INERT HOLDINGS LTD v GULF HARBOUR MARINE VILLAGE RESIDENTS’ ASSOCIATION INC [2022] NZCA 379

INERT HOLDINGS LTD v GULF HARBOUR MARINE VILLAGE RESIDENTS' ASSOCIATION INC [2022]NZCA 379 [15 August 2022]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA374/2021[2022] NZCA 379BETWEEN INERT HOLDINGS LIMITEDFirst AppellantWESTERN ARM MARINA LIMITEDSecond AppellantAND GULF HARBOUR MARINE VILLAGERESIDENTS' ASSOCIATIONINCORPORATEDRespondentHearing: 9 February 2022Court: Clifford, Gilbert and Collins JJCounsel: D W Grove for AppellantsP J Niven and L M Edginton for RespondentJudgment: 15 August 2022 at 3 pmJUDGMENT OF THE COURTA The application to adduce further evidence is declined.B The appeal is dismissed.C The appellants must pay costs to the respondent for a standard appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Gilbert J)Table of ContentsPara NoIntroduction [1]The pleaded claims [14]Development of the Marine Village [17]GHDL sells Town Centre land which is then developed by [20]other developersGHDL sells blocks of undeveloped residential land to other [24]developersLakeline Holdings Ltd [25]Golden Prospects Ltd [27]Sherrod Properties Ltd [28]Cornerstone Oyster Cove Ltd [29]GHDL assigns/transfers its remaining interests to [30]GCL/Gulf Corporate No 1 LtdGCL 1 on-sells [34]Jireh [34]CDAL [35]McNicoll [36]Development of Jireh Land [37]Development of CDAL Land [38]Development of Marinport Land [44]Development of the Waterway [47]The Berth agreement [51]Assignments of Controlling Member rights [59]GCL [59]Marlin [60]2012 amendment to the Constitution [66]High Court judgment [73]Did the High Court err in exercising its discretion [78]not to declare the 2012 amendment void?Did the High Court err in finding that neither appellant [85]would be the Developer and Controlling Member in anyevent?Conclusion [97]Result [98]Introduction[1] This is an appeal against a judgment of the High Court declining to grantdeclarations sought by the appellants in support of their claimed entitlement tothe status of "Developer" and "Controlling Member" under the Constitution ofthe respondent, Gulf Harbour Marine Village Residents' Association Inc(the Association).1 As the title suggests, the Controlling Member has power toout-vote all other members and pass ordinary resolutions. The Developer andControlling Member are also entitled to other important commercial benefits underthe Constitution.[2] The Gulf Harbour Marine Village (the Marine Village), located atWhangaparāoa Peninsula, north of Auckland, is an integrated residential andcommercial subdivision built around a waterway. The Association was incorporatedin December 1994 to manage the operation of the Marine Village and the commonfacilities. All owners of property in the Marine Village are required to be members ofthe Association and each has one vote.[3] The Constitution originally defined "Controlling Member" and "Developer"as follows:"Controlling Member" means Gulf Harbour Development Limited or itssuccessors or assigns."Developer" means Gulf Harbour Development Limited and its successorsand assigns carrying out the development of [the Marine Village].[4] Another important provision informs the definition of these terms:24.4 Developer as Controlling MemberUntil the development of [the Marine Village] is fully completed(as determined by the Developer), or the Developer chooses to resign,the Developer shall be the Controlling Member of the Association, regardlessof whether the Developer is at any time a Member. The Controlling Membershall have only the rights specified in this Constitution, and shall have no otherrights or obligations of a Member. No reference in this Constitution to aMember shall be taken as including a reference to the Controlling Member.1 Inert Holdings Ltd v Gulf Harbour Maine Village Residents Assoc [2021] NZHC 1262 [High Courtjudgment].2 The remainder of these provisions are drawn from the most recent version of the Constitution,re-registered in November 2019. For present purposes, there are no material changes.Upon the development of [the Marine Village] being fully completed,the Developer shall be deemed to have resigned as Controlling Member, andthereafter there shall be no Controlling Member.[5] Earlier defined terms also provide important context:"Commercial Unit" means a property within [the Marine Village] authorisedby the Association to be used for commercial purposes and owned in freehold(including stratum estate in freehold) by a Member."Developed Property" means a property within [the Marine Village]:(a) for which a separate freehold title (including a unit title) has issued;and(b) which has been fully developed by the Developer as a Dwelling or aCommercial Unit or for any other permitted use."Dwelling" means a residential property within [the Marine Village] ownedin freehold (including stratum estate in freehold) by a Member.[6] Members of the Association are not entitled to object to any application forconsent or other approval required by the Developer to facilitate its development plansin relation to the Marine Village or any other of the developments forming part ofGulf Harbour (including the marina, golf course and other residential developments):5.3 No objections to developmentEach Member acknowledges and confirms, as an independentacknowledgement and confirmation intended to be enforceable bythe Developer, that the Member shall not object or take steps to object to anyof the Developer's applications for consents and approvals required bythe Developer, or necessary to facilitate the Developer's development plans,whether in relation to [the Marine Village], or any other part ofthe developments forming part of Gulf Harbour, at the Whangapar[ā]oaPeninsula, nor shall any Member permit anyone claiming an interest throughor on behalf of the instruction of such Member [to] object or take any suchsteps to object.[7] It was contemplated that the Marine Village would be developed in stages:9.14 Staged developmentThe Members acknowledge that [the Marine Village] is to be developed instages, with new Owners becoming Members as each stage is completed.[8] The Controlling Member can out-vote all other members in respect of ordinaryresolutions but is not entitled to vote on any special resolution. A special resolution isrequired to make any amendment to the Constitution and the Controlling Membermust consent:17.2 Controlling MemberThe Controlling Member (if there is one) shall be entitled (other than where aSpecial Resolution is required by this Constitution) to exercise a number ofvotes equal to one more than the number of Members present at any generalmeeting. The Controlling Member shall not be entitled to vote on any SpecialResolution.18.2 Alteration of Constitution18.2.2 No Rule, including this one, shall be amended, added to or rescindedexcept by Special Resolution, and with the written consent of the ControllingMember (if there is one), provided that this Constitution may be amended bythe incorporation of new Waterway Plans, which:(a) identify the layout and allocation of new Berths, which relateto new Dwellings developed in [the Marine Village]; and/orsuch amendments to be made by a resolution signed by the ControllingMember, or, if there is no Controlling Member, by a resolution signed bythe majority of the Committee pursuant to Rule 14.13.[9] Gulf Harbour Development Ltd (GHDL) commenced the development inthe mid-1990s. However, GHDL encountered financial difficulties in 1999 and ceasedits involvement in 2001. The appellants claim that they are successors and assigns ofGHDL and are carrying out development of the Marine Village. This is the basis oftheir claims to have status as Developer and Controlling Member.[10] The development comprises approximately 10.4 ha of land (lot 1 in the originalscheme plan of subdivision) and 5.3 ha of waterway (lot 2) (the Waterway). Titles tothese lots were issued to GHDL in September 1995. GHDL immediately transferredthe Waterway to the Association which subsequently, in February 1996, granted anoccupation licence to GHDL (the Waterspace Licence). The Waterspace Licence hasbeen assigned twice, first by GHDL to Gulf Corporation Ltd (GCL) in May 2001 andthen by GCL to the second appellant, Western Arm Marina Ltd (WAM), inDecember 2013.[11] In mid-2014, WAM's parent, Inert Holdings Ltd (Inert), acquiredfive adjoining lots of bare land together comprising 3,766 m2 fronting onto the westernarm of the waterway (the Western Arm). To put this in perspective, Inert's landamounts to only 3.6 per cent of the total land in the Marine Village excludingthe Waterway. Attached to this judgment, as schedule 1, is a satellite image ofthe Marine Village produced in evidence by the appellants and showing Inert's landbordering the Western Arm to the middle left.[12] Some of the residential lots in the Marine Village have the benefit of anassociated marina berth in the Waterway. There are 180 such berths and most havelong since been allocated. WAM has constructed 23 berths in the Western Arm, nineof which have been allocated to residential units on adjacent land developed by Inert,and three berths outside of the Western Arm all of which have been allocated.The genesis of the present dispute concerns the right to allocate the remaining berths.[13] As noted, the appellants claim to be the successors and assigns of GHDL.However, that is not sufficient for them to succeed. That is because an amendedConstitution was registered in November 2012 which, amongst other changes,substituted Gulf Harbour Marlin Ltd (Marlin) in place of GHDL asControlling Member and Developer. It is common ground that this amendment wasmade in error and the change was never put to the vote at any meeting ofthe Association. The appellants do not claim to be successors or assigns of Marlin, sothey need to overcome this amendment to the Constitution as a first step.The pleaded claims[14] The two steps required for the appellants to succeed are reflected in the twocauses of action they advanced in the High Court.[15] In their first cause of action, they sought a declaration that the 2012 amendmentto the Constitution is void. Reliance was placed on s 21(3A) of the IncorporatedSocieties Act 1908 (the Act), which empowers the High Court, in the exercise of itsdiscretion, to declare an alteration to the rules of an incorporated society void in certaincircumstances. It is helpful to set out the relevant part of s 21 at this stage:21 Alteration of rules(1) A society may from time to time alter its rules in [the] mannerprovided by the said rules, but subject to the provisions of this Act.(2) Every alteration of the rules must be—(a) in writing; and(b) signed by at least 3 members of the society; and(c) delivered to the Registrar accompanied by a certificate by anofficer of the society or a solicitor certifying that the alterationhas been made in accordance with the rules.(3) The Registrar, if satisfied that the alteration has been duly made, andthat the rules as so altered conform in all respects to this Act, shallregister the alteration in like manner as in the case of the original rules,and the said alteration shall thereupon take effect according tothe tenor thereof. Such registration shall be conclusive evidence thatall conditions precedent to the making of the alteration, or tothe registration thereof, have been duly fulfilled.(3A) Notwithstanding anything in subsection (3), the [High] Court, on anapplication made to it by any member of the society, may in itsdiscretion, if it is satisfied that any such condition as aforesaid has notbeen duly fulfilled, declare the alteration to be void in whole or in part,and order that the registration be cancelled in whole or in part, andmay by the order give such directions and make such provisions asseem just in the circumstances of the case. On the delivery to theRegistrar of a sealed copy of the court's order he or she shall forthwithamend the register accordingly.[16] The second cause of action assumes success on the first, which would havethe effect of removing reference to Marlin in the relevant definitions andreinstating GHDL. The appellants plead in this cause of action that they arethe successors and assigns of GHDL carrying out development of the Marine Village.They sought a declaration that one or other (or both) of them is the Developer andControlling Member.Development of the Marine Village[17] Before turning to the High Court judgment, it is helpful to summarisethe history of the development and the events leading to the 2012 amendment tothe Constitution. It will be seen that from early 1999 GHDL commenced selling offlarge blocks of land in the Marine Village for further subdivision and development byother developers. Some of these developers in turn on-sold to other developers whocarried out further subdivision and development. In some cases, this process repeatedseveral times before the land was eventually built on. Small parcels of land still remainvacant today. In the result, instead of GHDL completing the entire development, manyothers have participated in what became a piecemeal and fragmented process.[18] As will become apparent from this review, if Inert's thesis is correct — that itis the Developer and Controlling Member by virtue of it: 1) being a successor in titleto GHDL in respect of its comparatively small landholding; and 2) carrying outthe development of the Marine Village by developing this small part of it — then manyothers would similarly have qualified as the Developer and Controlling Member.At various times, there would have been multiple Developers and ControllingMembers, including GHDL.[19] As noted, GHDL became the owner of the land, lot 1 in the original schemeplan of subdivision, in September 1995. We now briefly summarise howthe development has progressed since then.GHDL sells Town Centre land which is then developed by other developers[20] In November 1997, GHDL transferred 2.1252 ha of bare land to Gulf HarbourTown Centre Ltd (GHTCL), being the land on which the town centre was to be built.GHTCL subdivided this land into three lots. Lots 1 and 3 included the town centreland.[21] In 2003, GHTCL sold part of the town centre land to Gabrielle's TrusteeCompany Ltd (Gabrielle), Keen People Ltd and Gulf Harbour Sword Fish Lodge Ltd.Gabrielle and others subdivided lot 2 in April 2003 and eventually sold these units tonumerous purchasers. GHTCL sold a further part, lot 3, of the town centre land toMarlin in March 2004. Gabrielle and Marlin are related companies.[22] In 2005, Marlin further subdivided lot 3 into two lots, lot 1 being the towncentre land. We note that as at September 2009, the date of the arbitrator's awardreferred to below, lot 1 was still vacant and owned by Marlin. Gabrielle ownedthe other lot, which was a car park.[23] In December 2005, Marlin subdivided lot 1, the town centre land, into threelots. These three lots have since been transferred to successive owners — AUNZInvestment Group Ltd in December 2013, Zhong Rong International Investments Ltdin March 2014, First Investment Group Ltd in December 2017 and Harbourside GroupLtd in December 2017.GHDL sells blocks of undeveloped residential land to other developers[24] By March 1999, GHDL had completed 111 residential units on the Waterwaythat were sold to purchasers who became members of the Association. A further131 units remained to be completed on the Waterway at that stage. GHDL decided tosell 49 of these units to other developers for completion in accordance with detailedrequirements set by GHDL in a Standards, Operations & Procedures Manual.Lakeline Holdings Ltd[25] In furtherance of this plan, in October 1999, GHDL transferred 2,069 m2 ofbare land on the northern side of the Western Arm to Lakeline Holdings Ltd (Lakeline).Lakeline carried out a unit title development on this land creating eight principal unitswhich were on-sold to purchasers who became members of the Association.[26] In April 2000, GHDL transferred the adjoining block comprising 3,113 m2 toLakeline. Lakeline carried out a unit title development on this land creating12 principal units which were on-sold to purchasers who became members ofthe Association.Golden Prospects Ltd[27] GHDL transferred 4,140 m2 of bare land to Golden Prospects Ltd(Golden Prospects) in December 1999. Golden Prospects carried out a unit titledevelopment on this land creating 12 principal units. These were sold to purchaserswho then became members of the Association.Sherrod Properties Ltd[28] In March 2000, GHDL transferred 1,294 m2 of bare land to Sherrod PropertiesLtd (Sherrod). Sherrod carried out a unit title development on this land creatingsix principal units which were sold to purchasers who became members ofthe Association.Cornerstone Oyster Cove Ltd[29] In May 2001, GHDL transferred 5,478 m2 of bare land on the southern side ofInert's land to Cornerstone Oyster Cove Ltd (Cornerstone). Cornerstone carried out aunit title development on this land creating 41 principal units which were on-sold topurchasers who became members of the Association.GHDL assigns/transfers its remaining interests to GCL/Gulf Corporate No 1 Ltd[30] In May 2001, GHDL ceased its involvement with the development ofthe Marine Village. This was effected as follows:(a) GHDL assigned the Waterspace Licence to GCL.(b) GHDL executed a deed of nomination, assigning to GCL its "rights,duties and obligations" as Controlling Member of the Association.3(c) GHDL sold its remaining bare land in the Marine Village toGulf Corporate No 1 Ltd (GCL 1), comprising:3 This deed was not produced in evidence because no copy of it could be found. However, it isreferred to in the arbitration award discussed at [61] below.(i) a 2.5104 ha block of land on the southern side of the WesternArm (subsequently transferred to Cap d'Amarres Ltd (CDAL)in January 2003) (the CDAL Land);(ii) an adjoining block comprising 2,543 m2 to the north of theCDAL Land at the head of the Western Arm (subsequentlytransferred to Marinport Ltd (Marinport) in August 2005)(the Marinport Land); and(iii) a triangular block of land comprising 4,499 m2 to the north ofthe Lakeline land and to the east of the Golden Prospects land(subsequently transferred to Jireh Holdings Ltd (Jireh) inJuly 2002) (the Jireh Land).Attached as schedule 2 is a plan showing the location of these blocksof land.(d) GHDL and GCL 1 contemporaneously entered into a memorandum ofencumbrance for a term of 100 years requiring GCL 1 to comply withvarious restrictive covenants and procure the registration of a similarencumbrance against any new title to issue on the completion of anydevelopment of the land or any further subdivision of the land(the Memorandum of Encumbrance).[31] The background and purpose of the Memorandum of Encumbrance is set outin the recitals:A. The Encumbrancee [GHDL] is developing a high quality fully integratedresidential and commercial subdivision known as the Marine Village atGulf Harbour, Whangapar[ā]oa, Auckland.B. The Encumbrancee [GHDL] has agreed to sell that part of the land onwhich the ongoing development of the Marine Village is to be undertakento the Encumbrancer [GCL 1] [the] land is more particularly describedin the First Schedule to this Encumbrance ("Land").C. The Encumbrancer [GCL 1] has undertaken to develop the Land inaccordance with certain plans and to subdivide the Land.D. The Land is to be transferred to the Encumbrancer [GCL 1] subject tocertain restrictive covenants which, together with a further encumbrancein favour of [the Association] are also to be registered against the titles toissue in respect of the development and subdivision to be undertaken bythe Encumbrancer [GCL 1] on the Land.E. The Encumbrancer [GCL 1] has agreed to encumber the Land to secure tothe Encumbrancee [GHDL] the due performance by the Encumbrancer[GCL 1] of its obligations to register the restrictive covenants andencumbrance against the titles.F. The form of restrictive covenant transfer and the encumbrance areattached as the Second and Third Schedules to this encumbrance.[32] The form of restrictive covenant in the Second Schedule defines"Controlling Member" as "[GCL] and its successors and assigns beingthe Controlling Member of the Association as that term is defined in the Constitution".One of the restrictive covenants prohibited the building of any structure on any ofthe covenanting lots without first obtaining the approval of the Controlling Memberof the Association.[33] GHDL was placed in liquidation in March 2005 and removed fromthe Companies Register in February 2009.GCL 1 on-sellsJireh[34] In July 2002, GCL 1 transferred title to the Jireh Land to Gulf CorporationNo 3 Ltd which contemporaneously on-sold it to Jireh.CDAL[35] In January 2003, GCL 1 sold the CDAL Land to CDAL.McNicoll[36] In September 2003 GCL 1 sold the Marinport Land to Robyn andNeil McNicoll.Development of Jireh Land[37] Jireh carried out a staged unit title development leading to the issue of titles for17 principal units in August 2003.Development of CDAL Land[38] CDAL progressively subdivided and developed the CDAL Land fromJanuary 2003 to October 2012.[39] In December 2003, CDAL subdivided the land into 20 lots. Titles to five ofthese lots were transferred to other purchasers from February 2004 to April 2005.[40] CDAL subdivided one of the remaining lots into four lots in March 2004.One lot was transferred to each of Stone d'Amarres Ltd (Stone d'Amarres)(in April 2004), Stone d'Amarres 3 Ltd (in June 2004) and Marinport (in June 2005).CDAL subdivided the remaining lot into four lots in February 2005.CDAL transferred one of these four lots to Stone d'Amarres in March 2005.[41] Stone d'Amarres subsequently subdivided two of their lots into eight lots inSeptember 2005.[42] CDAL subdivided two other lots in April 2005. These were then sold byCDAL's mortgagee to purchasers in April and May 2009.[43] CDAL subdivided another lot into four lots in October 2006. Three werepurchased and on-sold as a block a number of times before being transferred toTony Devco Ltd in October 2012 following a mortgagee sale. The remaining lot wasalso transferred to Tony Devco Ltd at this time. These four lots were thenre-subdivided into four new lots in January 2013.Development of Marinport Land[44] As noted, the McNicolls acquired the Marinport land from GCL 1 inSeptember 2003. The McNicolls transferred it to Wahanga Ltd in May 2005.[45] Marinport acquired part of the CDAL Land from CDAL in June 2005 and partof Wahanga Ltd's land in August 2005. Marinport subdivided these lots inDecember 2007, creating seven lots. Title to these lots was transmitted fromMarinport to Wahanga (2011) Ltd in January 2013 by amalgamation under pt 13 ofthe Companies Act 1993.[46] Title to two lots was transferred to Fengxia Qin in February 2013. A resourceconsent for subdivision and construction of buildings on this land was granted inFebruary 2015. These lots have since been sold to new owners. The other five lotswere transferred by Wahanga (2011) Ltd to Inert in July 2014.Development of the Waterway[47] The Association granted the Waterspace Licence to GHDL in February 1996.GHDL assigned it to GCL in May 2001.[48] CDAL acquired a sublicence from GCL in May 2004 to enable it to developmarina berths in the Western Arm.[49] GCL assigned the Waterspace Licence to WAM in December 2013.[50] CDAL surrendered its sublicence in March 2016. At the same time,the Association, WAM and Bellingham Marine New Zealand Ltd (Bellingham)entered into an agreement relating to the construction of berths in the Western Arm(the Berth agreement).The Berth agreement[51] The background and purpose of the Berth agreement is set out in the recitals:Background:A. The Association owns the Waterway.B. Prior to the execution of this agreement [CDAL] surrendered itssublicence granting it the right to develop marina berths inthe [Western Arm]. The surrendered sublicence was granted by [GCL],the then licensee under the [Waterspace Licence], with the consent ofthe Association on 25 February 2005.C. As a consequence of that surrender [WAM] has the right to developmarina berths in the [Western Arm] pursuant to the [Waterspace Licence].D. The parties wish to record their agreement relating to the construction,licensing and allocation of berths and the construction of the Walkway onthe Residential Fringe.[52] The Berth agreement required WAM to engage Bellingham to construct23 berths on the southern side of the Western Arm and WAM was also required tostraighten six existing berths that had been constructed on an angle.[53] WAM was obliged to complete the construction of the walkway fromthe southern side of the Western Arm to the footpath on its northern side. The walkwayis constructed on the "Residential Fringe" (part of the Waterway above the level ofmean high water abutting the land in lot 1 of the original scheme plan of subdivision).The new section of walkway was to be built at the same height and to a similar qualityas the existing residential fringe.[54] WAM was obliged to complete all these works by 1 January 2018.[55] Upon satisfactory completion, the Berth agreement required the Association toallocate the completed berths as directed by WAM as follows:5.2 Upon the issue of the PS4 and Certificate of Acceptance forthe completed Berths as provided for by Bellingham, andthe Walkway, as provided for by [WAM] or their approved agentsthe Association will, within the boundaries of the Constitution, use itsbest endeavours to:a) Allocate one Berth to each of the Dwellings with streetnumbers 5-29 Rue d'Amarres, up to a total of 10 Berths withone Berth per Dwelling, as directed by [WAM];b) Allocate any of the remaining Berths, or any of the 13 Berthsthat are not allocated under clause 5.2(a), to any otherDwellings as directed by [WAM] to a maximum of one Berthper Dwelling.[56] Pending allocation, the Berth agreement provided for the Association to licenceberths to persons nominated by WAM, but only after all the berths had beensatisfactorily completed.[57] Disputes have arisen between WAM and the Association under the Berthagreement. WAM purported to cancel the agreement in March 2019.[58] As noted, this is the genesis of the present dispute. These proceedings werecommenced around this time and appear to be an attempt to overcome the difficultiesencountered by WAM under the Berth agreement regarding berth allocation andlicensing by asserting the right to control the Association. We observe thatthe allocation and licensing provisions in the Berth agreement, requiringthe Association to act on WAM's direction, would not have been necessary if WAM(or Inert) controlled the Association's decision-making on this matter, in any event, asthe Developer and Controlling Member as they now claim to be.Assignments of Controlling Member rightsGCL[59] In May 2001, GHDL entered into a deed of nomination and assignmentassigning to GCL its rights, duties and obligations as the Controlling Member ofthe Association.Marlin[60] In September 2008, GCL entered into a deed of assignment, assigning thesesame rights, duties and obligations to Marlin. Written notice of this assignment wasgiven to the Association on 17 September 2008 and Marlin thereafter acted asthe Controlling Member.[61] A dispute arose between Marlin and the Association as to whether Marlin heldthe status of Controlling Member. This was in the context of the Association'sobjection to Marlin's application for resource consent for a two-stage mixed-useresidential and commercial development on its land (the undeveloped portion ofthe land intended for the town centre). The applications were declined byRodney District Council, but this decision was reversed by the Environment Court.The Association then appealed to the High Court. Marlin contended that this was abreach of the "no objections" provision in the Constitution quoted at [6] above.The dispute was determined at arbitration before the Hon Barry Patterson QC. In hisaward dated 18 September 2009, the learned arbitrator found that Marlin wasthe Developer and Controlling Member and the Association was accordingly in breachof the Constitution in maintaining its action in the High Court against theEnvironment Court's decision.[62] The arbitrator accepted Marlin's submission that the assignment of ControllingMember status by GHDL to GCL was ineffective because the assignment could onlybe to a party carrying out the development of the Marine Village. (Marlin's positionwas that it took an assignment of this status from GCL in 2008 as a precaution.)The arbitrator reasoned that because GCL did not purchase the town centre land, onlythe undeveloped land on the Western Arm, it could not be the Controlling Member inrespect of the undeveloped town centre land that it did not acquire:[GCL] was purchasing undeveloped land on the [Western Arm], andthe purpose of the assignment appears to have been to give that landthe benefit of land covenants registered against other land. As [GCL] was notpurchasing all the undeveloped land, it could not be the Developer ofthe undeveloped land which it did not purchase. I therefore accept that thisassignment was ineffectual to transfer rights, duties and obligations ofthe Controlling Member in respect of land which [GCL] was not buying.[63] The arbitrator also found that the phrase in the definition of DevelopedProperty (referred to at [5] above) — "fully developed by the Developer" — did notrequire the Developer to build a house on residential land:The Developer has done all it intends to do when it has completedthe subdivision, built the necessary amenities (roading etc) so as to create titlesthat a developer could sell as retail stock.[64] The arbitrator was satisfied that the town centre land was not developed inthe sense that the residential sections on the Western Arm had been developed.He concluded that the only remaining undeveloped land in the Marine Village wasthe town centre land owned by Marlin:I am satisfied that the Town Centre land is not Developed but the residentialsections on the [Western Arm] are Developed. Therefore, the Town Centreland is today the remaining undeveloped land in the [Marine Village]. Marlin owns the only land in the [Marine Village] which is not DevelopedProperty.[65] Marlin was placed in liquidation in November 2011 and in receivership inFebruary 2012. It was removed from the Companies Register in September 2016.2012 amendment to the Constitution[66] The Constitution provides for the election of members to a committee tomanage the affairs of the Association. Marlin purported to exercise its power asControlling Member to remove the committee elected by members at an annualgeneral meeting of the Association and substitute its own committee. After Marlinwas placed in liquidation, the Association obtained legal advice that there was nolonger any Controlling Member. The Association then reinstated the previouslyelected committee at an annual general meeting held in around February 2012.Mr Rod Klarwill was elected chair of this committee.[67] The committee set about addressing a number of issues with the existingConstitution, working from a draft prepared by a previous committee. This earlierdraft proposed amending the definition of Controlling Member and Developer bysubstituting "Gulf Harbour Development Marlin Ltd4 (1494198) or its successors orassigns" in place of "Gulf Harbour Development Ltd or its successors and assigns".In view of the legal advice that there was no remaining Developer or ControllingMember following the liquidation of Marlin, the new committee proposed to deletethese definitions and all other such references in the redrafted Constitution.Numerous other amendments were also proposed.[68] In the first draft of the amended Constitution all proposed changes were shownin different coloured text — blue denoted parts to be deleted, red to be included andgreen to be considered by the committee for inclusion or deletion. The references to"Marlin" and "(1494198)" in both the Developer and Controlling Member definitionswere red. The words "Development" and "or its successors or assigns" in ControllingMember were blue. In the definition of Developer, "Development" and "and itssuccessors and assigns carrying out the development of the Gulf Harbour MarineVillage" were in blue. However, following receipt of the legal advice, the wordsDeveloper and Controlling Member in the definitions were changed to green and4 The inclusion of the word "Development" in Marlin's name was an inconsequential error.struck through, as were all references to these terms throughout the draft Constitution.A notice of meeting with explanatory notes on all the proposed changes and draftresolutions were then circulated for consideration at a special general meeting to beheld on 6 August 2012.[69] On the day of the proposed meeting, lawyers acting for the receivers of Marlinasserted that Marlin remained the Controlling Member and they threatened to seek aninterim injunction unless an undertaking was immediately given not to proceed withany amendments to the detriment of Marlin. In view of this threat, the meeting wasadjourned until 29 October 2012.[70] The minutes of the October meeting record that the parties had agreed to referto arbitration the issue of whether Marlin remained the Controlling Member.In the meantime, it was agreed that the proposed resolution to delete all reference tothe Controlling Member in the Constitution would not be put to the meeting.[71] Following the meeting, an amended version of the Constitution was preparedto reflect the changes that had been agreed. In this version, all the intended changeswere inputted as track changes. The definitions of Developer and Controlling Memberwere marked-up with "Development" struck through, and "Marlin" to be included.When this process was completed all proposed changes were simply accepted.The unintended effect was to record Marlin or its successors or assigns as theDeveloper and Controlling Member whereas it ought to have been GHDL or itssuccessors or assigns (as shown in the existing Constitution). The change to Marlinwas never put to the vote by members at any meeting, but this is how it found its wayinto the amended Constitution registered on 23 November 2012.[72] Further amendments to the Constitution were registered on 24 April 2014,2 June 2015, 17 June 2015, 27 March 2018, 6 July 2018 and 20 November 2019.No change was made to the Developer and Controlling Member provisions on any ofthese occasions.High Court judgment[73] The Judge found that a condition precedent in s 21 of the Act to the amendmentof the definitions in issue was not fulfilled. The Judge was satisfied this was the resultof an innocent mistake.5[74] The Judge considered that the appropriate course in the exercise of the Court'sdiscretion pursuant to s 21(3A) was not to declare the alteration void. She gave fourreasons. First, although the 2012 alteration was a mistake, it was an innocent onewhich reflected the arbitrator's award.6 Secondly, the alteration was made prior toInert agreeing to acquire its land. If Inert's director, Mr Ian McKay, had readthe Constitution prior to purchasing, he would have understood that Marlin or itssuccessors or assigns was the Developer and Controlling Member. However, theJudge stated that the essence of Mr McKay's evidence was that he took no interest inthe rules at that time.7 Further, Inert had only recently obtained standing to applyunder s 21(3A) by repurchasing a lot and becoming a member of the Association.Its purpose in making the application was not to correct an error affecting it as aresidential member, but rather to secure for itself or its subsidiary, WAM, an advantagewithin the Association.8 Thirdly, the Judge took into account that the Association hadaltered its rules on several subsequent occasions without changing the Developer andControlling Member provisions. Any person who had taken an interest in the rulessince 2012 would have understood that the Developer and Controlling Member wouldhave to be successors or assigns of Marlin.9 Fourthly, the Judge considered that somuch time had now passed since the 2012 alterations were made that it may not bepossible to restore the GHDL definitions without causing an injustice to one or moremembers of the Association.10[75] The Judge's finding that the appellants failed on their first cause of action wasfatal to their overall claim because the argument underpinning the second cause ofaction was contingent on success on the first. However, in case she was wrong in5 High Court judgment, above n 1, at [52].6 At [56].7 At [57].8 At [58].9 At [59]–[60].10 At [61].relation to the first cause of action, the Judge considered whether the appellants oreither of them would otherwise be the Developer and Controlling Member assuccessors or assigns of GHDL.[76] The Judge considered that neither of the appellants could qualify as Developerand Controlling Member in any event. Her primary reason for reaching thisconclusion was as follows:[69] I consider the Developer is a party undertaking the development ofthe [Marine Village] — land and waterway — as a whole, or at the very leasta substantial part of it. The provisions in the rules giving the Developerthe rights to which I have referred, such as to prevent members objecting toany application, whether for resource consent or anything else, to allocatethe class of membership attaching to specific sites, and asControlling Member, to control the Association and committee make sense inthe context of a large development of bare land and associated waterway, bothof which were to be completed in stages. I do not accept, however, that it wasever intended a successor in title (and every registered proprietor in the villageis a successor in title to GHDL) or an assignee that is carrying out much lesserdevelopment would enjoy those rights and powers.[77] The Judge considered that there was never to be more than one Developer andControlling Member at any given time.11Did the High Court err in exercising its discretion not to declare the 2012amendment void?[78] As Mr Grove, for the appellants, submits, the onus was on the Association todemonstrate why the discretion ought to be exercised against the making of adeclaration of invalidity. Relevant considerations are likely to include the gravity ofthe error, the nature and effect of the alteration and any effect on the Association,individual members or others.12[79] In their amended statement of claim, the appellants pleaded that they "shouldnot be denied their rights due to an illegal and invalid amendment to the Constitution".The Association responded in its statement of defence that neither appellant wasthe Developer or Controlling Member and accordingly neither was denied any rights11 At [74].12 Strand v Bays Music Centre Inc [2013] NZHC 1870, [2013] NZAR 1068 at [75] applying NgātiKikopiri Marae Māori Komiti Inc Society v Te Rūnanga O Raukawa Inc HC Palmerston NorthCIV-2005-454-409, 22 August 2006 at [29].by the unauthorised amendment to the Constitution. The Association added thatthe appellants acquired their interests in the Marine Village with actual or constructivenotice of the provisions as amended.[80] In terms of the pleadings therefore, the critical issue is whether the appellantsare correct in respect of their second cause of action. We consider this is a veryimportant factor bearing on the exercise of the discretion, if not a pivotal one inthe present case. The error in this case was fundamental; an amendment ordinarilyrequiring a special resolution was made in error, without the proposed change everbeing put to the vote. The amendment was to key provisions in the Constitution.Had we been persuaded that the amendment had the effect of depriving Inert or WAM(or anyone else for that matter) of the very significant benefits they otherwise wouldhave enjoyed as Developer and Controlling Member, we would have been inclined toallow the appeal in respect of this cause of action and declare the amendment void.In our assessment, the actual detriment to the party entitled to such status (assumingthere was one) would more than outweigh any potential prejudice to other membersof the Association who may have relied on the correctness of the amendment asdisclosed by the public register. We note there was no evidence of any actual relianceon the amended provisions and consequent prejudice if they were now declared void.[81] However, for the reasons given in the next section of the judgment, we aresatisfied, in agreement with the Judge, that neither of the appellants would be entitledto Developer and Controlling Member status even if the original provisions inthe Constitution were restored by replacing Marlin with GHDL. We have concludedthat there is no longer a Developer and Controlling Member. The amendment istherefore now immaterial. It correctly reflects the historical position as determined bythe arbitrator, namely that Marlin was the Developer and Controlling Member in 2009.That position remained, at least until Marlin was placed in liquidation inNovember 2011 and possibly beyond. Marlin was removed from theCompanies Register on 9 September 2016 and there is no suggestion that any otherparty has acquired the status as a successor or assign of Marlin. Certainly, theappellants did not do so.[82] It seems to us relevant that the appellants did not assert any claim to this statusfor more than four years after they acquired their respective interests inthe Marine Village in December 2013 and July 2014. They acted inconsistently withany right to the presently claimed status until they issued these proceedings in 2019.It was only after a dispute arose under the Berth agreement that this claim was madein an apparent effort to step around it.[83] Ten years have now passed since the innocent error was made. A further sixamendments and re-registrations have left the erroneous provisions intact. We agreewith the Judge that the possibility of prejudice to other parties cannot be ruled out ifthe position disclosed by the public register is now wound back 10 years.[84] In all the circumstances, we are not persuaded that the Judge wrongly exercisedher discretion by declining to declare the amendments void. This is sufficient todispose of the appeal, but we will go on to consider the second cause of action in casewe are wrong.Did the High Court err in finding that neither appellant would be the Developerand Controlling Member in any event?[85] We agree with the Judge that the parties must be taken to have intended thatonly one entity could hold these positions at any given time. The concept of therebeing more than one Controlling Member would be a contradiction in terms.Each could negate the voting power otherwise exercisable by the other, leaving neitherwith control. Similarly, we do not consider the parties can be taken to have intendedthat there could be multiple Developers at a given time, each protected from objectionto its proposals for the development which could reflect their quite differing visions.Although the Constitution contains a standard boilerplate provision to the effect thatthe singular includes the plural and vice versa, we are satisfied that this cannot beapplied to the Developer and Controlling Member definitions. This would defeatthe centrally important commercial objectives of these provisions, which were plainlydesigned to protect the Developer's investment and enable it to sell its rights andinterests as a package if it wished to do so.[86] The word "successor" means one who succeeds to or takes the place or positionof another.13 In the context of a corporate entity, it would include a corporation whichassumes its rights and liabilities through amalgamation, consolidation or some otherform of legal succession.14[87] An assignment, in the words of Lord Millet:15 denotes any conveyance, transfer, assurance or other disposition ofproperty from one party to another. The essence of an assignment is that itoperates to transfer its subject matter from the ownership of assignor to thatof the assignee.[88] The right(s) being assigned must be separate, distinct and pre-existing.16 As aresult of the assignment, the assignee "becomes either the legal or beneficial owner ofthe thing in action and its benefits".17 Absent some contrary indication, reference to aparty's assign in a legal document would ordinarily mean an assignee of that party'srights under that document, not under some other legal document.18[89] Mr Grove submits that a successor of GHDL is any entity holding undevelopedland in the Marine Village from GHDL as a successor in title and undertakingdevelopment on that land. While he acknowledges that every member ofthe Association is a successor in title to GHDL, he submits that no other member isthe Developer and Controlling Member because all other property is"Developed Property" in terms of the Constitution. Inert acquired bare land on whichit is building eight townhouses and an apartment block. Mr Grove claims that Inert isthe only party undertaking development on undeveloped land in the Marine Villageand it must therefore be the Developer and Controlling Member.[90] We do not accept this submission. If it were correct, as is demonstrated by oursummary of the fragmented development of the Marine Village set out above, it wouldmean that numerous other parties would equally, often simultaneously, have beenthe Developer and Controlling Member. This would include parties such as GHTCL,13 Kestrel Coal Pty Ltd v Construction, Forestry, Mining and Energy Union [1999] QSC 338 at [16].14 At [10].15 Burton v Camden London Borough Council [2000] 2 AC 399 (HL) at 408.16 At 408.17 Bexhill UK Ltd v Razzaq [2012] EWCA Civ 1376 at [44].18 Oquirrh Associates v First Nat Leasing Co Inc 888 P 2d 659 (Utah Ct App 1994) at 663–664.Lakeline, Golden Prospects and Sherrod, all of which acquired and were developingsubstantial blocks of bare land while GHDL remained involved in developing otherland in the Marine Village. On the appellants' interpretation, GHDL would have beenrequired to face off with all these other parties with an equal claim to Developer andControlling Member status. This cannot be right. We note that none of these partiesmade any claim to this status.[91] For the reasons already given, we are satisfied that the appellants'interpretation cannot have been intended by the parties at the time the Constitutionwas drafted. We consider that a successor to GHDL in this context means an entitystanding in its shoes and assuming its rights and liabilities such as would occur on anamalgamation or merger. Similarly, an assign of GHDL would be one acquiring byassignment its rights and liabilities as Developer and Controlling Member under theConstitution. We accept Mr Niven's submission, for the Association, that theConstitution contemplates a single chain of transmission, such that there can be onlyone successor or assignee at any one time, with each tracing their rights to the lastsuccessor or assignee in the chain. This interpretation gives these provisions businessefficacy and serves their evident purpose.[92] GCL 1, which acquired all of GHDL's remaining land in the development inMay 2001, was not GHDL's successor in this sense. Nor did it claim to be. This is nodoubt why the mechanism of assignment was chosen. Further, the assignment ofControlling Member status was to GCL, not GCL 1 which was the successor in titleto the land.[93] We conclude that although Inert is a successor in title, it is not a successor toGHDL in the required sense. Nor did it acquire by way of assignment any rights underthe Constitution previously vested in GHDL as Developer or Controlling Member.The only purported assignments were by GHDL to GCL in May 2001, and then byGCL to Marlin in September 2008. These parties all having now been removed fromthe Companies Register, without having ever assigned the rights to another, there isno scope for anyone to claim Controlling Member status.[94] We also accept the Association's submission that, in terms of the Constitution,Inert's land had been "fully developed by the Developer" prior to Inert acquiring itand therefore Inert is not the Developer "carrying out the development of[the Marine Village]". We agree with the arbitrator that the phrase "fully developedby the Developer" in the definition of Developed Property means that the Developerhas obtained a separate freehold title and has done all it intends to do by way ofdevelopment on that land. This does not require the construction of an actual Dwellingor Commercial Unit.[95] We accept Mr Niven's submission that the Constitution contemplates that onlythe Developer could create a "Developed Property". Once a Developed Property hasbeen created, the owner is required to be a member of the Association. Any subsequentdevelopment by an owner of this Developed Property does not constitute "carryingout the development of [the Marine Village]" in the required sense. Such developmentis constrained by the Owner's Scheme and Village Rules provided for inthe Constitution. These provisions do not apply to land that has not yet becomeDeveloped Property. Until then, the Developer and Controlling Member has a freehand (subject only to any regulatory constraints). In summary, we agree withMr Niven that Inert is carrying out a development in the Marine Village, but it is notcarrying out the development of the Marine Village.[96] The same reasoning applies to WAM. It does not qualify as a successor toGHDL, nor does it claim to. It took an assignment of the Waterspace Licence but notthe rights and obligations of Developer and Controlling Member.Conclusion[97] For these reasons, the appeal must be dismissed. Given our analysis andconclusions, it has not been necessary for us to consider the further evidencethe Association sought to adduce on appeal. This evidence does not assistthe interpretative exercise and is therefore not cogent. We are not prepared to receiveit.Result[98] The application to adduce further evidence is declined.[99] The appeal is dismissed.[100] The appellants must pay costs to the respondent for a standard appeal on aband A basis and usual disbursements.Solicitors:Foy & Halse, Auckland for AppellantsBuddle Findlay, Wellington for RespondentSchedule 1Schedule 2