Walshe v MacRae
[2012] NZHC 296
•28 February 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2009-404-8259 [2012] NZHC 296
BETWEEN ANTHONY PATRICK WALSHE Plaintiff
ANDROSS DONALD MACRAE AND LYNETTE GWYNETH JOY COLLINS Defendants
ANDLESLEY ANNE BERTRAM-SMITH First Counter-Claim Defendant
ANDDOUGLAS SEYMOUR ALDERSLADE, RAYMOND JOHN BEECH AND CHRISTINE BEECH
Second Counter-Claim Defendants
ANDRICHARD HAMMOND AITKEN, ANGELA RUTH AITKEN, BRIAN HAMMOND AITKEN AND ROBERT JAMES AITKEN
Third Counter-Claim Defendants
AND AUCKLAND COUNCIL
Fourth Counter-Claim Defendant
Hearing: 4 - 8 July 2011
Counsel: G C Jenkin for Plaintiff
D K Wilson for Defendants
Judgment: 28 February 2012
JUDGMENT OF KEANE J
This judgment was delivered by on 28 February 2012 at 5pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Date:
Bruce Dell Law, Panmure, Auckland for Plaintiffs
Tetley-Jones Thom Sexton, Auckland for Defendants
ANTHONY PATRICK WALSHE V ROSS DONALD MACRAE AND LYNETTE GWYNETH JOY COLLINS HC AK CIV 2009-404-8259 [28 February 2012]
[1] In issue in this case between neighbours in Church Bay, Waiheke Island, are two questions concerning a right of way given over the land of one, Anthony Walshe, for the benefit of his neighbours, Ross Macrae and Lynette Collins, whom I shall call the Macraes, who have, since the right of way was granted, subdivided their land into two.
[2] The first issue is as to the extent of their right of way, which was conferred by agreement between them and Mr Walshe's predecessor in title, Lesley Smith, dated August 1998, and conferred finally by easement transfer that she executed; since registered against Mr Walshe's title and now against both the titles into which the Macrae land is subdivided.
[3] Does this easement, as Mr Walshe contends, serve one 'dwelling' only on the Macraes' land, however subdivided and is it to be exercised only for that or a strictly related purpose? Or does it, as the Macraes contend, allow them access to any part of their land, however subdivided, and for any legitimate purpose including access to their 'visitors' facility'?
[4] The second issue arises from the Macraes' application for an order
'modifying' the easement under s 317 of the Property Law Act 2007, and ratifying the right of access they presently enjoy to each of their pieces of land; a right that extends to a 'dwelling' on each, not on one only. In issue on this application is the extent of any consequent injury to Mr Walshe if the easement is explicitly enlarged and what compensation, if any, he is entitled to.
Narrative of events
[5] Mr Walshe, a New Zealander, who apart from three years in Auckland between 2000 - 2003 has lived in England since 1991, owns 88E Church Bay Road, a 2.76 hectare property that he purchased in January 1999 as vacant land; the state in which it still remains. He and his wife intend to build their home there once he retires, an event that lies somewhere in the future.
[6] The Macraes own 88H Church Road, below Mr Walshe's property, known as Koao Bay Farm; an undeveloped block when they purchased it in 1980, that they have since developed. Originally their only access was along the beach by vehicle or on foot, or directly from the sea. They gained their present right of access in 1998.
[7] In that year Ms Smith, who then owned as she does still Piritaha Farm, 88A Church Bay Road, then a 20 hectare block that included the Walshe land, applied for Council consent to subdivide her property into nine lots. As that called for the consent of the Macraes as adjoining owners, she entered into an agreement with them, dated 25 August 1998, in which she granted them their right of way.
[8] Under the agreement the Macraes undertook to contribute $30,000 to the cost, and to complete part themselves. In exchange Ms Smith undertook to grant them a right of way in terms set out in an easement transfer incorporated by schedule in the agreement. It gave them, as it does still, a right of way to 'each and every part of their land', but the ability to 'service' one 'dwelling' only.
[9] At the date of the agreement there was only one 'dwelling' on the Macrae land, Wild Bay Villa, a two storey house in Colonial style, set just above the beach, which the Macraes had built in 1986 - 87. Until then they had lived in a bach, higher up their property, that then became an occasional sleep-out. The one 'dwelling' constraint agreed then intelligibly corresponded with that reality. But it was not the complete reality.
[10] On 2 May 1998, when the agreement was still being negotiated, the Macraes purchased a single storey villa in Onehunga and on 29 May 1998 their solicitors told Ms Smith's solicitors that they intended to set it on their property and that they anticipated that it, too, would have the benefit of the right of way. That is far as the correspondence then went.
[11] The August 1998 agreement reflects the Macraes' proposal, to the extent that it does so at all, only by stating that if the Macraes wanted to 'erect' any 'further dwellings' on their land they would have to negotiate the terms of access with the then owner of the Walshe land. The easement transfer incorporated in the agreement,
which Ms Smith later executed, and which governs their right ultimately, makes no reference even to that possibility.
[12] Coincidentally also, in July 1998, the Council advised the Macraes that under the Operative District Plan they were permitted only to have one 'dwelling' on their land. They could, they were told however, apply for consent to use their new villa for short stay accommodation as a 'visitors' facility'. So that is what they did and on 28 September 1998 they obtained that consent on a non-notified basis, and in October a related building permit.
[13] Ms Smith denies that she knew about those two applications, let alone consented to them. Nor was she asked, she says, when in mid January 1999 the Macraes trucked in their new villa across what is now the Walshe land. On 11 May
1999, indeed, she complained to the Council that it had been misled. She had just discovered from a search of the Council 's file, she said, that her consent to the earthworks on the Walshe land for the right of way had been attached to the Macreas'
'visitors' facility' application.
[14] Ms Smith's concern sprang from this. In early January 1999, on the day when Mr Walshe inspected and agreed to purchase his land, the Macrae's proposed further villa, so far as Ms Smith was concerned, was not a live issue. But by 18 February
1999, when she executed the easement transfer, it clearly was; and it remained so when on 9 March 1999 her subdivisional plan was registered and Mr Walshe's title was issued subject to the easement.
[15] After Mr Walshe took title, the Macraes took up with him more than once their ability to use the right of way to gain access to the further villa and indeed their wish for still wider access. In 2000 they envisaged, for instance, subdividing their land into three; a possibility to which Mr Walshe responded partly negatively, partly positively, by a solicitor's letter written 'without prejudice' on 7 November 2000.
[16] Mr Walshe contends that this letter is inadmissible precisely because it was written 'without prejudice'. I have decided, however, to allow it in. It is clearly
relevant. Also, as I recall, Mr Walshe himself relied on it, if only to a degree. That apart, I do not consider that it stands to his prejudice.
[17] In that letter Mr Walshe's then solicitor first asserted Mr Walshe's position in this case; that the right of way gave the Macraes access to one dwelling only. He then continued to say, however, and this is the aspect of the letter on which the Macraes rely, that Mr Walshe would only agree to their proposal if they sealed or concreted the right of way at their own cost, tied any purchaser to the terms of the easement transfer, obtained resource consent and met his costs.
[18] In that, the Macraes say, Mr Walshe accepted that the August 1998 agreement and the easement transfer entitled them, if they chose, to have access to more than one dwelling subject only to contribution being agreed. Mr Walshe denies that to be so and points out that no corresponding agreement was ever reached. He continues to rely on the actual terms of the grant made.
[19] In August 2006, without notifying Mr Walshe themselves, or being called on to do so by the Council, the Macraes obtained consent to subdivide their land into two lots. The bach and the Onehunga villa, by then known as Windmill House, now stand on the higher of the two lots, lot one, 3.627 hectares, with strip access to the sea. Wild Bay Villa now stands by itself on the lower lot, lot two, 2.606 hectares, just above the beach.
[20] The three buildings on the two lots remain connected by access ways; and the certificates of title issued, as I have said, give each lot the full benefit of the easement right benefiting the Macraes' original single title - a right of access to a
'dwelling' on each. It is on that basis, so it appears, that they began to advertise both their two properties for sale or for rent.
[21] Thus it was that in December 2009 Mr Walshe brought this case, contending that the Macraes were in breach of the 'one dwelling' covenant limiting access under the easement. Relying on causes of action in contract and nuisance, he sought an injunction to prevent them obtaining access to any one of the three 'dwellings' on their land by exercise of their right of access to any of the others. Mr Walshe also
sought an order varying or discharging the easement from one title or the other. He sought an interim injunction.
[22] In their original statement of defence and counterclaim, which they have since amended, and though they sought an order clarifying or varying the easement, the Macraes contended that the easement registered against each of their two titles did give them access to a 'dwelling' on each lot. On 25 June 2010, however, Woodhouse J granted Mr Walshe an interim injunction with contingent effect. If the Macraes sold either lot with the benefit of the right of way, they could not, he held, until further order, sell the other with the equivalent right.
[23] The Macraes now, as it appears, accept the logic of the interim order and thus seek an order enlarging the scope of the easement. And the four defendants to the counterclaim, Ms Smith and the owners of the other lots in her subdivision, are neutral as to whether the Macraes should have that enlarged access. The scope of the easement, as it actually is, here too must remain the essential starting point.
[24] Does the easement transfer give the Macraes access to a single 'dwelling' on their land, however it is subdivided, and does it exclude them from access for any purpose beyond any naturally related to access to a single dwelling? Or do the Macraes have access to any part of their land for any legitimate purpose, including access to their 'visitors' facility', but with the ability only to 'service' a single
'dwelling'? Or is there some midpoint?
Easement and restrictive covenant
[25] The easement transfer, first incorporated in the August 1998 agreement, has two contrasting elements that are in tension and the first of those elements is the grant of access that it makes to the Macraes, over the Walshe land, which could hardly be more complete.
[26] The right granted is that conferred by the first clause of the Seventh Schedule to the Land Transfer Act 1952, supplemented by the equivalent right under the first
clause of Schedule 9 of the Property Law Act 1952 and related ensuing rights. It is no less than this:
The full, free, uninterrupted and unrestricted right, liberty and privilege for the grantee, his servants, tenants, agents, workmen, licensees and invitees (in common with the grantor, his tenants and any other person lawfully entitled so to do) from time to time and at all times by day and by night to go pass and re-pass, with or without horses and domestic animals of any kind and with or without carriages, vehicles, motor vehicles, machinery, and implements of any kind over and along the land over which the right of way is granted or created.
[27] The second element is the limit placed on that grant, in the first instance by clause 4.3 of the August 1998; the limiting purpose or use, the nature and extent of which is in issue in this case:
Ross and Lynne ... acknowledge that the Right of Way is to service 1 dwelling only on Koao Bay Farm. Ross and Lynne further acknowledge that in the event that they wish to erect further dwellings on the Koao Bay Farm they will need to enter into negotiations with the then registered proprietor of the Right of Way.
[28] These two elements in tension are again set one against the other in the finally decisive operative clause of the easement transfer incorporated in the August
1998 agreement, and later executed and registered against the two titles originally affected, clause 3, a general covenant which says this:
The grants of rights of way shall be free of and appurtenant to each and every part of the dominant land save that the Easement of Right of Way shall only service one dwelling on the dominant land.
[29] In his interpretation of the easement transfer, and of the August 1998 agreement to the extent that it may still be pertinent, Mr Walshe contends that the one dwelling limitation quite literally limits the Macraes access across his land to that single or a strictly related purpose. The Macraes contend, by contrast, that the wide right of access conferred speaks for itself. It is a right of access to every part of their land and for any legitimate purpose. Which prevails is a matter of interpretation.
Principles of interpretation
[30] The August 1998 contract, and the easement transfer it incorporates, are to be interpreted objectively, like any other contract, to identify what Ms Smith and the Macraes must then have intended, taking into account the facts and circumstances as they knew them to be.1 But the subject matter of their contract, and of the ensuing easement transfer that it incorporates, is no less material.
[31] The right of way the Macraes obtained over what is now the Walshe land is a classic positive easement; a 'right to use the land of another person'2 that imposes on that other person a correlative burden; and, historically, as Priestley J said in Freestyle Enterprises Ltd v Starfin Group Ltd, such rights have been construed conservatively:3
A right of way constitutes a defined benefit for the use of the dominant land and constitutes a restriction on the use of the servient land. For that obvious policy reason, Courts tend to construe right of way easements strictly and are reluctant to extend their ambit.
[32] That is more likely to be so, moreover, where the easement is subject to restrictive covenant, as this easement is; a covenant, as s 4 of the Property Law Act
2007 recognises:
... expressed or implied in an easement, under which the covenantor undertakes to refrain from doing something in relation to the covenantor's land which, if done, would detrimentally affect the value of the covenantee's land or the enjoyment of that land by any person occupying it.
[33] Such a covenant is to be interpreted objectively like any other term of contract,4 but also against the limiting principle of interpretation to which I have referred, which rests, as Hammond J said in White v Chandler,5 on this imperative:
that which is sought to be done, must not diminish the servient tenement (or, to put it the other way, increase the grant to the dominant tenement).
1 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] 2 NZLR 444 at [19] - [37].
2 Hinde McMorland & Sim 'Land Law in New Zealand' para 16.002.
3 Freestyle Enterprises Ltd v Starfin Group Ltd [2008] 1 NZLR 266 at [23].
4 Bonnar & Ors v Summerland Property Development Ltd & Ors HC Auckland CP No 134-IM02,
4 July 2002.
5 White v Chandler [2001] 1 NZLR 28 at [52].
[34] This principle of interpretation may amount to no more than a need to identify scrupulously the right conferred and the duty imposed. Indeed, in Grinskis v Lahood6 Haslam J considered that the trend of the cases was rather, as he put it:
towards a more liberal construction of grants which, by their nature as a species are immutable in content but create rights of indefinite duration and are destined to enure in a changing environment.
[35] There is certainly no principle of interpretation that where, as here, there has been a change of use in the dominant tenement after the grant is made, the grant will be construed as limited to the original uses. In Grinkis v Lahood Haslam J held that the grant there made was so general that, though originally it was made to give access to a block of flats, it continued when nine motel units were set in their place.
[36] Nor conversely, where there has a been a legitimate change of use, can an easement be stretched beyond its plain meaning to cater for the change. Where the easement is too narrow, that can only be answered by an application for an order under s 317 of the 2007 Act modifying the easement; a remedy that was earlier open, though without any correlative power to compensate, under the Property Law Act
1952.
Status of 1998 agreement
[37] The issues that arise as to the effect of the easement transfer are to be resolved against these principles; an analysis, it seems to me, in which the August
1998 agreement cannot have a decisive part to play. Mr Walshe was not privy to it. Ms Smith did not attempt to commit him to it. There is no evidence that Mr Walshe saw it, or was even aware of it, before Mr Macrae supplied him with a copy in 2000.
[38] In one sense, moreover, the August 1998 agreement adds little. It incorporates the very easement transfer that Ms Smith did execute, that stands registered against Mr Walshe's title and now the two titles of the Macraes, that is surely definitive. To the extent that the agreement may still have at least a contextual part to play,
moreover, that is not to the Macraes' advantage.
6 Grinskis v Lahood [1971] NZLR 502 at 509.
[39] Clause 4.3 of the agreement states, as the easement transfer does also, that
'the Right of Way is to service 1 dwelling only'. In clause 4.3, however, in contrast to the easement transfer, it goes further. It emphasises that limitation by imposing on the Macraes this further duty, 'in the event that they wish to erect further dwellings ... they will need to enter into negotiations'. The Macraes did not do so before they trucked in Windmill Cottage.
Meaning of 'dwelling'
[40] Of the two issues of interpretation of the easement transfer to be resolved, that as to the meaning of 'dwelling' is the more confined. Do the Macrae have access only to a single 'dwelling', Wild Bay Villa? As well as that, are they entitled to access to Windmill Cottage, though it is capable of being lived in, because it is designated a
'visitors' facility'.
[41] The easement transfer does not define 'dwelling' and, unless the context in the narrower or wider senses requires, it is to be given its ordinary meaning. In the broadest and most generic sense, according to the Oxford English Dictionary, dwelling means 'a place of residence; a dwelling-place, habitation, house'. It is that widest of all possible meanings on which Mr Walshe naturally relies. Both Wild Bay Villa and Windmill Cottage are capable of being 'dwellings' in that very basic sense.
[42] 'Dwelling' is capable, however, as the Macraes say, of carrying narrower meanings, particularly when part of a compound term like 'dwelling house' in the Resource Management Act 1991. There too, however, they are not assisted by the actual definition, 'any building, whether permanent or temporary, that is occupied, in whole or in part, as a residence'. They rely rather on the definition of 'dwelling' in the Operative District Plan with which they say they were familiar in 1998. In that plan as it then was and still seems to be, 'dwelling' was defined to be:
... a building, a cluster of buildings, a room or a group of rooms, used, designed or intended to be used exclusively by one or more persons as a single, independent and separate housekeeping unit and includes home stay accommodation where lodging is provided or intended to be provided within the dwelling for reward or payment for not more than five (5) guests ...
[43] Furthermore, as the Macraes say, the Operative District Plan distinguished then and does so still between a 'dwelling' as just defined and a 'visitors' facility', which it defines to be:
... any premises in which transient accommodation or lodging is provided or intended to be provided for reward or payment, ie short term guests paying a daily tariff, licensed for the sale of liquor or not, and inclusive of any service or amenity ancillary to such a facility but excludes any premise where five or less persons are provided for within a dwelling ...
[44] Thus, the Macraes say, the 'dwelling' to which the easement gives them a right of access, assuming that to be Wild Bay Villa, does not confine their right of access just to it. Amongst the other legitimate purposes for which they may exercise access to every part of their land they are entitled to access to Windmill Cottage, which is not a 'dwelling' but a 'visitors' facility'.
[45] That distinction is open, obviously, under the Operative District Plan, and the
Macraes have the support of the Council's decision designating Windmill Cottage a
'visitors' facility'. But there is no hint in the August 1998 agreement, or in the easement transfer it incorporates, that 'dwelling' was to be defined in that more limited way. There is no reference in either to the contrasting definition of a 'visitors' facility'. Nor, in the wider evidence, is there any suggestion that this was ever proposed or that Ms Smith acceded to it.
[46] Such evidence as there is points the other way. The whole purpose of the one dwelling limit on which she insisted, Ms Smith said in evidence, was to restrict the Macraes' use of the right of way over the Walshe land. A 'visitors' facility', she might reasonably have feared, would have caused as much traffic as a second dwelling, perhaps significantly more.
[47] I conclude that the easement transfer does not confer on the Macraes, and has never conferred on them, access over the right of way to Windmill House, however it is designated under the operative district plan, as long at least as Wild Bay Villa continues to be used as a 'dwelling'. The issue is rather to what extent the easement gave them access to their land beyond that 'dwelling' and for what purposes.
Extent of access
[48] The right of way granted by the first words of clause 3 of the easement transfer, an easement 'free of and appurtenant to each and every part of the dominant land', could, as the Macraes say, certainly standing alone, confer on them an unrestricted right of access to every part of their land for any legitimate purpose.
[49] So too, the limiting words 'save that the Easement of Right of Way shall only service one dwelling on the dominant land', are words of exception. They do not expressly rule out access to other parts of the land for other purposes. So too, the sheer breadth of the imported statutory right to pass over the Walshe land that extends to the Macraes' invitees for an apparent range of natural purposes. So too the Macraes' identifiable reasonable needs for access at the time of their grant.
[50] The Macraes' lifestyle block, 6.1032 hectares, then within a single title, consists of a ridge and two bush clad valleys running down to the high water mark with orchards and a garden. The Macraes, or their successors in title, might well need help with fencing, pruning, cropping, the servicing of machinery and equipment. They might naturally offer access to campers and mountain bikers, bush walkers and swimmers.
[51] To the extent then that Mr Walshe contends that access to the whole of the Macraes' land is denied to them and to their invitees for such ordinary purposes, I disagree. But if, as I understand to be his essential point, the exception to the grant defines its fundamental purpose, and that is to allow access to a single dwelling and for naturally related or ancillary purposes, then that, I consider, conveys accurately the balance struck.
[52] Despite the breadth of the right of access granted, the only purpose for the single dwelling exception, I consider, is to limit traffic over the right of way to the occupants of a single dwelling, presently the Macraes, and to their natural invitees. If they, or their successors, wish access for any equally basic purpose, like another dwelling, or a visitors' centre, or a commercial enterprise, that will call for an enlarged grant.
[53] The result is that Mr Walshe is entitled to the order he seeks extinguishing the easement from the title of one of the Macraes two lots or the other and to the injunctive relief he seeks also unless the Macraes succeed in their application to modify their easement.
Application to modify easement
[54] The Macraes apply under s 316 of the Property Law Act 2007 for an order under s 317 ratifying the present state of their two titles and identifying the purposes or uses for which access may be exercised to every part of their land. They do not press for access to Windmill House as a 'visitors' facility' if Mr Walshe is against it.
[55] The Macraes' application raises two threshold issues and the first, which arises under s 316 of the Property Law Act 2007, is whether they have any right to apply. It says this:
A person bound by an easement, a positive covenant, or a restrictive covenant (including a covenant expressed or implied in an easement) may make an application to a court for an order under section 317 modifying or extinguishing that easement or covenant.
[56] Mr Walshe contends that the Macraes lack standing because they are not
'bound by' the easement. They hold the dominant tenement and thus have the benefit of it. They say, however, that they are 'bound by' the single dwelling exception in the easement, a 'restrictive covenant' curtailing their right of access; and as I have already said in para [30], I agree.
[57] Section 4 of the Property Law Act 2007 distinguishes between 'persons bound' and 'persons entitled' not just under any easement, but also under any covenant, whether positive or restrictive, that enlarges or narrows the scope of an easement.
[58] Thus s 4 defines a 'person bound' to mean 'in relation to an easement, a positive covenant, or a restrictive covenant burdening land, an owner or occupier of the land against whom the easement or covenant is enforceable.' A 'person entitled'
by contrast is 'an owner or occupier of the land who is entitled to enforce the easement or covenant'.
[59] The result in such a case as this can be, therefore, as Elias J described in Rental Space Ltd v March,7 one in which there are two relationships in law, not one, and with opposed benefits and burdens. What she then said of the relationship in that case could equally well be said of that in this case:
For the purposes of this negative covenant the land of the covenantee is the servient tenement and the land of the grantor is the dominant tenement, even though for the purposes of the right of way, the subject of the easement, dominancy and serviency are reversed.
[60] Accordingly, I conclude, though the Macraes have the benefit of the easement conferring the right of way, they are subject to a restrictive covenant as to the purpose for which they may exercise it, that Mr Walshe is entitled to enforce, as indeed he has set out to do in this case. They have standing to apply. That then results in the second threshold issue.
[61] In order to reduce their burden under the covenant, the Macraes seek to enlarge Mr Walshe's burden under the easement and so the issue becomes whether that lies within the Court's power, under s 317(1), to 'modify or extinguish' an easement or covenant. And, like 'extinguish', 'modify' most naturally means to reduce the burden of the easement or covenant, not to enlarge it, more especially because standing to apply rests only with the one carrying the burden, not the benefit.
[62] So narrow a reading of the Court's power, however, cannot be taken here. There are two relationships in issue, not one, and the benefits and burdens are opposed. But even if that were not so, and there were only one relationship, that would not be fatal. In Rental Space, which concerned s 126(g) of the Property Law Act 1952, from which s 317 derives, Elias J held that the power is broadly remedial and that although it might be highly unusual to enlarge a burden, that is within the
power. The issue is one of discretion. In Harnden & Ors v Collins,8 which did
7 Rental Space Ltd v March (1999) 4 NZ Conv C 192,873, 192,886.
8 Harnden v Collins HC Whangarei CIV 2009-488-000571, 18 December 2009 at [32].
concern s 317, Randerson J agreed. Otherwise, he said, the remedial purpose of the power would be unduly restricted.
[63] I agree with those decisions, both for the reason that I have just identified and for the further reason identified by Randerson J in Harnden. In contrast to the position as it was under s 126(g) of the 1952 Act, the Court now has power under s
317 to compensate the one adversely affected.
Grounds for application
[64] Section 317 empowers the Court to modify or extinguish an easement or covenant if satisfied that one or more of four grounds exist for doing so. Those grounds are as follows:
(a) the easement or covenant ought to be modified or extinguished (wholly or in part) because of a change since its creation in all or any of the following:
(i) the nature or extent of the use being made of the benefited land, the burdened land, or both:
(ii) the character of the neighbourhood:
(iii) any other circumstance the court considers relevant;
or
(b) the continuation in force of the easement or covenant in its existing form would impede the reasonable use of the burdened land in a different way, or to a different extent, from that which could reasonably have been foreseen by the original parties to the easement or covenant at the time of its creation; or
(c) every person entitled who is of full age and capacity—
(i) has agreed that the easement or covenant should be modified or extinguished (wholly or in part); or
(ii) may reasonably be considered, by his or her or its acts or omissions, to have abandoned, or waived the right to, the easement or covenant, wholly or in part; or
(d) the proposed modification or extinguishment will not substantially injure any person entitled.
[65] The Macraes rely primarily on the fourth of these grounds, s 317(1)(d), contending that the modification they seek will not 'substantially injure' Mr Walshe. To a lesser extent they rely on s 317(1)(a), contending that the change they seek will recognise the reality of their subdivision and ratify the present allocation of access rights to both lots on the titles issued. They contend also that they are entitled to rely on s 317(1)(c) because, they argue, Mr Walshe knew about and did not object to their use of the right of way. They do not suggest that s 317(1)(b) applies.
[66] In resisting their application, Mr Walshe contends that the modification the Macraes seek will injure him substantially, that the change of circumstance on which they rely is one they engineered themselves without ever notifying him or obtaining his consent, and that he at no stage waived any of his rights. And, except as to the first of his reasons, I agree with Mr Walshe.
[67] The Macraes, I consider, have only one arguable ground; that on which they rely primarily, s 317(1)(d). They cannot rely on any changes since the grant was made. They brought Windmill Cottage to their land without telling Ms Smith, let alone seeking consent. They applied to the Council for consent to subdivide their land without notifying Mr Walshe or seeking his consent. They acted not merely unilaterally but beyond the terms of the 1998 agreement and the easement transfer.
[68] The Macraes, furthermore, obtained resource consent to subdivide, on a non-notified basis, because the Council assumed, as it says in its report, that the existing right of way was to the 'two residential dwellings' on their land, Wild Bay Villa and the bach presumably, and that Windmill Cottage was a 'visitor facility'. Thus, the Council report concluded, 'the effects from traffic generation and roading capacity are considered to be negligible'.
[69] How Council officers came to that conclusion, and why they assumed that the easement transfer would give an identical right of access to the two lots into which the land was proposed to be subdivided, is also unclear. What is clear is that Mr Walshe was shut out of any ability to contest what occurred. When he learned of it, it was a fait accompli. He never acquiesced. He never waived his right to rely on the strict terms of the easement transfer.
[70] Even accepting that the Macraes acted entirely unilaterally, however, they are entitled to pursue their primary ground, that the modification they seek will not cause Mr Walshe 'substantial injury'. That ground does not turn on any question of notice or consent. It turns on the actual likely effect of the modification applied for.
[71] If the modification is likely to be 'substantial', and there is no independent ground for the application, the Court has no power to modify the easement or covenant. If, on the other hand, it is less than 'substantial', and there is no other basis to rule out the application, then the issue becomes how extensive the injury will be and what compensation may be called for.
[72] It is that last issue that has become truly critical. One way to assess whether Mr Walshe's injury would be 'substantial' is to identify to what extent, if at all, it is able to be met by compensation. And the converse is also true. What compensation might be right if the modification were allowed will depend on the nature and severity of any injury.
Extent of injury
[73] The extent to which Mr Walshe is likely to suffer 'substantial injury', if the modification is granted, must be set first against the breadth of the right the Macraes already enjoy to pass over Mr Walshe's land.
[74] Their right, as I have said more than once, if one leaves aside for the present the restrictive covenant, could hardly be more complete. And it extends to their natural invitees - their 'servants, tenants, agents, workmen, licensees and invitees'. It extends to access by 'horses and domestic animals ... carriages, vehicles, motor vehicles, machinery, and implements'. It may be exercised 'at all times by day and by night'.
[75] The Macraes' planner, Myles Goodwin, contends that this extensive right to pass over Mr Walshe's land has to be open for any purpose or use permitted to the Macraes on their land by the Operative District Plan. But that ignores the restrictive covenant, which I have held to limit the right to the service of one dwelling only.
[76] The right of access given must then be set against the covenant to be modified, which I have held to limit the right to the 'service' of one dwelling only'; a right to be understood broadly but still as one that excludes any other such primary use. That restriction immediately narrows in scope the three ways in which the right of way is conferred that I have just outlined. And the Macraes, themselves, limit their application to access to a single second dwelling.
[77] Any potential for injury must, also, be set against the reality that the Macraes have since the grant was made enjoyed an actual right of access over Mr Walshe's land by metal road, formed for the purpose, and that is not to change in scale or direction. It is to remain just as it is. Also relevant is that the Macraes have offered to double their share of maintenance and to meet the cost of sealing. The latter is to Mr Walshe's advantage. It is an offsetting benefit.
[78] The three detriments to Mr Walshe that have been the subject of evidence are the adverse effects of the likely increase in traffic, an intrusion on privacy and quiet enjoyment, and a loss of value to his land. None of these detriments seems to me to be so 'substantial' as to be decisive. All are able to be catered for, I consider, by a grant of compensation.
[79] As to the increase in traffic, Mr Goodwin's evidence is that each 'dwelling' is likely to attract ten traffic movements a day; and, even if that were a conservative estimate, as I consider it is very likely to be, the access road is unlikely to become overburdened. It is unlikely that there will be a significant increased risk of accident or in noise, dust, or in the play of headlights at night. The sealing of the road will counter all but the last.
[80] The loss of privacy that Mr Walshe will suffer again is unlikely to be
'substantial'. Though his 2.76 hectare property is relatively narrow and extends down the hillside, and the easement may reduce where he can situate his house to shield it from the road, he has had that predicament from the outset. His privacy is also to an extent compromised by the public walkway down the western boundary. He will need to plant screening trees in any event.
[81] The residual detriment that Mr Walshe would suffer, and this is the subject of the valuation evidence, is rather the effect on the market value of his property that a right of way giving access to two properties, not one, is likely to have. Purchasers on Waiheke Island in this area, as in others, very much value their privacy.
Principles of compensation
[82] Where an order is made modifying an easement or covenant, the power to compensate is conferred by s 317(2):
An order under this section modifying or extinguishing the easement or covenant may require any person who made an application for the order to pay to any person specified in the order reasonable compensation as determined by the court.
[83] Section 317 does not state how 'reasonable compensation' is to be assessed. Nor is that said anywhere else in the Property Law Act 2007. What is to be gleaned from s 317(2), when set against the section as a whole, is that the compensation awarded must bear a sensible relation to the modification to be made, whether to an easement or covenant, and that the assessment must be objective.
[84] Mr Walshe contends that compensation can only be assessed reasonably by comparing the value of his land and that of the Macraes before the modification with their values after. That is the way in which compensation is assessed when land is taken compulsorily under the Public Works Act 1981 and, more immediately still, where access is given to land locked land.9 In those two instances too what has to be assessed is 'reasonable compensation'.
[85] The Macraes question whether in this instance either analogy holds. Here access is already accorded by easement and what is to be modified is a restrictive covenant defining its scope. But that ignores the fact that the restrictive covenant they seek to modify presently renders land locked one of the two lots into which they
have subdivided their land and that is what they seek to change.
9 Public Works Act 1981, s 62; Property Law Act 2007, s 330.
[86] The way in which compensation is to be assessed, where land is unlocked, was fixed by the Court of Appeal in Jacobsen Holdings Ltd v Drexel,10 and is well encapsulated in the head note. The owner giving access, 'A' is entitled to be compensated by the owner obtaining access, 'B':
.... on the basis of what a willing seller and a willing buyer would arrive at, during friendly negotiations, taking into account the particular potentialities of the land in respect of each party. All factors of benefit or detriment on either side are material in assessing the amount of compensation appropriate. These might include any increased profitability to B's commercial venture, the special needs of B who might have been willing to pay more for the land than others in a market situation, the injury or damage caused to A, and the value of the land to B with all its existing advantages, possibilities and potentiality.
[87] In the later case, Lowe v Rankin,11 the Court of Appeal held that the primary focus of the test is not, as the Judge at first instance there had held, what the owners reluctantly yielding access would lose. It was to be assessed on a willing buyer and willing seller basis, however difficult that might be. The Court also spoke of the extent to which the owner obtaining access, there a developer, might be expected to pay a premium.
[88] Both sides in that case, the Court said, 'wanted too much'. The developer wanted to retain completely the increase in value that he was likely to obtain, and the owners giving access claimed as compensation a large part of the developer's likely profit. As the Court said:12
The short, and practical, point is that it must be taken to have been known to the parties, within the traditional formula, that ... (the developer) would pay more (a 'premium') but at some point ... would also have said: 'the amount of compensation I am being asked to pay is such that there is not enough in this for me and I would elect not to take up the opportunity afforded by the Court'.
[89] As against that the Court, when speaking of the 'detriment' to be suffered by those giving access, took into account 'their transaction costs in the form of their own time and attention, and that of their professional advisers'. These, the Court held13,
were 'a very distinct disturbance to the status quo, even though it is very difficult to
10 Jacobsen Holdings Ltd v Drexel [1986] 1 NZLR 324 (CA).
11 Lowe v Rankin (2006) 6 NZCPR 607.
distinctly quantify them'. The Court awarded on that account compensation beyond any share to which each was entitled of the developer's assumed profit.
[90] In the yet more recent case the Court of Appeal in Harjnal & Relich Asmussen & Ors,14 the Court again affirmed the Jacobsen test, and the 'degree of simplicity' that brings to what are often complicated cases historically.
[91] There as well the Court confirmed that the owner giving access is entitled to some part of the increase in value of the land obtaining access beyond 'the bare value of the land'.15 As against that, the Court also emphasised that the owner giving access had to be deemed to be a 'willing seller' as opposed to 'a reluctant seller determined to extract all that he or she could'.16
[92] The Court also offset against any compensation the benefiting owner had to pay any cost that owner would incur for work on the existing driveway.17 The land in issue had never been actually land locked. There had been a joint driveway for many years.18 That too went to the extent of the detriment actually suffered by the owner giving access and to the compensation payable. That too is a factor in this case.
Contrasting valuations
[93] Mr Walshe's valuers, Matthew Taylor and Matthew Tooman, valued Mr Walshe's land and the two lots into which the Macrae land is now subdivided, on Jacobsen principles, Mr Taylor more comprehensively than Mr Tooman.
[94] Robert Lawton, the Macraes' valuer, did not in his brief of evidence explicitly value on Jacobsen principles. He did so only to an extent, when giving his evidence in chief. He then accepted that compensation in a land locked land case did fall for a before and after assessment of the value of the affected properties but, he said, that
was all that was called for. Beyond that it was a matter of judgment.
14 Harjnal & Relich v Asmussen [2010] NZCA 410 at [45].
15 At [46].
16 At [51].
[95] These differences of principle aside, to the extent that they are differences, the valuers differed as to the value of the properties, both before or after. Mr Taylor and Mr Tooman, Mr Walshe's valuers, differ. Mr Tooman is much more conservative. Mr Taylor and Mr Lawton, the Macraes' valuer, differ in principle but stand very close in their values, though Mr Lawton did not value the Walshe land. He considered it would not change in value.
Taylor evidence
[96] Mr Taylor ascribed to Mr Walshe's property a vacant land value of
$1,230,000. It is, he said, at a favoured Waiheke location on an elevated site with good views. It is not, however, a water front site. It has a ridge line designation that will dictate how it is developed. The public walkway on the western boundary, he said, leaving aside the right of way in issue here, would reduce Mr Walshe's privacy and quiet enjoyment.
[97] Mr Taylor assumed, for the purpose of this initial valuation, correctly, I have held, that the Macraes' right of way is to serve one 'dwelling' only on the Macrae land and that this 'dwelling' is, most logically, Wild Bay Villa located on what is now lot two of the Macraes' land. He deemed Windmill Cottage on lot one to be land locked, again correctly.
[98] Mr Taylor did not think that the increased access the Macraes seek would have a 'significant detrimental impact' on Mr Walshe's property, reducing his privacy, increasing traffic and related noise, dust and disturbance. He did think that Mr Walshe's property would suffer a loss of market value.
[99] The market is one, he said, which places a high premium on privacy and quiet enjoyment. Potential buyers might well consider that any increase in access over the Walshe land would compromise both and discount any offer. The discount he considered proper was 7.5%, reducing the value to $1,140,000.
[100] Mr Taylor valued lot two on the Macrae land, on which Wild Bay Villa is located, at $2,200,000. That value would not change, he said, assuming the grant of
the modification, as that would relate only to access to lot one, on which Windmill
Cottage stands.
[101] In valuing lot one, Mr Taylor took only notional account of the right of access from the sea. The critical existing right of access to lot one, he said, is that along the beach. He was not certain whether as a matter of law it was open to vehicle traffic or was confined to foot access. He also took into account that vehicle access is weather and tide dependent and likely to be unavailable eight hours a day.
[102] Assuming vehicle access, Mr Taylor concluded, lot one would have a value before modification of $1,500,000. With foot access only it would have a value of
$1,250,000. With access by the right of way, by contrast, those values would each increase to $1,900,000, an increase of $400,000 - $650,000 depending on the nature of beach access.
[103] Mr Taylor's opinion was that Mr Walshe was entitled to be compensated for the 7.5% loss of value to his land, $90,000, and receive half the increase in value of lot one on the Macraes' land, $200,000 - $325,000. His compensation should thus lie, Mr Taylor concluded, between $290,000 - $415,000.
Tooman evidence
[104] Matthew Tooman, Mr Walshe's second valuer, gave the Walshe land a value of $800,000 as it is presently. He considers that, if the grant were increased in scale, the Walshe land would suffer a loss of value of $100,000.
[105] Privacy would be lost and the increase in use of the right of way could influence where any home was built on the land, compromising the ability to build to the best views and most suitable contour and convenient access. Any site chosen for privacy away from the road, he considered, would involve a significant cost to form and retain the access called for. Also there would be a loss of view.
[106] Mr Tooman valued the Macraes' lot one without the benefit of the right of way at $637,500. With the right of way he considered that it would double in value
to $1,275,000. The right of way itself, he considered, was worth to the Macraes
$637,500.
[107] Mr Tooman assesses Mr Walshe's compensation at 50% of the combined loss in value of his land, $100,000 and the improvement in lot one's value, $637,000. That equates to $735,500 in all and half of that is $368,750.
Lawton evidence
[108] Mr Lawton, the Macraes' valuer, not merely considered that the value of Mr Walshe's land would remain constant in value if the modification were granted. He considered that the value of the Walshe land might even marginally increase.
[109] The driveway, Mr Lawton said, benefits Mr Walshe as much as it does the Macraes. It extends down Mr Walshe's long, relatively narrow, property in the most logical and convenient way. It will give Mr Walshe access to every part of his property, most especially his house site. The Macrae proposal does not call for the right of way to be enlarged or to change direction. Instead they have offered to seal it and that too has to be to Mr Walshe's advantage.
[110] The only adverse effect to Mr Walshe, Mr Lawton considers, is the likely increase in traffic, which, like Mr Goodwin, he assumes will be 10 traffic movements a day, and then any increase in traffic noise and dust. He assumes that once the driveway is sealed they will largely be answered.
[111] In assessing any loss of privacy, he said, the public walkway on the western boundary has to be taken into account. Also that if, as he understands, Mr Walshe's preferred building site is towards the southern end of the property, that is reasonably removed from the driveway and there are already trees between the two. The greater loss of privacy, he thinks, would come from the public walkway and adjoining reserve.
[112] Mr Lawton does not consider that an enlargement of the easement to two dwellings would have 'any measurable level of impact on the value, use or amenities
of lot five'. He offsets against any increased risk of dispute, for instance, the fact that Mr Walshe will have to pay less for maintenance because there will be a third contributor.
[113] If the property were hypothetically on the market for sale at the present time, Mr Lawton considers, the modification proposed would not result in any identifiable difference in price. But Mr Walshe might be compensated to the extent of $50,000.
[114] At the conclusion of his evidence Mr Lawton was invited to supplement it. He was invited to consider the Tooman, Taylor valuations. In assessing that change in value Mr Lawton assumed that one dwelling on lot one would still retain access to Church Road through lot two, with which it is connected. It would also retain access on foot by the public walkway and there would be access along the beach on foot at all times and vehicle access for three quarters of the day.
[115] Mr Lawton confirmed that he had valued Macrae lot one on a before and after basis. Assuming access was available, he placed a value of $1,780,000 on that land, and where it was not available a value of $1,420,000 a 20% difference in value,
$360,000.
[116] Turning then to the question of compensation, he was asked what would be fair to Mr Walshe. On the basis, Mr Lawton said, as he assumed to be the case, that Mr Walshe was not giving any further land, was not contributing to the costs of sealing the right of way, and was in no way affected, Mr Walshe was gaining a windfall. At most he ought to be entitled to 5 - 10% of $360,000; between $18,000 -
$36,000.
Conclusions
[117] Mr Walshe is, I consider, likely to suffer a market detriment if the modification is granted as the Macraes wish. The enlargement of the easement they seek to obtain access to their two properties, no longer just one, once granted, will endure into the future. And, as the Macraes have demonstrated already, properties can change in character and the actual effect of a grant cannot be safely measured
against the purposes of the grantee at the time of grant. There will always be an element of uncertainty for the grantor and any successor in title.
[118] Conversely, the modification the Macraes seek has for them an immediate highly tangible result. The value of the higher of their two lots, lot two, on which Windmill Cottage is to be found, a dwelling in all but name, will immediately increase in value. Presently it is land locked. With a grant it will have instant access of a very good quality, just as lot one does.
[119] Assuming, as one is obliged to do on the Jacobsen Holdings test, the fiction of a willing buyer and seller engaged in a friendly negotiation, Mr Walshe must be compensated for the loss in market value that he will suffer and he is entitled as well to receive a share of the profit the Macraes can anticipate.
[120] For the purpose of fixing this compensation, I accept the evidence of Mr Taylor, who has very extensive experience valuing Waiheke properties, and whose values stand very close to those of Mr Lawton, who also has such long local experience. I accept also Mr Taylor's proposals for the fixing of the compensation to which Mr Walshe should be entitled, but subject to two qualifications.
[121] Mr Walshe, I am satisfied, should be fully compensated for the 7.5% discount to the value of his property resulting from the enlargement of the easement, $90,000. But I take Mr Lawton's point that Mr Walshe purchased his property subject to the right of way, that it has been formed without cost to him, and that it is to be improved by the Macraes sealing it. One third of that sealing cost should be offset against the $90,000 sum to which Mr Walshe is otherwise entitled.
[122] I accept, secondly, that Mr Walshe should receive one half of the increase in value to lot two, just as Mr Taylor proposes, but he has valued on two bases depending on whether lot two currently enjoys vehicle or foot access. Whether vehicle access exists as a matter of right will have to be established definitively before this figure can be fixed.
[123] Then there is the issue of timing. In principle Mr Walshe is entitled to the compensation awarded him when the order for modification is made or within a relatively short time afterwards. But that could also be linked to when it begins to take effect in a real sense, when for instance the Macraes sell one or both of their properties. There is also the issue when the Macraes should seal the driveway, and to what standard, and how that is to be assured and paid for.
[124] Finally, though the Macraes succeed in resisting the injunction that Mr Walshe seeks and will obtain the modification they seek, the merit of the case clearly lies with Mr Walsh, and he is entitled to receive compensation, not just under the heads identified, but for cost and inconvenience, a right that has been held to extend beyond an ordinary award of costs, even indemnity costs, that is not the subject of any specific claim as I recall; and that issue also needs to be clarified.
[125] I will defer entering judgment formally until I have a joint memorandum from counsel agreeing the issues I have still to resolve, which is to be filed by 30
March 2012; or, if those issues cannot be agreed, then on the basis of Mr Walshe's
memorandum by 23 March 2012 and the Macraes memorandum by 30 March 2012.
P.J. Keane J
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