Taylor v Small
[2018] NZHC 2785
•29 October 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-864
[2018] NZHC 2785
UNDER the Declaratory Judgments Act 1908 IN THE MATTER
of an application for a Declaratory Judgment
BETWEEN
WILLIAM PETER TAYLOR AND SUSAN MARY TAYLOR
First Plaintiffs
SCOTT KERRY JACKSON AND SARAH ANNE JACKSON
Second Plaintiffs
RICHARD DONALD JOHNSTON AND RACHEL ELIZABETH JOHNSTON
Third Plaintiffs
TREVOR FRANK SAVORY AND SALLIE ANN RENWICK
Fourth Plaintiffs
AND
GEOFFREY CLEMMENT SMALL AND ARIA SMALL
First Defendants
…./cont
Hearing: 17 September 2018 Appearances:
R Brabant and S Darroch for the Plaintiffs A Simkiss for the First Defendant
No appearance by or on behalf of the Second Defendant
Judgment:
29 October 2018
JUDGMENT OF GORDON J
This judgment was delivered by me on 29 October 2018 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
TAYLOR v SMALL [2018] NZHC 2785 [29 October 2018]
BOMBAY INVESTMENTS LIMITED
Second Defendant
Introduction
[1] The plaintiffs bring an application under the Declaratory Judgments Act 1908 in relation to the interpretation of restrictive covenants. In particular, the plaintiffs seek declarations that:
(a)Only three dwelling houses may be built on the land that the first defendants, the Smalls, purchased from the first plaintiffs, the Taylors, in 2013 (the Smalls’ land); and
(b)The equestrian facilities building (the building), which the Smalls have already constructed on that land, is in breach of the terms of the restrictive covenants.
[2] The plaintiffs further seek injunctions restraining the Smalls (or subsequent purchasers from them) from constructing any more than three dwelling houses on the Smalls’ land and ordering the Smalls to remove the building.
[3] The plaintiffs’ application is opposed by the Smalls and by the second defendant, Bombay Investments Ltd. After purchasing the Smalls’ land from the Taylors, the Smalls subdivided the land into seven lots (the Small subdivision). Bombay Investments Ltd purchased one of those lots.
[4] The Smalls also say that the plaintiffs are estopped from asserting their interpretation of the restrictive covenants, both in respect of the number of new dwelling houses that may be built on the Smalls’ land and whether the covenants permit the construction of the building.
[5] As no relief is sought against Bombay Investments Ltd, that company, having filed a notice of appearance reserving rights, has not taken part in the proceeding.
[6] Interested parties, Fei Wang and Yao Feng Qi (the Wang/Qis), in their notice of opposition, oppose the development of the Smalls’ land and the Smalls “further subdividing it”. They also oppose the plaintiffs’ application as it relates to the interpretation of the restrictive covenants (in relation to the number of dwelling houses
that may be built on the Smalls’ land) to the extent it may affect their property rights. The Wang/Qis did not take part in the proceeding beyond filing a notice of opposition.
The Taylor subdivisions
[7] The Taylors were the owners of 40 hectares of land in Ingram Road, Ramarama, south of Auckland. They also owned an adjacent 33 hectares of land.
[8] The Taylors obtained a subdivision approval from the (then) Franklin District Council. The approval was subsequently varied. On 31 March 1994, the scheme plan was deposited in the Land Transfer Office (the first Taylor subdivision). There were six rural-residential lots (old lots 1, 2, 3, 4, 5 and 6). There was a further lot (old lot
11) which was later combined with old lot 1, and there was also a lot (old lot 10) which was the access way for all the lots in the first Taylor subdivision.
[9] In October 1994, the Taylors sold the first of the old lots, old lot 2. The memorandum of transfer included a restrictive covenant on old lot 2 dated 9 December 1994 in favour of old lots 1, 2, 3, 4, 5, 6, 10 and 11 (Covenant 1). Old lot 2 was thus the servient land in Covenant 1. Covenant 1 was notified on the title of old lot 2, which forms part of the land now owned by the third plaintiffs, the Johnstons.
[10] In July 1997, the Taylors sold the second of the old lots, old lot 3. The memorandum of transfer included a restrictive covenant on old lot 3 dated 23 December 1997 in favour of old lots 1, 2, 3, 4, 5, 6, 10 and 11 (Covenant 2). Old lot 3 was thus the servient land in Covenant 2. Covenant 2 was notified on the title of old lot 3, which is now owned by the fourth plaintiffs, the Savory/Renwicks.
[11]The wording of all material parts of Covenants 1 and 2 is the same.
[12] By deed dated 15 July 1998 between the Taylors and the then owners of old lot 3, the parties agreed to restrictive covenants in favour of old lot 3 applying to the servient lands then owned by the Taylors, namely old lot 1 (with old lot 11 amalgamated), old lot 4, old lot 5 and old lot 6 (Covenant 3). Old lot 3 was thus the dominant land in Covenant 3.
[13]By this stage, the Taylors had sold only old lot 2 and old lot 3.
[14] In 2004,1 by way of a new subdivision, the Taylors created two lots (2004 lots 1 and 2) from old lot 4 and a small portion of old lot 5. 2004 lot 1 was made up of part of old lot 4 and the small portion of old lot 5. 2004 lot 2 was made up of part of old lot 4.
[15] The second plaintiffs, the Jacksons, purchased 2004 lot 1 (the Jackson land) from the Taylors. The current owners of 2004 lot 2 are the Wang/Qis. There is a dwelling house on both 2004 lot 1 and 2004 lot 2.
[16] On 24 June 2004, a deed was entered into between the Taylors and the Jacksons. By that deed, a covenant was completed in favour of the Jackson land (2004 lot 1) over old lot 1 (with old lot 11 amalgamated), old lot 6 and a further two titles then owned by the Taylors2 (Covenant 4). The Jackson land was thus the dominant land in Covenant 4.
[17] The wording of Covenant 4 is identical in all material respects to Covenant 3, save for the expressed value required for any dwelling house (not less than $200,000 in Covenant 3 and not less than $300,000 in Covenant 4).
[18] In 2005, the Taylors created a separate lot from a part of old lot 1 and sold it to the Johnstons, the owners of old lot 2. These two pieces of land were merged into one title at some stage.
[19] In 2007, the Taylors sold old lot 11 (which had been amalgamated with old lot 1) to a Kaye Maxwell. Old lot 11 was then merged into Ms Maxwell’s title, a golf course. I mention the sale of old lot 11 simply by way of narrative background. Any further discussion of old lot 11 is not required in terms of the issues I am required to consider.
1 There is some disagreement as to whether this occurred in 2003 or 2004, but this is not material.
2 Those two further titles were not part of the “first Taylor subdivision”. The two titles are now owned by Peter O’Meara who was served with the proceedings but who has not taken part.
[20] Mr Taylor’s evidence is that in 2010 he ceased dairy farming and they farmed the remainder of their land with dry stock. He says that by 2013, he and his wife were retired and wished to downsize the amount of land they owned. They undertook a common boundary location, creating two new lots of 4.1 hectares (being part of old lot 1 and on which there were two houses, both built before the first Taylor subdivision) and 17.5 hectares (of undeveloped land, being the balance of their original 40-hectare piece of land).
[21] In 2013, the Smalls purchased the 17.5 hectares of land in one lot from the Taylors. That land comprised a large part of old lot 1 (being all of old lot 1 except for the 4.1 hectares referred to in [20] above and the part of old lot 1 sold to the Johnsons in 2005 as referred to in [18] above), a small portion of old lot 4, most of old lot 5 and all of old lot 6.
[22] In 2015, the Taylors created a separate title for the two dwellings on the 4.1 hectares they retained. Those dwellings were a cottage and the house they live in. They are now selling the cottage.
The Small development and subdivision
[23] In 2014, the Smalls obtained a building consent and constructed the building, described in their 2015 application for subdivision consent as a new shed and stables with living quarters, associated access, effluent disposal field and an arena. The building comprises a stable and barn complex of 300 m2 with accommodation on two levels of 96 m2, and an attached truck/machinery shed of 85 m2.
[24] Earthworks carried out on the property as part of the development works included preparation of a building site for a dwelling house which has not been built. Since December 2014, the Smalls have been living in the accommodation included in the building.
[25] In 2015, the Smalls applied to the Auckland Council for consent to subdivide the land they purchased from the Taylors. Consent was granted on 8 October 2015, enabling subdivision into seven lots (Small lots 1-7). Their plan was that the sales of six lots would enable them to build their house on the lot they proposed to retain.
[26] Mr Small’s evidence was that the reason for constructing the building before constructing a home, was to give their youngest daughter the facilities she needed to succeed as soon as they could and with the money they had. Mr Small said that his daughter is a New Zealand representative in show jumping and is regularly named in the New Zealand Youth Squads. Their intention has always been to provide her with every opportunity to succeed.
[27] The approved scheme plan shows a specified building area on each of Small lots 1-6 and a condition of the consent requires any residential dwelling located within Small lots 1-6 to be located within the specified building area. The building is on Small lot 7.
[28] Since the Small subdivision was approved and titles issued, the Smalls have advertised Small lots 1-6 for sale. They have sold Small lot 4 to Bombay Investments Ltd. A single dwelling house is under construction on Small lot 4, which sits within the boundaries of old lot 1.
[29] In 2018, the Smalls sold Small lot 2 which sits within the boundaries of old lot 5.
[30] The Smalls have ceased marketing the other Small lots until the interpretation of the covenants is resolved.
Land to which Covenant 3 applies
[31] It is not in dispute that the upshot of all the foregoing is that Covenant 3 is notified on:
(a)The Jackson title (2004 lot 1, being part of old lot 4 and a small portion of old lot 5);
(b)The Johnston title (being old lot 2 and with the portion of old lot 1 amalgamated);
(c)The Taylor titles (two titles, one containing the cottage and the other the house, both titles being part of old lot 1);
(d)The Wang/Qi title (2004 lot 2, being part of old lot 4);
(e)The Maxwell title (includes old lot 11); and
(f)The seven lots in the Small subdivision.
Land to which Covenant 4 applies
[32]It is also not in dispute that Covenant 4 is notified on:
(a)The Jackson title;
(b)The Johnston title;
(c)The Taylor titles; and
(d)The seven lots in the Small subdivision.
Covenants 3 and 4
[33] It is also not in dispute between the parties that all of the plaintiffs, as original parties or successors in title, have the right to enforce the terms of Covenants 3 and 4.
[34] The controversy is over the interpretation of clause (i) of the Schedule in Covenants 3 and 4. That clause reads:
(i)That the Covenantors shall not erect or permit to be erected or placed on the servient lands or any part thereof any building or erection other than a new (not being an existing building previously occupied or used and removed from another locality) single dwelling house and such farm outbuilding or ancillary buildings as are usual and reasonable for the type of rural use of the land in the subdivision (of which the dominant land and the servient lands form part) and of a nature design or style (including that of the garden or land-scaping aspects and fencing of surrounding grounds) in keeping with each other such that the dwelling house and any additional buildings and the surrounding grounds thereof blend in with the rural nature of the surrounding area to ensure that a pleasing and aesthetically compatible appearance is
maintained for the benefit of the dominant land and all the servient lands.
[35] As to the definition of “servient lands”, in the section headed “Background”, clause A in Covenant 3 reads:
The Covenantors [the Taylors] are registered proprietors of all the land contained in Certificates of Title 92C/958 [old lot 1], 961 [old lot 4], 962 [old lot 5] & 963 [old lot 6] (inclusive) (North Auckland Land Registry) (“the servient lands”).
[36]In Covenant 4, clause A in the section headed “Background” reads:
The Covenantors [the Taylors] are registered proprietors of all the land contained in Certificates of Title 88C/139 [now O’Meara land], 92C/963 [old lot 6], 92C/958 [old lot 1] and 133C/912 [now O’Meara land] inclusive (North Auckland Registry) (“the servient lands”).
Issues
[37]There are three issues I must consider:
(a)How many new single dwelling houses may be built on the Smalls’ land;
(b)Do Covenants 3 and 4 permit the building constructed by the Smalls; and
(c)Are the plaintiffs estopped from asserting their interpretation of Covenants 3 and 4, both in respect of the number of new dwelling houses that may be built on the Smalls’ land and whether Covenants 3 and 4 permit the construction of the building.
Issue one
Interpretation of restrictive covenants – extrinsic evidence
[38]I first start with the approach to be taken to the interpretation of contracts. In
Firm PI 1 Ltd v Zurich Australian Insurance Ltd, the Supreme Court said:3
3 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.
[60] … the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended …
…
[63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant …
(Citations omitted)
[39]There is also the following:
[62] … The fact that parties are aware their contract might be relied upon by a third party may justify a more restrictive approach to the use of background in some instances …
[40] In Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust, the minority judgment of William Young and O’Regan JJ discusses the extent of extrinsic evidence that may be considered when ascertaining the true construction of a restrictive covenant:4
[60] If this was simply a dispute between the parties to an ordinary contract, the contract would be interpreted having regard to the background knowledge known or reasonably available to the parties, which would include the earlier iterations of the covenant and, in particular, the aerial photograph. Such an interpretative exercise would be carried out in terms of the principles discussed in Firm PI and could arguably result in the same outcome as that arrived at by the High Court and Court of Appeal using rectification. The problem, however, is that the open space covenant is not an “ordinary contract” of the kind just postulated. As indicated in the italicised section of the passage which we have set out from Firm PI, somewhat different considerations apply where the instrument in question affects the rights of third parties. And, as we will now explain, this is particularly so with instruments which create interests in land.
[41]In terms of the correct approach, the judgment concludes:
[73] A very flexible approach to the admission of extrinsic evidence as bearing on the construction of registered documents will promote litigation and, as was recognised in Westfield, has the potential to undermine the policy of indefeasibility of title. On the other hand, if we were to adopt a rigid rule
4 Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust [2018] NZSC 75.
excluding such evidence, there will still be marginal cases which will have to be addressed and, in some instances, perverse outcomes, despite there being no good reason why, as between the parties to the dispute, the extrinsic evidence should be ignored.
[74]Against that background, we consider that:
(a)Generally, registered documents should be construed without regard to extrinsic evidence which is particular to the original parties and is not apparent on the face of the register.
…
(c) We would not exclude reference to facts which a reasonable future reader of the document could be expected to be aware of and would recognise as relevant and which they have access to, such as the configuration of land, any physical features to which the document relates or refers and any material referred to in the document.
[42] In a separate judgment, Elias CJ notes that there is some authority that the only extrinsic evidence properly admitted when construing registered instruments is, in the absence of special circumstances, context that would be readily apparent to all third parties.5 However, the Chief Justice further states that it was unnecessary to resolve whether, and to what extent, resort to extrinsic evidence is appropriate in the case of instruments notified on a public register as the meaning of the covenant in that case was clear in its terms as a whole.6
[43] In her separate judgment, Glazebrook J agreed with the reasons of William Young and O’Regan JJ on all issues apart from the interpretation of the covenant.7
[44] Finally, Ellen France J recorded that she made no comment on the approach to be taken to the use of extrinsic evidence in the construction of registered documents.8
[45] I will follow the approach in [74] of Green Growth No 2 Ltd, set out in [41] above on the admission of extrinsic evidence.
5 At [133].
6 At [133].
7 At [151].
8 At [161].
The wording of Covenants 3 and 4
[46] I first focus on the relevant wording of clause (i) of the Schedule in Covenants 3 and 4 which reads as follows:
That the Covenantors [the Taylors as registered proprietors of the servient lands] shall not erect or permit to be erected or placed on the servient lands or any part therefore any building or erection other than a new (not being an existing building previously occupied or used and removed from another locality) single dwelling house …
[47]There are three possible ways to read the restriction:
(a)It permits a “single dwelling house” on the (defined) servient lands. This would mean that only one new dwelling house may be erected on the servient lands. On this reading, “or any part therefore” is emphasising that the prohibition extends to all parts of the servient lands;
(b)That the building of a new single dwelling house is restricted to a new single dwelling house on each of the lots identified in Covenants 3 and 4 as the servient lands (refer [35] and [36] above); or
(c)It permits “a” single dwelling house on any part of the servient lands. That is, not just one, but potentially many. “Any part thereof” means that further development and building on “any part” of the servient lands is permitted. Read this way, the restriction is not as to the number, but as to the nature of the dwelling.
[48]The first interpretation is not advanced by either party.
[49] The plaintiffs submit that the second interpretation is correct. They say therefore the maximum number of dwelling houses that may be built on the Smalls’ land is three, one per each of the old lots included in the Smalls’ land, namely old lots 1, 5 and 6.9 With one dwelling house already under construction by Bombay
9 Although there is a part of old lot 4 included in the Smalls’ land, there is already a dwelling house (in fact two dwelling houses) constructed on that old lot.
Investments Ltd on Small lot 4 (part of old lot 1), one able to be built on Small lot 2 now sold (within old lot 5) and a third able to be built on Small lot 7 (on old lot 6), that then “uses up” the number of dwelling houses that may be built.
[50]The Smalls, on the other hand, submit that the third interpretation is correct.
Submissions
[51] Mr Brabant, for the plaintiffs, places emphasis on the fact that the wording is in the singular. The covenants use the words “ a new single dwelling hous e”. He submits that if multiple dwelling houses were intended to be permitted, then that phrase would not have been employed.
[52] Mr Brabant submits that the words “new” and “single” are to be given their natural and ordinary meaning. He says that the meaning to be given to the word “new” is emphasised by adding in brackets a prohibition on an existing building previously occupied or used and moved from another locality.
[53] Mr Brabant submits that the two words “dwelling house” are also to be given their natural and ordinary meaning, and it would not be appropriate to have resort to, for example, the definitions in the Unitary Plan or previous district plans or schemes.10 Mr Brabant refers to The New Zealand Oxford Dictionary definition of a dwelling as “a house; a residence; an abode”, and a dwelling house as “a house used as a residence, not as an office etc”.11
[54] As to the words “or any part thereof”, Mr Brabant submits that the correct interpretation of this control is that “any part” would be any one of the four lots described as the “servient lands”.
[55] Mr Brabant submits that the position adopted by the Smalls, namely that Covenants 3 and 4 are concerned with the quality and character of the buildings (in other words, not density), and that the wording permits a single dwelling of the
10 Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 at [32].
11 Tony Deverson and Graeme Kennedy (eds) The New Zealand Oxford Dictionary (Oxford University Press, Melbourne, 2005) at 344.
required cost and standard on each separate legal lot regardless of the date that legal lot was created, is not an interpretation which recognises what he says is a crucial element of the covenant restriction, which was to limit the number of houses that could be built. In other words, it is a control on building density.
[56] Ms Simkiss, for the Smalls, submits that Covenants 3 and 4 do not restrict the number of dwelling houses on the Smalls’ land. She says that the plain meaning of clause (i) is that it permits the building of single dwelling houses on any part of the Smalls’ land. She says that this interpretation is supported by a careful analysis of the words used, their meaning and the order of the words in the clause.
[57] Ms Simkiss further submits that the most important interpretative factor is that the permission applies to any part of the servient land. Finally, she submits that Covenants 3 and 4 are concerned with the quality and nature of the buildings, not the number of them.
Analysis
[58] The meaning of “new” is clear and is not in dispute between the parties. The plain meaning is further supported by the words in brackets which state “not being an existing building previously occupied or used and removed from another locality”.
[59] “Dwelling” and “dwelling house” mean a building in which people live (as opposed to a place of business). Again, this is not in dispute. In my view, “dwelling house” is permissive enough to permit a single building containing more than one residential unit, for example, an apartment building.
[60] There is then the word “single”. It modifies the meaning of “dwelling house”. In my view, “single” denotes the permitted use of the land in this case. It is not a numerical value. In other words, it does not mean one dwelling house. It means a single family dwelling house. This interpretation is supported by the general rules of English grammar and usage as to word order. An adjective immediately before a noun is generally indicative of type or purpose. If the parties had wished “single” to indicate “one”, the clause would have said “single new … dwelling house”, not “new … single dwelling house”.
[61] There is then the word “a”. The issue between the parties focusses on what weight should be attached to that word. “A” is an indefinite article and does not necessarily indicate quantum.
[62] “A” may mean “one”, “some” or “any”.12 “A” is therefore capable of indicating a numerical value of “one” but does not always do so. In my view, “a” does not indicate a numerical value of one in this case for the following reasons:
(a)The word “one” could have easily been used if the parties had intended that there be a restriction on the number of sections or number of houses. In Big River Paradise Ltd v Congreve, the restrictive covenant provided:13
No subdivision of the Servient Lot shall permit the creation of more than three separate allotments nor permit more than one dwelling to be erected on each such allotment.
That was not done in this case.
(b)Or, alternatively, the same words could have been used as were used in this case but a different word order employed, namely “a single new … dwelling house”. In Young v Stolten, the relevant restrictive covenant read as follows:14
a)Not to erect on the land any building except a single new dwellinghouse with garaging and other building
…
In that case, the intention was seen to be the creation of sections of equal size with a single home on each. Such an interpretation is understandable with the word order being “a single new …”.
12 Lesley Brown (ed) Shorter Oxford English Dictionary (5th ed, Oxford University Press, Oxford, 2002) at 1; Deverson and Kennedy, above n 11, at 1.
13 Big River Paradise Ltd v Congreve, above n 10, at [1].
14 Young v Stolten [2009] NZCA 264 at [8].
However, in this case, single is separated from the word “dwelling house” by the word “new”. In my view, the word order does not support the plaintiffs’ interpretation.
[63] That “a” does not mean “one” in this case is also supported by the use of the words “or any part thereof” which follow the words “servient lands”. The “servient lands” is a defined term. It means the whole of the servient lands which are different in the two covenants:
(a)In Covenant 3, the servient lands are all the lands then owned by the Taylors and described in the certificates of title listed; and
(b)In Covenant 4, the servient lands are some of the lands in Covenant 3 plus the additional land then owned by the Taylors and now owned by Mr O’Meara.
[64] “Or any part thereof” means any part of the whole. The whole is that which immediately precedes the word “or”, that is any part of the servient lands. In my view, the plaintiffs’ submission that these words should be interpreted as “ a part” of the servient lands, being one of the four lots described in each of the covenants, is a reading down of the word “any”. This reading down of “any” is not supported by the context or the plain wording of the clause.
[65] There is also no control on subdivision in Covenants 3 and 4. That supports the interpretation I consider should be adopted.
[66] I agree with the submission made by Ms Simkiss that the focus of clause (i) is on the quality and nature of any dwelling house rather than being a control on density:
(a)The word “new” is emphasised by the addition of the words in brackets in clause (i);
(b)It must be a “single” dwelling house, not a dwelling house incorporating multiple units;
(c)Other words in clause (i) refer to the nature, design or style of a dwelling house (and other buildings);
(d)The dwelling house must be of a certain build value. Clause (ii) of the Schedule to Covenant 3 provides:
That the Covenantors will not erect or permit to be erected or placed on the servient lands or any part thereof any dwelling house except in accordance with (i) hereof and unless the value of that dwelling house (not including any ancillary buildings) shall have a value of not less than a base figure of $200,000.00 as at the 1st day of October 1994, adjusted by the movement of the New Zealand Institute of Valuers Model Housing Cost Index from that date to the date of application for permit.
(Covenant 4 adopts a value of $300,000); and
(e)There is a restriction on caravans, huts or sheds in clause (iii) which reads as follows:
That the Covenantors will not erect or place or permit to be erected or placed on the servient lands or any part thereof any caravan, hut or shed for permanent or temporary use of any kind except if any such hut or shed is of a permanent nature and forms part of the additional or ancillary farm buildings as maybe permitted pursuant hereto.
[67] For all those reasons, I do not accept the plaintiffs’ submission that the number of new dwelling houses on the Smalls’ land is restricted to three. A single dwelling house may be built on any part of that land.
Extrinsic evidence
[68] The parties were not in dispute that in considering the meaning of Covenants 3 and 4, the Court could have regard to Covenants 1 and 2.
[69] The test is whether the content of Covenants 1 and 2 are facts “which a reasonable future reader of the document [Covenants 3 and 4] could be expected to be aware of and would recognise as relevant and which they have access to …”.15
15 Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust, above n 4, at [74].
[70] Clauses C and D in the section headed “Background” in Covenants 3 and 4 read as follow:
C.THE dominant land is already subject to certain land covenants the benefit of which enures to the servient lands.
D.THE parties have agreed that the servient lands should be subject to identical positive and restrictive land covenants as detailed in the Schedule hereto.
[71] In my view, the Court is entitled to consider Covenants 1 and 2 as extrinsic evidence. The dominant land in Covenants 3 and 4 is identified under the heading “Background” in clause B, while clause C refers to “certain land covenants”. Those earlier land covenants would in my view be recognised as relevant by a reader of Covenants 3 and 4, and such reader would have access to Covenants 1 and 2, they being included in the memorandum of transfer for old lots 2 and 3.
[72] Although I will consider this extrinsic evidence, in my view it is not in fact necessary to do so, having regard to the plain meaning of clause (i).
[73] In Covenants 1 and 2, old lots 2 and 3 respectively were the servient land and defined in the transfer as “the subject land”. The substantive words of the restriction on erection of buildings in clause (i) of the second schedule to Covenants 1 and 2 were the same. Clause (i) reads as follows:
(i) That the Transferee [the purchaser of old lot 2/lot 3] shall not erect or permit to be erected or placed on the land any building or erection other than a new (not being an existing building previously occupied or used and removed from another locality) single dwelling house and such farm outbuildings or ancillary buildings as are usual and reasonable for the type of rural use of the land in the subdivision and of a nature design or style (including that of the garden or landscaping aspects and fencing of surrounding grounds) in keeping with each other such that the dwelling house and any additional buildings and the surrounding grounds thereof blend in with the rural nature of the surrounding area to ensure that a pleasing and aesthetically compatible appearance is maintained for the benefit of all Lots.
[74] Mr Brabant submits that these covenants allow only one new single dwelling house (plus outbuildings or ancillary buildings) on the servient land.
[75] Mr Brabant says that the same restriction was carried forward into Covenants 3 and 4 created by deed. In support of that submission, Mr Brabant refers to clauses C and D in the section headed “Background”.
[76] Mr Brabant submits that the Smalls are asking the Court to accept that the parties who entered into Covenants 3 and 4 intended that a different and more intensive level of dwelling house construction would be permitted on the lots described as the servient land in those two covenants. He submits that it is not tenable that the owners of the dominant land, having earlier agreed to restrict dwelling house density on their own property to a single building (and a farm outbuilding or ancillary buildings), would have agreed to future further subdivision and development of dwelling houses on each separate legal lot regardless of the date that legal lot was created.
[77] Ms Simkiss submits that clauses C and D should be read disjunctively. She submits that clause D is not a reference back to the land covenants in Covenants 1 and
2. What clause D means, she says, is that each of the certificates of title referred to as the servient lands in Covenants 3 and 4, should be subject to the same land covenants contained in the Schedule to Covenants 3 and 4.
[78] I do not accept that submission. If that were the case, there would be no need for clause C.
[79] However, having said that, I do not accept Mr Brabant’s submission that the meaning of the words in the second schedule to Covenants 1 and 2, is that only one new single dwelling house may be built on the subject land. I say that for all the reasons set out in [58] to [62] above.
[80]Also, as part of the preamble in Covenants 1 and 2, there is the following:
… PROVIDED ALWAYS that the Transferee shall as regards the said stipulations and restrictions be liable only in respect of breaches thereof which shall occur while the Transferee shall be the registered proprietor of the subject land described or any part thereof in respect of which any breach shall occur
…
(Emphasis added)
[81] In my view, the preamble contemplates subdivision and accordingly more than one new single dwelling house being able to be placed on the subject land.
[82] Further, that this is not a density control is reinforced by the following words in the preamble to both Covenants 1 and 2:
… The Transferor … subdivided that land into lots in the manner shown and defined on that plan for the purposes of the sale of the said land in separate lots as a group of rural lots designed for residential dwellings of a high standard in keeping with the rural setting thereof.
[83] Therefore, a reference to Covenants 1 and 2 does not alter the plain meaning of the words in Covenants 3 and 4.
Post-contractual conduct
[84] Ms Simkiss submits that the state of the land and boundaries, and how the boundaries have changed since 1998 (the date of Covenant 3), is admissible and highly relevant to the interpretation of Covenants 3 and 4. She submits, in reliance on the Supreme Court’s decision in Wholesale Distributors Ltd v Gibbons Holdings Ltd, that post-contractual conduct is admissible if it “is capable of shedding light on the meaning intended by both parties”.16
[85] However, the Supreme Court did not agree on the issue as to whether or not the subsequent conduct that may be taken into account has to be that of all parties to the contract. Tipping J said:
[63] … If the court can be confident from their subsequent conduct what both parties intended their words to mean, and the words are capable of bearing that meaning, it would be inappropriate to presume that they meant something else.
(Citations omitted)
[86] But Thomas J considered that the conduct of one party alone would suffice, at least if that conduct was inconsistent with the interpretation that party was arguing before the Court.17
16 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at [52].
17 At [136].
[87] The Taylors are a party to both Covenants 3 and 4. The other original party to Covenant 3 no longer owns the land and there is no relevant conduct on their part described in the evidence. The other original party to Covenant 4 is the Jacksons.
[88] In this case, the subsequent actions in completing further subdivision were those of the Taylors only. There is no evidence of any involvement by the other party with subsequent subdivision.
[89] While on the Thomas J approach, the evidence of the Taylors’ conduct might well be admissible were this an ordinary contract, bearing in mind that we are here considering the interpretation of a restrictive covenant, I take a cautious approach.
[90] In that regard, I do not consider the evidence of the subsequent conduct of the Taylors is admissible in construing the intention of the parties to Covenants 3 and 4.
[91] I also do not take into account the subjective intentions expressed in the evidence of Mr Taylor. In any event, such evidence is again not necessary for my decision.
Conclusion on issue one
[92] I find against the plaintiffs and accordingly will not make the declaration sought in their first cause of action that the plain wording of the restrictive covenants, interpreted in the context of Covenants 3 and 4 secured against the titles in the Small subdivision, read as a whole, limits the maximum number of dwelling houses on the land purchased by the Smalls to three dwelling houses.
Issue two
[93] Mr Brabant submits that the building which has been erected is neither a farm outbuilding nor an ancillary building because it has been constructed in the absence of a dwelling house. He says that the part of the building presently occupied by the Small family is not a dwelling house. He refers to Mr Small’s affidavit and says it is, at best, “temporary living quarters” attached to the stables complex.
[94] Mr Brabant further submits that the words “as are usual and reasonable for the type of rural use of the land in the subdivision” mean that any farm outbuilding or ancillary building must be measured against what has been established as farm outbuildings or ancillary buildings within the land in the first Taylor subdivision to date. He says by contrasting the Smalls’ building with the existing farm outbuildings on three of the plaintiffs’ properties, it is apparent that the Smalls’ building is in breach of that part of the covenant provision.
[95] Further, Mr Brabant submits that the building is in breach of the part of the covenants which requires it to be of a “nature design or style … in keeping with each other such that the dwelling house and any additional buildings and the surrounding grounds blend in with the rural nature of the surrounding area”. There are two issues here, Mr Brabant submits. First of all, the requirement that the outbuilding be in keeping with the main building cannot be met as the main building, the dwelling house, is absent. Second, he submits that the words “surrounding area” refer to the lots subject to the restrictive covenants rather than the area surrounding those lots.
[96] Finally, Mr Brabant says that both the qualitative controls I have referred to (that is usual and reasonable; and nature, design or style) have the purpose of ensuring that a “pleasing and aesthetically compatible appearance” is maintained for the benefit of the dominant land and all the servient lands. He refers to the affidavit of Mr Taylor which contains an opinion that the building is not in keeping with the existing development of houses, outbuildings, gardens and landscaping on the properties also subject to the covenants. He says that what the Smalls have developed does not blend in with their own property, and with the residential dwellings and landscaped grounds of the Johnston, Savory/Renwick and Jackson properties.
[97] Ms Simkiss, on the other hand, submits that the covenants do not require any farm outbuilding or ancillary buildings to be built in conjunction with a dwelling house; the equestrian facilities are an “outbuilding” which is usual and reasonable for the type of rural use in the subdivision and the surrounding area; facilities for the purpose of keeping, riding and training horses are usual and reasonable for the type of rural use in the subdivision and the surrounding area; and sheds, including sheds with
attached accommodation, are usual and reasonable for the type of rural use in the subdivision and the surrounding area.
Analysis
[98] The New Zealand Oxford Dictionary describes an outbuilding as “a detached shed, barn, garage, etc. within the grounds of a main building; an outhouse”.18 The Oxford English Dictionary similarly defines outbuilding as “[a]n ancillary building near to or adjoining a main building, esp. a shed, stable, etc., near to the main house on a farm; an outhouse”.19 The meaning of outbuilding as a structure belonging to, being subordinate to and separate from a main building is supported by the definition of “ancillary”. Ancillary is described as “subordinate, subservient” or “something which is ancillary; an auxiliary or accessory”.20
[99] My view, based on the plain meaning of the words, is that, in the absence of a dwelling house, the building cannot be said to be an outbuilding or ancillary building.
[100] However, further analysis of the words of clause (i) is required. Given the wording of the clause, both the dwelling house and any farm outbuilding or ancillary buildings must comply with further conditions. It is necessary and possible to assess whether the building complies with those further conditions. If the absence of a dwelling house is the only aspect of non-compliance with Covenants 3 and 4, this may well be relevant in terms of the remedy sought by the plaintiffs.
[101] The next issue is whether the building is “usual and reasonable for the type of rural use of the land in the subdivision”.
[102] I do not accept the plaintiffs’ submission that the assessment of whether a farm outbuilding or ancillary building is “usual and reasonable for the type of rural use of the land in the subdivision” must be measured against what has been established as farm outbuildings or ancillary buildings within the subdivision to date. If that were so, that would mean any farming is not permitted except possibly some grazing (the
18 Deverson and Kennedy, above n 11, at 804.
19 Oxford English Dictionary (online ed, Oxford University Press, 2018).
20 Deverson and Kennedy, above n 11, at 36.
Taylors run cattle over their land and the Jacksons have paddocks with cattle) and orchards (part of the Savory/Renwick’s land is in an avocado orchard) because the rest of the neighbours do not use their land for any other rural use.
[103] I consider that the plaintiffs’ interpretation of “type of rural use of the land in the subdivision” unduly narrows what is meant by the relevant covenants. I consider that it should be interpreted more broadly than the way in which the plaintiffs submit.
[104] First, clause (iv) of the Schedule to Covenants 3 and 4 contemplates farming. That clause provides:
(iv)That the Covenantors will not develop, farm, cultivate or otherwise use the servient lands or any part thereof except in accordance with the best husband like farming practices …
[105] The Oxford English Dictionary defines farming as “[t]he business of cultivating land, raising stock, etc.; agriculture, husbandry”.21
[106] Farming therefore includes keeping livestock. Livestock includes domestic animals on a farm for use or profit.22 In my view, that includes horses. I consider it also would include storing vehicles and equipment for farming purposes.
[107] The evidence of Glen Beal, who swore an affidavit on behalf of the Smalls, also supports a conclusion that the outbuilding is usual and reasonable for its “rural use”, being the keeping of horses and the storage of vehicles and equipment. Mr Beal is a director of Campbell Tyson, an accountancy practise which has operated in the Franklin District for many years. Mr Beal says his firm has a significant interest in the rural economy, and approximately one-third of their business is performed for their rural client base. Mr Beal has particular knowledge and experience in the equestrian industry and acts for a number of studs, trainers, traders and breeders in both the racing and sport horse industry. He has also been personally involved in the equestrian industry and sport since around 1970, including as an owner and breeder. He is familiar with the achievements of the Smalls’ daughter and says she is one of New Zealand’s most talented young riders.
21 Oxford English Dictionary, above n 19.
22 Oxford English Dictionary, above n 19; Brown, above n 12, at 3037.
[108] Mr Beal has visited the Smalls’ property and describes the facilities as consisting of a large arena, stables/shed, a horse walker, room for horse floats and trucks, as well as paddocks for grazing. He says the entire stables/shed is 33 metres long, 12 metres wide and 6 metres high. The arena is 80 metres long and 40 metres wide. Mr Beal says he is familiar with the spectrum of different types of private and public equestrian facilities in the Franklin area, including Pukekohe and Ramarama. His opinion is that the facilities at the Smalls’ property fit within the spectrum of private facilities he is familiar with, and they are not unusual or unexpected in the Franklin area. He says they are very similar to the facilities he has for his family, except that they do not have a horse walker which is on his wish list.
[109] Further, there is evidence from Mr Small that there are two large sheds on Mr O’Meara’s property which is part of the servient lands in Covenant 4. They are each 25 metres by 12 metres, both with attached living accommodation. Although those sheds are both smaller than the building, there are no limits or requirements as to size or dimensions on any buildings in the covenants.
[110] There is also no evidence that temporary accommodation is or is not a rural use. As noted, there is the evidence of Mr O’Meara’s sheds which suggests it is. But, in any event, the use of that part of the building for accommodation is temporary. Mr Small’s evidence is that the accommodation portion was signed off by the Auckland Council as “temporary living quarters” on the basis that once the Smalls’ house is built, the accommodation attached to the facilities will not be used as living quarters. Mr Small says that this means that the cooking facilities will be removed, rendering it a “lunch room” only.
[111] Based upon the evidence outlined above, I consider that the building is usual and reasonable for the type of rural use of the land in the subdivision, namely farming which includes the keeping of horses.
[112] The next issue is whether the building is of a “nature design or style” in keeping with the dwelling house. That cannot be tested in the absence of a dwelling house. As there is no dwelling house, the building cannot comply with this part of the clause because it is not “in keeping” with the dwelling house.
[113] The next issue is whether the building and the surrounding grounds blend in with the rural nature of the surrounding area.
[114] The first question here is whether the words “surrounding area” are restricted to the lands originally owned by the Taylors, or whether the words incorporate the area outside the servient lands. In my view, the words “surrounding area” were intended to refer to the land outside the subdivision. Had it been intended to restrict the assessment to the land in the subdivision, that word would have been used, as it has been used elsewhere in the same clause.
[115] The second question then is whether the building is of a “nature, design or style” such that it blends in with the rural nature of the surrounding area.
[116] As noted, Mr Beal’s evidence is that the Pukekohe/Bombay area has historically been characterised by farming, but it is more “lifestyle” in character these days. He says there are hundreds of what he describes as “equestrian properties” in the Franklin area, in which he includes Pukekohe and Ramarama. Equestrian properties are therefore common in the area, including in the immediate vicinity of Ingram Road, and have been for many years.
[117] Furthermore, there are hundreds of properties in the wider area having equestrian facilities for private use. The evidence of the Smalls that the equestrian facilities on their property are for private use, and further the evidence is that it is within the usual spectrum of such properties and typical for those with a strong commitment, such as the Smalls have, to their daughter’s development as a show jumper.
[118] This evidence supports the conclusion that the nature of the building blends in with the rural nature of the surrounding area.
[119] As to the physical appearance, or design and style, of the building, the evidence of Mr Small is that the outbuilding is a dark (iron sand) coloursteel clad shed with temporary accommodation clad in band sawn ply and brown batons. That description is consistent with photographs that were annexed to Mr Small’s affidavit.
[120] Mr Taylor, however, describes the building as painted in “an orange shade”. He further says that the temporary accommodation part of the building “glints in the sun”. In one of the photographs annexed to Mr Taylor’s affidavit, the accommodation part of the complex does appear to be orange in colour. However, two further photographs also annexed to Mr Taylor’s affidavit show the accommodation as a brown colour, consistent with the description given by Mr Small.
[121] Ms Simkiss submits that there is nothing particularly distinguished about the appearance of the building, but on the other hand, nor is there anything objectionable. She notes Mr Taylor’s description of the building as “utilitarian”. That would seem to be an accurate description, as is the submission by Ms Simkiss having regard to the photographs.
[122] While Mr Beal’s evidence is that the facilities at the Smalls’ property fit within the spectrum of private facilities, and are not unusual or unexpected in the Franklin area, he does not specifically comment on the design or style of the building and whether it blends it within the surrounding area. However, there is similarly no evidence to suggest the design or style of the building does not blend in with the rural nature of the (wider) surrounding area.
[123] Most of Mr Taylor’s complaints in his affidavit relate to the size of the building. But there is no restriction on size in the clause. Significantly, there is no evidence to suggest the building in its design or style does not blend in with the rural nature of the (wider) surrounding area. There is conflicting evidence as to the colour of the accommodation part of the complex, and there was no cross-examination. However, given that two of Mr Taylor’s photographs are consistent with Mr Small’s description and photographs, the weight of evidence supports Mr Small’s description.
[124] There are then the words “to ensure that a pleasing and aesthetically compatible appearance is maintained for the benefit of the dominant land and all the servient lands”. In my view, the Court is not required to make a judgment on aesthetics. The final words of the covenant, in my view, are to be read as a consequence that follows if all the preceding requirements are met (which is the case, save for the absence of a dwelling house).
[125] My conclusion on issue 2 is that the building does not comply with the terms of cl(i) of the Schedule, but only in two respects. First, there is not (yet) a dwelling house associated with the building. Second, as a result, the building cannot be said to be “in keeping” with the dwelling house.
[126] For completeness, I note that I have not taken into account the evidence of Michael Campbell or Nicholas Hall on behalf of the Smalls regarding the provisions of the (then) Franklin District Council planning documents or the Auckland Unitary Plan (the relevant document from 19 August 2016). Clause (iv) of Covenants 3 and 4 directs compliance with the “… Resource Management Act 1991, and the Franklin District Council District Scheme …”.
[127] Ms Simkiss referred to the definition of “farming” in the Franklin District Council planning document. In putting that to one side, I acknowledge the words of Dobson J in Whittaker v Jericevich where the Court was also required to interpret the meaning a restrictive covenant:23
[21] I accept Mr Gilmour’s caution about the inappropriateness of adopting interpretations used in different statutes, where the use of the expressions will be dictated by the statutory purpose. As the Court of Appeal noted in Big River Paradise, statutory definitions of words are often unhelpful in ascertaining what their ordinary meaning is as used in a contractual setting.
(Citations omitted)
Estoppel
[128] Ms Simkiss submits that if the plaintiffs are correct in their interpretation of Covenants 3 and 4, they are estopped from asserting those interpretations against the Smalls. The estoppel arises, Ms Simkiss says, both in relation to the number of dwelling houses permitted on the Smalls’ property and whether the building is in breach of Covenants 3 and 4.
[129] Having found against the Smalls that the building is in breach of the covenants, I need to address the claim of estoppel as it relates to the building.
23 Whittaker v Jericevich [2012] NZHC 1545.
[130] Having regard to my decision on the number of dwelling houses permitted, it is not strictly necessary to deal with estoppel as it relates to that issue. However, I will nevertheless do so.
[131] Ms Simkiss submits there are a number of ways in which the plaintiffs’ conduct gives rise to an estoppel. First, she says that in advertising the property for sale in 2013, the Taylors (by way of their estate agent’s advertising) expressly represented that it had exceptional “building sites”, “huge future potential” and “sub-division potential”. She says that this advertisement represents that multiple houses could be built on the land and gives rise to an estoppel by representation.
[132] Further, Ms Simkiss submits that at all relevant times there were two houses (the Jacksons and the Wang/Qis) on old lot 4. This naturally led the Smalls to believe that the covenants permitted that.
[133] None of the plaintiffs, entitled to prevent or remedy what they now say was a breach of Covenant 3, did so, thus encouraging the Smalls’ belief. Nor did they communicate to the Smalls that, in their case, and not in the Wang/Qis’ case, they intended to enforce the strict terms of the covenants. Ms Simkiss submits that the foregoing facts give rise to an estoppel by silence and/or by convention.
[134] Next, Ms Simkiss submits that despite being aware of the Smalls’ intended development and opposing it, none of the plaintiffs mentioned that the covenants would prevent the development. Ms Simkiss says this gives rise to an estoppel by silence and/or by convention, and she relies on the following facts:
(a)From March 2015, the plaintiffs were aware of the Smalls’ plan to subdivide. There was a meeting at the Smalls’ property on 13 March 2015 and a follow up letter on 8 May 2015 to all neighbours. At the meeting on 13 March 2015, the attending plaintiffs (all but the Jacksons) raised concerns regarding the driveway and traffic effects, but no-one mentioned the terms of any covenant at the meeting. In their responses to the follow up letter of 8 May 2015, while the Jacksons and
the Savory/Renwick’s took a position, they did not mention the covenants.
(b)In May 2015, the Smalls’ surveyor sought input from the Johnsons and the Taylors on visual effects. The Taylors, who responded, did not raise the issue of the covenants.
(c)The Smalls then changed the plans so that the neighbours’ consent was not required to the subdivision. However, the plaintiffs were aware of the Smalls’ application for subdivision consent made on 21 July 2015. The Taylors and the Jacksons sent letters to the Auckland Council objecting to the subdivision, but did not mention in their letters to the Council or to the Smalls any understanding that the covenants on the Smalls’ land prohibited a house on each of the Small lots 1-7.
(d)The Smalls began work on widening the access way for the purpose of the subdivision in August 2015. The neighbours were aware of that work and responded to it, but again did not mention the covenants.
[135] Next, Ms Simkiss submits that between February and May 2017, the plaintiffs did not assert that the covenants have the meaning they now advance in this Court. She says there were also positive statements to the contrary from the Taylors which give rise to an estoppel by silence and/or by representation. She refers to the evidence as follows:
(a)In August or September 2016, potential purchasers raised the interpretation of Covenants 3 and 4 with the Smalls’ land agent. It seems that the concern raised by potential purchasers at that time was that the covenants were not clear, thus enabling a person to claim that they restricted development to one dwelling per old lot.
(b)The Smalls then raised this with their neighbours by discussing it with some of them, and by delivering a letter from their lawyers dated 16 February 2017, which outlined a possible amendment to the
restrictive covenants. The purpose of the amendment was to remove any possible ambiguity.
(c)On the basis of their experience in communications with the plaintiffs, there was no reason for the Smalls to believe their neighbours would assert the covenants had a meaning they had never raised. In a letter dated 22 February 2017, Mrs Taylor wrote to the Smalls and in relevant part the letter reads as follows:
Even though the boundaries have been changed, each title that has been issued, has the same covenant registered, which provides for one house of a certain standard. We see no reason to change this.
[136] Ms Simkiss submits that Mrs Taylor’s use of the words “each title that has been issued” includes all the titles created by the Small subdivision.
[137] Ms Simkiss submits that it is highly relevant that despite being implacably opposed to the subdivision and raising a number of other reasons for their objection, the plaintiffs did not raise the covenants. She says this is not really silence, but constitutes acquiescence in the Smalls’ understanding of the legal position which she says the plaintiffs now unconscionably seek to deny.
[138] In relation to the building and its intended use, despite being aware of this since mid to late 2014, and much earlier in the case of the Taylors, all the plaintiffs remained silent about the covenants. Ms Simkiss submits this gives rise to an estoppel by convention and/or by silence as a result of the following conduct:
(a)Ms Simkiss says the Taylors knew before the Smalls purchased the land that they were horse people and intended to build a horse arena for their daughter.
(b)The building was constructed between June 2014 and December 2014, and she says all the neighbours would have observed the building during construction and when completed. However, they remained silent about the legal rights and obligations that they now assert. No
objection to the building was made until December 2017, and the alleged breach of Covenants 3 and 4 was raised for the first time in these proceedings.
[139] Finally, Ms Simkiss submits that by their actions in constructing the building and pursuing the subdivision of the property, the Smalls made it clear that they believed there was no impediment to their doing so. As soon as they became aware that the covenants might affect the subdivision, they ceased marketing the sections. But, by that time they had expended considerable time and money, including the cost of developing their plans, which involved the payment of consultants, the costs of seeking and obtaining resource consent, and the costs of work required to comply with the resource consent, notably a widening of the roadway. They were also unable to sell the subdivided properties (except the two that have already been sold), having purchased the land on a mistaken understanding of its development potential and having incurred the costs of constructing the building.
Analysis
[140]There are four elements of an estoppel:24
(a)The creation or encouragement of a belief or expectation;
(b)Reliance on that belief or expectation;
(c)Detriment as a result of that reliance; and
(d)That it would be unconscionable for the party against whom the estoppel is alleged to go back on his or her word.
24 Matthew Barber “Consideration” in Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) 105 at [4.6.2].
Estoppel by representation
[141] An estoppel by representation requires some form of communication from the representor to the representee.25 The meaning of that representation is assessed objectively.26 The representation must generally be clear and unequivocal.27
[142] The first alleged representations are contained in the estate agent’s advertisement of the property the Smalls purchased from the Taylors. They are the statements identified by Ms Simkiss, namely that the property had exceptional “building sites”, “huge future potential” and “sub-division potential”.
[143] I do not consider that these representations were “clear and unequivocal” representations as to the potential for “multiple houses” to be built on the land. The representations related to the ability to subdivide and the quality of potential building sites. They were not representations about what the restrictive covenants on the title permitted by way of further development.
[144] Even on the case for the plaintiffs, they say that the covenant provisions that apply to the Smalls’ land permit three new dwelling houses to be established. There was, therefore, subdivision potential. These were not clear representations of how many lots and how many building sites were possible.
Estoppel by convention
[145] In National Westminster Finance NZ Ltd v National Bank of NZ Ltd, the Court of Appeal set out the following pre-requisites for estoppel by convention:28
(a)The parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable (the assumption);
(b)Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction;
25 James Every-Palmer “Equitable Estoppel” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 601 at [19.3.1].
26 At [19.3.3].
27 At [19.3.4].
28 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA) at 550.
(c)Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them;
(d)The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption as being true and binding;
(e)The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption; and
(f)In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.
[146] The key element is that the parties have embarked on a course of dealing on the basis of a mutual assumption. This element is absent in the evidence referred to by Ms Simkiss. In relation to the presence of two houses on old lot 4, there is no evidence that at the time of the purchase of the Smalls’ property from the Taylors, there was a “mutual assumption” in relation to the presence of those two houses and the terms of the covenant on the title of old lot 4.
[147] There is then the evidence that Ms Simkiss refers to regarding the plaintiffs’ awareness of the Smalls’ intended subdivision. The submission made by Ms Simkiss comes down to a proposition that although the plaintiffs advised the Smalls that they strongly opposed the subdivision, this was insufficient and that the plaintiffs were required to state their intention to enforce the restrictive covenant. This does not satisfy the pre-requisites for estoppel by convention.
[148] Similarly, there is no evidence that the plaintiffs and the Smalls embarked on a mutual assumption that the covenants did not prevent the development. There was no discussion regarding the terms of the covenants which would found such an assumption. This does not satisfy the pre-requisites for estoppel by convention.
[149] Furthermore, there was no discussion by the plaintiffs and the Smalls to the effect that the plaintiffs acknowledged the covenants did not have the meaning which the plaintiffs now assert. There was therefore no assumption for the parties to rely on. In any event, it cannot be said that their acceptance of any assumption was intended to affect their legal relations.
[150] Then, in relation to the building, Ms Simkiss asserts a failure on the part of the plaintiffs to advise the Smalls that they considered the building to be in breach of the provisions of the restrictive covenant. However, on the evidence, none of the plaintiffs, including the Taylors, had prior knowledge of the building that was to be constructed on the Smalls’ land. There is no evidence that in deciding to proceed with the construction of the building, the Smalls placed reliance on any representation by any of the plaintiffs as to the building complying with the restrictive covenants. There was no evidence of any mutual assumption giving rise to an estoppel by convention in this regard.
Estoppel by silence
[151] In general, the law is reluctant to impose liability on a party who simply remains silent and allows another party to act to their detriment.29 However, in certain circumstances, silence may give rise to an estoppel either by amounting to a genuine representation or because the silent party was under a duty to speak.30
[152] For a duty to speak to arise, the silent party must be aware of the other party’s reliance on an incorrect understanding. Awareness includes actual knowledge, constructive knowledge, or at least the suspicion that the other party is relying on a false assumption.31
[153] In relation to the presence of the two houses on old lot 4, there is no evidence that the Taylors had actual knowledge, constructive knowledge, or at least a suspicion that the Smalls were relying on the presence of those two houses as a factor in their decision to proceed with the purchase. There was therefore no duty on the part of the Taylors to speak.
[154] In relation to the meeting at the Smalls’ property on 13 March 2015, and the events that followed, there was no evidence that Mr Small would have acted differently in obtaining consent to the subdivision or completing construction of the shed if any of the plaintiffs had spoken up. To the contrary, following the meeting
29 Every-Palmer, above n 25, at [19.5.2].
30 At [19.5.2].
31 At [19.5.4(2)].
with the neighbours who were “utterly opposed”, and were “not at all receptive or flexible” to the subdivision proposal, the Smalls went ahead and obtained a non- notified consent to subdivide the property into seven lots.
[155] In any event, there is no evidence which suggests that the Taylors had awareness of an incorrect understanding on the part of the Smalls which might have facilitated a duty on the part of the Taylors to speak.
[156] There was also an alleged duty to speak by way of a response to the letter from the Smalls’ solicitors enclosing a proposed variation to the covenants to enable multiple dwellings to be constructed. The proposed changes included alterations concerning the establishment of an outbuilding or ancillary buildings, and the qualitative restriction in relation to buildings, landscaping and fencing.
[157] Even if there was a duty to speak (and I do not find that there was) the date of the letter precludes any reliance.
[158] In relation to the letter sent by Mrs Taylor referred to in [135](c) above, even assuming the letter has the meaning that Ms Simkiss submits (in [136]), having regard to the date of the letter, the Smalls could not have relied on it.
[159] As to the building, as above, there is no evidence that the Taylors had knowledge (prior to construction commencing) of the building that was to be constructed on the Smalls’ land. It cannot therefore be said that there was awareness of an incorrect understanding.
[160]For all the foregoing reasons, the defence of estoppel fails.
The position of the Wang/Qis
[161] For completeness, I refer to the position of the Wang/Qis. Their notice of opposition first supports the plaintiffs, opposing the Smalls developing and further subdividing their land, but it also raises opposition to the plaintiffs’ application “as it relates to the interpretation of the land covenants to the extent it may affect our property rights”.
[162] It will be recalled that the house on the Wang/Qis’ land was the second house built on old lot 4. Having regard to my decision on the number of dwelling houses that may be built on the Smalls’ land, there is no consequential effect on the Wang/Qi dwelling house.
Relief
[163]In their first cause of action, the plaintiffs seek the following:
A declaration that the plain wording of the restrictive covenants, interpreted in the context of the 2 Deeds (covenants 3 and 4) secured against the titles in the Small subdivision, read as a whole, limits the maximum number of dwelling houses on the land purchased by the Smalls in 2013 (Lot 2 DP 459923 (CT 601983) to 3 single dwelling houses, by reference to the underlying original lots in the Taylor subdivision.
[164]For the reasons already given, I decline to make that declaration.
[165] It follows that I also refuse the relief sought in the third cause of action, namely an injunction restraining the Smalls or subsequent purchasers of the remaining unsold lots in the Small subdivision from constructing dwelling houses on those lots.
[166] I make the declaration sought in the second cause of action, namely that the equestrian facilities complex (described in this judgment as the building) is in breach of the restrictive covenant in clause (i) of the Schedule to Covenants 3 and 4.
[167] In their fourth cause of action, the plaintiffs seek an injunction that the Smalls, within six months of the date of the order, pull down and remove the building and restore the grounds under and around the building and associated facilities to a compatible appearance with the rural use of the land in the subdivision. They also seek an injunction restraining the Smalls from erecting any farm building or ancillary building which does not meet the terms of Covenants 3 and 4.
[168] Mr Brabant submits that, while damages in lieu of an injunction can be sought, this is a case where an injunction is appropriate. He submits that an injunction is required now for there to be certainty about compliance with the covenant provisions. He submits that in relation to the building, the injunction is proposed on terms that allow a reasonable time for demolition or removal to another site.
[169] Mr Brabant further submits that it would not be appropriate to allow the existing building to remain on the basis that a new single dwelling house, constructed at some time in the future, would “legitimise” the building.
[170] However, that submission is made on the basis that there are other reasons why the building is in breach of the restrictive covenant. In my decision, I have found that the building does not comply with the terms of clause (i) in two respects. Both of these relate to the absence of a dwelling house.
[171] I have found, significantly, the building complies with the qualitative controls in the clause. Furthermore, I note that the Smalls have prepared a building site for a dwelling house. They have not yet constructed a dwelling house, as they have been awaiting the outcome of these legal proceedings.
[172] The grant of an injunction is discretionary.32 In these circumstances, I do not consider it would be equitable to require the building to be taken down and removed, only to have it restored once a new dwelling house was constructed.
[173] I therefore refuse to grant injunctive relief as sought in relation to the building. I refuse this relief on the basis that the Smalls will construct a dwelling house.
Result
[174]I decline to make the declaration sought in the first cause of action.
[175]I make the declaration sought in the second cause of action.
[176] The applications for injunctions in the third and fourth causes of action are dismissed.
32 Andrew S Butler “Injunctions” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 765 at [25.2.2(2)(b)]. See also Thomas Borthwick & Sons (Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538 (CA) at 545; Ogle v Aitken [2017] NZHC 1799 at [30].
Costs
[177] My preliminary view is that the Smalls are entitled to costs, on a 2B basis. I encourage the parties to agree costs and file a joint memorandum. Any joint memorandum should be filed within 20 working days of the date of this judgment.
[178] If costs cannot be agreed, then the Smalls should file and serve their memorandum within five working days of the date for the joint memorandum and the plaintiffs within a further five working days. Memoranda should not exceed five pages (excluding any annexures).
Gordon J
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