Waitakere Farms Limited v Mawhinney
[2023] NZHC 1397
•7 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1499
[2023] NZHC 1397
UNDER the High Court Rules, Declaratory Judgments Act and Property Law Act 2007 BETWEEN
WAITAKERE FARMS LIMITED
Plaintiff
AND
PETER WILLIAM MAWHINNEY and SIXTY-SIX AUCKLAND LIMITED
Defendants
Hearing: 10 and 11 May 2023 Appearances:
AAH Low for plaintiff
P W Mawhinney for himself and second-named defendant
Date of judgment:
7 June 2023
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 7 June 2023 at 12.30pm.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Counsel/Solicitors:
Alexandra Low, Barrister, Auckland Cook Morris Quinn, Auckland
Copy to:
Defendants
WAITAKERE FARMS LTD v MAWHINNEY [2023] NZHC 1397 [7 June 2023]
[1] The plaintiff (Waitakere Farms) owns land in Auckland’s Waitākere, over part of which (the subject land)1 the defendants claim benefit of a 50-year encumbrance supporting their 30-year registered forestry right, both dating from 20 September 2010. The forestry right includes an option to purchase an embedded forestry block on the subject land, the exercise of such option requiring the subject land’s subdivision.
[2]In this proceeding Waitakere Farms seeks orders:
(a)under s 339 of the Property Law Act 2007 requiring it to acquire the defendants’ interest in the subject land, or for the subject land’s sale and division of the proceeds among the parties; alternatively, either:
(b)under the Declaratory Judgments Act 1908, rendering the encumbrance redundant and the forestry right extinguished; or
(c)under s 317 of the 2007 Act, extinguishing the encumbrance,
and by counterclaim, also under s 339, the defendants seek orders subdividing the subject land otherwise than in compliance with the conditions applicable to an applicable subdivision consent. Otherwise, the defendants’ evidence and submissions do not address the relief sought by Waitakere Farms.
Background
[3] Waitakere Farms acquired the subject land as ancillary to its primary landholding, in anticipation it may be used to satisfy conditions for the primary landholding’s subdivision, for which Waitakere Farms now has consent on terms not requiring recourse to the subject land.
[4] The subject land no longer being required for its ancillary purpose, Waitakere Farms wishes to sell it — according to Waitakere Farms’ sole director and shareholder, Joe Duncan, “to free up capital”, inferentially to settle “debt that needs to
1 The subject land is that described under the identifier 1050478 (formerly NA139A/725) in the North Auckland Land Registration District, comprising Lot 323 Deposited Plan 210991, Lot 9 Deposited Plan 166619 and Lot 200 Deposited Plan 210991.
be repaid” — but perceives the encumbrance and forestry right to be a hindrance to sale, particularly as no longer serving any material purpose.
[5] The encumbrance and forestry right both were created on 20 September 2010 as between Forest Trustee Limited as each encumbrancer and encumbrancee and grantor and grantee respectively. The forestry right defines ‘grantee’ and ‘grantor’ as meaning “Forest Trustee Limited at Auckland as trustee of the Forest Trust together with its successors in title”. The ‘Forest Trust’ is undefined and unevidenced (although the identity of its trustee(s) is the subject of some narrative in Mr Duncan’s and Mr Mawhinney’s evidence). Forest Trustee Limited had acquired the subject land from Mr Mawhinney on 8 June 2010. On 28 September 2010, the land was transferred to Sarah Jane Noble Lowndes and S J Lowndes Trustee Services Limited and then on 20 March 2019 to Waitakere Farms.
[6] Forest Trustee Limited (since liquidated on 13 March 2015, and removed from the Companies Register on 12 September 2019) was a company of which Mr Mawhinney was sole director. In July 2012, the encumbrance and forestry right were registered as having been transferred to Mr Mawhinney and Zebra Crossings Trading Limited, and thereafter to Mr Mawhinney and Sixty-Six Auckland Limited (the present defendants).
[7] Under cross-examination, Mr Mawhinney asserted he held the encumbrance and forestry right personally, together with Sixty-Six Auckland Limited as trustee of the Sixty-Six Auckland Trust (if that may be intended a reference to the Forest Trust). A necessary inference from the forestry right’s definition of grantor and grantee may be Mr Mawhinney and the two companies were at the relevant dates of transfer trustees of the Forest Trust, if they are to have succeeded to Forest Trustee’s title. On the dates of each the encumbrance’s and forestry right’s creation and transfers, Mr Mawhinney was (and remains) registered as an undischarged bankrupt (although Mr Mawhinney disputes the register’s current accuracy). I cannot determine on the evidence before me if that may have consequences for his trusteeship.
[8]Clause 2.1 of the memorandum granting the forestry right granted the grantee:
… for a term of thirty (30) years from and inclusive of the date of this Memorandum as a Forestry Right in gross the rights set out following:
(a) the non exclusive right to enter upon, occupy and maintain, the Forestry Block and the Access Lands;
(b) the exclusive right to plant, maintain, release, cultivate, graze with animals of all kinds including poultry, protect, harvest, carry away, sell and otherwise utilise trees of all kinds and species and any by products thereof that grow or may been grown on the Forestry Block;
(c) for the purpose of and to such extent as may be necessary or convenient for gaining access to and egress from the Forestry Block and from and to any other land the full free and unrestricted though nonexclusive right at any and all times by day to go, enter, pass and repass upon the Forestry Block and Access Lands with or without any aircraft, machinery, vehicles (empty or laden), implements, horses, plant of all kinds or any other thing whatsoever;
(d) the right to, entirely at its own cost, construct, install, maintain, improve and use roadways, skids, tracks, bridges, culverts, other works and other means of access upon the Forestry Block for the purpose of exercising the rights conferred in this Clause 2.1.
[9] Clause 1.1(a) of the encumbrance requires the encumbrancer, at the encumbrancee’s expense, to:
… do all things and sign all documents required to:
(i) establish a sustainable forest management plan under the Forests Act 1949 in respect of the Land (“sustainable forest management plan”); and/or
(ii) enable the putting into effect and the carrying out of a vegetation and weed management plan which is the subject of a condition of a subdivision consent under the Resource Management Act 1991 for the Land or land contiguous or conterminous [sic] with it or is amalgamated or is to be amalgamated with any such land or any combination of the aforesaid (“vegetation and weed management plan”).
The ‘Land’ is the subject land. Clause 1.1 relevantly continues to require the encumbrancer to:
(b) Allow access to the Land to the Encumbrancee and its workmen, servants, agents, and contractors, and the functionaries of any statutory authority, for the purposes of the sustainable forest management plan or the vegetation and weed management plan at any time between 6am and 9pm on any day during the terms of those plans.
(c) Not enter into any other covenants or grant any forestry right other than to the Encumbrancee in respect of vegetation including shrubs and trees on or in the Land without the prior written consent of the Encumbrancee, such consent to be at the sole and unfettered discretion of the Encumbrancee.
(d) Not destroy, damage, clear, cut down, trim or remove any native or indigenous vegetation from the Land except as provided for and in
accordance with the sustainable forest management plan and/or the vegetation and weed management plan (“indigenous” as defined in the definitions rule of the version of the Waitakere City Council’s District Plan that is operative on the date of this Instrument).
(e) Upon the written request of the Encumbrancee, execute and deliver to the territorial authority a covenant in favour of the territorial authority in gross or in which the [subject land] is dominant tenement, provided always that the covenant shall be on terms in accordance with any condition of subdivision consent issued by the territorial authority to enable the subdivision of the Land and/or any land conterminous [sic] with it or land that is amalgamated or is to be amalgamated with any such land or any combination.
[10] The forestry right thus entitled the grantee to use the subject land until 2040 as permitted, but the bulk of trees growing on its internal forestry block since have been harvested and sold and the right to replant said to have been transferred to Epsom Woods Limited, since liquidated. Waitakere Farms comprehends trees cannot now be planted for harvest by anyone before the right expires.
[11] The defendants argue the forestry right is not spent, as remaining available to grow trees until 2040. Whether or not that is the case in practical reality, the forestry right confers in its terms greater utility than for forestry alone through at least cl 2.1(b)’s reference to “graze with animals of all kinds including poultry”. I am unclear how it is contended the right to replant has been transferred. The forestry right does not appear expressly to confer a right to replant. If such right is to be inferred from cl 2.1(b)’s “exclusive right to plant”, the agreement with Epsom Woods appears to have been to provide access to and sell the timber subject to the forestry right at a price including planting “a total area of 12 hectares of land within 100 kilometres of the subject land in pinus radiata”. Epsom Woods’ solicitors only acknowledged it “owns the trees on the block of land together with all associated access rights over the property and the adjoining properties to extract the forestry”. I do not see cl 2.1(b)’s “exclusive right to plant” in the forestry block necessarily to have been transferred to Epsom Woods except if by some unusual implication from the planting component of the purchase price. I may misunderstand something.
[12] The defendants also argue the subject land may be subdivided to enable their acquisition of the forestry block (if conditions associated with the subject land’s 2012 subdivision consent were cancelled, as Mr Mawhinney pursues on separate appeal and
here before me under s 339). The defendants say they have exercised the option to purchase the forestry block.
[13] Mr Mawhinney appears to consider the encumbrance’s cl 1.1(a)(ii) and (e) may enable him to combine other land (albeit no longer owned by him or his interests) with the subject land, to achieve a minimum lot size for my division under s 339. I do not follow that logic so far as the option to purchase is concerned, which is limited to the forestry block, but acknowledge if the subject land is co-owned by the parties some different division may be achievable under s 339. Mr Mawhinney accepted under cross-examination his s 339 proposal “requires the division of the land and that the division of the land requires a consent”, but argued the consent’s present conditions
— contended contrary to s 84(1) of the Resource Management Act 1991, as not observing relevant policy statements or plans — “have no effect”, meaning they were unlawful.
Property owned by co-owners?
[14] Section 339 gives me broad discretion to make sale or division orders to resolve differences “in respect of property owned by co-owners”.2 Under the Act, unless the context otherwise requires, “co-owner means a tenant in common or a joint tenant”, possibly including present equitable tenancies,3 but nonetheless meaning co-ownership.
[15] But the parties here are not co-owners on any basis. The Forestry Rights Registration Act 1983, which enables the creation of forestry rights, provides “[n]otwithstanding any rule of law or equity to the contrary, every forestry right shall be deemed to be a profit à prendre”.4 A profit à prendre confers no tenancy in land, but only a right to take from it.5 The Land Transfer Act 2017’s definition of ‘land’ as
2 Lo v Lo [2021] NZCA 693, (2021) 22 NZCPR 721 at [21]–[27].
3 See Fraser v Butler [2017] NZHC 120, (2017) 18 NZCPR 358 at [44]–[54], predominantly in reliance on GW Hinde and others (eds) Butterworths Land Law in New Zealand (Butterworths, Wellington 1997) at [9.050] and GW Hinde and others (eds) Hinde McMorland & Sim Land Law in New Zealand (2nd ed, LexisNexis, Wellington 2004) at [13.021(a)], citing Fleming v Hargreaves [1976] 1 NZLR 123 (CA) at 127 (citing Halsbury’s Laws of England (1912) vol 21 Partition at 840, n l).
4 Forestry Rights Registration Act 1983, s 3(1).
5 Halliday v Bank of New Zealand [2012] NZHC 3099, [2013] 1 NZLR 279 at [39], citing DW McMorland and others (eds) Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed,
including “plants, trees, and timber on or under land” takes matters no further because of the final ‘land’, which a right to take does not attach.
[16] It “firmly” is established “the grantee of an option to purchase acquires an immediate equitable interest capable of supporting a caveat”.6 Only if and to the extent exercise of the option to purchase crystallises in a sale of the subject land might any legal interest in that land be said to arise, but then not in common or jointly with Waitakere Farms. By extrapolation, whatever present equitable interest may arise from the unexercised option, neither can it arise in common or jointly with Waitakere Farms.
[17] Nonetheless, Mr Mawhinney’s most recent affidavit, sworn 13 April 2023 in reply to that of Tim Duncan for Waitakere Farms sworn 30 March 2023, asserts “[t]hat option has now been exercised, by the posting of the 2 copies of the sales and purchase agreement to Waitakere Farms”. What is said to have been posted is not in evidence.
[18] However, the forestry right — while setting out at its cl 6.2 a mechanism for exercise of the option by such post — identifies “[a]ny sale and purchase agreement entered into as a result of the exercise … shall be conditional, as a precondition of sale” upon obtaining such consents as are necessary to enable completion of subdivision, completion of subdivision accordingly and provision of access, all at the defendants’ expense. There is no evidence the contended posted sale and purchase agreement made provision for any of those preconditions, or they could or would be met, particularly as the forestry block is 2 hectares in area and the Waitakere District Plan Rules appear to require a minimum lot size of 4 hectares (although Mr Mawhinney disputes the requirement as without jurisdiction). As such, any present equitable interest in the subject land arising from the option to purchase must be slim.
[19] At the hearing, I queried if Mr Mawhinney’s pursuit of the subdivision consent’s conditions’ unlawfulness on both his appeal and before me may be abusive. Pursuit of the same relief in duplicate proceedings is an abuse of process: “improper
LexisNexis) at [16.008]; Ford v Ensor [2015] NZHC 1459 at [17], citing Rebecca Hofmann (ed) Land Law (online looseleaf ed, Westlaw) at [9.2.01] (citing Alfred F Beckett Ltd v Lyons [1967] Ch 449 (CA) at 482).
6 Bevin v Smith [1994] 3 NZLR 648 (CA) at 665, citing Morland v Hales (1910) 30 NZLR 201 (CA).
use of [the court’s] machinery”;7 use of that process “for a purpose or in a way significantly different from its ordinary and proper use”.8 Duplicate proceedings are abusive in themselves, even if the former proceeding remains undetermined.9
[20] In response, in closing, Mr Mawhinney advised the appeal would be discontinued. After the hearing concluded he instead enquired, by memorandum of 15 May 2023 addressed to the registrar of this Court, of “the status of the appeal”, plainly contending for its continuation in saying “[t]he appellants don’t accept [it is determined]”. If the appeal is not discontinued, it is an abuse to seek the same relief in this proceeding. I will not indulge it. But, even if the appeal was discontinued, under s 339, I may not subdivide land contrary to s 11 or pt 10 of the Resource Management Act 1991.10 In respect of the subject land, that means any order must comply with the subdivision consent’s conditions.11 Given Mr Mawhinney’s desire the conditions be cancelled, and the lack of any evidence they are met, sale remains wholly conditional. Exercise of the option alone confers no tenancy.
[21]As the parties are not co-owners, s 339 has no application.
The encumbrance and forestry right
[22] The intended connection between the forestry right and the encumbrance is not entirely clear. Sections 67C, 67D and 67DB of the Forests Act 1949 prohibit export, milling and felling of indigenous timbers except in accordance with a registered sustainable forest management plan. I infer a ‘vegetation and weed management plan’ may similarly be a condition to be imposed under the Resource Management Act 1991.
7 Simon Goulding, DB Casson and William Blake Odgers Odgers on Civil Court Actions (24th ed, Sweet & Maxwell, London, 1996) at [10.15] as cited in Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [87].
8 Attorney-General v Barker [2000] 1 FLR 759 (QB) at 764.
9 Mahon v Waimauri Ltd [2022] NZCA 96 at [65]–[66]; Paul Finance Ltd v Commissioner of Inland Revenue HC Auckland CP65-SD00, 17 August 2000 at [35], citing Buckland v Palmer [1984] 1 WLR 1109 (CA), Otis Elevator Co Ltd v Linnell Builders Ltd (1991) 5 PRNZ 72 (HC), Fraser v Robertson [1991] 3 NZLR 257 (CA) at 260 and Bank of New Zealand v Rada Corp Ltd (1989) 2 PRNZ 147 (HC) at 150; and Cowley v Shortland Publications Ltd (1991) 5 PRNZ 76 (HC). See also Jessica Gorman and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR15.1.05(2)(c)].
10 Property Law Act 2007, s 340(1).
11 Resource Management Act 1991, s 11(1)(a).
[23] As the forestry right is not an interest in the subject land, its utility may have depended upon such plans being specified in relation to the subject land. (Mr Mawhinney said under cross-examination “a sustainable forestry plan has not been drafted” and “[t]here isn’t a … formal written [weed management] plan”.) Presumably the encumbrance was intended to obtain such specification of plans if required, under s 101 of the Land Transfer Act 1952 (now s 100 of the Land Transfer Act 2017), as conditions attaching to encumbering the land to secure its rentcharge of
$100 per annum. There is dispute if the rentcharge ever has been paid. Be that as it may, the encumbrance includes mandatory dispute resolution by arbitration, which I do not understand to have been initiated.
[24] Although Waitakere Farms argues the parties to the encumbrance do not include successors in title, the 1952 Act required certificates of title to be issued subject to registered encumbrances, as the present encumbrance was in relation to the subject land. For Waitakere Farms, Alexandra Low argues the encumbrance was given as part of a separate venture involving the Lowndes interests to whom the land was transferred in September 2010, a few days after the encumbrance’s creation, without intending application to the subject land. I am not prepared to reach that conclusion by inference from the limited evidence drawn from Mr Mawhinney under cross-examination as to the Lowndes interests’ involvement, particularly given the encumbrance registered on Waitakere Farms’ title.
[25] To the extent the encumbrance comprises “a promise expressed … in … an instrument” — that is, a ‘covenant’ as defined — s 317(1) of the Property Law Act relevantly entitles the Court to extinguish it if satisfied:
(a) the … covenant ought to be … extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i)the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii)the character of the neighbourhood:
(iii)any other circumstance the court considers relevant; or
(b) the continuation in force of the … covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the … covenant at the time of its creation; or
(c) …
(d) the proposed … extinguishment will not substantially injure any person entitled; or
(e) … the covenant is contrary to public policy or to any enactment or rule of law; or
(f) … for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
A “two-stage approach” generally is taken — first, if any of s 317(1)’s grounds is made out; then, if the discretion should be exercised12 — but “in cases solely based on s 317(f) a blended approach may be appropriate”.13
[26] There only is ‘burdened’, not ‘benefited’, land at issue here, being the subject land. I am unclear what ‘use’ was made of the subject land in reliance on the encumbrance at any time since its creation. Plainly the forestry block on the land was forested and harvested. But there is no evidence if any of that was in reliance on the encumbrance (although presumably not if the plans were not developed). Accordingly I can identify no ‘change’ in use — or, notwithstanding the deforestation, in the area’s character, despite subdivision — as may justify the encumbrance’s extinguishment.
[27] Neither then can I see the encumbrance’s impediment to reasonable use of the land from what may reasonably have been foreseen at the time of its creation. Such ‘reasonable use’ may not extend to its sale but, even if it does, sale must reasonably have been foreseen at the outset. Similarly I am unable to assess if extinguishment will (or will not) substantially injure the defendants. And, on the “just and equitable” ground: it is not for me to revisit the encumbrance’s justification and fairness;14 Waitakere Farms acquired the land encumbered, and cannot now seek to avoid the registration as inconvenient to its wishes to sell, presumably at the best price achievable.15
[28]I am not satisfied of any of s 317(1)’s grounds here.
12 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657 at [67].
13 Hürlimann v Lilley [2023] NZCA 173 at [22].
14 At [39].
15 At [40].
[29] The same analysis applies to the extent the option to purchase in the forestry right is a covenant to which s 317 applies. Plainly no use was made of the encumbered land in reliance on the option to purchase. Thus there is no qualifying ‘change’. Neither can I identify any intervening impediment. Without determination of Mr Mawhinney’s intended reliance on the option, if his appeal remains pursued, I cannot say the defendants will not be substantially injured by the option’s extinguishment. And, again, Waitakere Farms acquired the land subject to the option to purchase; its claimed inconvenience now on desired sale does not cross the ‘just and equitable’ threshold.
[30] So far as the forestry right itself is concerned, the Registrar’s limited powers to record its extinguishment — as a profit à prendre under ss 113 and 114 of the Land Transfer Act 2017, respectively through lapse of a fixed period of time or on occurrence of some other terminating event — have no application here. Ms Low is right to acknowledge the Registrar has no power to record its extinguishment as “redundant” under s 115, which power only is in relation to those easements remaining on titles of formerly adjoining land as having “no practical effect”.16 If extinguishment remained available at common law on grounds of abandonment or implied release,17 neither is made out on the evidence. To the contrary, given Mr Mawhinney’s reliance on the forestry right, he cannot be said to have either abandoned or impliedly released it. If his present (but disputed) registration as an undischarged bankrupt makes it implausible he will be able to exercise it now, that requires to be seen at least in the context of the right’s remaining 17 years.
Result
[31] Waitakere Farms’ July 2022 claim, and the defendants’ October 2022 counterclaim, both are dismissed.
16 Land Information New Zealand’s advice at “Redundant Easement Applications and Forestry Rights” < “A Forestry Rights Agreement under the Forestry Rights Registration Act 1983 … can be the subject of an application to extinguish an easement under s
… 115 of the Land Transfer Act 2017” is inaccurate, unless the forestry right somehow falls within s 115’s definition of a redundant easement, in which “all or part of the benefited land no longer adjoins the burdened land”. In the usual course a forestry right engages no ‘benefited land’. Neither here does the encumbrance.
17 DW McMorland and others (eds) Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [16.102].
Costs
[32] In my preliminary view, given neither party has succeeded, costs should lie where they fall or fell; that is, expenses to be borne by the party incurring them. If my view is not accepted by the parties, or they cannot otherwise agree, I reserve costs for determination on short memoranda each of no more than five pages — annexing a single-page table setting out any contended allowable steps, time allocation and daily recovery rate — to be filed and served by the party claiming them within ten working days of the date of this judgment, with any response or reply to be filed within five working day intervals after service.
—Jagose J
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