Watene Land Limited v Tauranga City Council
[2023] NZHC 3174
•10 November 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-150
[2023] NZHC 3174
UNDER Sections 316 and 317 of the Property Law Act 2007 IN THE MATTER OF
29 Caribbean Place, Papamoa, Tauranga
BETWEEN
WATENE LANE LIMITED
Applicant
AND
TAURANGA CITY COUNCIL
Respondent
ROBERT WYNYARD and TRACEY WALLER
Interested Parties
Hearing: 6 July 2023 Appearances:
M Sharp for the Applicant
PJ Anderson for the Interested Parties
Judgment:
10 November 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 10 November 2023 at 4.00 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Barristers:
Cooney Lees Morgan, Tauranga M Sharp, Tauranga
WATENE LANE LTD v TAURANGA CITY COUNCIL & ORS [2023] NZHC 3174 [10 November 2023]
Introduction
[1] The applicant, Watene Lane Ltd, is the registered proprietor of a property on Caribbean Place in Papamoa (Property). It has applied to modify the land covenant registered against the title of the Property on 21 January 2000 (Covenant) by removing the prohibitions preventing more than one dwelling house, a further subdivision or a road to be constructed. The Covenant is noted on the title of 31 other properties. In my minute dated 2 March 2023, I directed service of the application on the territorial authority, Tauranga City Council, and the registered proprietors of those other properties.
[2] At the first call, further parties attended and submitted that they had an interest in the application as although the Covenant was not noted on their titles, their properties were part of the same subdivision and in some cases were in closer proximity to the Property than the properties that shared the same Covenant. After discussion with counsel and the further parties, I made directions for the applicant to serve the registered proprietors of Caspian Place, a neighbouring street, and to consider service on the registered proprietors of Mornington Dell, without prejudice to the applicant’s right to challenge standing.
[3] Following service in accordance with those directions, a notice of opposition was filed on behalf of one of the registered proprietors whose property has the benefit of the Covenant and on behalf of Ms Waller, a registered proprietor of a Property on Caspian Place. Ms Waller’s property does not have the benefit of the Covenant but adjoins the Property in issue.
[4] The applicant challenges the standing of Ms Waller to be heard in response to the application to modify the Covenant. I am issuing this judgment to determine the question of standing prior to the hearing of the substantive application.
Applications to modify or extinguish covenants
[5] An application to modify a covenant is made pursuant to s 316 of the Property Law Act 2007 (PLA):
316 Application for order under section 317
(1)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.
(2)That application may be made in a proceeding brought by that person for the purpose, or in a proceeding brought by any person in relation to, or in relation to land burdened by, that easement or covenant.
(3)That application must be served on the territorial authority in accordance with the relevant rules of court, unless the court directs otherwise on an application for the purpose, and must be served on any other persons, and in any manner, the court directs on an application for the purpose.
[6] Section 317 empowers the Court to modify or extinguish easements or covenants:
317 Court may modify or extinguish easement or covenant
(1)On an application (made and served in accordance with section 316) for an order under this section, a court may, by order, modify or extinguish (wholly or in part) the easement or covenant to which the application relates (the easement or covenant) if satisfied that—
(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; or
(e)in the case of a covenant, the covenant is contrary to public policy or to any enactment or rule of law; or
(f)in the case of a covenant, for any other reason it is just and equitable to modify or extinguish the covenant, wholly or partly.
(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.
[7] Neither counsel was able to locate a previous decision of the New Zealand courts that considers the question of whether a person who is not the owner of a property that has the benefit of a restrictive covenant may nevertheless have standing to oppose an application to modify or remove the covenant. Counsel for the applicant refers however to commentary in The Laws of New Zealand that states it is only owners of properties who have the benefit of a covenant or easement or who have rights in equity arising out of a building scheme who may object to the application.1 The commentary refers to an Australian decision of the New South Wales Supreme Court,
Re Application of Poltava Pty Ltd, for this proposition.2
[8] Counsel for Ms Waller submits that although Ms Waller’s property does not share the benefit of the Covenant in issue, it is part of the same building scheme and on that basis she ought to have standing to be heard.
[9] In Poltava, the Australian Court referred to the traditional four-limbed test that must be satisfied to establish the existence of a building scheme:3
(a)the plaintiff(s) (here, the applicant) and the defendant(s) (here, Ms Waller), or their predecessors in title, obtained their titles from a common vendor;
1 T Gibbons (ed) The Laws of New Zealand Easements, Profits, and Covenants (online ed, LexisNexis) at [127].
2 Re Application of Poltava Pty Ltd [1982] 2 NSWLR 161 (NSWSC) at 166.
3 At 167; citing Elliston v Reacher [1908] 2 Ch 374 at 384.
(b)prior to the sales, the vendor laid out its estate, or a defined portion of it, for sale in lots subject to restrictions it intended to impose on all the lots in a consistent manner and consistent with some general scheme of development;
(c)the vendor intended the restrictions to be for the benefit of all the lots to be sold; and
(d)the plaintiff(s) and the defendant(s), or their predecessors, purchased their lots from the common vendor on the footing that the restrictions would be for the benefit of the other lots included in the general scheme.
[10] Counsel for Ms Waller submits that more recent cases have relaxed these traditional requirements provided there is a common intention that the restrictive covenants are to be mutually enforceable in the interests of the purchasers and their successors.4 In counsel’s submission, two requirements are essential and are universally insisted upon, namely:5
(a)that the area of the scheme shall be defined; and
(b)that the purchasers from the person who creates the scheme shall purchase on the footing that all purchasers shall be mutually bound by, and mutually entitled to enforce, a defined set of restrictions (albeit varying somewhat between lots).
[11] In addition, a common vendor is considered to be “usual”, although there might be cases in which the purpose of this requirement can be met by some other state of the title.6
4 Gibbons, above n 1, at [111]; citing Baxter v Four Oaks Properties Ltd [1965] Ch 816, [1965] 2 WLR 1115; and Re Dolphin's Conveyance [1970] Ch 654, [1970] 3 WLR 31.
5 George Newsom and Ewan Paton Preston and Newsom: Restrictive Covenants (11th ed, Sweet & Maxwell, United Kingdom, 2020) at 68–69.
6 At 69; and see D W McMorland and others Hinde McMorland & Sim Land Law in New Zealand
(online ed, Lexis Nexis) at [17.025].
[12] The applicant has filed expert evidence by Bruce McCoskrie, a planner, that shows the Property was created in stage five of a subdivision developed in five stages. From the evidence filed for Ms Waller, Ms Waller’s property appears to have been created at stage three of the subdivision. The covenant over her property and the Covenant in issue are almost identical, relevantly including the same restrictions on the number of dwellings, subdivisions and roading as the applicant is seeking to modify. These particular restrictions are worded as follows:
(vi)The Transferee will not erect any more than one single family dwellinghouse on the land, nor subdivide the land further.
(vii)The Transferee will not construct any road on any part of the said land which provides access to any other land adjoining the said land.
[13] Mr Anderson submits for Ms Waller that the requirements for a building scheme are satisfied in this case as the area of the building scheme is clearly defined, being the land that forms the original development. Furthermore, all lots are affected by similar covenants and although the covenants apply specifically to different groups of properties, the properties all:
(a)involve the same original vendors; and
(b)contain almost identical limitations on how the affected properties can be used.
[14] This appears to be consistent with the decision in Poltava itself where Master Cohen held that there was a building scheme, including on the basis that the similarity of the covenants indicated a consistency with a general scheme of development.7 All of the lots were given the benefit of a covenant which limited the erection of more than one private dwelling, prohibited the erection of flats and restricted the types of building materials that could be used, which the judge held “leads overwhelmingly to an inference that the vendors intended the covenants to be and they in fact were for the benefit of all lots sold.”8
7 Re Application of Poltava Pty Ltd, above 2, at 167.
8 At 168.
[15] Counsel for the applicant responds that building schemes predate the doctrine of restrictive covenants and that where the covenants noted on the title are clear as to the properties which have the benefit of the covenants, that will be the end of the matter. The applicant accepts that if there is any ambiguity, reference could be made to the transfer document for clarification but submits that attempted reference to anything beyond the registered instruments would conflict with the provisions of the Land Transfer Act 2017 that a person taking an estate is not bound by constructive notice of any interests and any restrictive covenants will be noted on the title. The applicant refers to commentary in Hinde McMorland & Sim Land Law in New Zealand in support of this.9
[16] In addition, counsel for the applicant relies on the fact that those with the benefit and burden of a covenant could seek a modification by consent as supporting the applicant’s position. Counsel refers in this regard to s 307 of the PLA which provides the Registrar-General with the power to note modifications of covenants on records of title.
[17] I do not accept that the changes in the legislation allowing a restrictive covenant to be noted (but not registered) on the title necessarily destroy any equitable rights arising from a building scheme that is not noted on the title. The discussion in Hinde McMorland & Sim emphasises the distinction between registration and notation and then comments:10
The notation of a covenant on the record of title of the burdened land does, however, have at least two positive outcomes.
First, notation on the record of title of the burdened land ensures that the registered owner holds that estate or interest subject to the covenant as “an estate or interest … noted on the record of title at the time of registration”. The result is that every purchaser necessarily has notice, actual or constructive, at least so long as there is a memorial on the current computer register, of the existence of the covenant since the notification is discoverable by a search of the register.
Secondly, the rules of equity are changed and a covenant not noted on the title is not binding on a purchaser with notice per se but is subject to the rules of the Land Transfer Act in that, like all other equitable interests, it is binding only on a registered proprietor who takes with fraud in respect of that interest.
9 McMorland, above n 6, at [17.025].
10 At [17.031] (footnotes omitted).
[18] Importantly however for this application, I do not consider that the parties who ought to have a right to be heard on the proposed modification of a covenant under the New Zealand provisions ought to be confined to those who have the benefit of the covenant or who can establish that their property is part of a building scheme.
[19] The provision that the Judge was considering in the Australian decision Re Application of Poltava Pty Ltd, referred to above, s 89 of the Conveyancing Act 1919 (NSW), confined the Court’s discretion to where the Court was satisfied:
(a)the covenant ought to be deemed obsolete; or
(b)that its continued existence would impede the reasonable user of the land subject to the burden of the covenant without securing practical benefit to the persons entitled to the covenant’s benefit; or would, unless modified, so impede such a user; or
(c)that those with the benefit of the covenant have consented to its modification or extinguishment or could be taken to have abandoned or waived the benefit of the restriction; or
(d)that the proposed modification or extinguishment of the covenant would not substantially injure the persons entitled to the covenant’s benefit.
[20] These limits can be contrasted with the broader powers extended by s 317 of the New Zealand legislation, including at s 317(1)(a) where the Court is satisfied that the covenant “ought to be modified” because of a change in the use of the benefited or burdened land or the character of the neighbourhood or any other circumstance the Court considers relevant, as opposed to requiring that the covenant be obsolete, and so forth. Furthermore, the NSW legislation does not include an equivalent provision to s 317(1)(f), as added in 2017.
[21] Furthermore, the Supreme Court confirmed in Synlait Milk Ltd v New Zealand Industrial Park Ltd that determinations pursuant to s 317 require a two-stage approach:11
The court’s first task is to determine whether one (or more) of the grounds of s 317(1) is made out. If one (or more) of the grounds in s 317(1) is made out, the second task is to determine whether the discretion to extinguish or modify the covenant should be exercised. We adopt that approach. We acknowledge, however, that if the court finds one or more of the grounds in s 317(1)(a) is engaged, it will have found that (using the words of s 317(1)(a)) “the easement or covenant ought to be modified or extinguished (wholly or in part)”, which may bring into play at the first stage some of the considerations that are also relevant at the second stage.
[22] This two-stage approach suggests that the Court retains a discretion whether or not to modify or extinguish the covenant even where, pursuant to s 317(1)(c), all parties with the benefit or burden of the covenant, have agreed to its modification or extinguishment. This would mean that any modification or revocation of a covenant would first be required to go through the ss 316 and 317 process and could not simply be noted on the title by consent as submitted by counsel for the applicant.
[23] The Supreme Court further confirmed in Synlait that the fact that nearby land is not subject to the covenants in question does not affect the relevance of changes to the neighbouring area.12 There ought therefore to be a right to be heard by those who can establish that they are in the relevant neighbourhood so the Court can be fairly informed.
[24] As Ms Waller’s property adjoins the Property in issue there is no question that her property is in the relevant neighbourhood.
[25] Section 316 supports this approach because it provides the Court with a broad discretion in terms of who an application is required to be served on. If it was intended that only those whose properties have the benefit of a covenant ought to have a right to be heard, then there would be no need for s 316 to provide the Court with the discretion to direct who an application may be served on. Instead, s 316 requires the
11 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657, at
[67] (footnote omitted).
12 At [145].
application to be served on the appropriate territorial authority and “on any other persons, and in any manner, the Court directs on an application for the purpose”.
[26]I therefore conclude that Ms Waller has a right to be heard on the application.
Building scheme or not?
[27] I do not consider that sufficient evidence has been filed for the question of whether Ms Waller’s property is part of a building scheme to be finally determined at this stage, although this was not disputed in any reply evidence for the applicant. Because of the view that I have reached above however, this does not prevent me from concluding that Ms Waller has a right to be heard.
[28] This is likely to be a matter that needs to be considered in the substantive hearing including because it may affect the weight to be given to Ms Waller’s position in the exercise of the Court’s discretion.13 However, that is a matter for the trial judge.
Should Ms Waller be joined as a respondent or an interested party?
[29] In submitting that Ms Waller has a right to be heard, Ms Waller’s counsel refers to r 4.56 of the High Court Rules 2016 as the relevant rule determining the addition of parties.14 That rule provides a power to add a person as a defendant (or in this case respondent) where their presence “may be necessary to adjudicate on and settle all questions involved in the proceeding”. Counsel for Ms Waller submits that this rule relates to formal joinder as a party which is not necessarily the same as standing to be heard. However, counsel submits that if a person falls within the category of someone who could be joined, it follows that they are also sufficiently interested to be permitted to appear and be heard.
[30] At the hearing the focus was on Ms Waller’s right to be heard, rather than her status as an interested party as compared to a respondent. This is likely to be because of the way the application came about, arising as the result of a challenge by the
13 McMorland, above n 6, at [17.046]; referring back to discussion at [17.025].
14 Leave has been granted for this proceeding to be brought under Part 19 of the High Court Rules 2016, but r 4.56 applies though the operation of rr 19.11 and 7.43A of the Rules.
applicant to Ms Waller’s right to be heard on the application. Ms Waller’s counsel describes her as an “interested party” but also describes the further party for whom he is acting, Mr Wynyard, whose property has the benefit of the covenant over the Property in issue, as an “interested party”. The description “interested party” may therefore be because of the nature of the application and the fact that it is not an ordinary claim by a plaintiff against a defendant, rather than a deliberate decision not to seek party status.
[31] In Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, Thomas J recorded that the difference between an additional plaintiff or defendant and an interested party is significant as additional plaintiffs or defendants have a right to appeal whereas an interested party or intervener has no such right.15 Her Honour noted that the High Court Rules do not specifically provide for the addition of an interested party or intervener to a proceeding but that the Court has recognised the existence of this jurisdiction both under the rules and in the exercise of the Court’s inherent jurisdiction.16 Her Honour went on to comment:17
The case law does not reveal a clear test for whether the Court should add interested parties or interveners in civil cases. It appears, however, that the Court may be influenced by broader considerations than on applications for joinder of plaintiffs or defendants. This corresponds to the more limited rights acquired by interested parties/interveners.
[32] After considering the relevant authorities, Thomas J held the following propositions could be distilled on the joinder of interveners/interested parties:18
(a)An applicant must show that its legal rights against or liabilities in relation to the subject matter will be directly affected. Commercial, financial, or reputational interests in the outcome will only be sufficient in exceptional circumstances.
15 Capital and Merchant Finance Ltd (in receivership and in liquidation) v Perpetual Trust Ltd [2014] NZHC 3205 at [8]; citing Beneficial Owners of Whangaruru Whakaturia No 4 v Warin [2009] NZCA 60, [2009] NZAR 523 at [27]. See also Fundacion Pimjo Asociacion Civil v Aguilar & Aguilar Ltd [2014] NZHC 2322 at [43] and Independent Fisheries Ltd v Minister for Canterbury Earthquake Recovery [2012] NZHC 1177 at [15].
16 At [8].
17 At [9].
18 At [41].
(b)If the intending intervener’s presence before the Court will not improve the quality of information before the Court, that will count heavily against its addition to the proceedings.
(c)A relevant consideration is the extent to which the proposed intervener can rely on one of the parties to protect its rights and obligations.
(d)If either party would be prejudiced by the intervention, or if the intervention would create an impression of partiality, the application will not be granted.
(e)In cases where development of the law is likely, the application is more likely to be granted if the proposed intervener has special expertise to assist the Court on wider public policy issues.
(f)The underlying issue is whether it would be unjust to adjudicate on the matter in dispute without the intervener being heard. Several of the factors mentioned above tie into this issue.
(g)Where intervention is justified, the degree of participation granted to the intervener should be the minimum necessary to protect the intervener’s interests.
[33] In Synlait, the Supreme Court confirmed that a respondent who unsuccessfully opposes a s 317 application will not be ordered to pay costs as long as the respondent acts reasonably.19 It appears to be unlikely therefore to make any difference from a costs perspective whether Ms Waller is named as a respondent or as an interested party. However, her right to appeal may be affected and costs are always at the discretion of the Court. At this stage, given she has not formally applied to be added as a respondent, I therefore confirm that Ms Waller has a right to be heard as an interested party.
Result
[34] Ms Waller is entitled to be heard as an interested party in respect of the application by Watene Lane Limited to modify the covenant over its land pursuant to s 317 of the PLA.
19 Synlait Milk Ltd v New Zealand Industrial Park Ltd, above n 12, at [204].
Costs
[35] Ms Waller has succeeded and so is entitled to costs. I ask the parties to confer and only if agreement cannot be reached to file memoranda of no more than three pages (excluding schedules), on behalf of Ms Waller within 25 working days and the applicant a further 10 working days.
Associate Judge Sussock
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