OMAHA BEACH RESIDENTS' SOCIETY (INCORPORATED) AND GNS TRUST LIMITED V TOWNSEND BROOKER LIMITED, WILLIAMSON LIMITED, PAMELA RASPE, OMAHA PARK LIMITED CA CA527/2009

OMAHA BEACH RESIDENTS' SOCIETY (INCORPORATED) AND GNS TRUST LIMITED V TOWNSEND BROOKER LIMITED, WILLIAMSON LIMITED, PAMELA RASPE, OMAHA PARK LIMITED CA CA527/2009 10 September 2010IN THE COURT OF APPEAL OF NEW ZEALAND CA527/2009 [2010] NZCA 413BETWEEN OMAHA BEACH RESIDENTS' SOCIETY (INCORPORATED) AND GNS TRUST LIMITED Appellants AND TOWNSEND BROOKER LIMITED, WILLIAMSON LIMITED, PAMELA RASPE, OMAHA PARK LIMITED Respondents Hearing: 10 August 2010 Court: O'Regan P, Randerson and Stevens JJ Counsel: R B Brabant and J C Brabant for Appellants D J Neutze and J D Young for Respondents Judgment: 10 September 2010 at 11.30 amJUDGMENT OF THE COURT A The appeal is dismissed. B The appellants must pay costs to the respondents for a standard appeal on a band A basis plus usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by O'Regan P)Introduction[1] The appellants appeal to this Court against a decision of Lang J in which he declined their application for a declaration that a restrictive covenant was not enforceable. 1[2] Lang J also declined to grant an application sought by the defendants (now respondents) relating to the same restrictive covenant, but his decision in that respect is not the subject of a cross-appeal.Factual background[3] The factual background was set out in the judgment of Lang J in terms with which neither party took issue. The summary which follows essentially replicates that of Lang J. [4] Some time ago a company called Omaha Beach Ltd developed the residential subdivision that is now the popular coastal resort of Omaha South. It did so by subdividing a large parcel of land that it owned into numerous smaller sections. [5] The proposed subdivision attracted opposition from several quarters. These included the respondents, who owned a large parcel of land to the south of the proposed subdivision. They objected to the application for resource consent to the proposed subdivision. When the Rodney District Council ultimately granted the application, they appealed to the Environment Court against that decision. [6] The respondents ultimately reached an accommodation with Omaha Beach Ltd that included the abandonment of their appeal. As part of the settlement Omaha Beach Ltd agreed that all of the land that was to comprise the subdivision would have a restrictive covenant registered against it. It is that covenant that is in issue in this appeal.1 Omaha Beach Residents Society Incorporated v Townsend Brooker Ltd [2010] NZRMA 53.[7] Omaha Beach Ltd created the restrictive covenant by executing a Memorandum of Transfer in favour of the respondents. The operative clause of the memorandum is clause 2.1, which provides as follows:The Transferor [Omaha Beach Limited] (or any successor in title to the Transferor) shall not, and shall not procure any third party to, object to submit to any local authority having jurisdiction over the Covenanting Lot, in respect of any application by the Transferee or any third party for resource consent or plan change relating to the property which is located within a radius of 5 kilometres of the southern most point of the land comprised in Certificate of Title 132D/499 (North Auckland Registry). This covenant shall bind the Transferor and its successors in title to the Covenanting Lot and shall apply to any present, future or proposed application by the Transferee or any third party.[8] The Memorandum of Transfer defined "the Transferee" as being the first to third respondents in their capacities as registered proprietors of the "Benefiting Lots" described in the Second Schedule to the memorandum. The Second Schedule contains the legal description of the parcels of land that the respondents own. [9] Every parcel of land in the Omaha South development (as listed in the First Schedule to the Memorandum) is a "Covenanting Lot" for the purposes of the restrictive covenant. [10] The restrictive covenant purports to restrict significantly the ability of landowners in the Omaha South development to exercise their statutory rights under the Resource Management Act 1991 (the Act). It prohibits them from lodging objections, or making submissions in respect of, any application for a resource consent or plan change in relation to any property that lies within a 5 kilometre radius of the southernmost point of a prescribed parcel of land. This prohibition applies not only to applications lodged by the owners of the Benefiting Lots but also to those lodged by any third party. [11] The present proceeding arose as a result of a review that the Rodney District Council initiated in respect of its Transitional District Plan 1993. That plan is the district scheme that was promulgated under the provisions of the Town and Country Planning Act 1977. It is deemed to be district plan under the Act by virtue of s 373 of the Act.[12] The review of the Transitional District Plan 1993 led the Council to notify publicly its Proposed District Plan 2000. Under this plan the Council sought to create an East Coast Rural Zone, in which the subdivision of land would be tightly controlled so as to protect the rural character of the zone. The respondents' land lies within the proposed East Coast Rural Zone. [13] Omaha Park Ltd lodged a submission in respect of the proposed classification so far as it affected the respondents' land. The submission opposed the creation of the East Coast Rural Zone in respect of that land. It sought to change the zoning of the land to a special zone called the "Omaha Park Special Zone". In this zone a range of conservation, recreational, commercial, residential, visitor accommodation and agricultural activities would be permitted. [14] The Council issued a decision rejecting that submission. Omaha Park Ltd appealed to the Environment Court, which upheld the Council's decision. 2[15] The first appellant, Omaha Beach Residents' Society, is a Society that was incorporated as part of the subdivision and development of the Omaha South land. All landowners in the Omaha South development are required to belong to it. The Society is charged by its constitution with taking any action that may reasonably be expected to promote the health, safety, welfare or wellbeing of members of the Society. [16] The Society wanted to provide funding for submissions to be made by a resident's association, Omaha Beach Community (Inc), in opposition to aspects of Omaha Park's appeal at the hearing before the Environment Court. It was not sure whether the restrictive covenant operated to prevent it from taking that step. For that reason it issued the present proceeding seeking a declaration that the restrictive covenant does not apply to the notification by a local authority of a new proposed District Plan under the First Schedule to the Act. [17] The second appellant, GNS Trust Ltd, owns land in the Omaha South development. It is therefore a successor in title to Omaha Beach Ltd, the Transferor2 Omaha Park Ltd v Rodney District Council [2010] NZEnvC 265.named in the Memorandum of Transfer that created the restrictive covenant. It was included as an applicant in the High Court proceeding to prevent the respondents from contending that, because the Society does not own land that is subject to the restrictive covenant, it lacks the necessary standing to seek declaratory relief. As it turns out, the respondents did not take that point.High Court judgment[18] Initially three declarations were sought by the appellants in the High Court. By the time the matter came to a hearing, the only declaration sought was to the effect that the covenant was unenforceable against the owners of the Omaha South land because it was a covenant in gross. The respondents had also sought three declarations in the High Court. By the time the matter came to a hearing the only declaration they sought was a declaration that the covenant was a restrictive covenant and was enforceable against the successors in title to the transferor under the transfer creating a restrictive covenant in relation to the "Covenanting Lots" as defined in that transfer. [19] Lang J defined the matters in issue as follows: (a) Is the covenant a covenant in gross? (b) Should any declaration be made? [20] As to the first of those, he defined a covenant in gross as one that fails to define or describe sufficiently the dominant tenement that is to receive the benefit of the restrictive covenant, citing ANZCO Foods Waitara Ltd v AFFCO New Zealand Ltd.3 He said that the present law was that a restrictive covenant in gross does not bind subsequent owners of the land bearing the burden of the covenant, again citingANZCO. Thus in the present case the restrictive covenant would be unenforceable if the transfer creating the covenant failed to identify sufficiently the land that was to receive the benefit of the covenant.3 ANZCO Foods Waitara Ltd v AFFCO New Zealand Ltd [2006] 3 NZLR 351 (CA) at 362.[21] Lang J accepted that the wording of the covenant was very wide, but was of the view that it was at least arguable that both Omaha Beach Ltd and the respondents intended that the respondents' land was to take the benefit of the covenant. In view of that, he also expressed the view that it was "well arguable" that the covenant was not a covenant in gross. He thought that it could fairly be taken that the lands owned by the respondents were to receive the benefit of the covenant, in which case it could operate to bind successors in title to the land originally owned by Omaha Beach Ltd. However he refrained from actually determining this point, and also left open the extent to which the covenant could be enforceable in so far as it relates to applications lodged by the parties other than owners of the respondents' land. [22] On the second issue, the Judge said it would be inappropriate for him to make declarations, given the conclusion he had reached in relation to the first issue. He also refused to make the declaration sought by the respondents on the basis that there was no actual controversy between the parties. He said it was not appropriate to determine the enforceability of the covenant in the absence of an actual dispute. [23] Another factor in the Judge's decision not to make the declaration sought by the respondents was that he considered that there was potentially another argument open to the appellants, namely that the covenant did not operate to restrict the manner in which the current owners of the Omaha South land used their land at all, in which case it would not be a restrictive covenant and would not be a burden on the Omaha South land. He considered that to be a finely balanced issue.Case for appellants[24] Senior counsel for the appellants, Mr Richard Brabant, sought to broaden the scope of the argument in this Court. In his written submissions he asked that the Court issue a declaration that the covenant was not a restrictive covenant. In the alternative, he sought declarations that: (a) the covenant was a covenant in gross;(b) the dominant tenements could only be the properties defined in the covenant as "Benefiting Lots"; (c) the restraint on any objectionable submission by the successors in title to the Transferor applied only in respect of any application for a resource consent or plan change directly relating to or affecting the Benefiting Lots, and not to "any property" within a five km radius described in the covenant.The respondents' position[25] Counsel for the respondents Mr Neutze pointed out that the declarations now sought were not sought in the High Court and objected to new points being advanced in this Court. He argued that the decision by Lang J to decline to make declarations was a discretionary decision and there was nothing to show that the Judge had acted on a wrong principle, failed to take into account a relevant matter, taken into account an irrelevant matter or was plainly wrong. He also argued that the appeal seeks answers to abstract questions in circumstances where there is no actual controversy between the parties. [26] Mr Neutze said that the respondents accepted that the dominant tenement could only be those properties defined in the covenant as "Benefiting Lots". That concession obviates the need for any declaration to that effect. Similarly, Mr Neutze said that the respondents accepted that the restraint on any objection or submission by the successors in title of the Transferor applied only in respect of any application for a resource consent or a plan change directly relating to or affecting (in the sense of "benefiting" the Benefiting Lots. That concession obviates the need to make any declaration to that effect.Matters now before the Court[27] The concessions made by Mr Neutze mean that the matters on which declarations are sought are that the covenant is not a restrictive covenant or, in the alternative, that the covenant in its present form is a covenant in gross.Issues[28] The issues which therefore require determination are: (a) Should the appellants be permitted to contend that the covenant is not a restrictive covenant? (b) Is there an actual controversy between the parties (or, conversely, are the questions before the Court abstract)? (c) Is the covenant a covenant in gross? (d) Should the Court interfere with the exercise of the discretion of the High Court Judge not to make the declaration sought by the appellants in the High Court? [29] We will deal with those issues in turn.Should the appellants be allowed to contend that the covenant is not a restrictive covenant?[30] There was disagreement between counsel as to whether the issue as to whether the covenant was a restrictive covenant was an issue in the High Court. Mr Brabant argued that the respondents' counterclaim raised this issue, because it sought a declaration that the covenant was a restrictive covenant. We do not see that counterclaim as directly placing that matter in issue. Rather, the declaration sought by the respondents was the converse of that sought by the appellants. While the appellants wanted the declaration that the covenant was a covenant in gross, andtherefore not enforceable, the respondents wanted a declaration that the covenant was enforceable (which would be the position if it were not a covenant in gross). [31] Mr Neutze said that the question as to whether the covenant was a restrictive covenant at all was a matter which the Judge raised himself, and this is confirmed by the way the Judge dealt with the issue in the judgment under appeal. 4 Mr Neutze also argued that the respondents may have adduced evidence in relation to that issue if they had been on notice that they were at risk of a declaration being issued that the covenant was not a restrictive covenant at all. [32] It is notable that the appellants' statement of claim including a pleading that Omaha Beach Ltd and the respondents had executed the transfer dated 11 June 2001 "creating a restrictive covenant in favour of the [respondents]". The respondents admitted this in their statement of defence. On the face of it this means that the parties have agreed that the covenant is a restrictive covenant. In those circumstances, we do not consider that it is arguable that there was a live issue in the High Court about whether the covenant was or was not a restrictive covenant. [33] We accept Mr Neutze's characterisation of the position in the High Court: neither party raised the matter but it was raised by the Judge. In the light of that, and given the issue was not placed in issue by the pleadings, we are hesitant about permitting a new matter which was not the subject to a pleading or of proper argument in the High Court to be raised in this Court. In any event, for reasons we will come to, we see the issue as essentially hypothetical. In those circumstances we conclude that it would not be appropriate to address this issue.Is there an actual controversy between the parties?[34] In the High Court judgment, this issue is addressed in relation to the respondents' counterclaim seeking a declaration that the covenant was an enforceable restrictive covenant. The Judge had already expressed his provisional view that the covenant was not a covenant in gross.4 At [42]-[46].[35] As noted earlier, 5 Lang J considered that there was no actual controversy between the parties, and that what they were effectively seeking was guidance for the future. He considered it would not be appropriate to attempt to define the extent to which the covenant might be enforceable until such time as an actual dispute arose between the parties. 6[36] In this Court, Mr Brabant accepted that the controversy between the parties which had prompted the proceedings 7 had been resolved by a concession by the respondents that the covenant did not prevent the Society from its involvement in Omaha Park's appeal before the Environment Court. However, he said that there was an actual controversy at the time the proceedings were issued, and although that controversy had been resolved, there remained a real dispute between the parties about the ambit and enforceability of the covenant. He argued that the very purpose of the Declaratory Judgments Act 1908 was to provide an opportunity to obtain a ruling on the interpretation and application of a document which included a covenant such as that in question in this case. [37] Mr Neutze argued that the position taken by the appellants was essentially circular: in effect they were saying that the fact that they had sought a declaration and the respondents had resisted it created a controversy which itself provided an appropriate context for the Court to deal with the matter substantively. [38] We accept Mr Neutze's submission that there is no live controversy between the parties in this case. The argument about the enforceability of the covenant itself is not a live controversy for that purpose. We do not think it alters the position that, at the time the proceedings were filed, there was a live controversy, one that has since been resolved.Is the covenant a covenant in gross?[39] For reasons we will come to, we do not propose to address this issue in detail.5 At [22].6 At [39].7 Described at [16] above.[40] Lang J did not make a ruling that the covenant was a covenant in gross, but he concluded that: (a) It was "at the very least arguable" that both Omaha Beach Ltd and the respondents intended that the respondents' land was to take the benefit of the covenant; (b) It was "well arguable" that the covenant is not a covenant in gross. This was because it could be fairly taken that the respondents' land was to receive the benefit of the restrictive covenant, in which case it could operate to bind successors in title to the land originally owned by Omaha Beach Ltd. [41] Having considered the text of the covenant itself, our views correspond broadly with those of the High Court Judge. But, like him, we do not consider it is appropriate to go further than that. Our reasoning for that conclusion follows.Should the Court make a declaration?[42] Mr Brabant argued that even though the controversy about the potential application of the covenant had been resolved, the Court should still make a declaration as to its status and meaning. He said that the appellants needed to know whether and to what extent the covenant restricted their options in relation to future applications for resource consent or for a plan change. He said such applications can be instigated at any time without notice and with limited periods provided for making a submission. He said this would make it difficult for the appellants and others in the same position to assess their position during that compressed timeframe. [43] Mr Neutze argued that the absence of a live controversy made it inappropriate for the Court to engage with the appellants' application. He rejected the proposition that there would be no opportunity to resolve the matter when a live issue arose. He said that any future application for resource consent or plan change would be proceeded by consultation with affected persons and the appellants andothers in their position would have plenty of time to clarify the position if an actual controversy arose between the parties as to the effect of the covenant on the ability of Omaha South to oppose the proposed resource consent or plan change. [44] Mr Neutze said that it will be for the respondents to determine in such a case whether they will seek to enforce the covenant. If they do not, there will be no controversy and there will be nothing to stop the appellants making submissions. If the respondents wish to enforce the covenant, they will need to seek declaratory or injunctive relief in the factual circumstances applicable at the relevant time, and there is no reason why that could not be dealt with in a manner which did not prevent the appellants taking part in the resource consent or plan change proceedings. [45] Mr Neutze said that it would not be appropriate for the Court to decide the enforceability of the covenant in a vacuum. If a live application was before the Court this would provide a proper factual context in which the enforceability of the covenant could be determined. [46] It has long been the case that the Courts will normally decline as a matter of discretion to issue a declaration in a case in which the factual context is either hypothetical or a prediction of future events. 8 As McCarthy P put it in New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd:9The jurisdiction to make orders under the Declaratory Judgments Act is wholly discretionary. The cases defining the attitude of the courts in the exercise of that discretion are numerous ... and they establish certain guidelines which will generally be followed. The Court will not answer purely abstract questions in anticipation of an actual controversy. It will not deal with mixed questions of fact and law.[47] McCarthy P added that the parties in the New Zealand Insurance case had "sought an answer based on the presumed existence of certain facts chiefly to assist counsel in possible negotiations or in future court action". He commented that he did not think that was what the declaratory judgment procedures were intended for.8 Harry Woolf Zamir & Woolf: The Declaratory Judgment (3rd ed, Sweet and Maxwell, London, 2002) at [4.042], [4.070].9 New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84 (CA) at 85.[48] In the present case we do not consider it appropriate to rule on the enforceability of the covenant against a background of a possible future application for resource consent or plan change, in circumstances where we do not know whether the respondents would seek to enforce the covenant, and we do not know the nature of the application and whether it can properly be said to be a matter that affects the Benefiting Lots. [49] It seems to us that it is preferable to leave the issue to be decided in the context of an actual controversy. In the meantime the parties are left in a position of equipoise, which will no doubt affect the decision of the respondents to attempt to enforce the covenant when an actual application is in play. We do not see the time constraints inherent in the resource consent process as compelling us to issue a declaration in anticipation of an actual application. We agree with Mr Neutze that in most cases there will be prior notice of an intention to seek a resource consent or a plan change. In any event the respondents are the parties who will need to enforce the covenant and it will be up to them to instigate an action for declaratory or injunctive relief at the relevant time, if they consider that the covenant is binding and seek to enforce it. [50] In the circumstances we conclude that this is not an appropriate case for the Court to exercise its discretion to issue a declaration.Result[51] For these reasons we dismiss the appeal.Costs[52] We award costs to the respondents for a standard appeal on a band A basis plus usual disbursements.Solicitors: Grove Darlow & Partners, Auckland for Appellants Brookfields, Auckland for Respondents