VINCENT V LAKES INTERNATIONAL GOLF MANAGEMENT LTD CA861/2013 [2014] NZCA 323 [14 July 2014]

VINCENT V LAKES INTERNATIONAL GOLF MANAGEMENT LTD CA861/2013 [2014] NZCA 323 [14 July 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA861/2013[2014] NZCA 323BETWEEN HARTLEY CLENDON VINCENTAppellantAND LAKES INTERNATIONAL GOLFMANAGEMENT LIMITEDRespondentHearing: 18 June 2014Court: Ellen France, Venning and Mallon JJCounsel: M J Fisher for AppellantC C Mansell for RespondentJudgment: 14 July 2014 at 11.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Ellen France J)Introduction[1] Hartley Vincent, the appellant, owns a property in the Lakes Resort, a gated community centred around a golf course in Pauanui.1 Lakes International Golf1 Details of registered proprietors discussed at [6], below.Management Ltd operates a golf club which provides playing rights for the golf course. A covenant registered against Mr Vincent's property states that onregistration as proprietor, the land owner is to join the golf club, remain a member and meet all levies and other lawful charges levied by the golf club. The golf club isdefined to mean "the golf club to be incorporated as an incorporated society to provide for playing rights on the golf course." As matters have transpired, the golf club is run by a limited liability company, not by an incorporated society.[2] The membership rules of the golf club provide for an annual membership fee. The respondent has rendered invoices to Mr Vincent for the annual membership fees payable in 2011, 2012 and 2013. Mr Vincent has not paid these fees leaving a sum of $5,070 unpaid.[3] The respondent brought a proceeding claiming the unpaid fees. Both parties sought summary judgment. Associate Judge Sargisson heard the applications for summary judgment and dismissed them both.2 She said the question of interpretation of the covenant should be addressed at trial to allow for consideration of all of the relevant evidence. Mr Vincent appeals. He says the covenant means that membership fees are payable to the golf club taking the form of an incorporated society. Because the respondent is not a person within that description, it is not entitled to enforce the covenant. Mr Vincent's case is that summary judgment wasappropriate because further evidence will not affect the meaning of the covenant. The respondent supports the approach taken by the Associate Judge.[4] The key issue on appeal is accordingly whether the Associate Judge was correct to conclude that further evidence would assist in the interpretation of the covenant. To put the matter in context, we first say a little more about the background, the terms of the covenant and then summarise the approach taken by the Associate Judge.2 Lakes International Golf Management Ltd v Vincent [2013] NZHC 2901 [High Court judgment].Background[5] The starting point in terms of the factual narrative is mid-2002 when Lakes Resort Golf and Country Club Ltd was incorporated as the operator of the golf course. We understand this company was linked to the developer of the Lakes Resort.[6] Later that year, on 26 November 2002, Michael Donovan and Richard Herbert became the registered proprietors of a property in the Lakes Resort (the property) as trustees for the Vincent Family Trust. A year later, on 17 November 2003, the trustees consented to the restrictive covenant being lodged on the title of the property. In December 2007, Messrs Donovan and Herbert retired. Mr Vincent, his wife and Provident Trustee Services were appointed (by Mr Vincent as settlor) as trustees. They became the registered proprietors of the property.[7] Lakes Resort Golf and Country Club Ltd, then running the golf course, was placed in liquidation on 1 May 2009. A new company, Lakes International Golf Management Ltd (Lakes International), was incorporated in October 2009 as the operator of the golf club. The land comprising the golf course was transferred by mortgagee sale to a company called The Lakes International Golf Course Ltd. The latter company leased the golf course land to Lakes International for the purposes of operating the golf club.[8] Although there is some dispute about when Mr Vincent was first asked about golf club membership fees, there is no dispute he was invoiced for the annual fees in 2011, 2012 and 2013 and that these fees were not paid. We note at this point that the matter proceeded before us, as it did in the High Court,3 on the basis there was no issue as to privity of contract. For present purposes, Mr Vincent accepts that if the covenant is interpreted in the way contended for by the respondent, the obligation to pay the membership fees would be his.[9] The final matter we record by way of factual background is that Ian Robertson, in his affidavit on behalf of the respondent, explained that there were3 At [10].difficulties in enforcing payment of the membership fees from "many" of the other39 property owners in the Lakes Resort whose properties were encumbered with the same or a similar covenant.The restrictive covenant[10] The covenant states that the transferee will:7.1 upon becoming registered as a proprietor of any estate in the Land, including an estate arising from a subdivision of the Land, immediately join as a member of the Golf Club, remain a member of the Golf Club in good standing throughout the Transferee'sownership of the Land and meet all levies and other lawful [impositions] levied by the Golf Club;7.2 at all times comply with the rules and regulations of the Golf Club;7.3 upon selling the Land procure the Transferee acquiring the Land to enter into, execute and deliver to the Golf Club an acknowledgement of membership form effective from the date the Transferee becomes the beneficial owner of the Land.[11] The covenant defines "golf club" as "the golf club to be incorporated as anincorporated society to provide for playing rights on the golf course". The "golf course" is defined as "the golf course being developed on the land in Certificate of Title SA71C/273". Finally, "land" is defined as "the land transferred by this transfer".The approach in the High Court[12] Associate Judge Sargisson said that "[t]o the extent that there is room forambiguity" in the wording "there is room for different interpretations".4 The Associate Judge continued:5It is telling that in submissions counsel for each party relies to a degree on the surrounding factual circumstances and intentions of the original covenantor and covenantee to support their opposing interpretations. I am satisfied that it would not be prudent to determine whose approach to interpretation is to be preferred on the limited evidence available to me. It would be more prudent to allow the context of the covenant to be exposed fully at trial as only on further analysis of the facts can the true intention of4 High Court judgment, above n 2, at [20].5 At [20].the original contracting parties, and indeed of Mr Vincent and his vendor, be ascertained. Such an analysis is not appropriate for summary judgment.The applications for summary judgment[13] The differences between the parties as to the appropriateness of summary judgment can be summarised in the manner set out below.The competing contentions[14] Mr Vincent maintains that in order for the covenant to be enforceable, the golf club must be an incorporated society whilst the respondent says the reference toa body "to be incorporated" is a suggestion of the form the body operating the clubmay take and not a requirement. The parties also differ as to the impact of the fact the club is operated by a limited liability company and as to the need for any further evidence to assist in the interpretation of the covenant. We need to say a little more about the latter two points.[15] For Mr Vincent, Mr Fisher highlights two differences between the impact of the form of incorporation. First, Mr Fisher notes that as a company, the golf club operates for commercial gain whereas that would not be the position if the club was an incorporated society. Secondly, the club operates on this basis without the members having any real say in how the club operates.[16] Mr Fisher says the differences between the two entities are apparent on a comparison of the membership rules of the club and the applicable provisions in the Incorporated Societies Act 1908. He points to the way various matters are addressed in the rules including the following: there is no provision for any sharing of income (cl 5.2) and, as a company, the club can distribute the surplus to shareholders; the members have no voting rights (cl 5.3); and the manager is to manage and operate the club facilities and to have the exclusive authority to establish, set and vary the annual subscription fee (cl 8.1). Further, while the rules provide for the formation of an advisory board, including three nominees of the members elected by the membership committee at least one of whom must be a property owner at Lakes Resort, the advisory board has no powers.[17] By contrast, Mr Fisher points to various sections in the Incorporated Societies Act indicating the focus of such bodies is not on pecuniary gain.6 He also relies on the provisions in that Act giving members a say in matters such as the alteration of rules,7 approval of financial statements,8 and the ability of members to pass a resolution to put the society into liquidation.9[18] Mr Fisher also says that the differences between the two entities is apparent in the rights and obligations of the club set out in the lease governing LakesInternational's tenancy and use of the land on which the golf club is situated.[19] The respondent's position is the differences arising from the form of incorporation are more apparent than real. For example, Ms Mansell for the respondent points out there is presently no advisory board as envisaged by the membership rules because none of the property owners has put forward their names as part of the membership committee. In other words, the absence of the ability to control the way the club operates has not troubled the property owners.[20] Finally, as to the need for further evidence, Mr Fisher submits that the interpretation of the clause is clear on the basis of the material before the Court and this is not a case where further evidence is necessary to assist in the interpretation exercise. It is also submitted that it was not appropriate to decline to grant defendant summary judgment on the basis of the need for further evidence in this case. Mr Fisher emphasises in this respect that the parties did not consider this was necessary given that both sought summary judgment. Further, he says there was not likely to be any relevant additional evidence given the restrictive covenant is a public document. On the latter point, Mr Fisher accepts that this Court has not shown a great deal of appetite for the potentially more restrictive approach to the admissibility of extrinsic evidence in construing a registered instrument adopted by the High Court of Australia in Westfield Management Ltd v Perpetual Trustee Co6 Incorporated Societies Act 1908, ss 4 ("not [associated] for pecuniary gain"), 5(a) (matters not deemed to amount to "pecuniary gain") and 20 (society not to engage in operations involvingpecuniary gain).7 Section 21.8 Section 23.9 Section 24.Ltd.10 However, he relies on Cherry Tree Investments Ltd v Landmain Ltd11 as authority for the proposition that because of the public nature of the registered covenant, extrinsic material would be of limited assistance.[21] The respondent submits that the words "to be" are ambiguous and that furtherevidence would assist in determining their meaning. But, in any event, even if the words are not ambiguous Ms Mansell contends that it would be premature to resolve the dispute now before there has been an opportunity for discovery. It is also submitted that it would not be appropriate to decide a novel question such as the applicability of the Westfield approach on a summary judgment application.Analysis[22] We first address the argument that the Associate Judge was wrong to say more evidence would assist when neither party advanced that position in the High Court. Mr Vincent was seeking summary judgment as a defendant. Accordingly, even if the plaintiff had not satisfied the Associate Judge summary judgment was appropriate, it does not follow automatically that defendant summary judgment should be granted. In that context, there is no dispute that the relevant principles relating to defendant summary judgment are as summarised by the Associate Judge, namely:12[9] Defendant summary judgment allows a defendant who has a complete defence which cannot be contradicted, to put such evidence forward so the proceedings can be summarily dismissed. The onus is on thedefendant, to prove, "on the balance of probabilities, that the plaintiff cannotsucceed." Defendant summary judgment will not be appropriate where thereis a dispute as to the material facts or where the Court needs to ascertain thematerial facts. If there is a "theoretical possibility" on the evidence that the plaintiff's claim could succeed, then summary judgment will beunsuccessful.10 Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA 45, (2007) 233 CLR 528. In Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 at [19] this Courtsaid that "To the perhaps uncertain extent that Westfield requires extrinsic evidence to be ignored when construing a registered instrument, it is open to question whether it should be applied in New Zealand".11 Cherry Tree Investments Ltd v Landmain Ltd [2012] EWCA Civ 736, [2013] Ch 305.12 High Court judgment, above n 2 (footnotes omitted).[23] As to whether further evidence would assist, the first point we make is that the Court is lacking the evidence that would place the covenant in its context. Although Mr Vincent supports a narrow approach to interpretation of the covenant, he does not dispute that the covenant should be considered in context.[24] In terms of contextual matters there is, for example, nothing before us as to why reference was made to an incorporated society in this commercial endeavour particularly given that, at the time the covenant was lodged in 2003, the golf club was already being operated by a company structure. There may be, for example, further evidence from the solicitors who acted on the initial transaction or the liquidator. Obviously, absent any pleading for rectification, evidence of backgroundcircumstances which "does no more than tend to prove what individual partiessubjectively intended or understood their words to mean or to prove what a party'snegotiating stance may have been at a particular time"13 is not admissible. But there may be admissible evidence of background circumstances that would assist.[25] Secondly, while ambiguity is not a precondition to reference to the wider background and circumstances,14 there are a number of inconsistencies in the covenant which further evidence may assist in resolving. For example, the heading of the relevant part of the covenant refers to "[m]embership Pauanui Lakes Golf &Country Club" but it appears there never was any such club. We interpolate here thatit is unclear what rules, if any, applied to membership of the club prior to the incorporation of Lakes International. Further, the relevant clause refers to the golfclub "incorporated to provide for playing rights on the golf course". That latterphrase does not suggest control being given to the members in the way Mr Fisher suggests but, rather, that the focus is on enabling residents to be able to play golf at the club. As to the latter point, we add that the club rules do not distinguish in a number of respects between those who are members by virtue of their property ownership and individual members. For example, members may resign their membership at any time by letter and there is provision for members to be expelled.13 Trustees Executors Ltd v QBE Insurance (International) Ltd [2010] NZCA 608 at [32], citingVector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19] per Tipping J, and at [14] per Blanchard J (with whom Gault J agreed) and [76] per McGrath J.14 Trustees Executors Ltd at [32].Quite what either of these options mean in terms of ongoing payment of the membership fees is unclear.[26] When all of these matters are considered, we conclude that the position is not clear cut. The Associate Judge was correct to decide the case on the basis that there may be further relevant evidence which could support the interpretation of the respondent.Result[27] For these reasons, the appeal is dismissed. There is no good reason why costs should not follow the event. We accordingly make an order that the appellant pay the respondent costs for a standard appeal on a band A basis and usual disbursements.Solicitors:Castle/Brown, Auckland for AppellantMartelli McKegg, Auckland for Respondent