TAYLOR v SMALL [2018] NZHC 2785

TAYLOR v SMALL [2018] NZHC 2785 [29 October 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-864[2018] NZHC 2785UNDER the Declaratory Judgments Act 1908IN THE MATTER of an application for a Declaratory JudgmentBETWEEN WILLIAM PETER TAYLOR AND SUSANMARY TAYLORFirst PlaintiffsSCOTT KERRY JACKSON AND SARAHANNE JACKSONSecond PlaintiffsRICHARD DONALD JOHNSTON ANDRACHEL ELIZABETH JOHNSTONThird PlaintiffsTREVOR FRANK SAVORY AND SALLIEANN RENWICKFourth PlaintiffsAND GEOFFREY CLEMMENT SMALL AND ARIASMALLFirst Defendants./contHearing: 17 September 2018Appearances: R Brabant and S Darroch for the PlaintiffsA Simkiss for the First DefendantNo appearance by or on behalf of the Second DefendantJudgment: 29 October 2018JUDGMENT OF GORDON JThis judgment was delivered by me on 29 October 2018 at 4.00 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:BOMBAY INVESTMENTS LIMITEDSecond DefendantIntroduction[1] The plaintiffs bring an application under the Declaratory Judgments Act 1908in relation to the interpretation of restrictive covenants. In particular, the plaintiffsseek declarations that:(a) Only three dwelling houses may be built on the land that the firstdefendants, the Smalls, purchased from the first plaintiffs, the Taylors,in 2013 (the Smalls' land); and(b) The equestrian facilities building (the building), which the Smalls havealready constructed on that land, is in breach of the terms of therestrictive covenants.[2] The plaintiffs further seek injunctions restraining the Smalls (or subsequentpurchasers from them) from constructing any more than three dwelling houses on theSmalls' land and ordering the Smalls to remove the building.[3] The plaintiffs' application is opposed by the Smalls and by the seconddefendant, Bombay Investments Ltd. After purchasing the Smalls' land from theTaylors, the Smalls subdivided the land into seven lots (the Small subdivision).Bombay Investments Ltd purchased one of those lots.[4] The Smalls also say that the plaintiffs are estopped from asserting theirinterpretation of the restrictive covenants, both in respect of the number of newdwelling houses that may be built on the Smalls' land and whether the covenantspermit the construction of the building.[5] As no relief is sought against Bombay Investments Ltd, that company, havingfiled a notice of appearance reserving rights, has not taken part in the proceeding.[6] Interested parties, Fei Wang and Yao Feng Qi (the Wang/Qis), in their noticeof opposition, oppose the development of the Smalls' land and the Smalls "furthersubdividing it". They also oppose the plaintiffs' application as it relates to theinterpretation of the restrictive covenants (in relation to the number of dwelling housesthat may be built on the Smalls' land) to the extent it may affect their property rights.The Wang/Qis did not take part in the proceeding beyond filing a notice of opposition.The Taylor subdivisions[7] The Taylors were the owners of 40 hectares of land in Ingram Road,Ramarama, south of Auckland. They also owned an adjacent 33 hectares of land.[8] The Taylors obtained a subdivision approval from the (then) Franklin DistrictCouncil. The approval was subsequently varied. On 31 March 1994, the scheme planwas deposited in the Land Transfer Office (the first Taylor subdivision). There weresix rural-residential lots (old lots 1, 2, 3, 4, 5 and 6). There was a further lot (old lot11) which was later combined with old lot 1, and there was also a lot (old lot 10) whichwas the access way for all the lots in the first Taylor subdivision.[9] In October 1994, the Taylors sold the first of the old lots, old lot 2. Thememorandum of transfer included a restrictive covenant on old lot 2 dated 9 December1994 in favour of old lots 1, 2, 3, 4, 5, 6, 10 and 11 (Covenant 1). Old lot 2 was thusthe servient land in Covenant 1. Covenant 1 was notified on the title of old lot 2,which forms part of the land now owned by the third plaintiffs, the Johnstons.[10] In July 1997, the Taylors sold the second of the old lots, old lot 3. Thememorandum of transfer included a restrictive covenant on old lot 3 dated23 December 1997 in favour of old lots 1, 2, 3, 4, 5, 6, 10 and 11 (Covenant 2). Oldlot 3 was thus the servient land in Covenant 2. Covenant 2 was notified on the title ofold lot 3, which is now owned by the fourth plaintiffs, the Savory/Renwicks.[11] The wording of all material parts of Covenants 1 and 2 is the same.[12] By deed dated 15 July 1998 between the Taylors and the then owners of old lot3, the parties agreed to restrictive covenants in favour of old lot 3 applying to theservient lands then owned by the Taylors, namely old lot 1 (with old lot 11amalgamated), old lot 4, old lot 5 and old lot 6 (Covenant 3). Old lot 3 was thus thedominant land in Covenant 3.[13] By this stage, the Taylors had sold only old lot 2 and old lot 3.[14] In 2004,1 by way of a new subdivision, the Taylors created two lots (2004 lots1 and 2) from old lot 4 and a small portion of old lot 5. 2004 lot 1 was made up ofpart of old lot 4 and the small portion of old lot 5. 2004 lot 2 was made up of part ofold lot 4.[15] The second plaintiffs, the Jacksons, purchased 2004 lot 1 (the Jackson land)from the Taylors. The current owners of 2004 lot 2 are the Wang/Qis. There is adwelling house on both 2004 lot 1 and 2004 lot 2.[16] On 24 June 2004, a deed was entered into between the Taylors and theJacksons. By that deed, a covenant was completed in favour of the Jackson land(2004 lot 1) over old lot 1 (with old lot 11 amalgamated), old lot 6 and a further twotitles then owned by the Taylors2 (Covenant 4). The Jackson land was thus thedominant land in Covenant 4.[17] The wording of Covenant 4 is identical in all material respects to Covenant 3,save for the expressed value required for any dwelling house (not less than $200,000in Covenant 3 and not less than $300,000 in Covenant 4).[18] In 2005, the Taylors created a separate lot from a part of old lot 1 and sold it tothe Johnstons, the owners of old lot 2. These two pieces of land were merged into onetitle at some stage.[19] In 2007, the Taylors sold old lot 11 (which had been amalgamated with oldlot 1) to a Kaye Maxwell. Old lot 11 was then merged into Ms Maxwell's title, a golfcourse. I mention the sale of old lot 11 simply by way of narrative background. Anyfurther discussion of old lot 11 is not required in terms of the issues I am required toconsider.1 There is some disagreement as to whether this occurred in 2003 or 2004, but this is not material.2 Those two further titles were not part of the "first Taylor subdivision". The two titles are nowowned by Peter O'Meara who was served with the proceedings but who has not taken part.[20] Mr Taylor's evidence is that in 2010 he ceased dairy farming and they farmedthe remainder of their land with dry stock. He says that by 2013, he and his wife wereretired and wished to downsize the amount of land they owned. They undertook acommon boundary location, creating two new lots of 4.1 hectares (being part of oldlot 1 and on which there were two houses, both built before the first Taylorsubdivision) and 17.5 hectares (of undeveloped land, being the balance of theiroriginal 40-hectare piece of land).[21] In 2013, the Smalls purchased the 17.5 hectares of land in one lot from theTaylors. That land comprised a large part of old lot 1 (being all of old lot 1 except forthe 4.1 hectares referred to in [20] above and the part of old lot 1 sold to the Johnsonsin 2005 as referred to in [18] above), a small portion of old lot 4, most of old lot 5 andall of old lot 6.[22] In 2015, the Taylors created a separate title for the two dwellings on the 4.1hectares they retained. Those dwellings were a cottage and the house they live in.They are now selling the cottage.The Small development and subdivision[23] In 2014, the Smalls obtained a building consent and constructed the building,described in their 2015 application for subdivision consent as a new shed and stableswith living quarters, associated access, effluent disposal field and an arena. Thebuilding comprises a stable and barn complex of 300 m2 with accommodation on twolevels of 96 m2, and an attached truck/machinery shed of 85 m2.[24] Earthworks carried out on the property as part of the development worksincluded preparation of a building site for a dwelling house which has not been built.Since December 2014, the Smalls have been living in the accommodation included inthe building.[25] In 2015, the Smalls applied to the Auckland Council for consent to subdividethe land they purchased from the Taylors. Consent was granted on 8 October 2015,enabling subdivision into seven lots (Small lots 1-7). Their plan was that the sales ofsix lots would enable them to build their house on the lot they proposed to retain.[26] Mr Small's evidence was that the reason for constructing the building beforeconstructing a home, was to give their youngest daughter the facilities she needed tosucceed as soon as they could and with the money they had. Mr Small said that hisdaughter is a New Zealand representative in show jumping and is regularly named inthe New Zealand Youth Squads. Their intention has always been to provide her withevery opportunity to succeed.[27] The approved scheme plan shows a specified building area on each of Smalllots 1-6 and a condition of the consent requires any residential dwelling located withinSmall lots 1-6 to be located within the specified building area. The building is onSmall lot 7.[28] Since the Small subdivision was approved and titles issued, the Smalls haveadvertised Small lots 1-6 for sale. They have sold Small lot 4 to Bombay InvestmentsLtd. A single dwelling house is under construction on Small lot 4, which sits withinthe boundaries of old lot 1.[29] In 2018, the Smalls sold Small lot 2 which sits within the boundaries of oldlot 5.[30] The Smalls have ceased marketing the other Small lots until the interpretationof the covenants is resolved.Land to which Covenant 3 applies[31] It is not in dispute that the upshot of all the foregoing is that Covenant 3 isnotified on:(a) The Jackson title (2004 lot 1, being part of old lot 4 and a small portionof old lot 5);(b) The Johnston title (being old lot 2 and with the portion of old lot 1amalgamated);(c) The Taylor titles (two titles, one containing the cottage and the otherthe house, both titles being part of old lot 1);(d) The Wang/Qi title (2004 lot 2, being part of old lot 4);(e) The Maxwell title (includes old lot 11); and(f) The seven lots in the Small subdivision.Land to which Covenant 4 applies[32] It is also not in dispute that Covenant 4 is notified on:(a) The Jackson title;(b) The Johnston title;(c) The Taylor titles; and(d) The seven lots in the Small subdivision.Covenants 3 and 4[33] It is also not in dispute between the parties that all of the plaintiffs, as originalparties or successors in title, have the right to enforce the terms of Covenants 3 and 4.[34] The controversy is over the interpretation of clause (i) of the Schedule inCovenants 3 and 4. That clause reads:(i) That the Covenantors shall not erect or permit to be erected or placedon the servient lands or any part thereof any building or erection otherthan a new (not being an existing building previously occupied or usedand removed from another locality) single dwelling house and suchfarm outbuilding or ancillary buildings as are usual and reasonable forthe type of rural use of the land in the subdivision (of which thedominant land and the servient lands form part) and of a nature designor style (including that of the garden or land-scaping aspects andfencing of surrounding grounds) in keeping with each other such thatthe dwelling house and any additional buildings and the surroundinggrounds thereof blend in with the rural nature of the surrounding areato ensure that a pleasing and aesthetically compatible appearance ismaintained for the benefit of the dominant land and all the servientlands.[35] As to the definition of "servient lands", in the section headed "Background",clause A in Covenant 3 reads:The Covenantors [the Taylors] are registered proprietors of all the landcontained in Certificates of Title 92C/958 [old lot 1], 961 [old lot 4], 962 [oldlot 5] & 963 [old lot 6] (inclusive) (North Auckland Land Registry) ("theservient lands").[36] In Covenant 4, clause A in the section headed "Background" reads:The Covenantors [the Taylors] are registered proprietors of all the landcontained in Certificates of Title 88C/139 [now O'Meara land], 92C/963 [oldlot 6], 92C/958 [old lot 1] and 133C/912 [now O'Meara land] inclusive (NorthAuckland Registry) ("the servient lands").Issues[37] There are three issues I must consider:(a) How many new single dwelling houses may be built on the Smalls'land;(b) Do Covenants 3 and 4 permit the building constructed by the Smalls;and(c) Are the plaintiffs estopped from asserting their interpretation ofCovenants 3 and 4, both in respect of the number of new dwellinghouses that may be built on the Smalls' land and whether Covenants 3and 4 permit the construction of the building.Issue oneInterpretation of restrictive covenants – extrinsic evidence[38] I first start with the approach to be taken to the interpretation of contracts. InFirm PI 1 Ltd v Zurich Australian Insurance Ltd, the Supreme Court said:33 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.[60] the proper approach is an objective one, the aim being to ascertain"the meaning which the document would convey to a reasonable personhaving all the background knowledge which would reasonably have beenavailable to the parties in the situation in which they were at the time of thecontract". This objective meaning is taken to be that which the partiesintended [63] While context is a necessary element of the interpretive process andthe focus is on interpreting the document rather than particular words, the textremains centrally important. If the language at issue, construed in the contextof the contract as a whole, has an ordinary and natural meaning, that will be apowerful, albeit not conclusive, indicator of what the parties meant (Citations omitted)[39] There is also the following:[62] The fact that parties are aware their contract might be relied uponby a third party may justify a more restrictive approach to the use ofbackground in some instances [40] In Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust, theminority judgment of William Young and O'Regan JJ discusses the extent of extrinsicevidence that may be considered when ascertaining the true construction of arestrictive covenant:4[60] If this was simply a dispute between the parties to an ordinarycontract, the contract would be interpreted having regard to the backgroundknowledge known or reasonably available to the parties, which would includethe earlier iterations of the covenant and, in particular, the aerial photograph.Such an interpretative exercise would be carried out in terms of the principlesdiscussed in Firm PI and could arguably result in the same outcome as thatarrived at by the High Court and Court of Appeal using rectification. Theproblem, however, is that the open space covenant is not an "ordinarycontract" of the kind just postulated. As indicated in the italicised section ofthe passage which we have set out from Firm PI, somewhat differentconsiderations apply where the instrument in question affects the rights ofthird parties. And, as we will now explain, this is particularly so withinstruments which create interests in land.[41] In terms of the correct approach, the judgment concludes:[73] A very flexible approach to the admission of extrinsic evidence asbearing on the construction of registered documents will promote litigationand, as was recognised in Westfield, has the potential to undermine the policyof indefeasibility of title. On the other hand, if we were to adopt a rigid rule4 Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust [2018] NZSC 75.excluding such evidence, there will still be marginal cases which will have tobe addressed and, in some instances, perverse outcomes, despite there beingno good reason why, as between the parties to the dispute, the extrinsicevidence should be ignored.[74] Against that background, we consider that:(a) Generally, registered documents should be construed withoutregard to extrinsic evidence which is particular to the originalparties and is not apparent on the face of the register.(c) We would not exclude reference to facts which a reasonablefuture reader of the document could be expected to be awareof and would recognise as relevant and which they haveaccess to, such as the configuration of land, any physicalfeatures to which the document relates or refers and anymaterial referred to in the document.[42] In a separate judgment, Elias CJ notes that there is some authority that the onlyextrinsic evidence properly admitted when construing registered instruments is, in theabsence of special circumstances, context that would be readily apparent to all thirdparties.5 However, the Chief Justice further states that it was unnecessary to resolvewhether, and to what extent, resort to extrinsic evidence is appropriate in the case ofinstruments notified on a public register as the meaning of the covenant in that casewas clear in its terms as a whole.6[43] In her separate judgment, Glazebrook J agreed with the reasons of WilliamYoung and O'Regan JJ on all issues apart from the interpretation of the covenant.7[44] Finally, Ellen France J recorded that she made no comment on the approach tobe taken to the use of extrinsic evidence in the construction of registered documents.8[45] I will follow the approach in [74] of Green Growth No 2 Ltd, set out in [41]above on the admission of extrinsic evidence.5 At [133].6 At [133].7 At [151].8 At [161].The wording of Covenants 3 and 4[46] I first focus on the relevant wording of clause (i) of the Schedule in Covenants3 and 4 which reads as follows:That the Covenantors [the Taylors as registered proprietors of the servientlands] shall not erect or permit to be erected or placed on the servient lands orany part therefore any building or erection other than a new (not being anexisting building previously occupied or used and removed from anotherlocality) single dwelling house [47] There are three possible ways to read the restriction:(a) It permits a "single dwelling house" on the (defined) servient lands.This would mean that only one new dwelling house may be erected onthe servient lands. On this reading, "or any part therefore" isemphasising that the prohibition extends to all parts of the servientlands;(b) That the building of a new single dwelling house is restricted to a newsingle dwelling house on each of the lots identified in Covenants 3 and4 as the servient lands (refer [35] and [36] above); or(c) It permits "a" single dwelling house on any part of the servient lands.That is, not just one, but potentially many. "Any part thereof" meansthat further development and building on "any part" of the servientlands is permitted. Read this way, the restriction is not as to the number,but as to the nature of the dwelling.[48] The first interpretation is not advanced by either party.[49] The plaintiffs submit that the second interpretation is correct. They saytherefore the maximum number of dwelling houses that may be built on the Smalls'land is three, one per each of the old lots included in the Smalls' land, namely old lots1, 5 and 6.9 With one dwelling house already under construction by Bombay9 Although there is a part of old lot 4 included in the Smalls' land, there is already a dwelling house(in fact two dwelling houses) constructed on that old lot.Investments Ltd on Small lot 4 (part of old lot 1), one able to be built on Small lot 2now sold (within old lot 5) and a third able to be built on Small lot 7 (on old lot 6),that then "uses up" the number of dwelling houses that may be built.[50] The Smalls, on the other hand, submit that the third interpretation is correct.Submissions[51] Mr Brabant, for the plaintiffs, places emphasis on the fact that the wording isin the singular. The covenants use the words "a new single dwelling house". Hesubmits that if multiple dwelling houses were intended to be permitted, then thatphrase would not have been employed.[52] Mr Brabant submits that the words "new" and "single" are to be given theirnatural and ordinary meaning. He says that the meaning to be given to the word "new"is emphasised by adding in brackets a prohibition on an existing building previouslyoccupied or used and moved from another locality.[53] Mr Brabant submits that the two words "dwelling house" are also to be giventheir natural and ordinary meaning, and it would not be appropriate to have resort to,for example, the definitions in the Unitary Plan or previous district plans or schemes.10Mr Brabant refers to The New Zealand Oxford Dictionary definition of a dwelling as"a house; a residence; an abode", and a dwelling house as "a house used as a residence,not as an office etc".11[54] As to the words "or any part thereof", Mr Brabant submits that the correctinterpretation of this control is that "any part" would be any one of the four lotsdescribed as the "servient lands".[55] Mr Brabant submits that the position adopted by the Smalls, namely thatCovenants 3 and 4 are concerned with the quality and character of the buildings (inother words, not density), and that the wording permits a single dwelling of the10 Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 at [32].11 Tony Deverson and Graeme Kennedy (eds) The New Zealand Oxford Dictionary (OxfordUniversity Press, Melbourne, 2005) at 344.required cost and standard on each separate legal lot regardless of the date that legallot was created, is not an interpretation which recognises what he says is a crucialelement of the covenant restriction, which was to limit the number of houses that couldbe built. In other words, it is a control on building density.[56] Ms Simkiss, for the Smalls, submits that Covenants 3 and 4 do not restrict thenumber of dwelling houses on the Smalls' land. She says that the plain meaning ofclause (i) is that it permits the building of single dwelling houses on any part of theSmalls' land. She says that this interpretation is supported by a careful analysis of thewords used, their meaning and the order of the words in the clause.[57] Ms Simkiss further submits that the most important interpretative factor is thatthe permission applies to any part of the servient land. Finally, she submits thatCovenants 3 and 4 are concerned with the quality and nature of the buildings, not thenumber of them.Analysis[58] The meaning of "new" is clear and is not in dispute between the parties. Theplain meaning is further supported by the words in brackets which state "not being anexisting building previously occupied or used and removed from another locality".[59] "Dwelling" and "dwelling house" mean a building in which people live (asopposed to a place of business). Again, this is not in dispute. In my view, "dwellinghouse" is permissive enough to permit a single building containing more than oneresidential unit, for example, an apartment building.[60] There is then the word "single". It modifies the meaning of "dwelling house".In my view, "single" denotes the permitted use of the land in this case. It is not anumerical value. In other words, it does not mean one dwelling house. It means asingle family dwelling house. This interpretation is supported by the general rules ofEnglish grammar and usage as to word order. An adjective immediately before a nounis generally indicative of type or purpose. If the parties had wished "single" to indicate"one", the clause would have said "single new dwelling house", not "new singledwelling house".[61] There is then the word "a". The issue between the parties focusses on whatweight should be attached to that word. "A" is an indefinite article and does notnecessarily indicate quantum.[62] "A" may mean "one", "some" or "any".12 "A" is therefore capable ofindicating a numerical value of "one" but does not always do so. In my view, "a" doesnot indicate a numerical value of one in this case for the following reasons:(a) The word "one" could have easily been used if the parties had intendedthat there be a restriction on the number of sections or number ofhouses. In Big River Paradise Ltd v Congreve, the restrictive covenantprovided:13No subdivision of the Servient Lot shall permit the creationof more than three separate allotments nor permit more thanone dwelling to be erected on each such allotment.That was not done in this case.(b) Or, alternatively, the same words could have been used as were used inthis case but a different word order employed, namely "a single new dwelling house". In Young v Stolten, the relevant restrictive covenantread as follows:14a) Not to erect on the land any building except a singlenew dwellinghouse with garaging and other buildingIn that case, the intention was seen to be the creation of sections ofequal size with a single home on each. Such an interpretation isunderstandable with the word order being "a single new ".12 Lesley Brown (ed) Shorter Oxford English Dictionary (5th ed, Oxford University Press, Oxford,2002) at 1; Deverson and Kennedy, above n 11, at 1.13 Big River Paradise Ltd v Congreve, above n 10, at [1].14 Young v Stolten [2009] NZCA 264 at [8].However, in this case, single is separated from the word "dwellinghouse" by the word "new". In my view, the word order does notsupport the plaintiffs' interpretation.[63] That "a" does not mean "one" in this case is also supported by the use of thewords "or any part thereof" which follow the words "servient lands". The "servientlands" is a defined term. It means the whole of the servient lands which are differentin the two covenants:(a) In Covenant 3, the servient lands are all the lands then owned by theTaylors and described in the certificates of title listed; and(b) In Covenant 4, the servient lands are some of the lands in Covenant 3plus the additional land then owned by the Taylors and now owned byMr O'Meara.[64] "Or any part thereof" means any part of the whole. The whole is that whichimmediately precedes the word "or", that is any part of the servient lands. In my view,the plaintiffs' submission that these words should be interpreted as "a part" of theservient lands, being one of the four lots described in each of the covenants, is areading down of the word "any". This reading down of "any" is not supported by thecontext or the plain wording of the clause.[65] There is also no control on subdivision in Covenants 3 and 4. That supportsthe interpretation I consider should be adopted.[66] I agree with the submission made by Ms Simkiss that the focus of clause (i) ison the quality and nature of any dwelling house rather than being a control on density:(a) The word "new" is emphasised by the addition of the words in bracketsin clause (i);(b) It must be a "single" dwelling house, not a dwelling houseincorporating multiple units;(c) Other words in clause (i) refer to the nature, design or style of adwelling house (and other buildings);(d) The dwelling house must be of a certain build value. Clause (ii) of theSchedule to Covenant 3 provides:That the Covenantors will not erect or permit to be erected or placedon the servient lands or any part thereof any dwelling house except inaccordance with (i) hereof and unless the value of that dwelling house(not including any ancillary buildings) shall have a value of not lessthan a base figure of $200,000.00 as at the 1st day of October 1994,adjusted by the movement of the New Zealand Institute of ValuersModel Housing Cost Index from that date to the date of applicationfor permit.(Covenant 4 adopts a value of $300,000); and(e) There is a restriction on caravans, huts or sheds in clause (iii) whichreads as follows:That the Covenantors will not erect or place or permit to be erected orplaced on the servient lands or any part thereof any caravan, hut orshed for permanent or temporary use of any kind except if any suchhut or shed is of a permanent nature and forms part of the additionalor ancillary farm buildings as maybe permitted pursuant hereto.[67] For all those reasons, I do not accept the plaintiffs' submission that the numberof new dwelling houses on the Smalls' land is restricted to three. A single dwellinghouse may be built on any part of that land.Extrinsic evidence[68] The parties were not in dispute that in considering the meaning of Covenants3 and 4, the Court could have regard to Covenants 1 and 2.[69] The test is whether the content of Covenants 1 and 2 are facts "which areasonable future reader of the document [Covenants 3 and 4] could be expected to beaware of and would recognise as relevant and which they have access to ".1515 Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust, above n 4, at [74].[70] Clauses C and D in the section headed "Background" in Covenants 3 and 4read as follow:C. THE dominant land is already subject to certain land covenants thebenefit of which enures to the servient lands.D. THE parties have agreed that the servient lands should be subject toidentical positive and restrictive land covenants as detailed in theSchedule hereto.[71] In my view, the Court is entitled to consider Covenants 1 and 2 as extrinsicevidence. The dominant land in Covenants 3 and 4 is identified under the heading"Background" in clause B, while clause C refers to "certain land covenants". Thoseearlier land covenants would in my view be recognised as relevant by a reader ofCovenants 3 and 4, and such reader would have access to Covenants 1 and 2, theybeing included in the memorandum of transfer for old lots 2 and 3.[72] Although I will consider this extrinsic evidence, in my view it is not in factnecessary to do so, having regard to the plain meaning of clause (i).[73] In Covenants 1 and 2, old lots 2 and 3 respectively were the servient land anddefined in the transfer as "the subject land". The substantive words of the restrictionon erection of buildings in clause (i) of the second schedule to Covenants 1 and 2 werethe same. Clause (i) reads as follows:(i) That the Transferee [the purchaser of old lot 2/lot 3] shall not erect orpermit to be erected or placed on the land any building or erectionother than a new (not being an existing building previously occupiedor used and removed from another locality) single dwelling house andsuch farm outbuildings or ancillary buildings as are usual andreasonable for the type of rural use of the land in the subdivision andof a nature design or style (including that of the garden or landscapingaspects and fencing of surrounding grounds) in keeping with eachother such that the dwelling house and any additional buildings andthe surrounding grounds thereof blend in with the rural nature of thesurrounding area to ensure that a pleasing and aestheticallycompatible appearance is maintained for the benefit of all Lots.[74] Mr Brabant submits that these covenants allow only one new single dwellinghouse (plus outbuildings or ancillary buildings) on the servient land.[75] Mr Brabant says that the same restriction was carried forward into Covenants3 and 4 created by deed. In support of that submission, Mr Brabant refers to clausesC and D in the section headed "Background".[76] Mr Brabant submits that the Smalls are asking the Court to accept that theparties who entered into Covenants 3 and 4 intended that a different and more intensivelevel of dwelling house construction would be permitted on the lots described as theservient land in those two covenants. He submits that it is not tenable that the ownersof the dominant land, having earlier agreed to restrict dwelling house density on theirown property to a single building (and a farm outbuilding or ancillary buildings),would have agreed to future further subdivision and development of dwelling houseson each separate legal lot regardless of the date that legal lot was created.[77] Ms Simkiss submits that clauses C and D should be read disjunctively. Shesubmits that clause D is not a reference back to the land covenants in Covenants 1 and2. What clause D means, she says, is that each of the certificates of title referred to asthe servient lands in Covenants 3 and 4, should be subject to the same land covenantscontained in the Schedule to Covenants 3 and 4.[78] I do not accept that submission. If that were the case, there would be no needfor clause C.[79] However, having said that, I do not accept Mr Brabant's submission that themeaning of the words in the second schedule to Covenants 1 and 2, is that only onenew single dwelling house may be built on the subject land. I say that for all thereasons set out in [58] to [62] above.[80] Also, as part of the preamble in Covenants 1 and 2, there is the following: PROVIDED ALWAYS that the Transferee shall as regards the saidstipulations and restrictions be liable only in respect of breaches thereof whichshall occur while the Transferee shall be the registered proprietor of the subjectland described or any part thereof in respect of which any breach shall occur(Emphasis added)[81] In my view, the preamble contemplates subdivision and accordingly more thanone new single dwelling house being able to be placed on the subject land.[82] Further, that this is not a density control is reinforced by the following wordsin the preamble to both Covenants 1 and 2: The Transferor subdivided that land into lots in the manner shown anddefined on that plan for the purposes of the sale of the said land in separatelots as a group of rural lots designed for residential dwellings of a highstandard in keeping with the rural setting thereof.[83] Therefore, a reference to Covenants 1 and 2 does not alter the plain meaningof the words in Covenants 3 and 4.Post-contractual conduct[84] Ms Simkiss submits that the state of the land and boundaries, and how theboundaries have changed since 1998 (the date of Covenant 3), is admissible and highlyrelevant to the interpretation of Covenants 3 and 4. She submits, in reliance on theSupreme Court's decision in Wholesale Distributors Ltd v Gibbons Holdings Ltd, thatpost-contractual conduct is admissible if it "is capable of shedding light on themeaning intended by both parties".16[85] However, the Supreme Court did not agree on the issue as to whether or notthe subsequent conduct that may be taken into account has to be that of all parties tothe contract. Tipping J said:[63] If the court can be confident from their subsequent conduct whatboth parties intended their words to mean, and the words are capable ofbearing that meaning, it would be inappropriate to presume that they meantsomething else.(Citations omitted)[86] But Thomas J considered that the conduct of one party alone would suffice, atleast if that conduct was inconsistent with the interpretation that party was arguingbefore the Court.1716 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at [52].17 At [136].[87] The Taylors are a party to both Covenants 3 and 4. The other original party toCovenant 3 no longer owns the land and there is no relevant conduct on their partdescribed in the evidence. The other original party to Covenant 4 is the Jacksons.[88] In this case, the subsequent actions in completing further subdivision werethose of the Taylors only. There is no evidence of any involvement by the other partywith subsequent subdivision.[89] While on the Thomas J approach, the evidence of the Taylors' conduct mightwell be admissible were this an ordinary contract, bearing in mind that we are hereconsidering the interpretation of a restrictive covenant, I take a cautious approach.[90] In that regard, I do not consider the evidence of the subsequent conduct of theTaylors is admissible in construing the intention of the parties to Covenants 3 and 4.[91] I also do not take into account the subjective intentions expressed in theevidence of Mr Taylor. In any event, such evidence is again not necessary for mydecision.Conclusion on issue one[92] I find against the plaintiffs and accordingly will not make the declarationsought in their first cause of action that the plain wording of the restrictive covenants,interpreted in the context of Covenants 3 and 4 secured against the titles in the Smallsubdivision, read as a whole, limits the maximum number of dwelling houses on theland purchased by the Smalls to three dwelling houses.Issue two[93] Mr Brabant submits that the building which has been erected is neither a farmoutbuilding nor an ancillary building because it has been constructed in the absence ofa dwelling house. He says that the part of the building presently occupied by the Smallfamily is not a dwelling house. He refers to Mr Small's affidavit and says it is, at best,"temporary living quarters" attached to the stables complex.[94] Mr Brabant further submits that the words "as are usual and reasonable for thetype of rural use of the land in the subdivision" mean that any farm outbuilding orancillary building must be measured against what has been established as farmoutbuildings or ancillary buildings within the land in the first Taylor subdivision todate. He says by contrasting the Smalls' building with the existing farm outbuildingson three of the plaintiffs' properties, it is apparent that the Smalls' building is in breachof that part of the covenant provision.[95] Further, Mr Brabant submits that the building is in breach of the part of thecovenants which requires it to be of a "nature design or style in keeping with eachother such that the dwelling house and any additional buildings and the surroundinggrounds blend in with the rural nature of the surrounding area". There are two issueshere, Mr Brabant submits. First of all, the requirement that the outbuilding be inkeeping with the main building cannot be met as the main building, the dwellinghouse, is absent. Second, he submits that the words "surrounding area" refer to thelots subject to the restrictive covenants rather than the area surrounding those lots.[96] Finally, Mr Brabant says that both the qualitative controls I have referred to(that is usual and reasonable; and nature, design or style) have the purpose of ensuringthat a "pleasing and aesthetically compatible appearance" is maintained for the benefitof the dominant land and all the servient lands. He refers to the affidavit of Mr Taylorwhich contains an opinion that the building is not in keeping with the existingdevelopment of houses, outbuildings, gardens and landscaping on the properties alsosubject to the covenants. He says that what the Smalls have developed does not blendin with their own property, and with the residential dwellings and landscaped groundsof the Johnston, Savory/Renwick and Jackson properties.[97] Ms Simkiss, on the other hand, submits that the covenants do not require anyfarm outbuilding or ancillary buildings to be built in conjunction with a dwellinghouse; the equestrian facilities are an "outbuilding" which is usual and reasonable forthe type of rural use in the subdivision and the surrounding area; facilities for thepurpose of keeping, riding and training horses are usual and reasonable for the type ofrural use in the subdivision and the surrounding area; and sheds, including sheds withattached accommodation, are usual and reasonable for the type of rural use in thesubdivision and the surrounding area.Analysis[98] The New Zealand Oxford Dictionary describes an outbuilding as "a detachedshed, barn, garage, etc. within the grounds of a main building; an outhouse".18 TheOxford English Dictionary similarly defines outbuilding as "[a]n ancillary buildingnear to or adjoining a main building, esp. a shed, stable, etc., near to the main houseon a farm; an outhouse".19 The meaning of outbuilding as a structure belonging to,being subordinate to and separate from a main building is supported by the definitionof "ancillary". Ancillary is described as "subordinate, subservient" or "somethingwhich is ancillary; an auxiliary or accessory".20[99] My view, based on the plain meaning of the words, is that, in the absence of adwelling house, the building cannot be said to be an outbuilding or ancillary building.[100] However, further analysis of the words of clause (i) is required. Given thewording of the clause, both the dwelling house and any farm outbuilding or ancillarybuildings must comply with further conditions. It is necessary and possible to assesswhether the building complies with those further conditions. If the absence of adwelling house is the only aspect of non-compliance with Covenants 3 and 4, this maywell be relevant in terms of the remedy sought by the plaintiffs.[101] The next issue is whether the building is "usual and reasonable for the type ofrural use of the land in the subdivision".[102] I do not accept the plaintiffs' submission that the assessment of whether a farmoutbuilding or ancillary building is "usual and reasonable for the type of rural use ofthe land in the subdivision" must be measured against what has been established asfarm outbuildings or ancillary buildings within the subdivision to date. If that wereso, that would mean any farming is not permitted except possibly some grazing (the18 Deverson and Kennedy, above n 11, at 804.19 Oxford English Dictionary (online ed, Oxford University Press, 2018).20 Deverson and Kennedy, above n 11, at 36.Taylors run cattle over their land and the Jacksons have paddocks with cattle) andorchards (part of the Savory/Renwick's land is in an avocado orchard) because the restof the neighbours do not use their land for any other rural use.[103] I consider that the plaintiffs' interpretation of "type of rural use of the land inthe subdivision" unduly narrows what is meant by the relevant covenants. I considerthat it should be interpreted more broadly than the way in which the plaintiffs submit.[104] First, clause (iv) of the Schedule to Covenants 3 and 4 contemplates farming.That clause provides:(iv) That the Covenantors will not develop, farm, cultivate or otherwiseuse the servient lands or any part thereof except in accordance withthe best husband like farming practices [105] The Oxford English Dictionary defines farming as "[t]he business ofcultivating land, raising stock, etc.; agriculture, husbandry".21[106] Farming therefore includes keeping livestock. Livestock includes domesticanimals on a farm for use or profit.22 In my view, that includes horses. I consider italso would include storing vehicles and equipment for farming purposes.[107] The evidence of Glen Beal, who swore an affidavit on behalf of the Smalls,also supports a conclusion that the outbuilding is usual and reasonable for its "ruraluse", being the keeping of horses and the storage of vehicles and equipment. Mr Bealis a director of Campbell Tyson, an accountancy practise which has operated in theFranklin District for many years. Mr Beal says his firm has a significant interest inthe rural economy, and approximately one-third of their business is performed for theirrural client base. Mr Beal has particular knowledge and experience in the equestrianindustry and acts for a number of studs, trainers, traders and breeders in both the racingand sport horse industry. He has also been personally involved in the equestrianindustry and sport since around 1970, including as an owner and breeder. He isfamiliar with the achievements of the Smalls' daughter and says she is one of NewZealand's most talented young riders.21 Oxford English Dictionary, above n 19.22 Oxford English Dictionary, above n 19; Brown, above n 12, at 3037.[108] Mr Beal has visited the Smalls' property and describes the facilities asconsisting of a large arena, stables/shed, a horse walker, room for horse floats andtrucks, as well as paddocks for grazing. He says the entire stables/shed is 33 metreslong, 12 metres wide and 6 metres high. The arena is 80 metres long and 40 metreswide. Mr Beal says he is familiar with the spectrum of different types of private andpublic equestrian facilities in the Franklin area, including Pukekohe and Ramarama.His opinion is that the facilities at the Smalls' property fit within the spectrum ofprivate facilities he is familiar with, and they are not unusual or unexpected in theFranklin area. He says they are very similar to the facilities he has for his family,except that they do not have a horse walker which is on his wish list.[109] Further, there is evidence from Mr Small that there are two large sheds onMr O'Meara's property which is part of the servient lands in Covenant 4. They areeach 25 metres by 12 metres, both with attached living accommodation. Althoughthose sheds are both smaller than the building, there are no limits or requirements asto size or dimensions on any buildings in the covenants.[110] There is also no evidence that temporary accommodation is or is not a ruraluse. As noted, there is the evidence of Mr O'Meara's sheds which suggests it is. But,in any event, the use of that part of the building for accommodation is temporary.Mr Small's evidence is that the accommodation portion was signed off by theAuckland Council as "temporary living quarters" on the basis that once the Smalls'house is built, the accommodation attached to the facilities will not be used as livingquarters. Mr Small says that this means that the cooking facilities will be removed,rendering it a "lunch room" only.[111] Based upon the evidence outlined above, I consider that the building is usualand reasonable for the type of rural use of the land in the subdivision, namely farmingwhich includes the keeping of horses.[112] The next issue is whether the building is of a "nature design or style" in keepingwith the dwelling house. That cannot be tested in the absence of a dwelling house. Asthere is no dwelling house, the building cannot comply with this part of the clausebecause it is not "in keeping" with the dwelling house.[113] The next issue is whether the building and the surrounding grounds blend inwith the rural nature of the surrounding area.[114] The first question here is whether the words "surrounding area" are restrictedto the lands originally owned by the Taylors, or whether the words incorporate the areaoutside the servient lands. In my view, the words "surrounding area" were intendedto refer to the land outside the subdivision. Had it been intended to restrict theassessment to the land in the subdivision, that word would have been used, as it hasbeen used elsewhere in the same clause.[115] The second question then is whether the building is of a "nature, design orstyle" such that it blends in with the rural nature of the surrounding area.[116] As noted, Mr Beal's evidence is that the Pukekohe/Bombay area hashistorically been characterised by farming, but it is more "lifestyle" in character thesedays. He says there are hundreds of what he describes as "equestrian properties" inthe Franklin area, in which he includes Pukekohe and Ramarama. Equestrianproperties are therefore common in the area, including in the immediate vicinity ofIngram Road, and have been for many years.[117] Furthermore, there are hundreds of properties in the wider area havingequestrian facilities for private use. The evidence of the Smalls that the equestrianfacilities on their property are for private use, and further the evidence is that it iswithin the usual spectrum of such properties and typical for those with a strongcommitment, such as the Smalls have, to their daughter's development as a showjumper.[118] This evidence supports the conclusion that the nature of the building blends inwith the rural nature of the surrounding area.[119] As to the physical appearance, or design and style, of the building, the evidenceof Mr Small is that the outbuilding is a dark (iron sand) coloursteel clad shed withtemporary accommodation clad in band sawn ply and brown batons. That descriptionis consistent with photographs that were annexed to Mr Small's affidavit.[120] Mr Taylor, however, describes the building as painted in "an orange shade".He further says that the temporary accommodation part of the building "glints in thesun". In one of the photographs annexed to Mr Taylor's affidavit, the accommodationpart of the complex does appear to be orange in colour. However, two furtherphotographs also annexed to Mr Taylor's affidavit show the accommodation as abrown colour, consistent with the description given by Mr Small.[121] Ms Simkiss submits that there is nothing particularly distinguished about theappearance of the building, but on the other hand, nor is there anything objectionable.She notes Mr Taylor's description of the building as "utilitarian". That would seem tobe an accurate description, as is the submission by Ms Simkiss having regard to thephotographs.[122] While Mr Beal's evidence is that the facilities at the Smalls' property fit withinthe spectrum of private facilities, and are not unusual or unexpected in the Franklinarea, he does not specifically comment on the design or style of the building andwhether it blends it within the surrounding area. However, there is similarly noevidence to suggest the design or style of the building does not blend in with the ruralnature of the (wider) surrounding area.[123] Most of Mr Taylor's complaints in his affidavit relate to the size of the building.But there is no restriction on size in the clause. Significantly, there is no evidence tosuggest the building in its design or style does not blend in with the rural nature of the(wider) surrounding area. There is conflicting evidence as to the colour of theaccommodation part of the complex, and there was no cross-examination. However,given that two of Mr Taylor's photographs are consistent with Mr Small's descriptionand photographs, the weight of evidence supports Mr Small's description.[124] There are then the words "to ensure that a pleasing and aesthetically compatibleappearance is maintained for the benefit of the dominant land and all the servientlands". In my view, the Court is not required to make a judgment on aesthetics. Thefinal words of the covenant, in my view, are to be read as a consequence that followsif all the preceding requirements are met (which is the case, save for the absence of adwelling house).[125] My conclusion on issue 2 is that the building does not comply with the termsof cl(i) of the Schedule, but only in two respects. First, there is not (yet) a dwellinghouse associated with the building. Second, as a result, the building cannot be said tobe "in keeping" with the dwelling house.[126] For completeness, I note that I have not taken into account the evidence ofMichael Campbell or Nicholas Hall on behalf of the Smalls regarding the provisionsof the (then) Franklin District Council planning documents or the Auckland UnitaryPlan (the relevant document from 19 August 2016). Clause (iv) of Covenants 3 and 4directs compliance with the " Resource Management Act 1991, and the FranklinDistrict Council District Scheme ".[127] Ms Simkiss referred to the definition of "farming" in the Franklin DistrictCouncil planning document. In putting that to one side, I acknowledge the words ofDobson J in Whittaker v Jericevich where the Court was also required to interpret themeaning a restrictive covenant:23[21] I accept Mr Gilmour's caution about the inappropriateness of adoptinginterpretations used in different statutes, where the use of the expressions willbe dictated by the statutory purpose. As the Court of Appeal noted in Big RiverParadise, statutory definitions of words are often unhelpful in ascertainingwhat their ordinary meaning is as used in a contractual setting.(Citations omitted)Estoppel[128] Ms Simkiss submits that if the plaintiffs are correct in their interpretation ofCovenants 3 and 4, they are estopped from asserting those interpretations against theSmalls. The estoppel arises, Ms Simkiss says, both in relation to the number ofdwelling houses permitted on the Smalls' property and whether the building is inbreach of Covenants 3 and 4.[129] Having found against the Smalls that the building is in breach of the covenants,I need to address the claim of estoppel as it relates to the building.23 Whittaker v Jericevich [2012] NZHC 1545.[130] Having regard to my decision on the number of dwelling houses permitted, itis not strictly necessary to deal with estoppel as it relates to that issue. However, I willnevertheless do so.[131] Ms Simkiss submits there are a number of ways in which the plaintiffs' conductgives rise to an estoppel. First, she says that in advertising the property for sale in2013, the Taylors (by way of their estate agent's advertising) expressly representedthat it had exceptional "building sites", "huge future potential" and "sub-divisionpotential". She says that this advertisement represents that multiple houses could bebuilt on the land and gives rise to an estoppel by representation.[132] Further, Ms Simkiss submits that at all relevant times there were two houses(the Jacksons and the Wang/Qis) on old lot 4. This naturally led the Smalls to believethat the covenants permitted that.[133] None of the plaintiffs, entitled to prevent or remedy what they now say was abreach of Covenant 3, did so, thus encouraging the Smalls' belief. Nor did theycommunicate to the Smalls that, in their case, and not in the Wang/Qis' case, theyintended to enforce the strict terms of the covenants. Ms Simkiss submits that theforegoing facts give rise to an estoppel by silence and/or by convention.[134] Next, Ms Simkiss submits that despite being aware of the Smalls' intendeddevelopment and opposing it, none of the plaintiffs mentioned that the covenantswould prevent the development. Ms Simkiss says this gives rise to an estoppel bysilence and/or by convention, and she relies on the following facts:(a) From March 2015, the plaintiffs were aware of the Smalls' plan tosubdivide. There was a meeting at the Smalls' property on 13 March2015 and a follow up letter on 8 May 2015 to all neighbours. At themeeting on 13 March 2015, the attending plaintiffs (all but theJacksons) raised concerns regarding the driveway and traffic effects,but no-one mentioned the terms of any covenant at the meeting. In theirresponses to the follow up letter of 8 May 2015, while the Jacksons andthe Savory/Renwick's took a position, they did not mention thecovenants.(b) In May 2015, the Smalls' surveyor sought input from the Johnsons andthe Taylors on visual effects. The Taylors, who responded, did not raisethe issue of the covenants.(c) The Smalls then changed the plans so that the neighbours' consent wasnot required to the subdivision. However, the plaintiffs were aware ofthe Smalls' application for subdivision consent made on 21 July 2015.The Taylors and the Jacksons sent letters to the Auckland Councilobjecting to the subdivision, but did not mention in their letters to theCouncil or to the Smalls any understanding that the covenants on theSmalls' land prohibited a house on each of the Small lots 1-7.(d) The Smalls began work on widening the access way for the purpose ofthe subdivision in August 2015. The neighbours were aware of thatwork and responded to it, but again did not mention the covenants.[135] Next, Ms Simkiss submits that between February and May 2017, the plaintiffsdid not assert that the covenants have the meaning they now advance in this Court.She says there were also positive statements to the contrary from the Taylors whichgive rise to an estoppel by silence and/or by representation. She refers to the evidenceas follows:(a) In August or September 2016, potential purchasers raised theinterpretation of Covenants 3 and 4 with the Smalls' land agent. Itseems that the concern raised by potential purchasers at that time wasthat the covenants were not clear, thus enabling a person to claim thatthey restricted development to one dwelling per old lot.(b) The Smalls then raised this with their neighbours by discussing it withsome of them, and by delivering a letter from their lawyers dated16 February 2017, which outlined a possible amendment to therestrictive covenants. The purpose of the amendment was to removeany possible ambiguity.(c) On the basis of their experience in communications with the plaintiffs,there was no reason for the Smalls to believe their neighbours wouldassert the covenants had a meaning they had never raised. In a letterdated 22 February 2017, Mrs Taylor wrote to the Smalls and in relevantpart the letter reads as follows:Even though the boundaries have been changed, each title thathas been issued, has the same covenant registered, whichprovides for one house of a certain standard. We see no reasonto change this.[136] Ms Simkiss submits that Mrs Taylor's use of the words "each title that has beenissued" includes all the titles created by the Small subdivision.[137] Ms Simkiss submits that it is highly relevant that despite being implacablyopposed to the subdivision and raising a number of other reasons for their objection,the plaintiffs did not raise the covenants. She says this is not really silence, butconstitutes acquiescence in the Smalls' understanding of the legal position which shesays the plaintiffs now unconscionably seek to deny.[138] In relation to the building and its intended use, despite being aware of this sincemid to late 2014, and much earlier in the case of the Taylors, all the plaintiffs remainedsilent about the covenants. Ms Simkiss submits this gives rise to an estoppel byconvention and/or by silence as a result of the following conduct:(a) Ms Simkiss says the Taylors knew before the Smalls purchased the landthat they were horse people and intended to build a horse arena for theirdaughter.(b) The building was constructed between June 2014 and December 2014,and she says all the neighbours would have observed the buildingduring construction and when completed. However, they remainedsilent about the legal rights and obligations that they now assert. Noobjection to the building was made until December 2017, and thealleged breach of Covenants 3 and 4 was raised for the first time inthese proceedings.[139] Finally, Ms Simkiss submits that by their actions in constructing the buildingand pursuing the subdivision of the property, the Smalls made it clear that theybelieved there was no impediment to their doing so. As soon as they became awarethat the covenants might affect the subdivision, they ceased marketing the sections.But, by that time they had expended considerable time and money, including the costof developing their plans, which involved the payment of consultants, the costs ofseeking and obtaining resource consent, and the costs of work required to comply withthe resource consent, notably a widening of the roadway. They were also unable tosell the subdivided properties (except the two that have already been sold), havingpurchased the land on a mistaken understanding of its development potential andhaving incurred the costs of constructing the building.Analysis[140] There are four elements of an estoppel:24(a) The creation or encouragement of a belief or expectation;(b) Reliance on that belief or expectation;(c) Detriment as a result of that reliance; and(d) That it would be unconscionable for the party against whom theestoppel is alleged to go back on his or her word.24 Matthew Barber "Consideration" in Jeremy Finn, Stephen Todd and Matthew Barber Burrows,Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018)105 at [4.6.2].Estoppel by representation[141] An estoppel by representation requires some form of communication from therepresentor to the representee.25 The meaning of that representation is assessedobjectively.26 The representation must generally be clear and unequivocal.27[142] The first alleged representations are contained in the estate agent'sadvertisement of the property the Smalls purchased from the Taylors. They are thestatements identified by Ms Simkiss, namely that the property had exceptional"building sites", "huge future potential" and "sub-division potential".[143] I do not consider that these representations were "clear and unequivocal"representations as to the potential for "multiple houses" to be built on the land. Therepresentations related to the ability to subdivide and the quality of potential buildingsites. They were not representations about what the restrictive covenants on the titlepermitted by way of further development.[144] Even on the case for the plaintiffs, they say that the covenant provisions thatapply to the Smalls' land permit three new dwelling houses to be established. Therewas, therefore, subdivision potential. These were not clear representations of howmany lots and how many building sites were possible.Estoppel by convention[145] In National Westminster Finance NZ Ltd v National Bank of NZ Ltd, the Courtof Appeal set out the following pre-requisites for estoppel by convention:28(a) The parties have proceeded on the basis of an underlying assumptionof fact, law, or both, of sufficient certainty to be enforceable (theassumption);(b) Each party has, to the knowledge of the other, expressly or byimplication accepted the assumption as being true for the purposes ofthe transaction;25 James Every-Palmer "Equitable Estoppel" in Andrew Butler (ed) Equity and Trusts in NewZealand (2nd ed, Thomson Reuters, Wellington, 2009) 601 at [19.3.1].26 At [19.3.3].27 At [19.3.4].28 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA) at550.(c) Such acceptance was intended to affect their legal relations in thesense that it was intended to govern the legal position between them;(d) The proponent was entitled to act and has, as the other party knew orintended, acted in reliance upon the assumption as being true andbinding;(e) The proponent would suffer detriment if the other party were allowedto resile or depart from the assumption; and(f) In all the circumstances it would be unconscionable to allow the otherparty to resile or depart from the assumption.[146] The key element is that the parties have embarked on a course of dealing onthe basis of a mutual assumption. This element is absent in the evidence referred toby Ms Simkiss. In relation to the presence of two houses on old lot 4, there is noevidence that at the time of the purchase of the Smalls' property from the Taylors, therewas a "mutual assumption" in relation to the presence of those two houses and theterms of the covenant on the title of old lot 4.[147] There is then the evidence that Ms Simkiss refers to regarding the plaintiffs'awareness of the Smalls' intended subdivision. The submission made by Ms Simkisscomes down to a proposition that although the plaintiffs advised the Smalls that theystrongly opposed the subdivision, this was insufficient and that the plaintiffs wererequired to state their intention to enforce the restrictive covenant. This does notsatisfy the pre-requisites for estoppel by convention.[148] Similarly, there is no evidence that the plaintiffs and the Smalls embarked ona mutual assumption that the covenants did not prevent the development. There wasno discussion regarding the terms of the covenants which would found such anassumption. This does not satisfy the pre-requisites for estoppel by convention.[149] Furthermore, there was no discussion by the plaintiffs and the Smalls to theeffect that the plaintiffs acknowledged the covenants did not have the meaning whichthe plaintiffs now assert. There was therefore no assumption for the parties to rely on.In any event, it cannot be said that their acceptance of any assumption was intendedto affect their legal relations.[150] Then, in relation to the building, Ms Simkiss asserts a failure on the part of theplaintiffs to advise the Smalls that they considered the building to be in breach of theprovisions of the restrictive covenant. However, on the evidence, none of theplaintiffs, including the Taylors, had prior knowledge of the building that was to beconstructed on the Smalls' land. There is no evidence that in deciding to proceed withthe construction of the building, the Smalls placed reliance on any representation byany of the plaintiffs as to the building complying with the restrictive covenants. Therewas no evidence of any mutual assumption giving rise to an estoppel by convention inthis regard.Estoppel by silence[151] In general, the law is reluctant to impose liability on a party who simplyremains silent and allows another party to act to their detriment.29 However, in certaincircumstances, silence may give rise to an estoppel either by amounting to a genuinerepresentation or because the silent party was under a duty to speak.30[152] For a duty to speak to arise, the silent party must be aware of the other party'sreliance on an incorrect understanding. Awareness includes actual knowledge,constructive knowledge, or at least the suspicion that the other party is relying on afalse assumption.31[153] In relation to the presence of the two houses on old lot 4, there is no evidencethat the Taylors had actual knowledge, constructive knowledge, or at least a suspicionthat the Smalls were relying on the presence of those two houses as a factor in theirdecision to proceed with the purchase. There was therefore no duty on the part of theTaylors to speak.[154] In relation to the meeting at the Smalls' property on 13 March 2015, and theevents that followed, there was no evidence that Mr Small would have acteddifferently in obtaining consent to the subdivision or completing construction of theshed if any of the plaintiffs had spoken up. To the contrary, following the meeting29 Every-Palmer, above n 25, at [19.5.2].30 At [19.5.2].31 At [19.5.4(2)].with the neighbours who were "utterly opposed", and were "not at all receptive orflexible" to the subdivision proposal, the Smalls went ahead and obtained a non-notified consent to subdivide the property into seven lots.[155] In any event, there is no evidence which suggests that the Taylors hadawareness of an incorrect understanding on the part of the Smalls which might havefacilitated a duty on the part of the Taylors to speak.[156] There was also an alleged duty to speak by way of a response to the letter fromthe Smalls' solicitors enclosing a proposed variation to the covenants to enablemultiple dwellings to be constructed. The proposed changes included alterationsconcerning the establishment of an outbuilding or ancillary buildings, and thequalitative restriction in relation to buildings, landscaping and fencing.[157] Even if there was a duty to speak (and I do not find that there was) the date ofthe letter precludes any reliance.[158] In relation to the letter sent by Mrs Taylor referred to in [135](c) above, evenassuming the letter has the meaning that Ms Simkiss submits (in [136]), having regardto the date of the letter, the Smalls could not have relied on it.[159] As to the building, as above, there is no evidence that the Taylors hadknowledge (prior to construction commencing) of the building that was to beconstructed on the Smalls' land. It cannot therefore be said that there was awarenessof an incorrect understanding.[160] For all the foregoing reasons, the defence of estoppel fails.The position of the Wang/Qis[161] For completeness, I refer to the position of the Wang/Qis. Their notice ofopposition first supports the plaintiffs, opposing the Smalls developing and furthersubdividing their land, but it also raises opposition to the plaintiffs' application "as itrelates to the interpretation of the land covenants to the extent it may affect ourproperty rights".[162] It will be recalled that the house on the Wang/Qis' land was the second housebuilt on old lot 4. Having regard to my decision on the number of dwelling housesthat may be built on the Smalls' land, there is no consequential effect on the Wang/Qidwelling house.Relief[163] In their first cause of action, the plaintiffs seek the following:A declaration that the plain wording of the restrictive covenants, interpretedin the context of the 2 Deeds (covenants 3 and 4) secured against the titles inthe Small subdivision, read as a whole, limits the maximum number ofdwelling houses on the land purchased by the Smalls in 2013 (Lot 2DP 459923 (CT 601983) to 3 single dwelling houses, by reference to theunderlying original lots in the Taylor subdivision.[164] For the reasons already given, I decline to make that declaration.[165] It follows that I also refuse the relief sought in the third cause of action, namelyan injunction restraining the Smalls or subsequent purchasers of the remaining unsoldlots in the Small subdivision from constructing dwelling houses on those lots.[166] I make the declaration sought in the second cause of action, namely that theequestrian facilities complex (described in this judgment as the building) is in breachof the restrictive covenant in clause (i) of the Schedule to Covenants 3 and 4.[167] In their fourth cause of action, the plaintiffs seek an injunction that the Smalls,within six months of the date of the order, pull down and remove the building andrestore the grounds under and around the building and associated facilities to acompatible appearance with the rural use of the land in the subdivision. They alsoseek an injunction restraining the Smalls from erecting any farm building or ancillarybuilding which does not meet the terms of Covenants 3 and 4.[168] Mr Brabant submits that, while damages in lieu of an injunction can be sought,this is a case where an injunction is appropriate. He submits that an injunction isrequired now for there to be certainty about compliance with the covenant provisions.He submits that in relation to the building, the injunction is proposed on terms thatallow a reasonable time for demolition or removal to another site.[169] Mr Brabant further submits that it would not be appropriate to allow theexisting building to remain on the basis that a new single dwelling house, constructedat some time in the future, would "legitimise" the building.[170] However, that submission is made on the basis that there are other reasons whythe building is in breach of the restrictive covenant. In my decision, I have found thatthe building does not comply with the terms of clause (i) in two respects. Both ofthese relate to the absence of a dwelling house.[171] I have found, significantly, the building complies with the qualitative controlsin the clause. Furthermore, I note that the Smalls have prepared a building site for adwelling house. They have not yet constructed a dwelling house, as they have beenawaiting the outcome of these legal proceedings.[172] The grant of an injunction is discretionary.32 In these circumstances, I do notconsider it would be equitable to require the building to be taken down and removed,only to have it restored once a new dwelling house was constructed.[173] I therefore refuse to grant injunctive relief as sought in relation to the building.I refuse this relief on the basis that the Smalls will construct a dwelling house.Result[174] I decline to make the declaration sought in the first cause of action.[175] I make the declaration sought in the second cause of action.[176] The applications for injunctions in the third and fourth causes of action aredismissed.32 Andrew S Butler "Injunctions" in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed,Thomson Reuters, Wellington, 2009) 765 at [25.2.2(2)(b)]. See also Thomas Borthwick & Sons(Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538 (CA) at 545; Ogle v Aitken[2017] NZHC 1799 at [30].Costs[177] My preliminary view is that the Smalls are entitled to costs, on a 2B basis. Iencourage the parties to agree costs and file a joint memorandum. Any jointmemorandum should be filed within 20 working days of the date of this judgment.[178] If costs cannot be agreed, then the Smalls should file and serve theirmemorandum within five working days of the date for the joint memorandum and theplaintiffs within a further five working days. Memoranda should not exceed five pages(excluding any annexures).___________________________________Gordon J