NEWHAVEN WALDORF MANAGEMENT LIMITED v ALLEN [2015] NZHC 2770

NEWHAVEN WALDORF MANAGEMENT LIMITED v ALLEN [2015] NZHC 2770 [9 November 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-678[2015] NZHC 2770IN THE MATTER of the Declaratory Judgments Act 1908ANDIN THE MATTER of "Newhaven"BETWEEN NEWHAVEN WALDORFMANAGEMENT LIMITEDPlaintiffAND GEOFFREY ROBERT ALLENFirst DefendantBODY CORPORATE 355923 (KAURI),BODY CORPORATE 342656(PARKSIDE), BODY CORPORATE346225 (RIMU), AND BODYCORPORATE 352635 (WATERVIEW)Hearing: 22 and 23 June 2015Appearances: N Campbell QC, M O'Brien, H Macfarlane for the PlaintiffT Rainey and J Wood for the DefendantsJudgment: 9 November 2015JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 9 November 2015 at 3:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarSolicitors / Counsel: Mr N Campbell QC, Barrister, AucklandMs C Bryant (Plaintiff's solicitor), Hesketh Henry, Solicitors, AucklandMr T J Rainey and Mr J P Wood, Rainey Law, Solicitors, AucklandIntroduction[1] The plaintiff (Waldorf) is the encumbrancee under encumbrances that areregistered over 176 residential properties in an estate known as "Newhaven". Thematerial terms of the encumbrances are identical.[2] The encumbrances include provisions which, amongst other things: create covenants designed to maintain the appearance and condition of each property, with aspects of this subject to direction or approval of Waldorf as encumbrancee; entitle the owners to use recreational facilities owned by Waldorf; entitle Waldorf to levy the owners for the costs of the operating expenses of the recreational facilities and"managing Newhaven"; make provisions for meetings of owners and occupiers of the residential properties, referred to as the "Newhaven Community"; and requireestablishment of a committee of the members of the Newhaven Community to liaise with the encumbrancee and to attend to other matters.[3] The first defendant, Mr Allen, is one of the owners and is the chairperson ofthe committee.[4] Disputes have arisen between Waldorf and the committee, and some other owners, as to the meaning of the encumbrances. Waldorf brought this proceeding against Mr Allen seeking declarations under the Declaratory Judgments Act 1908 as to the meaning of the encumbrances.[5] The four second defendants are four Newhaven bodies corporate. The seconddefendants were joined on an application of Mr Allen.The issues[6] Waldorf seeks five declarations related to three main issues, all of which concern interpretation of the encumbrances. These issues, in summary, and in the order I will address them, are as follows:(a) The scope of clause 7(i) in relation to the committee's obligations tosupply Waldorf with an up-to-date list of members. This issue wasresolved by agreement reached towards the end of the hearing. The terms of the agreement are recorded below.(b) The scope of Waldorf's power to levy for "managing Newhaven"under clause 7(h).(c) The scope of Waldorf's powers or rights under clause 7(c) of theencumbrance to call a meeting of property owners.[7] The defendants pleaded what are described as five affirmative defences, butonly three in the end were advanced. These are as follows:(a) What properties are included in "Newhaven", and who are the ownersand occupiers included in the "Newhaven Community", being definedterms in the encumbrance? The defendants' essential proposition isthat the owners and occupiers of properties in a fifth body corporate,known as Jarrah, are not members of the Newhaven Community.(b) Are there provisions in the encumbrances which are a restraint of trade and, as such, unenforceable?(c) Are the covenants in the encumbrances invalid because they are in conflict with the Unit Titles Act 2010?[8] It will be convenient, and in some ways more appropriate, to consider the three defences before considering the declarations sought by Waldorf which remain in issue.The agreement on the clause 7(i) issue[9] The fifth declaration sought by Waldorf was that, under clause 7(i), the committee is required to provide an up-to-date list of members to Waldorf at periods of not less than six months.[10] Clause 7(i) provides that:The Committee will keep a register of all members and any occupants or tenants of the Land together with a contact address for the service of notices. The Convenantor [sic] shall provide all such details to the Committee upon becoming a member of the Newhaven Community and upon any change of the occupancy of the Land. The Committee shall provide an up to date copy of the register of members to the Encumbrancee at intervals of not less than six months. The Encumbrancee shall be entitled to refuse entry to theEncumbrancee's Land to any person not named on the register of members.[11] Mr Campbell QC, in his submissions in reply for Waldorf, in response to a question from me, said that the declaration was sought because of contentions for thedefendants, now contained in a statement of defence, and there is practical utility inseeking the declaration because, as a matter of fact, the committee has failed tosupply any list, as Mr Allen confirmed. In respect of evidence from Mr Allen thatdetails were not provided by owners, Mr Campbell said that it was not Waldorf'scase that the committee was bound to pursue owners, or occupiers, who did notprovide information for compilation of an up-to-date register of members and anyoccupants or tenants. What Waldorf was seeking, and what Mr Campbell submittedWaldorf was entitled to, was provision of whatever particulars the committee had inthe register at six monthly intervals. Mr Rainey, counsel for the defendants,intervened at this point, a discussion followed, and this led to the agreement earliernoted.[12] The agreement was as follows:The defendants agree to a declaration as sought in paragraph (e) of thesecond amended statement of claim, at page 8. Waldorf accepts that thecommittee is not required to pursue any owner or occupier who fails toprovide information.1[13] There is a declaration in those terms.Factual background[14] There was no material dispute about the relevant background facts. To theextent that there were issues of fact I am satisfied these do not bear on the questions1 The agreement as recorded by me and read back to counsel referred to the pleading "at page 9 ofthe bundle of documents". Page 8 is the original page number of the pleading and is moreappropriately referred to for a formal order.of interpretation which are at the heart of this case. There is the issue raised by the defendants as to whether owners of units in the Jarrah complex are members of the"Newhaven Community", which is a term defined in the same way in all of theencumbrances. For reasons I will come to I am satisfied that the Jarrah owners are members of the Newhaven Community. The factual narrative that follows proceeds on that basis.[15] Properties owned by members of the Newhaven Community are in one of six residential complexes, in a residential development undertaken in South Auckland some years ago. The six complexes have different legal structures and forms of ownership. There are five complexes which are unit title developments, known as Parkside, Waterview, Rimu, Kauri and Jarrah. The first four are the seconddefendants. Each of these complexes has its own body corporate. There is a total of164 unit titles in these five complexes. There is a sixth complex, known asCourtside, which consists of 12 fee simple titles. There is, therefore, a total of 176properties. All the titles, fee simple and unit, are subject to encumbrances in favourof Waldorf.[16] The encumbrances are not registered against the common property of any of the bodies corporate.[17] The encumbrance instrument for the fee simple and unit title properties in the Parkside, Waterview, Rimu, Kauri and Courtside complexes is the same and isconveniently referred to as "the main encumbrance". The main encumbrance wasregistered on 22 September 2004 against a single estate in fee simple. The individual fee simple and unit titles in the Parkside, Waterview, Rimu, Kauri and Courtside complexes all derive from that title. The main encumbrance was brought down on to the individual fee simple and unit titles. In consequence the covenants binding on every property are in identical terms.[18] The unit titles in the Jarrah complex have separately numbered encumbrance instruments because separate instruments were registered against the title of each unit after creation. The definition of "Land" in each of these encumbrances therefore differs from the definition of "Land" in the main encumbrance, but this has nobearing on the relevant issues. The relevant provisions of each of the Jarrah encumbrances are identical to those of the main encumbrance.The encumbrances[19] Each of the 176 properties is subject to a rentcharge, which is contained in the first operative provision of the encumbrances. The defendants expresslyacknowledged, in Mr Rainey's submissions, that they "cannot and do not seek tochallenge the effectiveness of the rentcharge device". As Mr Campbell noted in hissubmissions, rentcharges have been used for decades as a means to enforcecovenants.2 In Jackson Mews Management Ltd v Menere the Court of Appealreferred to "the widespread use of the rentcharge device to secure ongoingobligations, to mutual advantage, in retirement villages and other group housingsituations".3 The Supreme Court dismissed an application for leave to appeal and indoing so said that "the technique of using encumbrances to secure obligations otherthan a monetary sum appears to be widely used": Menere v Jackson MewsManagement Ltd.4[20] Expert evidence was given for Waldorf by Mr Thomas Gibbons outlining the legal and practical reasons for using encumbrances. His evidence was not challenged. Evidence of particular relevance was that encumbrances are used in developments such as the Newhaven development, being developments which involve a number of different bodies corporate in close proximity to one another. AsMr Gibbons put it, without a common "monitor", there is a danger of differentbodies corporate enacting different rules which adversely affect the amenity and value of neighbouring properties. As will become apparent from the description ofthe provisions in the encumbrances, the objective was to achieve this form of overallcontrol, or general regulation, in respect of 176 individual titles, with these containedin five distinct bodies corporate and 12 more fee simple titles.2 This practice and some of the reasons for it are summarised in D W McMorland & Ors Hinde McMorland & Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) at [17.040]- [17.041].3 Jackson Mews Management Ltd v Menere [2009] NZCA 563, [2010] 2 NZLR 347 at [46].4 Menere v Jackson Mews Management Ltd [2010] NZSC 39, [2010] 2 NZLR 347 at [4].[21] As Mr Gibbons explained, encumbrances are also used to enact and enforce rules which do not fall within the powers of a body corporate. In the Newhaven context, that includes rules for the regulation, use and upkeep of the common facilities which are on land owned by Waldorf and, therefore, under legal control quite distinct from that applying to the five unit title developments and the 12 fee simple titles.[22] The remaining relevant provisions of the encumbrances are to be assessed having regard to those general reasons for encumbering individual properties with a rentcharge in developments such as Newhaven.[23] There are several defined terms relevant to the present issues, including some of the affirmative defences. These are:(a) "Encumbrancee's Land means that part of the land highlighted red on the attached plan, such land to be held in a separate title upon the final completion of the Newhaven development and subdivision."(b) "Common Facilities means the land, buildings, amenities andequipment situated on the Encumbrancee's Land." There is an obvious redundancy in this definition, with the first reference to"Land" but this is not material. The buildings, amenities and equipment referred to the recreational facilities mentioned in the introduction and owned by Waldorf as the current encumbrancee. The common facilities are not be confused with common property owned by a body corporate.(c) "Land means the Encumbrancer's Land described in the First Schedule."(d) "Letting Service means the business of renting premises on the Lot, or any part thereof, for those purposes allowed under the District Plan and does not excludes [sic] the Encumbrancer from managing the rental process directly. For the avoidance of doubt theEncumbrancer's director's [sic], shareholders, beneficiaries, friends or family may occupy the Land for nominal or no rent."(e) "Lot means individual titles in respect of single dwellings or duplexes and any unit title within Newhaven."(f) "Newhaven means the units, houses and proposed houses as shown on the attached plan."(g) "Newhaven Community means the owners and occupiers from time to time of Newhaven to whom the covenants contained in this Encumbrance, or any other document containing the same or similarcovenants registered against a Newhaven title, apply."[24] Clause 3 contains nine specific covenants made by each owner with Waldorf. These covenants are designed either to ensure that the appearance and condition of each property (and therefore Newhaven as a whole) is maintained in good order or to control the use of the recreation facilities. Clause 3 is as follows:The Encumbrancer hereby covenants as follows with the Encumbrancee (so that the covenants run with the Land as to both the burden and the benefit of such covenants):(a) Not to change the colour scheme or materials used in respect of the exterior of the building or buildings thereon nor to replace any boundary fence or wall except with similar materials and appearance as those used in the fence or wall being replaced or with the consent or requirements of the Encumbrancee.(b) Not to vary the external appearance of such building or buildings without first obtaining prior approval in writing of the Encumbrancee.(c) Generally from time to time to maintain, paint and decorate the exterior of the building or buildings thereon in accordance with the original colour scheme or any new colour scheme designated by the Encumbrancee when the condition of the same so requires.(d) To maintain the gardens and grounds on the Land in a neat and tidy condition free from noxious weeds and to keep any grass thereon well mown.(e) To keep and maintain in good order, repair and condition all boundary fences between the Land and any adjoining land, including any Lot, road or street.(f) Not to erect any temporary structure, building or shed on the Land or any part thereof without first obtaining prior approval in writing of the Encumbrancee.(g) To ensure that no broken down or derelict vehicle remains on the Land and that no maintenance or repair work other than essential repair work of a minor nature is carried out on any motor vehicle located thereon.(h) Not to keep any animal on the Land which may reasonably be regarded as of a dangerous nature or to which the owners or occupiers of neighbouring Lots may reasonably take exception.(i) To comply with all rules for the use of the Common Facilities as promulgated by the Encumbrancee from time to time.[25] Clause 4 provides:The covenants contained herein are designed to:(a) control the use, maintenance, repair, replacement and operation of the Common Facilities;(b) ensure the operation and enforcement of the regulations and covenants benefiting owners and occupiers within Newhaven; and(c) to enable the provision or co-ordination of services for the benefit of Newhaven including securing favourable terms of supply for Utilities and other services provided to Newhaven;by levying owners within Newhaven sufficient funds to ensure the above purposes can be undertaken.[26] Clauses 5 and 6 are concerned with letting of each of the premises on a lot.Waldorf is granted the exclusive right to provide the business of renting the owner'sproperty, but the owner remains entitled to rent the property directly.[27] Clause 7 includes the clauses giving rise to Waldorf's application, and partsof it are conveniently reproduced for the purpose of subsequent discussion.By execution of this Encumbrance the Encumbrancer agrees to the Covenants and to be bound by the rules of the Newhaven Community as set out below:(a) Membership in the Newhaven Community is automatic by virtue of the execution of this Encumbrance or by becoming a registered proprietor of Lots to which the covenants contained in this encumbrance apply.(c) A meeting of members of the Newhaven Community shall be called upon request by the Encumbrancee or if 20% of those members give written notice to the Encumbrancee requesting that a meeting be held.(d) A committee of members shall be formed to liase [sic] with the Encumbrancee regarding concerns members may have with the Encumbrancee or the operation or management of the Common Facilities or Letting Service.(e) The committee shall consist of up to seven members of the Newhaven Community and an external professional advisor (if needbe) ("Committee") and shall meet as necessary. The Committeeshall appoint a chairperson who will have a casting vote. The Encumbrancee shall take due consideration to any of theCommittee's recommendations. All the reasonable external costs of the Committee shall be paid by the Encumbrancee out of the levies specified in subclause (h) hereof. The Committee shall organise a meeting of members at least once every two years with a view to discussing and debating important issues that might affect the Newhaven Community and to appoint a new Committee. The Encumbrancee shall be present at such meeting and any decisions and/or appointments shall be decided by a majority of a show of hands. The chairperson for the time being of the committee shall chair such meeting. As the Committee is not handling money a treasurer or bank account is not required. The Encumbrancee shall hold copies of the Committee minutes and resolutions.(g) Each member of the Newhaven Community (and their occupiers and invitees) shall be entitled to use the Common Facilities in accordance with the rules for use promulgated from time to time by the Encumbrancee, in consultation with the Committee.(h) Each member of the Newhaven Community shall pay the Encumbrancee an annual estimate of operating expenses (levies) for the Common Facilities and managing Newhaven, which will be added to the rent charge as set out in this Encumbrance. In the event any member rents their Lot using the Letting Service then theEncumbrancee's reasonable fees for providing the Letting Service shall be added to the rent charge. Any charges for Utilities shall also form part of the rent charge. The annual rent charge under this sub- clause may be levied monthly. Each year the estimate will be finalised and a statement issued to each member. Shortfalls andsurplus' [sic] will be added or deducted to the following years [sic]estimate. Principles of interpretation[28] Mr Campbell provided a summary of principles of interpretation. Because Iam satisfied that the submissions covered the relevant points, and because Mr Raineyaccepted those submissions, it will be sufficient to record the essence of thesubmissions.[29] Instruments that create encumbrances (or covenants or easements) are interpreted in the same way as any contract: Big River Paradise Ltd v Congreve.5[30] The Supreme Court recently restated the approach to contractual interpretation in Firm PI 1 Ltd v Zurich Australian Insurance Ltd.6 In summary:(a) The aim of contractual interpretation is to ascertain the meaning the contract would convey to a reasonable person, having all thebackground knowledge reasonably available to the parties in thesituation they were in at the time of the contract.7(b) While context is a necessary element of interpretation, the text is ofcentral importance. "If the language at issue, construed in the contextof the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant."8(c) A restrictive approach to the use of background information isappropriate when dealing with formal commercial contracts, wherethe language is the result of a process of negotiation and where the5 Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402.6 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 (Zurich).7 Zurich, above n 6, at [60] applying Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffman and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 at [14] per Lord Hoffmann.8 Zurich, above n 6, at [63].text will be relied upon by third parties (such as subsequent purchasers or financiers).9[31] I agree with Mr Campbell's submission that the third point is of importance in this case because the encumbrance is registered under the Land Transfer Act 1952. It is also applicable given that an encumbrance in materially identical terms is registered against the titles of 176 individual properties. In this case Mr Allen has undertaken a substantial amount of research of an historical nature relating to the progress of the development, including apparent consideration of an alternative to the encumbrance which in the end was abandoned. I am satisfied that historical matters of this nature cannot be brought into account for the purposes of interpreting these encumbrances. As discussed below, the meaning of the provisions by reference to the text is clear. The provisions should not be interpreted having regard to thebackground matters relied on by the defendants (or to subsequent events also soughtto be relied on, as discussed below). These background matters, even if some mightbe regarded as matters of context as that expression is used for contractualinterpretation, are matters probably unknown to most of the 176 owners andprobably unavailable for consideration by any person contemplating purchasing anyof the properties.First defence: Are the Jarrah owners and occupiers of the Jarrah units part of the Newhaven Community?[32] In his submissions, Mr Rainey posed the question: "What is Newhaven?" andsaid:[The] answer to this question is essential to each of the declarations soughtby the [plaintiff] because the definition of "Newhaven" in the encumbranceis fundamental to the reach of the encumbrance and in particularmembership of the "Newhaven Community" and all the rights andobligations that follow.[33] The defendants submitted that the Jarrah units are not part of Newhaven andthat owners and occupiers of Jarrah units are not part of the Newhaven Community.The plaintiff disagreed.9 Zurich, above n 6, at [62].[34] I do not agree with the defendants' proposition that it is necessary to decidewhether Jarrah is part of Newhaven in order to answer the questions arising from thedeclarations sought by the plaintiff. If Jarrah units and owners are not included, thisdoes not provide a defence to the relief sought by the plaintiff. And if the Jarrahunits and owners are excluded, this does not have a bearing on the interpretation ofthe main encumbrance, as Mr Rainey acknowledged. Notwithstanding theseconclusions, an answer to the question is warranted to reduce the scope for furtherdispute between these parties.[35] The defence argument turns on the definition of "Newhaven". The definition of Newhaven in all of the encumbrances, including the Jarrah encumbrances, is identical. It refers to the units, houses and proposed houses on an attached plan. The plan attached to all of the encumbrances is identical.[36] The plan shows many more properties than either party contended are owned by people who are part of the Newhaven Community. There are eight large areas of housing generally bounded on all sides by roads. I will call these areas "sections".Also shown on the plan are the common facilities, a park and a mall.[37] Three of the sections of housing are shaded. These are sections containing the Parkside, Waterview, Rimu and Kauri unit title developments and the Courtside fee simple development. The common facilities are contained within one of these shaded sections and the encumbrancee's land is also shaded. In addition to being shaded, the encumbrancee's land is identified by what appears on the copy as a thick black line apparently drawn on the plan with felt tip pen. The original of the plan has been lost, but the parties agree that this is the part of the land referred to in thedefinition of "Encumbrancee's Land" as being "highlighted red on the attachedplan".[38] The remaining five sections containing housing (or at least what appears to be housing), the park and the mall are not shaded. The Jarrah units are in one of the unshaded sections.[39] The defendants' argument that Jarrah is not part of Newhaven is based on thefact that in the plan the three sections containing the Parkside, Waterview, Rimu,Kauri and Courtside properties are shaded, but the section containing Jarrah is not.In his submissions Mr Rainey also referred to some other defined terms in support ofhis argument, and in particular the definitions of "Land" and "Lot", but thisargument stands or falls on the validity of the argument based on the shading.[40] The defence argument is not one going to interpretation of the relevant provision or provisions. The definition of Newhaven simply refers to an "attached plan". It does not refer, for example, to "the shaded areas on the attached plan".There are the three shaded sections, but in the absence of explanatory words in the encumbrances, or a clear implication from words that are used, the meaning of the words in the definition cannot be altered by the fact of the shading of part of the plan. There is no explanation in the encumbrances themselves as to why part of the plan is shaded. And there are no provisions justifying an implication that the shading is part of the definition.[41] The shading does not cause any difficulty in interpretation. Any residual doubt that might reasonably have arisen because of the shading is removed by the definition of Newhaven Community. For convenience I will reproduce the definitions of Newhaven and Newhaven Community:"Newhaven" means the units, houses and proposed houses as shown on the attached plan."Newhaven Community" means the owners and occupiers from time to time of Newhaven to whom the covenants contained in this Encumbrance, or any other document containing the same or similar covenants registeredagainst a Newhaven title, apply.(emphasis added)[42] The definition of "Newhaven Community" further defines the meaning of"Newhaven" for the purposes of the encumbrances. This flows from the words Ihave italicised in the definition of "Newhaven Community". Without the italicisedwords in the definition of "Newhaven Community", the definition of "Newhaven"could in fact be taken to extend to all eight of the residential sections on the attachedplan. None of the parties contended that it did. And as a matter of straightforward interpretation it does not.[43] But also as a matter of straightforward interpretation Newhaven Community does include Jarrah, notwithstanding the fact that the Jarrah section is unshaded.This is because the Jarrah units are subject to "the same or similar covenants". Any other owners and occupiers of other units and houses in the other sections shown on the attached plan will also be members of the Newhaven Community if the encumbrance is registered against title to the property on which the house or unit sits.[44] If the shading had relevance, the straightforward means of indicating the relevance would be to add appropriate words to the definition of Newhaven referring to the shading. Both counsel agreed that there are infelicities in some of the drafting of the encumbrances, but there is no infelicity in this regard.[45] The significance of the absence of words indicating that the shading is relevant is reinforced by the definition of "Encumbrancee's Land". This does explain that a different form of visual designation on the plan is relevant – the definition refers to "that part of the land highlighted red on the attached plan".[46] It is unnecessary to decide what the purpose of the shading was, but it may be inferred that it was for some purpose unrelated to the matters now being dealt with. This is demonstrated, if by nothing else, from the fact that the common facilities areshaded in the same way that the three residential sections are shaded, but it isobvious that the common facilities were never intended to be subject to anencumbrance and, by that means, to be part of the Newhaven Community.[47] A further point, and given some appropriate emphasis by Mr Campbell, is that if the owners and occupiers of Jarrah units are not part of the NewhavenCommunity, and not part of "Newhaven" for the purpose of the encumbrances, thenthe Jarrah encumbrances are meaningless. I agree. The other side to that point is that all of the provisions in all of the encumbrances can be applied without difficulty to all 176 of the residences notwithstanding the differences between the Jarrahencumbrances and the main encumbrance to which Mr Rainey referred. As recorded in the factual background, the main encumbrance was first registered against theunderlying title which contained the three sections which are shaded on the plan.The "Land" as defined in the main encumbrance refers to the underlying title and istherefore the same for all of the properties subject to the main encumbrance. Themethod of registration of an encumbrance for the Jarrah units was different and the"Land" for each of the Jarrah encumbrances refers to the unit title for the individualunits. Nothing turns on this difference in relation to the meaning of the covenants inthe encumbrances.[48] For these reasons I am satisfied that the Jarrah units are part of Newhaven and that the Jarrah owners and occupiers are part of the Newhaven Community.Second defence: Are encumbrance provisions unenforceable restraints of trade?[49] The defendants contended that two provisions in the encumbrances arerestraints of trade and are unenforceable because they cannot be justified asreasonable restraints. These are:(a) The requirement that all owners must pay for the common facilities and managing Newhaven. The obligation arises under clause 7(h) with further provisions (which do not need to be reproduced) as to the operating expenses to be included in the levy and for calculating the share for each owner. The primary power to levy is in clause 7(h) and this refers to operating expenses for the common facilities "and managing Newhaven". There are two elements, and this is the subject matter of two of the declarations sought by Waldorf. But the two matters can be dealt with together when considering this defence, which is the way in which the defendants presented their argument.(b) The second alleged restraint of trade is said to come from provisions conferring on the encumbrancee the exclusive power to provide a letting service for Newhaven properties.[50] Mr Rainey's submissions for the defendants were directed in large measure totwo questions:(a) Whether the doctrine of restraint of trade can apply to covenants over land. He referred to discussions in some of the leading cases.10(b) Whether the alleged restraints of trade could be justified on some recognised ground as being reasonable. He referred to Lord Reid'sdiscussion in Esso Petroleum.11[51] Mr Campbell's first submission was that the defendants' restraint of tradecontentions, even if correct, could not provide a defence to the relief sought byWaldorf. The relief sought by Waldorf – the declarations – amounts to a claim thatthe covenants have particular meanings, and meaning will not turn on whether aparticular provision is an unenforceable restraint of trade. Mr Campbell furthersubmitted that the restraint of trade argument in relation to the letting service couldnot have a bearing on any of the declarations sought by Waldorf because it does notseek a declaration relating to the letting service.[52] I agree with both submissions for Waldorf. This conclusion is sufficient to dismiss the restraint of trade argument as a defence to the relief sought by Waldorf.[53] Given that conclusion it is strictly unnecessary to consider the further submissions on both sides as to whether the provisions in issue do constitute restraints of trade and, if so, whether they can be justified as reasonable. However, because I am satisfied that the encumbrances do not contain provisions in restraint of trade I will briefly record one clear reason for that conclusion.[54] The first question on an argument that a provision is an unjustified restraint of trade would usually be whether the provision restrains trade at all. The provisionsrelating to the common facilities do not in any way interfere with any "trade" that10 Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 (HL) (Esso);Quadramain Pty Ltd v Sevastopol Investments Pty Ltd (1976) 133 CLR 390 (HCA) (Quadramain); Rhone v Stephens [1994] 2 AC 310 (HL) (Rhone).11 Esso, above n 10, 300-301.any owner may wish to enter into. When I pressed Mr Rainey on this point he did not pursue the argument. It was not a concession in a formal sense, but it was sufficient to dismiss this argument without detailed discussion. I am satisfied that the provisions in the encumbrances requiring owners to pay a share of the operating expenses of the common facilities and for managing Newhaven do not amount to restraints of trade. The provision does not place any restriction on an owner inrelation to any "trade" an owner may wish to pursue.[55] The other provision said by the defendants to constitute a restraint of trade isthat concerned with the encumbrancee's power to provide a letting service forNewhaven properties. For this to constitute a restraint of trade it would have toprevent an owner from letting that owner's property, or prevent that owner fromrunning a letting business. The provisions in question do not do either of thosethings. Owners are entitled to organise the letting of their own properties. If anowner operated, or wanted to set up, a letting business (which owner I will refer to as"the letting owner"), that letting owner is not restrained in any way from operatingsuch a business. Another Newhaven owner (owner B) wanting to rent that owner'sproperty, could not engage the services of the letting owner, but that does not arisefrom any restraint of trade on the letting owner. It arises because the provisionsbinding on owner B require owner B to use a letting service provided by theencumbrancee unless owner B wants to deal directly with the letting of owner B'sproperty. That restriction on owner B does not constitute a restraint of trade imposedon owner B.[56] There were further submissions for both parties on other questions, including whether the doctrine of restraint of trade can ever apply, as a matter of principle, toencumbrances registered against title to land.12 I am inclined to the view that, evenif there are provisions in the encumbrances which are restraints of trade binding onNewhaven owners, the doctrine does not apply to the encumbrances. However,because determination of that question, which is not straightforward, is not requiredto determine the main question, I consider that this issue is best left for another case12 See the discussions in Esso, above n 10; Cleveland Petroleum Co Ltd v Dartstone Ltd (1969) 1 WLR 116, [1969] 1 All ER 201 (CA); Robinson v Golden Chips (Wholesale) Ltd [1971] NZLR 257 (CA); Quadramain, above n 10; and Rhone, above n 10.where the decision will be determinative. There were also submissions on the question whether, if some of the provisions are restraints of trade, they are nevertheless reasonable and therefore enforceable. I am satisfied that the provisions are reasonable, but it is again unnecessary to go into any detail on this.Third defence: Are the covenants in the encumbrances in conflict with the Unit Titles Act 2010?[57] This defence was pleaded as follows:If the encumbrance is capable of giving the plaintiff the right to manage the estate and charge for that service, which is denied, the defendant says thatthe Unit Titles Act 2010 ("the Act") imposes a statutory scheme thatsupplants the rights under the encumbrance.[58] The defendants' submissions on this issue began with reference to evidencefor the defendants to the effect that Waldorf had in the past acted as the on-sitemanager for the bodies corporate and organised that in particular ways, andchallenged Waldorf's quantification of a fee it charged for managing Newhaven,with this involving references to historical accounts from Waldorf. This evidenceand the arguments are not relevant for three reasons. The first is that the particularactivities of Waldorf were pursuant to individual contracts quite separate from anyrights or powers of Waldorf pursuant to the encumbrances. The second is that adispute about quantification has no bearing on the present issue as to the effect, ifany, of the Act. The third is that what Waldorf may or may not have done in the pastcan have no bearing on the question whether the introduction of the Unit Titles Act2010 precludes the operation of the covenants in the encumbrances. The answer tothe question whether the provisions in the encumbrances conflict with the Act turnson consideration of the relevant provisions in the encumbrances and in the Act, noton what one party or the other asserts was or is being done. In other words, again, itis a matter of interpretation.[59] The defendants' interpretation argument is directed to Waldorf's claim that itis entitled, under clause 7(h), to charge for managing Newhaven, in addition tocharging for the common facilities. The defendants deny that Waldorf has any rightto charge for managing Newhaven, but say that if that is incorrect the managementactivities, which are set out in clause 3, cannot now be undertaken because of the provisions of s 138(1) of the Act. This provides:138 Body corporate duties of repair and maintenance(1) The body corporate must repair and maintain—(a) the common property; and(b) any assets designed for use in connection with the common property; and(c) any other assets owned by the body corporate; and(d) any building elements and infrastructure that relate to or serve more than 1 unit.[60] Under s 77 of the Act each body corporate has the power to employ a manager to carry out various obligations, including those under s 138, and Waldorf has not been engaged for that purpose. Mr Rainey pointed to the absence of power for individual unit owners to manage their own land in respect of matters required by the Act to be under the control of the body corporate. He submitted that this is nevertheless the effect of the covenants on each owner under the encumbrances. He said:This in effect is a way by which [Waldorf] can obviate the protections Bodies Corporate have from being locked into a long term management contract by the developer when it owns all the units and controls the Body Corporate.He referred to ss 139 and 140 of the Act and two cases.13[61] Individual unit owners have, as Mr Rainey put it, "exclusive dominion over the use of a unit".14 He submitted that the covenants in the encumbrances cannot be read as applying only to these exclusive rights of owners.[62] The substance of the defence is that the enactment of the Act in 2010 has made clause 3 of the encumbrances invalid because it purports to give to the encumbrancer powers granted by statute to the Newhaven bodies corporate. I am13 Russell Management Ltd v Body Corporate No 341073 (2008) 10 NZCPR 136; Body Corporate No 396711 v Sentinel Management Ltd [2012] NZHC 1957, (2012) 13 NZCPR 418.14 See ABCDE Investments Ltd v Van Gog [2013] NZCA 351, (2013) 14 NZCPR 736 (CA).satisfied that the defence is not sustainable because clause 3 does not have that effect. Clause 3 does not state that the bodies corporate cannot do the things that bodies corporate are statutorily required to do under s 138(1). Nor does clause 3 state that bodies corporate cannot do any other things that they are required to do under the Act. This may be seen by reference to the detailed provisions of clause 3 earlier recorded.[63] If there were covenants in the encumbrances binding on the bodies corporate, and these covenants purported in some way to alter the statutory obligations of bodies corporate, those covenants would be likely to be unenforceable. But that does not arise for the simple reason that the bodies corporate are not bound by the encumbrances.[64] As discussed earlier, the encumbrances, operating through the rentcharge, are a common feature of comprehensive developments such as the development at Newhaven, being comprehensive developments containing groups of housing subjectto separate legal structures. A "monitor" is appointed to maintain the integrity of thedevelopment as a whole. Mr Campbell made a point in respect of the defence now being considered that it is not a case of conflict between powers of individual bodies corporate and powers of the encumbrancee, but a case of complementary powers. It is a point with some force, particularly when the provisions of s 138 are compared with the provisions of clause 3.[65] Mr Campbell also submitted that if a conflict nevertheless arose in the future between the encumbrancee seeking to exercise a specific power under clause 3, and an individual body corporate seeking to exercise a specific power under s 138, the matter would be capable of being resolved either by compromise, or use of conflict resolution provisions in the encumbrance, or by going to court. But the possibility of conflict in respect of an actual activity cannot lead to a conclusion that encumbrances as a whole are invalid, or that clause 3 should be struck out in its entirety. A hypothetical possibility of this nature cannot lead to invalidity. To anextent this was acknowledged by Mr Rainey. He accepted that if there is "minimalmanagement" by Waldorf, then the potential for actual conflict may not be there; forexample, if Waldorf's main activities involve general oversight and checking acrossNewhaven as a whole. And it may be noted in this context that there were separate contentions from the defendants that the fee charged by Waldorf for managingNewhaven could not be justified. This is a fee of $5,000 per annum, an expense tobe shared by 176 properties. That works out at $28.40 per annum per property.[66] This defence also is dismissed.Waldorf's application for declarations on its power to levy for "managing Newhaven": clause 7(h)[67] Waldorf seeks the following declarations relating to the scope of clause 7(h) of the encumbrances:a. A declaration that under the first sentence of clause 7(h) of the Encumbrance Waldorf, as Encumbrancee, is entitled to recover operating expenses (levies) in respect of both of the following:i. The Common Facilities:(1) Having regard to the purposes set forth in clause 4(a) of the Encumbrance, and(2) Including but not limited to the items listed in clause 7(j) of the Encumbrance;andii. Managing Newhaven, having regard to the covenants set forth in clause 3 and the purposes set forth in clauses 4(b) and 4(c) of the Encumbrance.b. A declaration, that under clause 7(h) of the encumbrance, operatingexpenses of "managing Newhaven" may include (without limitation)costs associated with (i) the provision of services to areas that are not common property of any body corporate and for which the bodies corporate are not required under the UTA to take responsibility and/or (ii) monitoring on behalf of the Encumbrancors [sic] the provision of any complex-wide services voluntarily undertaken by any of the bodies corporate, including relaying any complaint from Encumbrancors [sic] in connection therewith and/or (iii) liaising with the Newhaven Committee.[68] The defendants do not dispute Waldorf's entitlement, as encumbrancee, torecover operating expenses for the common facilities. Mr Allen has disputed thequantum of operating expenses charged by Waldorf for the common facilities, butthis does not have any bearing on the meaning of the provisions and a quantum issuedoes not require consideration. The defendants' argument that does requireconsideration relates to the second part of the first declaration sought, and the seconddeclaration – does Waldorf have power to charge for operating expenses of managingNewhaven as an item separate from operating expenses of the common facilities?[69] The defendants' main argument was that "the conduct of the parties after thecontract", which can be taken to refer to conduct after execution of the encumbranceinstruments, may be taken into account to determine the meaning of the provisions inquestion and, in effect, that the conduct identified in the defendants' submissions wassubstantially determinative of meaning. The defendants' written submissions weredirected almost entirely to consideration of the evidence of conduct. This was muchthe same evidence relied on by the defendants in support of the third defence – thatWaldorf's claimed management powers or rights conflicted with the Act. Thesewere the defendants' contentions as to the way in which Waldorf had acted in thepast in relation to matters of management, together with evidence of the details ofWaldorf's calculation of operating expenses and a management fee, and a challengeto quantification.[70] I am satisfied that in this case the matters sought to be relied on by thedefendants, and which in considerable measure constituted the defendants'submissions on interpretation, are not properly brought into account. This is forthree reasons. The first was outlined in the discussion of principles of interpretationand the restrictive approach to interpretation of documents such as theseencumbrances. The second is that the evidence relied on by the defendants would inany event be an unreliable guide to interpretation. This is because, to the extent thatthe evidence relates to conduct by Waldorf in reliance, or purported reliance, ofprovisions in the encumbrance, this would be unilateral action by the encumbranceeafter the encumbrances were entered into. The third reason is that, to the extent thatthe evidence relied on by the defendants relates to conduct by Waldorf pursuant tocontracts between Waldorf and bodies corporate, this conduct can have no bearing oninterpretation of the encumbrances.[71] Whether Waldorf is entitled to the declarations it seeks in respect of clause 7(h) is therefore to be determined by interpreting the words used in clause 7(h),taking account of any other relevant provisions in the encumbrance itself, but without regard to the evidence of conduct sought to be relied on by the defendants.Approaching the matter in this way, and taking account of Mr Rainey's oralsubmissions as to the meaning of the words used, the broad question is whetherclause 7(h) entitles Waldorf, as encumbrancee, to charge a fee for managingNewhaven as an item distinct from the charge (the levy) in respect of operatingexpenses for the common facilities. This arises from the words in clause 7(h) whichrefer to a payment to the encumbrancee of "an annual estimate of operating expenses(levies) for the Common Facilities and managing Newhaven".[72] Focussing first on the words used in clause 7(h), it appears clear that there are two distinct items: a levy for operating expenses for the common facilities and a levy for managing Newhaven. If operating expenses for managing Newhaven is not an item distinct from operating expenses for the common facilities, the words "and managing Newhaven" have no meaning.[73] An entitlement to charge a fee for managing Newhaven is consistent with, and arises from, clause 4(b) of the encumbrance read in conjunction with clause 3. Clause 4(b) provides that covenants in the encumbrances are there to ensure the operation and enforcement of those covenants which are of benefit to Newhaven owners and occupiers as a whole. This, when compared with the other provisions in clause 4, must relate to clause 3 in particular. It is the encumbrancee that will have the responsibility to ensure the operation and enforcement of the relevant covenantsand those activities are appropriately described as "management of Newhaven".[74] The management responsibilities, expressly provided for in clause 4(b), read in conjunction with clause 3 which explains the nature of those responsibilities, can be readily distinguished from the provisions of clauses 4(a) and 4(c). Clause 4(a) is concerned with the common facilities. Clause 4(c) is concerned with provision or co-ordination of "Utilities and other services to Newhaven". Clause 7(h) makesseparate provision for separate levies by the encumbrancee for both of these separate activities.[75] There is one matter of background context which can be taken into accountbecause it arises directly from the fact that these are encumbrances registered againsttitles to land. It is the point, earlier discussed, that encumbrances of this nature, withrentcharges, are devices well established in law and practice for regulation ofdevelopments which have several parts subject to different forms, or independentforms, of legal control. Someone has to manage this regulation and a fee for doingso is unexceptionable.[76] Mr Rainey, in particular in his oral submissions, did address matters of interpretation by reference to the words used in the encumbrances, in addition to thedefendants' reliance on evidence of conduct earlier discussed. I have taken thesesubmissions into account. Some of them have already been dealt with, at leastindirectly, in discussion of the defences relating to Jarrah and the Act. In addition tothose matters, Mr Rainey submitted that another clause, also numbered 7, assists indetermining what is meant by the words "managing Newhaven" used in clause 7(h).The second clause 7 relevantly provides:Should the Encumbrancee no longer wish to manage Newhaven it shall delegate and assign all its rights to a professional body corporate secretary or property management company who will then administer Newhaven in conjunction with the Committee.[77] The essence of Mr Rainey's submission, as I understood it, was that thereference to a professional body corporate secretary, or a property management company, indicated that the management activities referred to in clause 7(h) could only be those for which a body corporate secretary would be responsible under the Act. To the extent that that was an argument in support of the defence under the Act it does not require further consideration. To the extent that it was an argument directed to interpretation of clause 7(h) I am satisfied that it does not assist in that interpretation. The second clause 7 has no bearing on the essential question whether the encumbrancee is entitled to charge a fee for managing Newhaven as an item distinct from a fee for operating expenses for the common facilities. What is more, as Mr Campbell pointed out, the second clause 7 is, in any event, directed to assignment of all of the encumbrancee's rights, not just those concerned with management – the matters dealt with in clauses 3 and 4(b) of the encumbrance.[78] For these reasons I am satisfied that Waldorf is entitled to the declarations it seeks in respect of clause 7(h).Waldorf's application for declarations on its power to call meetings: clause 7(c)[79] Waldorf seeks two declarations as to the scope of its powers pursuant to clause 7(c) of the encumbrances. These are:(a) That it is entitled to call a meeting of members of the Newhaven Community by giving written notice to the members.(b) That it is not required to make a request to the committee in order to call a meeting of members of the Newhaven Community.[80] The defendants contended that Waldorf must request any meeting through thecommittee.[81] Waldorf submitted that, when clauses 7(a)-(e) are read together, it is apparent that meetings of the Newhaven Community can be called either: (1) by Waldorfunder clause 7(c) upon its own "request", or upon request of 20% of the members; or(2) by the committee under clause 7(e). Waldorf further submitted that the ordinary and natural meaning of clause 7(c) is that it is entitled to call a meeting directly under the first alternative, without having to make a request to the committee.[82] The defendants' argument is founded on the use of the word "request" inclause 7(c). The defendants submitted:The ordinary meaning of "request" is the act of asking politely or formallyfor something. In context that presupposes that the Encumbrancee will bemaking the "request" for a meeting of someone who will then organise the meeting.The logical entity to make the request to is the committee of the Newhaven Community.[83] The defendants submitted that the conclusion based on the use of the word"request" is supported by the fact that, under clause 7(e), the committee is "chargedwith responsibility for organising meetings of the Newhaven Community" and thatthe committee is the only entity in a position to give notice of a meeting to membersbecause the committee is required to keep a register of members under clause 7(i). Itwas further submitted that, in the absence of detailed rules in the encumbrance forthe running of meetings, such as rules as to quorums and voting, decisions on suchmatters should be made by the committee "and its Chairperson who is required tochair all meetings of the Newhaven Community". These submissions weresupported by general propositions that control by the committee would promote aconsistent approach and was "the most practical way of interpreting the clauses".Evaluation[84] The defendants' argument turns on the meaning of the word "request" inclause 7(c). Mr Rainey accepted that if the word "request" was not in the clause thedefendants would not have an argument – Waldorf would be entitled to give noticedirectly to all members of a meeting on a date and at a time stipulated by Waldorf. Iam satisfied that the word "request" does not lead to the result contended for by thedefendants and that Waldorf is entitled to the two declarations it seeks.[85] The defendants' argument effectively requires the first part of clause 7(c) tobe read and interpreted in isolation; that is, as if the clause simply said that a meetingof members of the Newhaven Community shall be called upon request by theencumbrancee. The meaning of the words cannot be determined in that way. Thedefendants' argument requires the second part of clause 7(c) to be ignored. But if theclause is read is its entirety, the second part means that on a request from 20% of themembers the encumbrancee must call a meeting. The second part of clause 7(c)requires the request of 20% of the members to go to the encumbrancee, not to thecommittee. It is clear from this that the encumbrancee is then required to call ameeting on behalf of the 20%. It cannot be intended that the encumbrancee shouldthen pass the request of the 20% on to the committee. It would be illogical that thissingle clause would have two different processes: a meeting being called by theencumbrancee on a request of 20% of the members, but when the encumbranceeitself wants a meeting it must present its "request" to the committee. The words"upon request by the Encumbrancee" in the first part of clause 7(c) mean "if theEncumbrancee wishes", or words to similar effect.[86] Clause 7(e), relied on by the defendants, makes different provision for thecalling of meetings. Clause 7(e), as a whole, sets out some rules relating to thecommittee, a number of which rules have nothing to do with meetings of theNewhaven Community. The particular provision relating to meetings in clause 7(e)is a mandatory provision, similar to the requirement for an annual general meeting tobe called for shareholders of a company. The obligation imposed on the committeeby clause 7(e) to call a meeting does not have any bearing on the question whetherthe encumbrancee has power under clause 7(c) to call a meeting if it decides that ameeting is required.[87] I do not agree with the defence submission that clause 7(e) "charges the committee with responsibility" for calling all meetings, including those provided for in clause 7(c). If that had been intended the simple course would have been to make appropriate provision in clause 7(c). The vigour with which the defendants pursuedthis particular argument was somewhat surprising. I asked Mr Rainey why thematter was being pursued with such vigour. He said, in essence, that if Waldorf has aright to go direct to members it could sidestep the committee; that if Waldorf made arequest the committee was bound to give notice to the members of the Newhavencommittee, but the committee would decide when and where the meeting would takeplace. The defendants' resistance to Waldorf's argument seems to be driven simplyby a desire for power. One of the written submissions spells this out with surprisingexplicitness – "the committee and its elected chairperson, Mr Allen, wishes to dictatethe procedures for calling meetings" (emphasis added).[88] The plaintiff is entitled to the declarations it seeks on clause 7(c).Costs[89] Waldorf is entitled to costs. If the parties can agree on the appropriate categorisation under Schedules 2 and 3 of the Rules, but there are issues of quantification, those issues should be referred to the Registrar. If there is any issue of principle the issue should be referred to me. If there is disagreement, amemorandum for the plaintiff, directed to the Registrar or to me as appropriate,should be filed and served within three weeks of the date of this judgment and amemorandum for the defendants should be filed and served within a further twoweeks.Result[90] There are declarations as sought in the second amended statement of claim at a. to d., and as recorded in this judgment at [12]-[13].[91] The defendants are to pay the plaintiff's costs to be fixed as directed at [89]._____________________________________Woodhouse J