Thompson v Battersby HC Auckland CIV-2007-404-676
[2007] NZHC 1815
•8 June 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2007-404-676
BETWEEN MICHAEL LEITH THOMPSON Plaintiff
AND THOMAS ROGER TROUNSON BATTERSBY & ANOR Defendants
Hearing: 1 May 2007
Appearances: R O Parmenter for Plaintiff
K A Muir and B J Thomas for Defendant
Judgment: 8 June 2007 at 2:30 pm
RESERVED JUDGMENT OF COURTNEY J
This judgment was delivered by Justice Courtney on 8 June 2007 at 2:30 pm
pursuant to Rule 540(4) of the High Court Rules
Registrar / Deputy Registrar
Date……………………….
Solicitors: Bruce Dell Law, P O Box 14224, Panmure
Fax: (09) 527-1669
Morgan Coakle, P O Box 114, Auckland
Fax: (09) 379-9155 - K Muir
Counsel: R O Parmenter, P O Box 1052, Shortland Street, Auckland
Fax: (09) 309-8303
THOMPSON V BATTERSBY & ANOR HC AK CIV-2007-404-676 8 June 2007
Introduction
[1] The plaintiff, Mr Thompson, and the defendant, Mr Battersby are, respectively, the owners of adjoining properties at 15 and 18 Lilford Place, Half Moon Bay. Mr Battersby’s property is subject to a restrictive covenant, which precludes any building being erected beyond the building line shown on the deposited plan. Mr Battersby wants to extend an existing deck and erect a wall for privacy. The proposed wall will interfere with Mr Thompson’s extensive sea view.
[2] Mr Thompson maintains that the proposed work will breach the restrictive covenant. He seeks a mandatory permanent injunction requiring Mr Battersby to demolish the works that have been constructed and a permanent injunction prohibiting the construction of any further works in the area beyond the building line. The issue to be determined is whether the proposed deck and wall constitute a building for the purposes of the restrictive covenant.
Nature of restrictive covenants and effect of noting of them in the register
[3] The nature of a restrictive covenant is succinctly described at paragraph
17.011 in LexisNexis Land Law in New Zealand as follows:
A restrictive covenant is a promise or agreement made by the owner of the servient land with the owner of the dominant land that the covenantor will not do some act in relation to the servient land which he or she could otherwise do. If the promise is negative in substance and benefits the dominant land, it will run with the servient land in equity, thus constituting an equitable interest in the land which binds the covenantor’s successors in title who take with notice of it.
[4] A restrictive covenant is equitable in nature. As such, it is not enforceable against a bona fide purchaser for value of the legal estate without notice. In New Zealand, however, the Property Law Amendment Act 1952 allows for restrictive covenants to be noted on the certificate of title of the servient land. Section 126A provides:
(1) Where a positive covenant or a restrictive covenant relating to any land under the Land Transfer Act 1952, the benefit of which is intended to
be annexed to other land, is contained in an instrument coming into operation after the operative date, the following provisions shall apply:
(a) The district land registrar shall have power to enter in the appropriate folium of the register book relating to the land subject to the burden of the covenant [and the land with the benefit of the covenant] a notification of the covenant, and a notification of any instrument purporting to affect the operation of the covenant of which a notification has been so entered, and if the covenant is revoked or modified to cancel or alter the notification:
(b) A notification in the register book of any such covenant shall not give a covenant any greater operation than it has under the instrument creating it:
(c) Every covenant notified on the appropriate folium of the register book shall be an interest within the meaning of s 126A(1) of the Land Transfer Act 1952.
[5] Section 62 Land Transfer Act 1952 relevantly provides that:
Notwithstanding the existence in any other person of any estate or interest…the registered proprietor of land or of any estate or interest in land under the provisions of this Act shall, except in case of fraud, hold the same subject to such encumbrances, liens, estates or interests as may be notified on the folium of the register constituted by the grant or certificate of title of the land but absolutely free from all other encumbrances, liens, estates or interests whatsoever…
[6] In Sawyer v Starr [1985] 2 NZLR 540 at 548 Thorp J observed, in relation to the notation of restrictive covenants on the Land Transfer Register under s 126 that:
Entry in the register accordingly provides one of the two principal benefits of the land transfer system, the protection of purchasers acting in reliance on the register, and the elimination, short of actual fraud, of the significance of notice of unregistered interests.
Interpretation of a restrictive covenant
[7] There is dispute in this case as to what principles apply in the interpretation of a restrictive covenant. Mr Parmenter, for Mr Thompson, submitted that a restrictive covenant is to be construed in the same way as any other contractual document, by applying the approach taken in Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 (HL), applied in Boat Park Limited v Hutchinson [1999] 2 NZLR 74 (CA), where the Court of Appeal
reiterated Lord Hoffman’s statement of the principles to be applied in interpreting contractual documents, namely that:
a) Interpretation is the ascertainment of 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;
b) The background knowledge includes absolutely anything reasonably available to the parties and which would have affected the way in which the language of the document would have been understood by a reasonable man;
c) Previous negotiations and declarations of subjective intent are, however, excluded from the admissible background save in an action for rectification;
d)The meaning that a document would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean;
e) The rule that words should be given their natural and ordinary meaning reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes especially in formal documents. On the other hand, if one nevertheless concluded from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.
[8] Mr Muir, for Mr Battersby, submitted that the proper approach was to treat the restrictive covenant as a public document and interpret it in accordance with the approach taken by the Privy Council in Opua Ferries Limited v Fullers Bay of
Islands Limited [2003] 3 NZLR 740, although he submitted that the result would be the same whichever approach was taken.
[9] In Opua Ferries the Privy Council considered the proper interpretation of a ferry timetable. After referring to the Investors Compensation Scheme principles Lord Hope said at [20]:
But it does not follow that the same approach is to be taken when one is construing a public document. The documents included in the register maintained by a regional council under s 52(1) of the Act have that character. This is, and is intended to be, a public register of passenger transport services. Members of the public who consult the register may have come from far and near. They may have some background knowledge but they may have none at all. In Slough Estates Limited v Slough Borough Council [1971] AC 958 at p962 Lord Reid said that extrinsic evidence may be used to identify a thing or place referred to in a public document but he went on to say that this was a very different thing from using evidence of facts known to the maker of the document but which are not common knowledge to alter or qualify the apparent meaning of words or phrases used in it. As he put it, members of the public, entitled to rely on a public document, ought not to be subject to the risk of its apparent meaning being altered by the introduction of extrinsic evidence. Moreover, the only information which a regional council is obliged by s 53 to ensure is reasonably readily available to the public is that which gives details of the service which the council has registered. The statute makes the position clear. The register is expected to speak for itself.
[10] There have been three recent New Zealand cases involving the interpretation of covenants. In Bonnar v Summerland Property Development Limited HC AK CP134/1MO2 4 July 2002, Heath J applied the Investors Compensation Scheme principles but did not consider the possibility that a restrictive covenant might be a public document and, as such, require a different approach. I note that Heath J decided that case some months before the Privy Council’s decision in Opua Ferries was delivered and there is no indication in his judgment that the point was actually argued.
[11] In Myers Park Apartments Limited v Sea Horse Investments Limited (2006)
7 NZCPR 454, Venning J also applied the Investors Compensation Scheme principles to a positive covenant noted on the relevant titles. Once again the possibility of the covenant being a public document by virtue of being noted on the title does not seem to have been argued.
[12] The point was, however, argued in Congreve v Big River Paradise Limited HC AK CIV-2005-404-6809 8 March 2007 in relation to a restrictive covenant, with Williams J observing at [26] that:
The covenant being in a transfer registered on the relevant certificate of title and accordingly deemed to be “embodied in the register as part and parcel thereof” (Land Transfer Act 1952 s 38(2)) there is force in Mr Stapleton’s submission that additional restrictions apply to the admissibility of extrinsic and subsequent conduct arising out of what may be called the “public document” gloss on the authorities earlier discussed.
[13] Although Williams J referred to the covenant at [29] as being a public document he actually appeared to apply the Investors Compensation Scheme principles, assuming at [44] that the covenant was to be interpreted in accordance with those principles and stating at [68] that “the interpretation of the covenant
…being a public document, is to be construed from the point of view of a reasonable person with the framer’s background knowledge.” This approach would reflect the Investors Compensation Scheme principles rather than those enunciated in Opua Ferries, which require the document to “speak for itself”, and which would make the framer’s knowledge irrelevant and inadmissible for the purposes of interpreting a public document.
[14] The restrictive covenant started life as a contractual provision. Mr Muir’s argument raises the question whether a contractual document should nevertheless be interpreted as a public document as a result of being noted on the register. On the one hand the contracting parties would be entitled to assume that their contract would be interpreted in accordance with the factual matrix in which it was agreed. On the other hand, those dealing with the land years later might reasonably assume that the covenant would speak for itself, since they would have no knowledge of the factual matrix in which the original contracting parties reached their agreement.
[15] The effect of noting a document on the register is, self-evidently, to give notice to those dealing with the land of the existence of the noted interest. The act of noting the existence of the instrument does not purport to affect it in any way. It remains what it has always been, a contract between two parties. In Tonks & Anor v Tonks & Ors [2003] VSC 195 the Supreme Court of Victoria held that:
The construction of a restrictive covenant is approached by the Court in the same way it would approach the construction of any other document recording an agreement between parties…The matter is purely a question of construction, approached against the background of the facts which existed at the time the contract was entered into.
[16] It is of course true that as time passes the evidence as to what factual matrix existed at the time the contract was entered into may no longer be available. The land will continue to be dealt with decades after the original contracting parties have gone. Eventually determining the meaning of the covenant may only be able to be done by reference to the document itself. However, that fact cannot dictate how the nature of the document should be viewed for the purposes of interpretation.
[17] I therefore intend to interpret the covenant in accordance with the Investors Compensation Scheme principles. This means that it is proper to take into account the circumstances in which the restrictive covenant came to be agreed and formulated.
The restrictive covenant over 15 Lilford Place
History of the covenant
[18] The properties in Lilford Place were part of a subdivision developed in the
1970s. In 1971 the developer engaged engineers Tonkin & Taylor to conduct an investigation as to land stability in the area. Tonkin & Taylor identified geotechnical issues arising from the proximity of the proposed sections to the cliff edge and areas of unstable land along the cliff edge. In particular, there was an area to the north of the sections, that are now 15 and 18 Lilford Place, that showed sign of a previous slump. Tonkin & Taylor concluded that this area of coast was generally unsuitable for development.
[19] Section 7.1(a) of its report contained the following recommendation:
No erection of buildings should be permitted within 50 feet of the cliff edge, to allow for cliff recession and the possibility of failure in the weathered overburden. Reference to pipe trenches is made in s 7.4 of this report.
[20] Among the drawings attached to its report was Drawing No. 2047E-1 which showed the recommended building line along the cliff face beyond which Tonkin & Taylor recommended that no buildings be erected.
[21] Tonkin & Taylor reiterated its recommendation in a later report produced in
September 1973:
Along the coastal section of the development we recommend that no erection of buildings be permitted within 50 feet of the cliff edge. We understand that in the area of shallow slumping in surface soils along the clifftop the existing scarps are to be re-graded to a low angle which will further improve the stability of this portion of the cliff line.
[22] Mr Freer, a geotechnical engineer, gave evidence about these reports. He said that the reports were relied on by the Manukau City Council in issuing subdivision consent. There did not appear to be a copy of the subdivision consent produced. However, the Land Information Memorandum (LIM) in relation to Mr Battersby’s property refers to the Tonkin & Taylor investigations, the Tonkin & Taylor drawing 2047E and records the instructions:
No buildings permitted beyond building line restriction shown on Tonkin & Taylor consultant’s report 2047E dated September 1973 and plan AB8 as built E6-99. Refer all permits to structural engineer. Covenants on titles.
[23] Several restrictive covenants were recorded in the Second Schedule of the original memorandum of transfer from the developer to the first owners of the property. The covenant that is in issue is contained in cl 4(a):
4THAT where the firstly described land is one of the lots shown in the Fourth Schedule the Transferee will not at any time hereafter:
(a) Erect or permit to be erected any building or permit any drainage to be carried out upon or under that part of the firstly described land marked “I” on the said Deposited Plan
81252.
[24] The Deposited Plan, which is attached to the certificate of title, shows a line running roughly parallel to the cliff edge through all six sections shown on the plan, including those which are now 15 and 18 Lilford Place. The building line bisects Mr Battersby’s site at a point that leaves about two-thirds of the land within the area marked “I”. The other sites have only about half of the land within the area marked
“I”. However, those sites range in size from 948 m² to 1,173 m², while Mr Battersby’s site is 2,674 m². As a result, even if only 25% of Mr Battersby’s site were inside the building line he would still have approximately the same amount of buildable area within the building line as the other sites.
Meaning of covenant 4(a)
[25] It is apparent from the memorandum of transfer as a whole that it relates to residential property. The second schedule contains several restrictive covenants. The purpose of some, for example cl 1, forbids the erection of any building or structure below a certain value, which is clearly aimed at preserving the value of the other properties in the subdivision. It is not clear from the face of the covenant why
4(a) was included. However, with the benefit of the Tonkin & Taylor reports it is possible to see that it was concern over the possibility of the cliff receding and further failure of the already unstable land that led to the covenant being added. The report, in turn, became the basis for the subdivisional consent and the wording of the convenant was ultimately lifted straight from the report. The Tonkin & Taylor report is clearly an important part of the genesis of the covenant and I therefore consider it is extrinsic evidence that is admissible in ascertaining the meaning of the covenant.
[26] I start, however, with the ordinary and natural meaning of the words used in cl 4(a). The relevant prohibition for present purposes is against “any building”. The Oxford English Dictionary defines “building” as:
That which is built; a structure, edifice: now a structure of the nature of a house built where it is to stand.
[27] Of course, most members of the public would recognise that office blocks, hospitals, schools and all manner of other buildings are nevertheless buildings, although not in the nature of a house. Nonetheless, all such buildings do share a basic similarity of purpose, namely to provide some form of shelter by providing a roof. In a case not dissimilar to the present one, Hilderbrandt v Stephen [1964] NSWR 740, decided in the Supreme Court of New South Wales, the question was whether a tennis court would breach a covenant that “no building of whatever
nature” would be erected on the land. Jacob J considered the ordinary meaning of
“building” and concluded that at 742:
Although popularly it refers to a house, its ordinary meaning, I think, is wider than this; but I think that in its ordinary meaning, it at least involves the concept of a structure with a roof and a support for that roof.
[28] I agree with this approach. In ordinary language people do not view a wall or deck as a building. Just looking at the plain and ordinary meaning of cl 4(a) I consider that it does not have the effect of prohibiting walls or decks.
[29] This conclusion is reinforced when one looks at the other covenants contained in the second schedule. Elsewhere in the second schedule the phrase “any building or structure” is used rather than just the word “building”. For example clause 1, the purpose of which is obviously to protect the values of the properties in the subdivision, provides:
THAT the transferee will not erect or permit to be erected on the land firstly described any building or structure without first obtaining the approval of the Transferor to the plans therefor (which approval will not be unreasonably or arbitrarily withheld) and satisfying the Transferor that the value of the building or structure when erected shall not be less than $30,000.00
PROVIDED HOWEVER that where the firstly described land is one of the lots shown in the Fourth Schedule the value hereinbefore referred to shall be not less than $25,000.00.
(emphasis added)
[30] Clause 2, the apparent purpose of which is to preserve and protect the character of the neighbourhood, provides:
THAT except where the firstly described land is one of the lots shown in the Fourth Schedule hereto the Transferee will not use or permit to be used any building or part thereof on the firstly described land as a flat or flats nor as a boarding house nor as a residence for more than one household unit and will not permit the erection of more than one residential building thereon……..
(emphasis added)
[31] Clause 5, the apparent purpose of which is to protect the views enjoyed from many of the properties in the subdivision, provides:
5. THAT where the firstly described land is one of the lots shown in the Third Schedule hereto the Transferee will not erect or permit to be erected on the land firstly described any building or structure or part thereof to a height exceeding the height set out in the Third Schedule hereto opposite the reference therein to the land firstly described.
(emphasis added)
[32] The addition of the word “structure” can only be intended to widen the category beyond that encompassed by “building”. The Oxford Dictionary defines “structure” as:
That which is built or constructed…a building or edifice of any kind…
[33] Mr Parmenter acknowledged that the dictionary definitions would lead to an inference that while a building is a structure, a structure is not necessarily a building. This reflects what, I think, is the generally understood distinction between a structure, which includes any manner of things that have been constructed but are not necessarily buildings and a building, which will usually be expected to have a roof. In the residential context pergolas, decks, walls, pools and even childrens’ play equipment will usually be regarded as structures but not buildings. In comparison garages, garden sheds or pool houses would usually be regarded as buildings.
[34] Looking at cl 4(a) in the context of all the covenants I have to conclude that it imposes a narrower prohibition on what can be constructed than those covenants which prohibit both buildings and structures. Further, I am satisfied that this meaning is consistent with the purpose of the covenant as it can be ascertained by reference to the Tonkin & Taylor report. The reason that the covenant was included was clearly to accommodate the concern that there may be cliff recession and further failure of the weathered overburden. If that were to happen any construction on the land would be endangered. The consequences of such an event would depend on what that construction was. If it were a house, the consequences in terms of human health and safety could be serious. If it were a structure such as a wall the consequences are more likely to be financial only. In neither case would the general amenities of the subdivision be affected. It would therefore be logical to impose a covenant that was less restrictive than the other covenants so that landowners were not unduly limited in the use of their land.
[35] I should add that, regardless of the purpose of cl 4(a) as it can be acsertained with the assistance of the Tonkin & Taylor report, my conclusion would have been the same because the wording of the covenant is so clear that resort to the available extrinsic evidence could not, in this case, alter the meaning of the document as it stands.
Can the proposed works be regarded as part of a building?
[36] Mr Parmenter submitted that, even allowing for the fact that walls and decks may not be buildings the proposed works will nevertheless constitute a building because they would be an integral part of the house. The architect of the proposed works, Mr Sang, gave evidence that the design generally included the replacement of parts of the existing deck, an extension of the existing deck and extension of the eastern wall of the house by way of the privacy wall. The wall (which is what concerns Mr Thompson the most) would run from the existing wall of the house, along the edge of the deck and along a new deck at a lower level. Mr Sang agreed in cross-examination that the extensions merged into the original house from a design point of view.
[37] Mr Thompson called evidence from an architectural designer, Mr Irwin, who also expressed a view that the proposed works would appear as an integral part of the house, being an extension to the existing house.
[38] Mr Parmenter relied on the decision in Collins v Kennedy [1972] NZLR 939 where Henry J held that a retaining wall and terrace connected to a garage altogether constituted a building for the purposes of s 129 Property Law Act 1952. Collins v Kennedy was referred to in Briggs v Currie (1994) 2 NZConvc 191,837 and Browning v Hirsch HC WN CP91/98 14 June 2000 Heron J (both cases involving encroachment rather than the interpretation of restrictive covenants). In Browning at [21] Heron J, considering an encroaching deck, said:
In my view it is plain that it is effectively a step into the house and it is attached to the property. It is substantial. Without it the house could not wholly function and it is plainly a substantial construction and a building in its own right.
[39] I agree that structures such as a deck and a wall could constitute part of a building if they form an integral part of it. I have no doubt, for example, that when the current deck, which is an integral part of the original house, was first constructed it formed part of the house. However, the restrictive covenant prohibits the erection of a building. The house of which the existing deck forms part has already been erected. The extension of the deck and construction of the wall will take place separately. Can it be said that the work will involve the erection of a building?
[40] Mr Parmenter relied on Webb v Fagotti Brothers (1899) LTR 683 in which a covenant that no hotel or other building for the sale of alcohol “shall be built” was held not to exclude other methods of dealing with the land and simply meant that there was not to “be” any building on the land for the sale of alcohol. However, that case was concerned with the question whether an existing building could be regarded as breaching the covenant. That is the opposite situation of the present case, in which the works have not yet been constructed. Had that been the situation in Webb there would have been no question that there was a breach since the act of construction of the prohibited structure was accepted as constituting a breach, the issue being whether there could be a breach without that act.
[41] I come back to Mr Parmenter’s submission that because the proposed wall is designed to merge with the existing house it should be regarded as part of that building and therefore constitute a breach of the covenant. Although attached to the house in the sense of appearing to be an extension of the existing wall of the house, that attachment is clearly not required in terms of the function of the house. The purpose of the proposed wall is privacy. Mr Sang’s evidence was that the design of the wall was intended to make the wall appear as though it had always been there. There is, I think, a difference between the appearance achieved for design purposes and the kind of functional merging that Heron J was describing in Browning. I consider that a wall of the type proposed is a structure but not a building and is not prohibited by the covenant.
Result
[42] I consider that:
a) Covenant 4(a) only precludes buildings, which are structures in the nature of a house or, at least, which have a roof. It does not preclude the building of other structures;
b) The proposed wall and deck are structures but not buildings and therefore are not prohibited by the covenant.
[43] There will be judgment for the defendant. Counsel may file memoranda on costs as follows:
a) On behalf of the defendant, by 5pm Friday 22 June 2007;
b) On behalf of the plaintiff, by 5pm Friday 29 June 2007;
c) On behalf of the defendant in reply, by 5pm Friday 6 July 2007.
P Courtney J
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