person; leaving a message informing you when we have completed any necessary work and have subsequently left the farm.
An outline of the above arrangement will be attached to any future job cards raised in our computer system and our staff will be informed of this policy.
[47] That letter had been requested by the Fountaines to meet a requirement of their insurers. Mr Fountaine’s evidence was that he had no problems with Mr Mouldy, he saw their arrangements with Mr Mouldy as a continuation of the arrangements they had had with Mr McPhail, but better.
[48] Calm descended on the limestone hills of the Ahiaruhe district. But trouble was brewing.
[49] Mr Street encountered difficulties through the winter of 2011 with the Lower Scheme. On 27 September 2011 Mr Street wrote to the Fountaines. He enclosed a draft water supply agreement. As I explain in more detail later, that draft agreement replicated many of the rights and obligations provided by the Land Transfer Act and its regulations, as the Street Trustees now say they are entitled to by agreement or equitable estoppel. Mr Street said he had prepared the draft in the context of what he understood to be a mutual wish to clarify arrangements. He also said he wished to access the system “next week to find out why it had been out of action since the end of July”. He thought it would be Stewart Cowan (his plumber I infer) and him that would inspect the line. Ideally they would welcome the Fountaines joining them. If that was not possible, Doug McPhail might be able to assist.
[50] Mr Fountaine phoned Mr Street the following day. He said he was not interested in signing a water rights agreement. Other than agreeing on that, Mr Street and Mr Fountaine provided different accounts of that telephone conversation. Mr Street characterised Mr Fountaine telling him that “he would never allow Mr Street onto Waikaramu”. Mr Fountaine was, he said, aggressive. Mr Fountaine said he did not think he had been aggressive. He had simply given some history and background. His concern was that the Lower Scheme was beginning to split into separate factions, and the Fountaines would have problems in the future if individuals starting making their own rules.
[51] Later that week Mr Street spoke with the Fountaines’ solicitor, Mr Kershaw. At 10.30 am11 on 4 October 2011 Mr Street sent Mr Kershaw a revised draft asking Mr Kershaw to communicate his clients’ final position, ie as to whether or not the Fountaines would sign that document, by 5.00 pm that day. Mr Kershaw wrote to Mr Street the next day, 5 October 2011, at 3.46 pm: he confirmed that the Fountaines were not willing to sign a formal water rights agreement. He concluded by saying
that, in their view, the best way to proceed was to continue with Mr Mouldy.
Mr Fountaine did not himself use the system but “understands your need to maintain
11 All times are those recorded on emails communicating various letters and documents.
supply and would not stop that being achieved. Rex just believes it best if a qualified plumber is used”. Mr Fountaine acknowledged the easement over Maungahuia, but was “reluctant to permit access to his original farm known as Waikaramu over which no easement is held”. Mr Kershaw’s letter concluded:
You may wish to telephone the writer to discuss any aspect of this letter if you wish.
[52] At 4.14 pm, some 28 minutes later, Mr Street replied to Mr Kershaw. Mr Street’s reply set the tone for the interactions between the parties and their lawyers from that point on, up until and including trial. It read:
Thank you for reverting. Unfortunately, your letter takes me no further than my discussion on Wednesday night last week with Rex Fountaine – nothing has been achieved whilst we have waited for 7 days.
We are very clear about our rights under the Scheme. We have endeavoured to be as courteous and co-operative as possible, taking steps, and proposing protocols, not required on our part. We consider your clients’ clear attempt to interfere with our rights and business to be nothing short of reprehensible (in addition to unlawful and unneighbourly).
The draft agreement is withdrawn. We will now issue proceedings to establish our rights, and those will not be “softened” or trimmed by any process agreement, once established.
Obviously, a substantive hearing will be many months away, once pleadings and evidence are in place. There is much water to go under the bridge. That leaves the matter of interim access.
Please advise by 5pm tomorrow:
(i) whether you are authorised to receive service on behalf of your clients
(ii) whether your clients consent to Stewart Cowan or myself accessing our water scheme (on the basis that had been outlined in the draft agreement) until the substantive outcome has been achieved – if not, we will need to consider an application for urgent injunctive relief.
At this point, I will begin acting for The Homunculus Trust12 in this matter, as its legal adviser. I am likely to instruct Les Taylor, of Stout Street Chambers, as Senior Counsel. My hourly rate is $500 plus GST. I understand that Les’ is $800 plus GST. Please ensure that your clients understand that we will seek full recovery of our costs, be that in an application for indemnity costs, or in any settlement of the proceeding.
12 The Homunculus Trust is the name Mr Street has given to his family trust which I refer to as
“the Street Trustees”.
I suggest that it is no longer appropriate for me to have any contact with your clients, without your express consent.
I will await your advice tomorrow.
[53] The next day Mr Kershaw wrote to Mr Street. He described the contents of Mr Street’s email of 5 October as being “inflammatory, unhelpful and verging on the belligerent”. Nevertheless, injunctive proceedings would not be necessary. The Fountaines would, under protest, allow access to Waikaramu to Mr Street or his employees/contractors. If proceedings were issued, the Fountaines would be seeking mediation.
[54] Mr Street emailed Mr Blathwayt on Thursday 6 October 2011 at 10.45 pm. He offered the Fountaines “one final opportunity” to accept the revised agreement he had sent to Mr Blathwayt on Tuesday. He confirmed his view that:
- Your clients have acted unlawfully and have indicated they will continue to do so
- The position at law is clear and simple
- Your clients’ refusal to acknowledge and abide by their legal obligations
is extreme and will not be well received by the Court
[55] He declined the possibility of mediation:
I have never been a proponent of mediation – especially when the legal position is so clear. We will take this matter to trial if it is not settled by
5 pm tomorrow.
[56] At that point Mr Stapleton was instructed. His first suggestion was to propose a without prejudice meeting.
[57] Proceedings were finally issued by the Street Trustees in May 2014. In the intervening two and a half years, there were ongoing interactions of various intensity between the parties. In February 2012, Mr Street was prompted to fire the following, somewhat incendiary, salvo after an inconclusive exchange of possible drafts of agreements between the parties:
It is regrettable that your clients have adopted this approach and are still not prepared to execute the revised draft agreement I sent you. It was a simple and fair document.
This is now going to be a long and unnecessary process through the courts. As you have been previously advised, there will be no mediation. I put you on notice once more, for the record:
- HT (Homunculus Trust) will be pursuing recovery of its actual solicitor/client costs from your clients in full;
- HT will access your clients’ land when, how, through whom and by whichever entrance point it considers appropriate, without any further notice to attend to its water scheme.
[58] In July 2014 the Street Trustees applied for, and were granted, interim relief.13 The terms of that relief were something of a compromise. Goddard J concluded, reflecting the terms of the McPhail 10/07 letter, that “plainly, the status quo has never been ‘unrestricted access’”. On that basis, and in line with the terms of the McPhail 10/07 letter, the Street Trustees’ farm manager would have the right to access Waikaramu on 12 hours’ notice, or on as much notice as was practicable (although in exceptional circumstances notice of entry may not be possible). Access would be, reflecting aspects of Mr Street’s original draft agreement, on terms that the farm manager would:
(a) ensure that as little disturbance as possible was caused to the
Fountaines’ land;
(b) perform work promptly and in a workmanlike manner; and
(c) make good any damage to the Fountaines’ land, and compensate the Fountaines for any damage to the buildings, fences and crops on the Fountaines’ land.
[59] Mr Street himself would not have access because of “the current level of
unfortunate acrimony that appears to exist between him and the Fountaines”.
[60] Goddard J ruled that the costs of the application were to lie where they fell. [61] When these proceedings came to be heard, Mr Street had, with his contractor,
accessed the Scheme pursuant to those arrangements on three occasions in 2015
13 Street v Fountaine [2014] NZHC 2697.
(January, July and November). I infer that he may have done so likewise in the unacceptably lengthy period of time it has taken me to prepare and release this judgment. From Mr Fountaine’s point of view, those access arrangements had worked well.
[62] Against that background, I turn to the questions of whether there was an agreement in 1971 by Mr Fountaine Senior to grant the Lower Owners an easement in the terms that the Street Trustees assert and, if not, whether the Street Trustees have made out their claim in equity that the Fountaines are estopped from now declining to grant such an easement to him, or for the alternative relief they seek.
Analysis
Agreement to grant easement
[63] The Street Trustees’ claim that Mr Fountaine agreed to the registration over Waikaramu for the conveyance of water was based particularly on the Catchment Board letter of 24 December 1971. They point to that letter recording, as it did:
Messrs Fountaine and Burns have agreed to an easement over their land for the pipe.
[64] The Street Trustees supplemented their reliance on the 24 December 1971
letter by pointing to other references to “easements” in various records:
(a) In his August/October feasibility report, addressed to Messrs Riddell, Ashby, McGrath and Neligan, Mr Heveldt wrote:
It could be necessary, where pipes are laid on neighbouring land, to get these endorsed on a legal easement. Provision for this has not been included in the costing above.
(b)One of Mr Ashby Senior’s diary notes, comprising allocation of costs and other account details, includes the following, very brief, reference:
Easement costs Aranui Fountaines Ashby
Riddell
Andrews
(c) A similar entry reads:
Easement to be done through Aranui and Fountaines
[65] The other contemporaneous record is the reply from the solicitors for the Upper Owners to the Catchment Board’s 12/71 letter. That letter provides confirmation, from a person with authority, ie Aranui’s solicitor, that Aranui would grant an easement to the downstream owners “if so requested”. That agreement is confirmed by a reference in Mr Ashby’s diary to survey work undertaken in October as regards an easement over Aranui’s land, from the original source of both the Upper and Lower Schemes to Point B on the boundary between Aranui and The Downs. But, as that letter shows, there was – at least from the perspective of the Upper Owners – uncertainty as to whether or not the Lower Owners were going to require and/or agree to easements amongst themselves.
[66] The final piece of documentary evidence is that a plan was prepared and deposited (DP35275), providing the easements agreed as between the Upper Owners. It would appear on that plan that an easement had been surveyed over Waikaramu for the short part of the line that, when the Scheme was installed, was put onto Waikaramu to go around the spur of higher land between the source and Point B. But, as regards Waikaramu, that easement was never registered.
[67] What is able to be taken from that, mixed, documentary record?
[68] First, the Catchment Board 24 December 1971 letter purports, on its face, to be the record of an agreement between the Upper and Lower Owners. Other than the reference to Mr Fountaine having agreed to grant an easement, Mr Fountaine himself is not referred to in the letter, and the letter writer does not purport to write to, or on behalf of, Mr Fountaine. Moreover, the letter writer had no authority to do so.
[69] The other, very brief, references in the documentary record to easements add little if anything. The most they establish is the possibility that there may have been discussions – whether involving Mr Fountaine or not is unclear – amongst the Lower
Owners about an easement. If those discussions did occur, that was more likely than not when, in the context of the Mr Burns’ agreement the Lower Owners were to have an easement over Aranui to Point B, it was realised that a brief diversion onto Waikaramu was desirable.
[70] But that is far from establishing, on the basis of that documentary evidence, that Mr Fountaine had ever agreed to that proposal.
[71] Nor is there any evidence available as to what was meant by those various documentary references at the time.
[72] None of the individuals involved in the discussions at the time, in the preparation of the Catchment Board 12/71 letter, in the solicitors’ reply, or in the making of the various diary entries, survive.
[73] As for the evidence I heard, and as is obvious, Mr Street was not able to give evidence as to what was or was not agreed at that time. Nor could Mr McPhail. In any event, although Mr Street relied on Mr McPhail’s advice and his files in bringing this claim, Mr McPhail did not give evidence.
[74] Evidence was given by Mr and Mrs Fountaine, and the Ashby brothers, of their clear understanding – reflected in the term “a gentlemen’s agreement”, that Mr Fountaine Senior had never agreed to give an easement to the users of the Lower Scheme. Rather, he had agreed that, on appropriate notice to and cooperation with him, the Lower Owners could access the Lower Scheme via his land, and the Waikaramu access track in particular. Moreover, they could similarly lay a short section of pipe on Waikaramu when the Lower Scheme was first established. Subsequently, when the Scheme was improved, Mr Fountaine Senior agreed to the pipeline servicing Maungahuia and the far side of Millars Road running on Waikaramu’s land, principally by following the line of the Ahiaruhe itself.
[75] In cross-examination and, subsequently, submission, Mr Macdonald sought to characterise that evidence as “a reasonable rationalisation of what the gentlemen’s agreement between the Scheme ‘elders’ likely entailed; namely non-registration of
easements because of mutual respect and trust, and certain other farming-related
matters”.
[76] The Fountaines and the Ashbys did not accept that characterisation when it
was put to them. Nor am I persuaded by Mr Macdonald’s submissions to that effect.
[77] I accept that, on that matter and indeed more generally, the Fountaines and the Ashbys were honest, that is, credible, witnesses. By my assessment, they were not fabricating or embellishing the narrative they provided, including as regards the rights of the users of the Lower Scheme. That is not to say, of course, that their narrative was at all points fully accurate or complete. They themselves recognised that, with the passage of time, details could have been lost or misinterpreted. But that recognition did not lead me to conclude that they were in any material way unreliable witnesses. Their understanding, based on what their parents had told them and based on their own participation as farmers, was that the Lower Owners accessed Waikaramu for the purposes of the Lower Scheme on notice to Mr Fountaine, with his permission and subject to appropriate terms and conditions. Given that, when the Lower Scheme was first established, only a short section of the pipe was in fact on Waikaramu, and the great majority of it was on The Downs and Maungahuia, it can easily be understood why a group of local owners did not see easements as being necessary.
[78] The circumstances surrounding the modification of the Lower Scheme in
1993-1994 are of considerable evidential significance in this context. At that time, by far the greater part of the infrastructure for the Lower Scheme, as it served both The Downs, Maungahuia and the land on the eastern side of Millars Road, was – for the first time – located on Waikaramu. There is no evidence of an easement over Waikaramu being discussed, let alone agreed at that time. If the original arrangement had been that Mr Fountaine Senior agreed to grant an easement over Waikaramu, then the incentive for the Lower Owners to pursue that arrangement, and register that easement, was considerably greater at that time. That the Lower Scheme was modified, without that happening, in my view points to the absence of any agreement from Mr Fountaine Senior to grant any such easement, whether in
1971 or in 1993-1994.
[79] For all those reasons, the Street Trustees did not establish the existence of such an agreement.
[80] Nor, in my view, can part performance be relied on. The factors outlined above, which in my view count against the Catchment Board 12/71 letter constituting a written agreement, also count against a conclusion of part performance. My assessment is that what Mr Fountaine Senior did, and what Mr and Mrs Fountaine have done in the years that have passed, is consistent with their characterisation of an informal arrangement that was never intended to, nor did it, reflect a contract to grant a legal easement.
[81] There is, moreover, the question of valuable consideration. Mr Stapleton’s strongly made submission was that no consideration had ever flowed to Mr Fountaine Senior, or the Fountaines, in exchange for a grant of water carriage and maintenance access rights. For the Street Trustees, Mr Macdonald’s response was to submit that Mr Fountaine Senior received the indirect benefit of the settlement of the potential dispute between the Upper and Lower Owners, and the protection of the Ahiaruhe as a prospective source of water, including for Waikaramu.
[82] The problem with that submission is that Waikaramu did not then and does not now benefit from the Lower Scheme at all. Moreover, there was no evidence of use of the Ahiaruhe’s waters by Waikaramu, even in terms of stock accessing the stream directly. Mr Fountaine Senior may have seen a benefit to the area, and to his neighbours, in the facilitation of the Lower Scheme. But that does not comprise “valuable consideration”, sufficient for the existence of a contract, flowing to him.
[83] It is for all those reasons that the Street Trustees did not establish, on the balance of probabilities, that Mr Fountaine Senior had agreed to grant the Lower Users an easement, in the terms pleaded, over Waikaramu in association with either the installation or the upgrade of the Lower Scheme.
[84] For the Fountaines, Mr Stapleton advanced a further argument. In 1971, Mr Fountaine Senior’s interest in Waikaramu constituted a deferred payment licence.
As licensee, Mr Fountaine could not agree to or grant such an easement. Only the Land Settlement Board could do so, pursuant to s 60 of the Land Act 1948. In the circumstances, I do not need to consider that, rather technical, argument. However, if the Street Trustees had otherwise succeeded up until here in their claim that there was a contractually based grant of easement rights, I consider it unlikely the Fountaines could rely on that provision to now deny the same.
Equitable estoppel
[85] Whereas the question of whether Mr Fountaine Senior had agreed to grant an easement required a consideration of events many years ago, the question of equitable estoppel as between the Street Trustees, the Fountaines and Ashby Downs involves, at least to some extent, more recent events.
[86] For the Street Trustees, the argument Mr Macdonald advanced as regards an easement by estoppel can, I think, fairly be summarised as follows:
(a) Mr Fountaine Senior and after him the Fountaines had, through their actions and acquiescence, created or encouraged a belief or expectation in the Lower Owners – if not Mr Street or the Street Trustees themselves, of water carriage and access rights as represented by the pleaded easement.
(b)That belief or expectation had been relied on by the Street Trustees, through Mr Street, when from 2006 onwards the Street Trustees acquired additional land on the eastern side of Millars Road and invested considerable sums of money in improving the water supply
and distribution infrastructure on that land.14
(c) Detriment, in effect the potential loss of the value and benefit of that investment, would be suffered if that belief or expectation was
departed from.
14 Over $100,000.
(d)It would unconscionable for the Fountaines, and Ashby Downs, to depart from the belief or expectation as represented by their action in declining to grant the Street Trustees a registered easement in the terms pleaded.
[87] There is little, if any, evidence to support the existence of such a belief or expectation on the part of anyone, other of course than Mr Street himself. The evidence before me from the Ashbys is to the contrary. Mr McPhail, whose absence as a witness was not well explained by the Street Trustees, would not seem to have had that expectation or understanding either: witness the terms of the McPhail 10/07 letter and his experiences, the “difficulties” as he described them, with the Fountaines over time. If he had had a belief that the Lower Owners were entitled to an easement, he certainly never expressed that belief or acted on it.
[88] So the Street Trustees rely on the evidence of Mr Street himself as to what he did and did not know, as to what he found out over time from Mr McPhail and as to what he asserts to have been his clear understanding of the legal rights that accrued to those land owners who drew water from the Lower Scheme.
[89] Mr Street’s evidence was extensive. It included a considerable amount of hearsay and opinion evidence. Mr Street relied particularly on documents he had obtained from Mr McPhail, and what he said Mr McPhail had told him. Mr Street’s evidence also involved his explanation of what he had taken or understood from what he had read or been told. The evidential issues, in a formal sense, which arise are obvious. The documentary record was hearsay. The issue of admissibility was not addressed by Mr Macdonald in any detail, if at all. Nevertheless, the parties generally were prepared to take the documents at face value, and to address questions of interpretation and accuracy by reference to that record itself, or the evidence of the parties. Similarly, the parties were generally prepared to accept evidence of what had been said to witnesses, including by Mr McPhail, without making a great deal of the hearsay point. Accordingly, I approached those issues with a degree of pragmatism. At the end of the day, and is so often the case in civil trials, my task became one of interpretation and assessment of weight, rather than a formal one of admissibility.
[90] As relevant, Mr Street’s evidence begins in or about December 2006 when, as he put it, “after several years of waiting, the Trust succeeded in securing WN49C/466 and WN33C/530, although it would be fair to say the Trust paid at the very top end of the value range to do so”. Mr Street went on to explain that on a number of occasions, leading up to, during and/or soon after the purchase period, he had inspected disconnected pipelines and water troughs on the eastern side of Millars Road, he had reviewed a file relating to the “water scheme” that Mr McPhail had made available to him (including the Catchment Board’s letter of 24 December
1971), and so had seen a number of references made “to the grant of easements”. Mr McPhail had also explained to him how the Lower Scheme worked, and had taken him onto Waikaramu to inspect the infrastructure. Mr McPhail had told him about the issues (past and present) around the operation and performance of the Scheme.
[91] Mr Street summarised his “belief or expectations” at that point in December
2006 in the following terms:
I had a clear view of the rights and interests of the users of the water scheme, based on my review of Mr McPhail’s “water scheme” file and my discussions with Mr McPhail and other neighbours.
Some referred in passing to a “gentlemen’s agreement” having been in place
since the inception of the scheme – whatever that meant.
But, as far as I was concerned, users had orthodox rights to take and convey water from and over others’ land – and the current and previous users had obviously acted on those rights for many years.
[92] Quite how, in the circumstances I have already outlined, Mr Street reached his conclusion as “to orthodox rights to take and convey water” was a matter Mr Macdonald was unable to satisfy me on. Further, Mr Street’s self-assessment at that time is telling:
(a) He knew of the gentlemen’s agreement, but did not know what it meant.
(b)Notwithstanding that, “as far as I was concerned” users had “orthodox rights to take and convey water” from and over others’ land.
[93] Remember, at that time there was no connected Lower Scheme infrastructure on the land the Street Trustees had first acquired; that Mr McPhail had – as Mr Street’s description of observing disconnected tanks and pipelines confirms – ceased to rely on the Lower Scheme as regards his land on that side of Millars Road; and that Mr McPhail had, quite some years before, disconnected Maungahuia from the Lower Scheme. As I understand the evidence, what infrastructure remained in use was the pipeline from the header/settling tank running along the Ahiaruhe boundary of Waikaramu, across Maungahuia, to deliver water to the far side of Millars Road. There what remained was a somewhat primitive stone lined pit in which water that flowed through the Lower Scheme under Millars Road was collected and from where farmers, other than Mr McPhail, obtained water for their land.
[94] Once the Street Trustees began to invest in their stock water infrastructure, any expectation or belief Mr Street might have garnered from Mr McPhail and his file was confronted by the responses of the Fountaines and the Ashby brothers. In my view, and objectively assessed, nothing that happened thereafter could have in any way added to an expectation or belief that the Street Trustees can rely on here. That is, the only actions and communications by the Fountaines and the Ashbys were to deny Mr Street’s assertion of a legal entitlement, and to propose various less formal ways by which he could benefit from the Lower Scheme as it delivered water to his land. For the Street Trustees, Mr Macdonald argued they could rely on the Fountaines’ and the Ashbys’ “acquiescence” in the considerable work Mr Street did to improve stock water infrastructure on his land in reliance on his understanding of their rights as a user of the Lower Scheme. The submission was made, for example, that neither the Fountaines nor the Ashbys had communicated any difficulties to Mr Street when, as would have been obvious to them, he was carrying out that work.
[95] The evidence is that, by the time Mr Street acquired his various parcels of land, those parcels of land had all ceased to be users of water provided by the Lower Scheme. That alone points against an argument of acquiescence. Furthermore, the immediate reaction of the Ashbys and the Fountaines, when Mr Street first communicated directly with them, is fatal to such a claim.
[96] On that basis, the Street Trustees have not established the first element of their claim for an easement by estoppel, namely that the Street Trustees had a belief or expectation of an entitlement to a registered easement as pleaded. On that basis, it is not necessary for me to consider the question of unconscionability.
[97] That issue was, however, of some significance to the defendants. Accordingly I comment on it, albeit relatively briefly.
[98] At the trial, Mr Stapleton was particularly critical of the approach Mr Street had taken to this dispute, of the terms in which he had communicated and of his refusal to accept reasonable counter-proposals made by the Fountaines and Ashby Downs. Mr Stapleton relied on that conduct as disentitling the Street Trustees to any equitable relief that might otherwise have been in the Court’s contemplation.
[99] In that context, I accept the Fountaines’ evidence that they were disconcerted, to say the least, by Mr Street’s threat of legal proceedings. They were first upset by the approach he took when they declined to sign the water rights agreement he had prepared. Their discomfort continued as the dispute ratcheted up, threats of litigation were followed by further threats of litigation and possible claims for indemnity costs, whilst at the same time proceedings were not issued and the dispute hung over their heads. Mr Street’s very early reference to a claim for indemnity costs was clearly inflammatory. Mr Street had been a commercial lawyer. The Fountaines and the Ashbys were farmers. As it happens, to the extent that Mr Street asserted a right to recover his own costs in acting for himself and his fellow trustees, he overlooked the basic legal principle that a person who acts on their own behalf is not entitled to legal costs.
[100] I also accept, however, that Mr Stapleton may have had a somewhat inflexible attitude to Mr Street’s less than formal, in terms of professional protocols, way of dealing with Mr Stapleton and other practitioners involved. For example, at one point a Mr Greenwood, a Wellington property solicitor, was engaged by the Fountaines’ solicitor to assist in the preparation of a contractual document, short of a registrable instrument or a caveatable interest, to address Mr Street’s concerns. Mr Street and Mr Greenwood had previously practised in the same law firm.
Mr Street spoke directly to Mr Greenwood, an action Mr Stapleton responded to adversely.
[101] Nor, however, did Mr Street’s somewhat discursive approach to the facts and the law always help Mr Stapleton’s task.
[102] The focus here, however, is on the possible legal significance of Mr Street’s
behaviour.
[103] Based on my experience, Mr Street’s forthright and direct manner would have been regarded as fairly aggressive, even by hard-nosed commercial lawyers dealing with other people’s money. As Mr Macdonald indirectly acknowledged, that behaviour took on a different significance when addressed to the Fountaines and the Ashbys. Something of the flavour of Mr Street’s approach can be seen in one of his communications to Mr Stapleton, shortly after Mr Stapleton had been instructed and had suggested – as a possible first step – a without prejudice meeting. In an email of
10 October 2011, at 6.49 in the morning, Mr Street repeated for Mr Stapleton’s
benefit his analysis of the legal status quo:
- There are no legal uncertainties in this matter – rights and obligations at law have always been, and remain, clear
- Your clients have rejected a generous gesture on our part to do them the courtesy of tabling a well written and clear agreement intended to accommodate their concerns as landowners (even when the law does not require that of us).
[104] On the basis of that assessment he said he saw no benefit in discussing the matter further, and proffered the following remarks in closing:
I assume, however, that you have only recently been instructed and may not have had an opportunity to meet with your clients.
On that assumption, and in the knowledge that water can currently be accessed, I respectfully invite you to meet with your clients, advise them on the scheme rights and obligations at law and the draft agreement, and then let me know whether they are prepared, or remain unwilling, to give effect to our rights and sign the agreement (under which we voluntarily assume obligations).
[105] There were many examples of that type of communication by Mr Street. Because I am not required to, I have reached no conclusion as to whether that mode of behaviour, stressful as it understandably was for the Fountaines and the Ashbys, constituted conduct which, in terms of the clean hands doctrine, would have stood in the way of a grant of equitable relief if that relief was otherwise available. Likewise, I have also not assessed the significance, if any, of other encounters between Mr Street and the defendants and what was or was not established as having been said or done. Once Mr Street moved into litigation mode, it is difficult to see what the defendants saying or doing could have assisted Mr Street substantively. Given the findings I have reached, it is not necessary for me to consider whether Mr Street’s actions would have harmed his claims, if they had otherwise been established.
[106] More substantively, in the period from September 2011 to April 2014 when proceedings were finally issued, the parties exchanged proposals and counter- proposals for forms of water rights agreements.
[107] As best as I can tell, the essential difference between the agreements proposed by Mr Street, and those proposed by the Fountaines, was that:
(a) Mr Street wanted rights to enter onto the Fountaines’ land without the
need for prior notice and/or permission;
(b)subject to that, whilst on the land, Mr Street proposed – in general terms – to act reasonably; but
(c) Mr Street would not agree to accepting that the water rights agreement created neither an easement capable of registration, nor a legal interest capable of being protected by a caveat.
[108] That is, the difference in position was not as to the substantive nature of the rights that would be created, but rather their legal nature. For Mr Street they were to be registrable rights or certainly rights in rem. For the Fountaines, they were to be personal rights or contractual rights giving rise to a form of licence.
[109] Seen against that background, in my view – whatever expectation Mr Street might have had – the Fountaines and Ashby Downs were not acting unconscionably. They were prepared, in effect, to allow the Street Trustees ongoing rights to convey water, to maintain the Scheme and to access Waikaramu for that purpose. The conditions they asked for were reasonable notice and a right for the Fountaines, acting reasonably (I infer) and having regard to the operational and safety requirements of their farming business, to restrict that access where that was appropriate.
[110] That overall conclusion is supported by the observations I made during the view of Aranui, The Downs, Waikaramu and the Street Trustees’ property that took place on the first scheduled day of the trial, Monday 29 February 2016. The Waikaramu access track is well formed, but provides for one way traffic. It is twisting, runs across Waikaramu paddocks and includes many “blind” corners. I can well understand why, questions of principle aside – (that is an unwillingness to create legal rights over his land) – Mr Fountaine Senior and more recently Mr and Mrs Fountaine would be concerned that that track could only be used on notice to them. There was not only the safety of their farming operation to consider, to say nothing now of their obligations as owners under the Health and Safety Act. There was also, in the more relaxed years of the 1990s and the early part of this century when their sons were growing up, the concern of a clash between young farm bike riders and unexpected users of that track.
Result
[111] I am therefore satisfied that the Street Trustees have not established that:
(a) Mr Fountaine Senior agreed to grant the users of the Lower Scheme an easement over Waikaramu as pleaded; and
(b)the Fountaines are estopped from declining to grant them such an easement.
Final observations
[112] I have not considered it necessary to pay great attention to the alternative relief Mr Street sought. First, it received little or no attention in submissions: it was never explained to me quite what that relief might involve in a legal sense. Moreover, and as best as I can tell, the defendants have already offered Mr Street or his contractors access to do the very things Mr Street wants to do, on “alternative” terms. In those circumstances, I do not see any basis for the Street Trustees to be given relief by this Court in similar terms.
[113] Mr Street’s statement in February 2012 that he would:
access your clients’ land when, how, through whom and by whichever entrance point it considers appropriate, without any further notice to attend to its water scheme
represented, as I understood matters, Mr Street’s assessment of what he considered to be his “full” legal rights. It is, however, a requirement of the Land Transfer Regulations that a grantee of a relevant easement exercise their rights under that easement to cause “as little damage or disturbance as possible” to the servient land or the grantor. In my view, “without notice” access, and refusal by a grantee to meet reasonable limitations on the time and nature of access, would be incompatible with that obligation. Modern health and safety law, if nothing else, would I suggest make that conclusion inevitable.
[114] The question of Maungahuia’s rights under the Lower Scheme would appear to be still at large. Given Mr Street’s actions in reconnecting the land the Street Trustees now own to that Scheme, I do not see how the Street Trustees could ever be in the position to deny the Fountaines, or any subsequent owner of Maungahuia, the right to do likewise.
[115] In this judgment I did not have to consider the legal significance of an absolute or unreasonable refusal by the Fountaines to allow access over Waikaramu for the purposes of the Lower Scheme. But on the fundamental proposition that the law, hopefully more often than not, reflects properly informed assessments of what is
fair and reasonable, such an absolute and unreasonable refusal would, in my view, be of highly uncertain legality.
Costs
[116] I see no reason why costs should not follow the event. I invite submissions. Submissions are not to exceed five pages in length. Those submissions should be filed on or before 1 November.
“Clifford J”
Solicitors:
Rob Macdonald, Lower Hutt for Plaintiffs
Nowland Gordon and Associates, Wellington for Defendants