RE GLADSTONE HEIGHTS LTD [2022] NZHC 1953

RE GLADSTONE HEIGHTS LTD [2022] NZHC 1953 [9 August 2022]IN THE HIGH COURT OF NEW ZEALANDDUNEDIN REGISTRYI TE KŌTI MATUA O AOTEAROAŌTEPOTI ROHECIV-2022-412-000041[2022] NZHC 1953UNDER the Property Law Act 2007IN THE MATTER of an application by GLADSTONEHEIGHTS LTD to modify or partiallyextinguish Land Covenant 11331709.19(Otago Registry)ApplicantHearing: 8 August 2022Appearances: T J Shiels QC for ApplicantMr Davis for interested party R DavisJudgment: 9 August 2022JUDGMENT OF DOOGUE JThis judgment was delivered by me on 9 August 2022 at 11.45 am pursuant toRule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] The applicant is, by incremental stages, developing a block of land in Mosgielon the outskirts of Dunedin into residential lots.[2] A land covenant registered at the time of the first stage of the subdivision iscausing practical difficulties for the second and subsequent stages of the subdivision.[3] The applicant is applying to the Court under s 316 of the Property Law Act2007 (the Act) for an order under s 317 modifying or partially extinguishing landcovenant 11331709.19 (the land covenant) for the sole purpose of removing thepractical difficulties for the second and subsequent stages of the subdivision.Background[4] A subdivision of the subject land was originally authorised by a Dunedin CityCouncil resource consent on 6 May 2011. This was followed by an objection toconditions and a revised consent was issued on 28 June 2011.[5] In 2015, an application was made to extend the lapsed period, to vary thesubdivision and staging of the land use consent for subdivision, earthworks and overallreduction of yard spaces. This was processed on a non-notified basis and an amendedconsent issued on 19 June 2015 (the revised resource consent).[6] The revised resource consent makes it clear that a number of stages ofsubdivision are contemplated and consented. The relevant titles are affected byvarious easements.[7] The land covenant was registered at the time the first stage of the subdivisiontook place. The intention of the applicant as the subdivider was to ensure that thebuildings on the subdivided sections would be of high quality and the subdivisionwould be an attractive and pleasant living environment.The land covenant[8] Clause 1 provides that the grantor shall not subdivide any of the allotments.[9] Clause 2 of the land covenant limits the erection of structures on the lotsbroadly to one new dwelling space plus ancillary buildings on each lot. Other aspectsof cl 2 relate to roof and exterior cladding, and also building heights on some lots.[10] Clauses 3 to 9 of the land covenant have no relevance to this application.[11] Clause 10 provides as follows:While the Grantee remains registered proprietor of any lot the Granteereserves the right to itself (with the intent that this right does not enure to itssuccessors in title) to waive or modify any of the above restrictive covenantsbut will only do so if in its opinion such action does not impinge on theintegrity of the subdivision in its entirety and provided that the Grantee maynot vary clause 1 and clause 2.[12] Clause 10 permits the applicant as grantee to waive or modify the restrictivecovenants. However, the grantee may not vary cls 1 or 2. It is the covenants in cls 1and 2 that are causing the practical difficulties for the second and subsequent stages ofthe subdivision.[13] Clause 12 provides that the covenants shall apply for a period of 10 years fromthe date titles issue for the first stage of the subdivision.[14] Clause 13 provides that in the land covenant the words "the grantee" meansthe applicant.[15] All the lots in Stage 1 (except for Lot 71, at the north-western corner, andLot 75 which vested as roads) have both the benefit and burden of the land covenant.[16] The land covenant binds future owners of the various lots in the first stage ofthe subdivision, including Lot 100 but excluding Lot 71. In particular, it binds thethen owners and any future owners of the balance lot, being Lot 100.[17] At the time the land covenant was registered the applicant owned all the landbeing subdivided but subject to the agreements for sale and purchase for the Stage 1sections (except Lot 71).The issues that have arisen[18] In December last year it became apparent that the land covenant could causetwo practical difficulties for the second and subsequent stages of the subdivision.[19] The first difficulty became clear after the plan for the second stage of thesubdivision was provided to Land Information New Zealand (LINZ). LINZ pointedout that s 224(1)(b)(i) of the Resource Management Act 1991 required that for anyland that would vest in a territorial authority the consent of the registered owner of anyinterest in that land had to be endorsed on a survey plan or, alternatively, depositedwith the Registrar General of Lands. That means the consent of every lot owner of thefirst stage of the subdivision would be required.[20] The second difficulty is the land covenant prohibited the further subdivision ofLot 100. Each one of the lot owners in the first stage of the subdivision would be ableto claim a breach of the covenant as a result of the further subdivision of Lot 100.Discussion[21] Section 317 of the Act provides: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 orextinguish (wholly or in part) the easement or covenant to which theapplication relates (the easement or covenant) if satisfied that—(a) the easement or covenant ought to be modified orextinguished (wholly or in part) because of a change since itscreation in all or any of the following:(i) the nature or extent of the use being made of thebenefited 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 itsexisting form would impede the reasonable use of theburdened land in a different way, or to a different extent, fromthat which could reasonably have been foreseen by theoriginal parties to the easement or covenant at the time of itscreation; or(c) every person entitled who is of full age and capacity—(i) has agreed that the easement or covenant should bemodified or extinguished (wholly or in part); or(ii) may reasonably be considered, by his or her or its actsor omissions, to have abandoned, or waived the rightto, the easement or covenant, wholly or in part; or(d) the proposed modification or extinguishment will notsubstantially injure any person [entitled; or].(e) [in the case of a covenant, the covenant is contrary to publicpolicy or to any enactment or rule of law; or(f) in the case of a covenant, for any other reason it is just andequitable to modify or extinguish the covenant, wholly orpartly.](2) An order under this section modifying or extinguishing the easementor covenant may require any person who made an application for theorder to pay to any person specified in the order reasonablecompensation as determined by the court.[22] I am satisfied that none of the purchasers of the sections in the first stage of thesubdivision understood or expected that the owner of Lot 100 would be restricted toone dwelling house plus ancillary buildings or prevented from further subdivision.[23] Further, at the time the sections in the first stage of the subdivision were beingmarketed there was already visible work underway for the second stage of thedevelopment. Photographs produced demonstrate that physical work was beingundertaken very early on in the period that the first lots were being sold. It would havebeen evident from the earthworks that there was an intention to carry the subdivisionfurther up the hillside.[24] All relevant parties have been served with the proceeding. Some of the partieshave expressly indicated their consent to what is proposed. The owners of one lothave informally indicated they are not likely to consent but have not said they wouldoppose. A number of the lot owners did not reply to an enquiry by correspondenceabout their stance. Overall, it is plain there is a lack of engagement by the relevant lotowners with the issues, which has meant that the most practical way of resolving thedifficulties is by this application to the Court.[25] The evidence is that all parties to the covenant were well aware of theapplicant's intention to further develop the balance lot in stages, initially by the currentStage 2 subdivision. There is nothing in the evidence to suggest that the developmentof further residential land adjacent to the first stage of the subdivision will have anynegative effects for lot owners in the first stage.[26] There is no evidence of any injury or prejudice to any person entitled to thebenefit of the covenant. In particular, the ability of lot owners to continue to enforcethe covenant in accordance with its terms as between themselves and other purchasersof the first stage sections remains. It is a clear inference that that is all they expected.[27] None of the purchasing lot owners have incurred any expense in relation to thisproceeding. There is no evidence they will incur any expense or even inconvenienceby the granting of the order and its implementation.[28] I am satisfied that jurisdiction to make the order has been made out in this case(s 317(1)(d)).Result[29] An order shall issue pursuant to s 317 of the Property Law Act 2007 modifyingor extinguishing land covenant 11331709.19 (Otago Registry) (the covenant) insofaras it applies to Lot 100, DP 526034.Doogue JSolicitors:Joynt Andrews Solicitors, ChristchurchCC:T Shiels, DunedinR Davis, Mosgiel