JUSTITIAE TRUSTEE CO LTD v AAL HOLDINGS LTD [2021] NZCA 281

JUSTITIAE TRUSTEE CO LTD v AAL HOLDINGS LTD [2021] NZCA 281 [29 June 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA137/2020[2021] NZCA 281BETWEEN JUSTITIAE TRUSTEE COMPANYLIMITEDAppellantAND AAL HOLDINGS LIMITEDFirst RespondentXIAOLI DAISecond Respondent121 LIMITEDThird RespondentPETER JOHN AITKEN AND PETERLOUISE FELSTEDFourth RespondentsHearing: 11 March 2021Court: Kós P, Miller and Collins JJCounsel: J K Goodall and R B Hucker for AppellantM J Fisher and T J Yoon for First RespondentNo appearance for Second, Third and Fourth RespondentsJudgment: 29 June 2021 at 2.30 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The declarations issued by the High Court are upheld.C The appellant must pay the first respondent costs for a standard appealon a band A basis plus usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Collins J)Introduction[1] The focus of this appeal is a 2083m2 property in Herne Bay, Auckland.Currently the property comprises:(a) The fee simple estate in the land. AAL Holdings Ltd (AAL) owns anundivided 60 per cent share of the fee simple estate. Justitiae TrusteeCompany Ltd (Justitiae) and the second to third respondents ("the otherunit owners") each own a ten per cent share of the fee simple estate.(b) Justitiae and the other unit owners each crosslease a designated area ofthe property, where four separate dwelling units have been erected.Each of the four crossleases is for a term of 999 years.[2] AAL wishes to construct further dwelling units on an undeveloped portion ofthe fee simple estate, referred to in the crossleases as "the relevant area". It claimsthat, once it has constructed further dwelling units on the relevant area, it is entitled torequire Justitiae and the other unit owners to execute, as co-lessors, crossleases forthose dwelling units. AAL relies on the terms of the covenants in cls 32–36 of thecrossleases to support its position. We explain those covenants at [10]–[14].[3] Associate Judge Smith issued declarations consistent with the meaning of thecovenants advocated by AAL.1 In issuing his declarations in favour of AAL, theAssociate Judge also dismissed a cross-application for summary judgment sought byJustitiae. We summarise the High Court judgment at [20]–[27]. Justitiae now appealsthat judgment. The other unit owners have adopted neutral positions in relation to thislitigation.1 AAL Holdings Ltd v Dai [2020] NZHC 211 [High Court judgment].Background[4] Originally, a large homestead was on the property which is situated on aslightly elevated site that provides views over the Waitematā Harbour. InDecember 1989, the then-owner, Mr Jones, executed a crosslease over what becamedwelling unit 1, containing the covenants in cls 32–36 relating to the relevant area. In1990, Mr Jones transferred 90 per cent of the fee simple estate to Art and ArchitectureLtd, a property development company. Later, the lease of dwelling unit 1 along withthe other 10 per cent of the fee simple estate were transferred to Mr Aitken.[5] Art and Architecture Ltd built two new dwelling units (units 2 and 3), which itsold along with 10 per cent of the fee simple estate attached to each dwelling unit.Justitiae became the owner of dwelling unit 3 in April 2008.[6] Art and Architecture Ltd sank into financial difficulties before it was able tocomplete the development of another dwelling unit. In 1991 a mortgagee sold Art andArchitecture Ltd's interest (then 70 per cent of the fee simple estate) to Taylor TradingCo Ltd, another development company which managed to complete and sell a fourthdwelling unit, again with 10 per cent of the fee simple estate.[7] In October 1992, Taylor Trading Co Ltd sold its interest (by then 60 per centof the fee simple estate) to a Mr Reeves. In the ensuing years there were a number ofsales and purchases of the 60 per cent interest in the fee simple estate, culminating inAAL purchasing it in 2018. By that time, the units and relevant area were depicted onthe certificate of title to the property in the following way:The covenants[8] The memoranda of crosslease are registered interests against the freeholdcertificate of title to the property. The crossleases contain a series of conventionalcovenants which Justitiae accepts bind the successor lessees. Examples of standardcovenants found in the leases include:11. USE OF EXCLUSIVE AND COMMON AREASThe Lessee shall not without the written consent of the Lessors in anyway use or enjoy any part of the said land except: (a) The Flat (b) Thatpart of the said land relating to the Flat marked or shown onDeposited Plan No. 141791: (c) That part of the said land marked orshown on Deposited Plan 141791 but only for the purposes ofreasonable ingress and egress by vehicle or on foot.14. LESSEES OWNERSHIP OF SHARE IN FEE SIMPLEThe Lessee shall remain the owner of the Land share in the fee simpleof the land while he continues to be a Lessee hereunder. If the Lessee(unless by these presents expressly authorised so to do) shall deal witheither his interest hereunder or his interest in the fee simple in such amanner that both leasehold and freehold interests are not owned bythe same person then this Lease shall immediately determine withouthowever discharging the Lessee from payment of any moneys owinghereunder or releasing him from liability arising from any otherbreach previously committed provided always that this Clause shallnot apply to the first Lessee hereof.16. QUIET ENJOYMENTThe Lessee performing and observing all and singular the covenantsand conditions on his part herein contained and implied shall quietlyhold and enjoy the Flat without any interruption by the Lessors or anyperson claiming under them.[9] The dispute concerns the special covenants set out in cls 32–36 of the leases.[10] Clause 32(a) of the crosslease defines "the relevant area" by reference tomarked areas on the Deposited Plan. Clause 32(b) then defines "the Lessors" forcls 32–36:the expression "the Lessors" shall mean (to the exclusion of any other personor persons) such of the registered proprietors of an estate in fee simple in thesaid land as are not the registered proprietors of an estate in leasehold in anyflat or dwellings erected on the said land.[11] Clause 33 provides that "the Lessors" shall at any time be entitled to erectdwelling units and garages on the relevant area. Clause 33 is subject to:(a) the requirements of local authorities concerning the development of therelevant area; and(b) the terms of any agreement between "the Lessors" and "the Lessee"relating to the building of further dwelling units.Clause 33 also provides that "the Lessors" and their representatives, includingcontractors, may enter onto and remain on the relevant area at all reasonable times toerect dwelling units provided they take reasonable steps to minimise inconvenience tothe lessees.[12] The relevant parts of cl 34 provide that upon "substantial completion by theLessors of the dwelling units" on the relevant area, "the Lessee" shall: when so requested by the Lessors join in and execute as a Co-Lessor aLease of the dwelling units for a term corresponding with the unexpired periodof this Lease, and the Lessee shall do all such things as shall be necessaryor desirable in order to enable registration of such lease and the Lessorsshall at the Lessor's expense with all due speed register such Lease.[13] Clause 35 provides for the appointment of a Power of Attorney in favour of"the Lessors" on behalf of "the Lessee" in the latter's capacity as lessee and as anowner of an interest in the fee simple of the property, so as to enable "the Lessors" toexecute for "the Lessee" any lease created pursuant to cl 34. Clause 35 states:35. THAT in consideration of the granting to the Lessee of thisMemorandum of Lease the Lessee doth hereby irrevocably nominateconstitute and appoint the Lessors and any nominee of the Lessors tobe the true and lawful attorneys and attorney of the Lessee both asLessee and as registered proprietor of any interest in the fee simple ofthe said land and on behalf of the Lessee as Lessee and/or suchregistered proprietor and as fully and effectively as the Lessee eitheras a Lessee and/or such registered proprietor could do if personallypresent to execute for the Lessee in any capacity the Lease referred toin Clause 34 hereof and to sign and use the name of the Lessee in anycapacity to such Lease and to do all such other acts and things(including signing any new Flats Plan) as shall be necessary ordesirable to effect registration of such Lease.[14] Clause 36 provides that, in the event of "the Lessee" or "the Lessors"transferring their share in the fee simple of the property, then a Power of Attorney shallbe executed whereby "the Lessors" shall be appointed Attorney of the new lease onthe same basis set out in cl 35. Clause 36 states:36. THAT in the event of the Lessee or the Lessors transferring orotherwise disposing of the whole or any part of their respective sharein the fee simple estate in the said land, then on the occasion of suchtransfer or other disposition:(a) A Power of Attorney shall be executed whereby theLessee or the Lessee's transferee or disposee, as thecase may be, appoints the Lessors or the Lessors'transferee or disposee, as the case may be, theAttorney of the Lessee or the Lessee's transferee ordispose[e], on the same basis and with the samepowers as are set forth in Clause 35 hereof.(b) The Power of Attorney shall be prepared by thesolicitors for the Lessors and shall be given andexecuted prior to the registration of the transfer orother disposition hereinbefore in this Clause referredto. A copy of the Power of Attorney shall forthwiththereafter be deposited in the Land Transfer Office.(c) The costs of preparation, stamping and registration ofthe Power of Attorney shall be borne by the persontransferring his interest in the fee simple estate in thesaid land.The reference in this Clause to a transfer or other disposition by theLessee or the Lessors of the whole or any part of their respective sharein the fee simple estate in the said land shall extend to and include theexercise by any mortgagee or other person of a power of sale inrespect of a share in the fee simple estate in the said land.[15] Under cl 37, once the new dwelling units are completed and the lease undercl 34 registered, then cls 32–36 cease to have effect.Previous decisions[16] The property has been the subject of previous litigation involving similar issuesto the present dispute:(a) In Taylor Trading Co Ltd v Aitken,2 the High Court rejected anargument by Mr Aitken, the co-owner of unit 1 (who is also one of thefourth respondents in the current appeal) that cls 32–36 of thecrosslease were not enforceable as between assignees of the crosslease.Mr Aitken wished to enforce what he thought was a height restrictionon further dwelling unit developments on the relevant area.Master Towle held there was privity of contract between the parties byreason of s 4 of the Contracts (Privity) Act 1982.3 A writ of specificperformance was issued to compel Mr Aitken to comply with hisobligations under the covenant.2 Taylor Trading Co Ltd v Aitken (1992) 2 NZ ConvC 191,212 (HC).3 Now ss 12 and 17 of the Contract and Commercial Law Act 2017.(b) In Werder v Aitken,4 Master Kennedy-Grant issued summary judgmentforcing Mr Aitken to again comply with his obligations under thecovenants.(c) In another Werder v Aitken judgment,5 Blanchard J dismissedMr Aitken's application for special leave to appeal the judgmentsreferred to in (a) and (b) and required Mr Aitken to immediately complywith his obligations under the covenants.[17] The judgments referred to above have been criticised by academiccommentators, in particular Associate Professor Thomas, who is concerned thejudgments reflect a misunderstanding of legal principles relating to crossleases.6Ongoing litigation[18] There are two other sets of proceedings that may be affected by the way wedetermine this appeal:(a) AAL has applied for orders under s 339 of the Property Law Act 2007.It seeks to have the High Court divide the property into freehold titles.(b) Mr Aitken and his co-owner have initiated proceedings against AALconcerning the refusal of AAL to transfer to them a specified portion ofthe property. That proceeding has been adjourned pending the outcomeof this appeal.7[19] Thus, to date the issues arising from the legal status of the various interests inthe property and the meaning of the covenants have given rise to six proceedings inthe High Court.4 Werder v Aitken HC Auckland CP339/93, 7 July 1993.5 Werder v Aitken HC Auckland CP339/93, 17 May 1994.6 Rod Thomas Cross Leases and Future Development Covenants (1992) 6 BCB 113;Elizabeth Toomey (ed) New Zealand Land Law (3rd ed, Thomson Reuters NZ, Wellington, 2017)at [11.6.01] and [11.7.04] citing Rod Thomas. See also DW McMorland and others HindeMcMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [14.089].7 Aitken v AAL Holdings Ltd HC Auckland CIV-2019-404-1016, 9 October 2020.High Court judgment[20] The Associate Judge found that cls 32–36 created an agreement to lease therelevant area and any dwelling units built on the relevant area pursuant to those clauses(the "agreement to lease"), between the unit owners' predecessors as lessors andAAL's predecessor as lessee.8 Critical to the Associate Judge's finding was hisdetermination that each agreement to lease was concluded by the unit owners'predecessors in their capacities as registered co-owners of the property's fee simpleestate.9[21] The Associate Judge then found that the covenants in the agreement to lease"ran with the land" under ss 231–233 of the Property Law Act.10 The Associate Judgetherefore held that the covenants not only bound the unit owners' predecessors andAAL's predecessor, but also all subsequent transferees. The Associate Judge held thatupon satisfying its obligations under cl 34, AAL was entitled to call on the existingunit owners to execute leases for further dwelling units on the relevant area.[22] The Associate Judge also disposed of other challenges to the declarationssought by AAL:(a) Justitiae argued that there was not a sufficient lis or dispute between theparties to engage the High Court's jurisdiction to issue a declaration.This point was also referred to in the notice of appeal, but it was notpursued in counsel's submissions. For completeness, we record that inMandic v Cornwall Park Trust Board,11 the Supreme Court made clearthat there need not be an existing dispute or lis in order to engage theCourt's jurisdiction to issue a declaration under s 3 of the DeclaratoryJudgments Act 1908. Although not referred to in the Court below,Mandic v Cornwall Park Trust Board would appear to be a completeanswer to the jurisdictional argument that Justitiae advanced before theAssociate Judge.8 High Court judgment, above n 1, at [82].9 At [74].10 At [64]–[68].11 Mandic v Cornwall Park Trust Board [2011] NZSC 135, [2012] 2 NZLR 194.(b) In view of the principal conclusions reached by the Associate Judge, hedid not engage in an alternative argument concerning the application ofs 303 of the Property Law Act and ss 12 and 17 of the Contract andCommercial Law Act 2017.12 The same argument has been pursued asan alternative submission before us. We need only consider thisalternative argument if we disagree with the Associate Judge's principalfindings.(c) The Associate Judge also rejected Justitiae's argument that AAL's onlyrecourse was to seek relief under s 339 of the Property Law Act.13 TheCourt below was satisfied that all AAL was seeking to do was to obtaindefinitive rulings on the meaning of the covenants and that it was not,in this proceeding, seeking to affect the legal status of the lessees'interests in the property.[23] Ultimately, the Associate Judge concluded that it was appropriate to exercisehis discretion to issue declarations in favour of AAL.14 The Associate Judge alsoreached the corollary conclusion that Justitiae's application for summary judgmenthad to be dismissed.15[24] The formal declarations made by the Associate Judge mirrored the terms ofcls 33–35 of the lease.16 As to cl 33, the declaration states:17(i) there is an area of land at 121 Shelly Beach Road, Herne Bay,Auckland on which the registered proprietor of the plaintiff's share inthe fee simple estate ("the registered owner") is entitled to erectdwellings and, if desired, garages and/or other buildings normallyappurtenant to or associated with dwellings ("the dwelling units"),being the area marked ("the relevant area");(ii) there are no restrictions under each cross lease as to how manydwelling units may be erected on the relevant area, where the dwellingunits may be erected within the relevant area, or as to the dimensions12 High Court judgment, above n 1, at [83].13 At [86].14 At [87].15 At [88]–[91].16 AAL Holdings Ltd v Dai [2020] NZHC 691 [Declaratory judgment].17 Declaratory judgment, above n 16, at [2(1)].of the dwelling units, apart from the requirements that the dwellingunits be erected within the relevant area and conform in all respects tothe requirements of Auckland Council and any other "Authority"having jurisdiction for dwelling units on the site and also to anyrequirements of any agreement between the registered owner and theLessee under each cross lease relating to the erection of the dwellingunits.(iii) [25] The declaration concerning the meaning of cl 34 states:18(i) on substantial completion of each of the dwelling units on the relevantarea the Lessee under each cross lease shall at the cost in all things ofthe registered owner and when requested by the registered owner joinin and execute as a co-Lessor a Lease of each of the dwelling units fora term corresponding with the unexpired period of the lessee's crosslease which new Lease(s) shall contain a restrictive covenant in thesame form as clause 31 of each cross lease in respect of the relevantarea exclusive of the dwelling units and shall otherwise contain thesame terms and conditions as are contained in each cross lease(excluding clause 32 to 37 of the cross lease);(ii) the Lessee under each cross lease shall do all things necessary ordesirable in order to enable registration of such new Lease(s) on therelevant area (including cooperating in the deposit of a new Flat Plan)and to obtain the consent thereto of any mortgagee of the estate orinterest of the Lessee under each cross lease in the land;(iii) the registered owner shall, at the registered owner's expense, with alldue speed register such new Lease(s).[26] The declaration concerning the meaning of cl 35 states:19the Lessee under each cross lease irrevocably nominates, constitutes andappoints the registered owner, and any nominee of the registered owner, to bethe true and lawful attorneys and attorney of the Lessee under each cross lease,both as Lessee under each cross lease and as registered proprietor of theinterest held by that Lessee in the fee simple of the land, and on behalf of theLessee under each cross lease as Lessee and/or as registered proprietor, andas fully and effectively as the Lessee under each cross lease (either as a Lesseeand/or as a registered proprietor) could do if personally present, to execute forthe Lessee under each cross lease in any capacity the new Lease(s) referred toin clause 34 and to sign and use the name of the Lessee under each cross leasein any capacity to such new Lease(s) and to do all such other acts and things(including signing any new Flats Plan) as shall be necessary or desirable toeffect registration of such new Lease(s).[27] No declaration was issued concerning the meaning of cl 36.18 At [2(2)].19 At [2(3)].The appeal[28] Justitiae did not address in submissions the ground of appeal relating to thejurisdiction to issue a declaration in the absence of a lis or dispute between the parties.As we have noted at [22(a)], there was, in any event, no merit to this ground of appeal.[29] The remaining grounds of appeal can be distilled to two broad questions:(a) Did the Associate Judge err when he held that the covenants in issuecould be enforced against Justitiae by AAL?(b) Did the Associate Judge err when he exercised his discretion to issuedeclarations in circumstances where, according to Justitiae, the propercourse was for AAL to pursue an application for orders under s 339 ofthe Property Law Act?Can the covenants in issue be enforced against Justitiae by AAL?Justitiae's submissions[30] Mr Goodall advanced several reasons as to why, in his submission, theAssociate Judge erred in finding that cls 32–36 created an agreement to lease therelevant area and any dwelling units built on it:(a) Mr Goodall submitted that cls 32–36 never created an agreement tolease because:(i) Clause 33 was at most a licence to occupy the relevant area, andcl 34 was merely part of a "development option" that wouldonly create a lease after it was exercised.(ii) The original parties lacked the capacity to grant a lease.(iii) The original parties did not agree to a lease.(iv) Auckland City Council rules and consents were not compliedwith.(b) Mr Goodall also submitted that, even if cls 32–36 created an agreementto lease between the original parties, such an agreement to lease nolonger exists because:(i) Any agreement to lease was not registered so would have beendefeated by the registration of later interests in the fee simple.(ii) Any agreement to lease would have been cancelled by a newagreement AAL entered into with one of the unit owners.[31] To support its submissions in [30(a)(iv)], Justitiae gave notice that it wished toadduce evidence about applications made by prior owners to build further units andthe terms of consents issued by the Auckland City Council. To support its submissionsin [30(b)(ii)], Justitiae wished to adduce evidence about proceedings between AALand other unit owners. However, on the day before the hearing of the appeal, Justitiaewithdrew its application to adduce further evidence and it did not advance the groundsof appeal to which the application to adduce further evidence related.[32] Justitiae also challenged the applicability of ss 231–233 of the Property LawAct, which allow covenants to run with the land. According to Justitiae, ss 231–233only apply to legal leases, not equitable leases. Therefore, even if cls 32–36 createdan agreement to lease, it would only be an equitable lease, and ss 231–233 would notapply to allow the covenants to run with the land.AAL's submissions[33] Mr Fisher for AAL supported the Associate Judge's finding that cls 32–36created an agreement to lease the relevant area and any dwellings built on it, and thefinding that ss 231–233 of the Property Law Act allow the covenants to run with theland.[34] Mr Fisher also pursued an alternative argument on appeal that did not rely onfinding that cls 32–36 created an agreement to lease the relevant area and anydwellings built on it. It is common ground that AAL and the unit owners are lessorand lessees of the existing dwelling units, so Mr Fisher submitted that cls 32–36 couldrun with the land as part of those leases.Analysis[35] We shall commence our analysis by examining the approach followed by theAssociate Judge. In doing so, we will address the arguments put forward byMr Goodall when he submitted the approach taken by the Associate Judge was wrong.Agreement to lease?[36] In the High Court, Justitiae conceded that cl 33 gave exclusive possession. Inthis Court, Mr Goodall, who was not counsel below, argued that the concession waswrong and that, at most, cl 33 created a licence to occupy but did not confer exclusivepossession upon AAL.[37] The Associate Judge relied on the plain meaning of cl 33, when he concludedthere was an agreement to lease the relevant area, and that cl 34 extended theagreement to lease to any dwelling units built on the relevant area.[38] Like the Associate Judge, we are satisfied that cl 33 did grant exclusivepossession of the relevant area. Clause 33 allows "the Lessors" to enter and build onthe relevant area. This is supported by cl 11, which prohibits the unit owners fromusing any part of the land except their unit and the common area. The effect of theseclauses is that AAL has exclusive possession of the relevant area.Merely a development option?[39] Mr Goodall submitted that cl 34 did not create an agreement to lease anydwelling units built on the relevant area. He argued that cl 34 was merely part of a"development option", where no agreement to lease could be created until the dwellingunits had been built.[40] Mr Goodall relied on Showa Shoji Australia Pty Ltd v Oceanic Life Ltd tosupport this part of his submissions.20 In that case, the owner of a tower, Burns Philp,leased floors to two entities, Telecom and McIlwraith. Burns Philp also agreed with athird entity, Oceanic, that if Telecom and McIlwraith did not renew their leases, itcould require Oceanic to take a lease of those floors. Burns Philp sold the tower toShowa Shoji. Telecom and McIlwraith did not renew their leases, and Showa Shojiargued that it could require Oceanic to take a lease. The New South Wales SupremeCourt disagreed. It held that Burns Philp and Oceanic did not enter an agreement tolease. It was only a put option that, if exercised by Burns Philp while it was still theowner, would have created an agreement to lease.[41] We are, however, satisfied that Showa Shoji is quite a different type of case:(a) First, it can be distinguished by the type of condition that was engaged.In Showa Shoji, the put option was conditional on third parties notrenewing their leases. Burns Philp could not control whether thecondition was satisfied, so it could not have an agreement to lease. Inthis case, cl 34 is conditional on "the Lessors" building on the relevantarea. Whoever are "the Lessors" have control over whether thecondition is satisfied, so it is logically possible to treat "the Lessors" asalready having an agreement to lease.(b) Second, Showa Shoji can also be distinguished by the context of theagreement. In Showa Shoji, the put option was the only agreementbetween Burns Philp and Oceanic. In this case, cl 34 must beconsidered within the broader agreement between the parties. We havealready held that cl 33, in combination with cl 11, created an agreementto lease the relevant area. It therefore follows cl 34 extended this todwelling units built on the relevant area.20 Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 (NSWSC).Capacity[42] Mr Goodall also submitted that the parties lacked the capacity to grant a lease.This argument was based on the fact that cls 32–36 referred to the other unit ownersas "the Lessee" rather than as co-owners.[43] The Associate Judge explained, however, that:21 the expression "the Lessee" in cls 33-35 was intended only to identify theparty concerned, and not to specify the capacity (lessee or co-owner) in whichthe person referred to as "the Lessee" was required to act.[44] The interpretation adopted by the Associate Judge was the only sensiblemeaning that could be attributed to the term "the Lessee" in the covenant and wasentirely consistent with cls 35 and 36 in which "the Lessee" appoints "the Lessors" tobe its Attorney, not only to take steps that "the Lessee" might have taken in its capacityas a lessee of its unit, but also as a "proprietor of any interest in the fee simple" of theland.Does an agreement to lease subsist?[45] The next issue is whether the agreement to lease still subsists. Mr Goodallargued that any agreement to lease would no longer subsist, because it would not havebeen registered, so it would have been defeated by the registration of later interests inthe fee simple.[46] It is common ground that the leases of the existing dwelling units areregistered, and that the lease instruments have been deposited. Mr Fisher argued thatthose lease instruments contain cls 32–36, which create the agreement to lease, so theagreement to lease is also registered.[47] The agreement to lease was not registered as a separate lease. It was merelycontained within the clauses of another registered lease. The purpose of registrationis to allow parties to quickly check the register for interests in land. Requiring parties21 High Court judgment, above n 1, at [72].to look through the clauses of deposited instruments might be thought to be contraryto this purpose.[48] Nevertheless, the depositing of the lease instruments in issue does provide amechanism for checking the interests in the land and no evidence was placed beforethe Court to suggest the parties were unaware of the covenants at the time theyacquired their interests in the property. We are satisfied that this ground of appealcannot succeed.Do the covenants run with the land?[49] The principal statutory provisions that govern whether or not lease covenantsrun with the land are to be found in ss 231–233 of the Property Law Act:231 Burden of lessor's covenants to run with reversion(1) If the reversion expectant on a lease ceases to be held by the lessor(whether by transfer, assignment, grant, operation of law, orotherwise), the obligations imposed by every covenant of the lessor—(a) run with the reversion; and(b) may be enforced by the person who is from time to timeentitled to the leasehold estate or interest against the personwho is from time to time entitled to the reversion.(2) Subsection (1) applies unless a contrary intention appears from thelease or from another circumstance.(3) In subsection (1), the reference to every covenant of the lessor is,—(a) for a lease that comes into operation before 1 January 2008, areference to every covenant of the lessor that refers to thesubject matter of the lease; and(b) for a lease that comes into operation on or after that date, areference to every covenant of the lessor, whether it refers tothe subject matter of the lease or not.232 Rights under lease to which section 233 applies(1) Section 233 applies to all or any of the following rights under a lease:(b) the right to enforce every covenant of the lessee, including acovenant relating to a subject matter that was not in existencewhen the covenant was made:(d) all rights and remedies of the lessor.(2) In subsection (1)(b), the reference to every covenant of the lessee is,—(a) for a lease that comes into operation before 1 January 2008, areference to every covenant of the lessee that refers to thesubject matter of the lease; and(b) for a lease that comes into operation on or after that date, areference to every covenant of the lessee, whether it refers tothe subject matter of the lease or not.233 Benefit of lessee's covenants to run with reversion(1) If the reversion expectant on the lease ceases to be held by the lessor(whether by transfer, assignment, grant, operation of law, orotherwise), the rights to which this section applies—(a) run with the reversion; and(b) may be exercised by the person who is from time to timeentitled to the income of the land, whether or not the lesseehas acknowledged that person as lessor (that is, with orwithout attornment be the lessee).(2) Subsection (1) applies unless a contrary intention appears from thelease or from another circumstance.[50] The leases of the dwelling units came into operation before 1 January 2008, soonly covenants that refer to "the subject matter of the lease" will run with the land.This reflects the common law position that an assignee of a lease or a transferee of thereversion is only bound, subject to any agreement to the contrary, by covenants in thelease that "touch and concern" the relevant leasehold estate.[51] In Specialist Diagnostic Services Pty Ltd v Healthscope Ltd,22 the Court ofAppeal of Victoria adopted the following test for determining if a covenant in a leasetouches and concerns the land:(a) The covenant benefits only the lessee for the time being, and ifseparated from the lease ceases to be of benefit to the lessee.(b) The covenant affects the nature, quality, mode of user or value of theleased land.(c) The covenant is not expressed to be personal (that is to say neither beinggiven only to a specific lessor nor in respect of a specific lessee).Do the covenants benefit only the lessee for the time being?[52] We are satisfied that the covenants in cls 32–36 benefit only the lessee for thetime being. The covenants are dependent on the lease granted and enjoy noindependent standing.Are the covenants personal?[53] We are also satisfied that the covenants in cls 32–36 are not expressed to bepersonal. Clauses 32–36 refer to "the Lessors" and "the Lessee". They are notconfined to the original parties to the crosslease.Do the covenants affect the leased land?[54] We are also satisfied that the covenants in cls 32–36 affect the leased land. Theleased land is the relevant area, and cls 32–36 affect the relevant area.[55] Mr Goodall relied upon the judgment of Buckley LJ in Dewar v Goodman.23That case concerned the lease of land on which were built 211 houses containing acovenant by the lessee to maintain and repair with a provision permitting the taking ofthe premises by the lessor in the event of a breach of the covenant by the lessee. The22 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2017] VSCA 175, (2012) 305 ALR 569.23 Dewar v Goodman [1908] 1 KB 94 (CA).lessee gave a sublease in relation to two houses in which the sublessor covenanted toperform the covenants in the headlease in so far as they related to the other 209 housesnot leased by the sublease. Both parties then assigned their interests in the sublease.The new sublessor failed to maintain and repair the other 209 houses, and theheadlessor terminated both the headlease and the sublease. The new sublessee madea claim against the new sublessor for breach of the covenant to maintain and repair theother 209 houses, alleging that the breach effectively destroyed the sublease. TheEnglish Court of Appeal held the covenant in question could not be enforced becauseit did not touch or concern the two houses leased in the sublease.[56] Dewar v Goodman is not relevant to the analysis we have taken, because, inthis case, cls 32–36 mainly relate to the leased land. We nevertheless make thefollowing points about Dewar v Goodman in deference to Mr Goodall's submissions.[57] It may be noted that the House of Lords upheld the decision of the Court ofAppeal.24 Lord Collins explained that the covenants in question were merely collateralbut he also said he could envisage "covenants to do things on land other than thatdemised which touch and concern so nearly the land demised as to run with it".25 WhatLord Collins was saying is that it is conceivable that covenants may touch and concerndemised land even though the covenants are attached to adjoining property. Such asituation may arise where the land that is covenanted is intertwined with the land inissue.[58] The reasoning in Dewar v Goodman was later criticised by the English Courtof Appeal in Kumar v Dunning for its failure to address, amongst other concerns, itsapparent inconsistency with Dyson v Forster,26 a contemporaneous decision of theHouse of Lords. Lord Browne-Wilkinson VC said it was "very difficult, if notimpossible, to reconcile" the two cases,27 and explained why the reasoning in Dysonv Forster was preferable to that in Dewar v Goodman.24 Dewar v Goodman [1909] AC 72 (HL).25 At 77.26 Kumar v Dunning [1989] 1 QB 193 (CA) at 205–206; and Dyson v Forster [1909] AC 98 (HL).See also Congleton Corporation v Pattison (1808) 10 East 130 (KB).27 Kumar v Dunning, above n 26, at 205.[59] We have also found the decision of the New South Wales Supreme Court inHurlfite Pty Ltd v Coles Myer Ltd to be more apposite than Dewar v Goodman, and tobe a case that reflects the type of scenario envisaged by Lord Collins.28 Hurlfite PtyLtd v Coles Myer Ltd concerned a lease of a shopping centre where a clause in thelease said the lessor could not build on car parks next to the shopping centre. Thelessor transferred ownership of the shopping centre and the new lessor refused to bebound by the clause. The new lessor argued the clause related to car parks rather thanto the shopping centre, so it did not touch and concern the leased land. The New SouthWales Supreme Court disagreed. It held the car parks were highly beneficial to theshopping centre, so covenants relating to the car parks also touched and concerned theshopping centre. That case can be accurately described as one in which for all practicalpurposes the covenants relating to the car parks touched and concerned the leases ofthe shopping centre.Can covenants in equitable leases run with the land?[60] Mr Goodall raised an argument that ss 231–233 of the Property Law Act donot apply to equitable leases. We do not think it is necessary to traverse in detail theevolution of the status of agreements to lease. Suffice to note that the author of therelevant part of Hinde McMorland and Sim Land Law in New Zealand observes:29Before the Property Law Act 2007 came into force it was practically certainthat the burden of the lessor's stipulations in an informal lease fell on anassignee of the revision, the reasoning being similar to that which was appliedin relation to the passing of the benefit of the lessee's stipulations in aninformal lease to the assignee of the reversion. Any remaining uncertainty hasnow been removed by the Property Law Act 2007 We also observe that the sentence we have quoted is consistent with the conclusionsof other authorities, such as the Property Law and Equity Reform Committee.3028 Hurlfite Pty Ltd v Coles Myer Ltd (1990) NSW ConvR 55 (NSWSC).29 McMorland and others, above n 6, at [11.206]. (Footnotes omitted).30 Minister of Justice Property Law and Equity Reform Committee — Final Report on LegislationRelating to Landlord and Tenant (November 1986) at [65].Conclusion in relation to approach taken by the Associate Judge[61] We are satisfied that the Associate Judge was correct when he treated cls 32–36 as covenants to lease the relevant area and any dwelling units built on that area andthat those covenants do run with the land under ss 231–233 of the Property Law Act.Alternative grounds[62] Our findings in relation to the principal grounds of appeal also render itunnecessary for us to consider the alternative ground put forward by AAL which wehave summarised at [34]. It is also unnecessary to consider the arguments relating tos 303 of the Property Law Act and ss 12 and 17 of the Contract and Commercial LawAct.Section 339 of the Property Law Act[63] In the High Court, Justitiae argued that AAL's only recourse was to seek reliefunder s 339 of the Property Law Act. This it has done by commencing proceedings inthe High Court for orders to divide the property into freehold titles.[64] This element of Justitiae's case really engages the issue of the exercise of theAssociate Judge's discretion to grant a declaration. We think the fact that AAL hasnow made application under s 339 of the Property Law Act does not undermine theway in which the Associate Judge exercised his discretion to issue a declarationbecause, as he correctly identified that all AAL was seeking to do was have the Courtexplain the parties' rights and interests under the covenants. That is quite separatefrom the consequences which may flow from an application under s 339 of theProperty Law Act. The current proceedings and the application under s 339 of theProperty Law Act are not mutually exclusive, indeed, we were advised that the latterapplication may be assisted by this Court's decision concerning the meaning of thecovenants.Result[65] The appeal is dismissed.[66] The declarations issued by the High Court are upheld.[67] The appellant must pay the first respondent costs for a standard appeal on aband A basis plus usual disbursements.Solicitors:Hucker & Associates, Auckland for AppellantBrown Partners, Auckland for First Respondent