LINDSAY v NOBLE INVESTMENTS LTD [2015] NZCA 588

LINDSAY v NOBLE INVESTMENTS LTD [2015] NZCA 588 [4 December 2015]IN THE COURT OF APPEAL OF NEW ZEALANDCA74/2015[2015] NZCA 588BETWEEN STUART ELLESMERE LINDSAY ANDJULIE IVONNE LINDSAYAppellantsAND NOBLE INVESTMENTS LIMITEDRespondentHearing: 19 October 2015Court: French, Venning and Asher JJCounsel: A C Hughes-Johnson QC for AppellantsP B McMenamin for RespondentJudgment: 4 December 2015 at 2.00 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellants must pay the respondent's costs for a standard appeal ona band A basis, and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Asher J)Introduction[1] This is an appeal against part of two decisions of Associate Judge Osborne in the High Court at Christchurch. In the first decision, dated 16 April 2014, the Judgeordered that a caveat not lapse until further order of the Court.1 In the secondassociated judgment of 4 September 2014, the Judge made more detailedconsequential orders and confirmed his findings in the first decision.2[2] The appeal is not about the caveat remaining. Rather, the appeal relates to anaspect of the judgments that is likely to be important, if not determinative, in thelater substantive hearing between the parties. That aspect is a straightforward issueof contractual interpretation. The appellants, Stuart and Julie Lindsay, say theAssociate Judge erred in finding it was not reasonably arguable that the agreementbetween the parties obliged the respondent, Noble Investment Ltd (Noble), toprovide stormwater services to a lot purchased by them.Background[3] In 2002 Noble planned to subdivide a large piece of land it owned on the outskirts of Christchurch. Noble planned to do this in two stages, first through aninitial subdivision and then through a further subdivision where lots in the initialsubdivision would be further divided into smaller titles.[4] The Lindsays as purchaser entered into an agreement for sale and purchasewith Noble as vendor, dated 11 February 2002 (the agreement). The Lindsayspurchased land described as Lot 4. It was 10,834 square metres. The purchaseincluded a one-tenth share in a proposed Lot 22, which would be a thin strip of landconnecting various lots to the road and through which services could be provided.The agreement also referred to the purchase of another lot, Lot 15, which was to betransferred back to Noble, and this occurred later.[5] The Lindsays settled their agreement to purchase Lot 4 when the titles to theinitial subdivision became available on 14 October 2003. They proceeded to occupythe land. Noble had sold a number of lots in the initial subdivision to third parties,but also retained a considerable number of lots. It then proceeded with the proposedfurther subdivision. The proposed subdivision application, including the subdivision1 Lindsay v Noble Investments Ltd [2014] NZHC 799.2 Lindsay v Noble Investments Ltd [2014] NZHC 2127.of Lot 4, was approved by the Christchurch City Council on 25 May 2009. Noble has undertaken residential subdivision work in adjoining areas of the development.[6] Under the initial subdivision referred to in the agreement, the services Noblewas obliged to provide were to go through Lot 22, which was known as "the accesslot". In the final subdivision application approved on 25 May 2009, the servicesconfiguration changed. Rather than Lot 22 being the access route and the route forservices, a new spine road in a different position in the subdivision was approved,and it is through that spine road that it is intended there should be access to thesubdivision and the provision of services. The Lindsays had not been party to anyagreement varying the obligation of Noble to provide the services through Lot 22.[7] Once the further subdivision was completed, the Lindsays came to considerthat Noble had failed to fulfil its obligations under the agreement. On 9 November2012 they lodged a caveat to protect their claimed rights under the agreement. Thecaveat was lodged against various titles in the subdivision that were owned byNoble. The caveat claimed an estate or interest in the following terms:Pursuant to an Agreement for Sale and Purchase dated 11 February 2002 whereby the registered proprietor agreed to provide services for sewer,stormwater, water supply, power and telecommunications for the benefit ofthe land owned by the Caveators in (now) Identifier 442736 [8] The Lindsays submitted the agreement to provide services required theregistration of easements over parts of Noble's land in favour of the Lindsays' land.[9] Following unsuccessful negotiations about Noble's alleged breaches, on10 June 2013 Noble initiated the caveat lapsing procedures under the Land Transfer Act 1952. The Lindsays applied for an order that the caveat not lapse.[10] In the first decision under appeal, Associate Judge Osborne concluded the caveat should not lapse, for the Lindsays as caveators had established a reasonably arguable case that, by the agreement, Noble granted the Lindsays an equitable easement that protected rights of access for roadway and services.3 That part of the judgment is not appealed. However, in the course of his judgment, the Associate3 Lindsay v Noble Investments Ltd, above n 1, at [101].Judge found the Lindsays had no caveatable interest in respect of stormwater services, because it was not reasonably arguable that the agreement obliged Noble to provide stormwater services to Lot 4.4 Accordingly, the equitable easement identified by the Associate Judge was other than in respect of stormwater services.[11] As noted above, the Lindsays seek to challenge this finding on appeal. Theysubmitted that, having regard to the contract and the parties' correspondence, it isreasonably arguable Noble is obliged under the contract to provide stormwater services. In contrast, Noble said the contract contains no such term and the discharge of stormwater from Lot 4 is plainly not its responsibility.Approach to appeal[12] Section 137(1) of the Land Transfer Act regulates the entitlement of a person claiming to be entitled to or beneficially interested in the land or estate to lodge a caveat. The applicable legal principles that govern an application to sustain a caveatare now well settled:(a) The onus is on a caveator to show a reasonably arguable case for theinterest claimed.(b) The caveator must show an entitlement to or beneficial interest in theland referred to in the caveat. A personal or contractual right will notbe sufficient unless it involves an interest in the land. What isnecessary is a legal or beneficial interest. The types of interest are notclosed.5(c) An equitable interest in land can be sufficient, and such interest can becreated by agreements for sale and purchase.64 At [45].5 Tom Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at 259, and Philpott v Noble Investments Ltd [2015] NZCA 342 at [28].6 Bevin v Smith [1994] 3 NZLR 648 (CA), Motor Works Ltd v Westminster Auto Services Ltd[1997] 1 NZLR 762 (HC) and Philpott v Noble Investments Ltd, above n 5, at [29].(d) Given the summary nature of the procedure, it is not suited to thedetermination of disputed questions of fact. To order a caveat tolapse, it must be "patently clear" the caveat cannot be maintainedbecause there was no ground for lodging it at the time it wasregistered, or because such ground no longer exists.7[13] It was not submitted on behalf of the appellants that there was any questionarising in relation to the technical requirements of a servient and dominant tenementand a right being capable of being the subject matter of a grant. As we discuss later,we proceed on the basis it is reasonably arguable that the contractual right at issue inthis case, if established, could give rise to an equitable interest.[14] As both counsel submitted, whether or not a caveatable interest existsdepends upon the objectively determined construction of the contract. That isdetermined by ascertaining the meaning of the relevant clauses within the context ofthe document as a whole, and what those clauses would convey to a reasonableperson having all the background knowledge reasonably available to the parties inthe situation they were in at the time of the contract.8[15] While words are not given a purely literal meaning, the text remains central.9As the majority of the Supreme Court said in Firm PI 1 Ltd v Zurich Australian Insurance Ltd:10While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of 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. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.7 Sims v Lowe [1988] 1 NZLR 656 (CA) at 659–660, and Philpott v Noble Investments Ltd, above n 5, at [26(c)].8 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912.9 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]–[63].10 At [63] (footnote omitted).[16] Although a commercially absurd interpretation may provide reason to read the contract in a different way than the language might suggest, that does not mean the court can conclude the contract does not mean what it seems to say simply because the court considers it is unduly favourable to one party.11The agreement[17] The agreement was in the Auckland District Law Society standard form. Itcontained a number of special conditions of sale, which were attached to theagreement. The "access lot" was defined as Lot 22 on the plan of proposedsubdivision. The "further subdivision" was the Noble subdivision that would followthe issue of title according to the plan of proposed subdivision.[18] The special conditions also defined services in cl 16:"Services" means power, telecommunications, water supply, sewer and the carriageway contained within the Access Lot.[19] As mentioned, the appellants accept the definition excludes stormwater discharge.[20] Clause 19 is headed "services". It states that prior to the settlement date andin accordance with the initial subdivision the vendor "will arrange for power andtelecommunications services to be available at a service point stipulated by thepurchaser". It provides that the vendor will construct a sealed vehicle carriagewayon the access lot, will provide connection to the Christchurch City Council watersupply, will install and meet the cost of a connection to a communal seweragesystem, and that all services will be provided in accordance with the conditions ofthe consent to the initial subdivision and to the standards required by the relevantauthority.[21] Under the heading "further subdivision", cl 21 provides that Noble willpursue the further subdivision. Clause 21.5.2 provides that if vendor obtains the further consent, the purchaser agrees:11 Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 9, at [89].21.5.2 to execute and deliver all documents required to grant, create orreceive whatever easements, covenants, restrictions, or otherencumbrances, rights or obligations that may be imposed by theRelevant Authority or that may reasonably be required by the Vendorin order to effect the Further Subdivision and to provide for accessand services to the lots within the Further Subdivision, and to enablethe Vendor to register all such documents against the relevantcertificates of title; Analysis[22] The context here is uncontested. The Lindsays were buying a piece of land for subdivision purposes. That piece of land sat within a larger piece of land owned by Noble. Noble intended to develop that land, the Lindsays' land and other land it had sold as part of a large subdivision. The Lindsays' land would be part of thatbroader subdivision. Noble was entering into similar agreements with otherpurchasers. The Lindsays, together with their co-purchasers, would be in substanceco-venturers in respect of the subdivision.12[23] There was no express provision in the contract for the granting of aneasement. However, no particular form of words is necessary for an implied grant ofan easement. Associate Judge Osborne found there was a reasonably arguable casethat Noble had granted the caveators an equitable easement. This was also theconclusion reached by the Associate Judge and the Court of Appeal in the relatedcase of Philpott v Noble Investments Ltd.13[24] The intention to confer a right to an easement is implicit in cl 19. In this case there was a contractual intention that the vendor would be responsible for access to the public road via the access lot (cl 19.2), power and telecommunications services at a service point on the boundary between the Lindsays' property and the access lot(cl 19.1), together with a connection to the Council water supply (cl 19.3), and theinstallation of a communal sewerage system (cl 19.4). It can be inferred that it wasintended these benefits would pass with the titles, and that the rights were more thanpersonal. The dominant land was Lot 4 and the servient land could be any of theNoble land, including land Noble had on-sold to other Noble purchasers.1412 Philpott v Noble Investments Ltd, above n 5, at [38].13 Philpott v Noble Investments Ltd [2012] NZHC 1431; Philpott v Noble Investments Ltd, above n 5.14 This was found to be the case in Philpott v Noble Investments Ltd, above n 5, at [40].[25] Therefore we accept it is reasonably arguable Noble possessed an intention toconfer on the Lindsays a right that affected the land and that this right was capable ofbeing made the subject of the grant of an easement. However, the question iswhether the provision of stormwater services was part of that right.[26] The definition of services is precise, and plainly does not include stormwaterservices. In the definition of services, the end phrase "contained within the AccessLot" could qualify either the immediately preceding word "carriageway" or "all ofthe power, telecommunications, water supply, sewer and carriageway". Although itis not essential to our decision, we favour the former interpretation as it would seempossible that some services might not be within the access lot.[27] Mr Hughes-Johnson QC, for the appellants, accepted that the definition ofservices excluded stormwater. He argued, however, that the exclusion related only tothe initial subdivision as defined in the agreement, and not the further subdivisioncontemplated by the agreement. Under cl 19, the services had to be installed "priorto the settlement date" and were to be installed "in accordance with the initialsubdivision". Therefore, he submitted, the definition of services did not haveapplication throughout the totality of the agreement.[28] This argument is not however supported by any words in the agreement. Theagreement contains only one definition of "services" and there are no qualifying orlimiting words (for example "as the context may require") to suggest the definitiondoes not apply throughout the contract wherever the word "services" is used. Thepurpose of a precise and unqualified definition of this type can be taken to be toavoid speculation as to any meaning other than that set out. The obligation toarrange for services in cl 19 is unambiguous. Clause 21, which relates to the furthersubdivision, makes no reference to additional services.[29] Mr Hughes-Johnson also relied on cl 21.5.2, which refers to the purchaser providing all documents required of or by the vendor to effect the subdivision or toprovide for access and services to the lots. In our view, this clause does not assist hisargument as its purpose is to place an obligation on the purchaser, the Lindsays, andnot Noble.[30] A further argument raised by Mr Hughes-Johnson related to cl 23.1 of theagreement. It states that "the Vendor shall apply on behalf of the Purchaser and theother Noble Owners for the vesting of the Access Lot". The appellants submittedthe vesting could not be effected without the provision of stormwater services.However, stormwater services were not a requirement of the initial subdivision. Itfollows in our view that he later stormwater services required for the consent grantedin 2009 for aspects of the further subdivision cannot assist in interpreting anagreement made seven years earlier, or the intentions of the parties at that earliertime, objectively assessed.[31] Mr Hughes-Johnson referred to the commercial context. There was no detailed evidence about the commercial background. The case was put to us by bothcounsel on the basis that, for the initial subdivision at least, it was expectedstormwater could be disposed of on-site. There was therefore no need to provide forthe disposal of stormwater.[32] There is indeed no evidence indicating that in 2002 there was any expectationprovision for stormwater off-site would be a requirement of the further subdivision.We note indeed that one engineer, Mr Graham, deposed that the Council engineershad confirmed they were agreeable to roof run-off discharging into the ground.There is nothing in the evidence for the Lindsays that asserts stormwater provisionwas a requirement in 2002, or that they believed it to be so. As it was not animmediate requirement, it seems likely the parties never turned their mind to theissue of stormwater disposal off-site. In that context, it is unsurprising there was noexpress provision for Noble to provide for stormwater disposal off-site at any stagein the development process.[33] Although Mr Hughes-Johnson did not argue for an implied term, we observethat the background facts would not support a position where an officious bystanderwould say "but of course" services must include stormwater.15 This is because it wasnot clear stormwater would have to be discharged off-site, and, in any event, it isperfectly conceivable that some costs might have to be met by the purchaser. It is to15 Hickman v Turn and Wave Ltd [2011] NZCA 100, [2011] 3 NZLR 318 at [241]–[249]; BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings(1977) 16 ALR 363 (PC) at 376.be noted that in the Philpott case the definition of services did expressly include stormwater. It comes down to what the parties expressly agreed.[34] We turn to the exchange of correspondence, which was also relied on byMr Hughes-Johnson in support of his argument. He placed reliance on a letter sentby the Lindsays' solicitors to Noble's solicitors on 6 March 2002, some weeks afterthe signing of the agreement. The letter referred to a number of matters and recordedthat the agreement was conditional upon solicitors' approval of the deed of optionand the special conditions of sale. It was recorded in the letter that Noble had madea number of representations and warranties, which included:3. The capacity of services to be installed at the cost of the vendor will be adequate for the proposed further subdivision (including Lot 4);5. Mr & Mrs Lindsay and/or their successors in title will be able to connect to the new services as installed in which situation they will have to pay the cost of such connections and relevant Council fees, but there will be no cost recovery by the vendor for the cost of installing the services.[35] These stated representations and warranties were confirmed by Noble'ssolicitors in their reply of 7 March 2002. Mr Hughes-Johnson submitted thatwithout stormwater services the capacity of services would not be adequate for theproposed further subdivision.[36] The expression used in the 6 March 2002 letter of "services to be installed at the cost of the vendor" is clearly a reference back to the definition of "services" inthe agreement at cl 16 and the obligations in respect of those services in cl 19. Thisletter, read objectively, cannot be seen as intended to extend the meaning of"services" as defined. The paragraphs in the letter are directed to a different point,namely that the capacity of the services that are defined and are to be installed at thecost of the vendor will be adequate for the proposed further subdivision. In terms ofthe definition in the agreement, these services do not include stormwater. Similarly,the reference to the Lindsays being able to connect with the new services is to thosedefined services, which do not include stormwater.[37] The terms of this letter in fact run against Mr Hughes-Johnson's submission that there was a different and broader meaning for services in relation to theproposed further subdivision than in relation to the initial subdivision. Paragraph 3appears to assume it will be the same services installed for the initial subdivision thatmust be adequate for the proposed further subdivision. It would be inconsistent withthis if there was a further service to be installed.Conclusion[38] The words of the agreement do not include the word "stormwater" in thedefinition of "services", and there is nothing to indicate the word "services" shouldassume a different meaning in relation to the initial and the further subdivisions. Tothe contrary, the natural reading of the definition in the context of the agreement isthat the definition will govern the word "services" in relation to both subdivisions.This interpretation, which excludes stormwater services, is, if anything, confirmed inthe subsequent correspondence.[39] The background commercial context is consistent with this natural meaning.There is nothing to indicate that in 2002 the parties considered stormwater wouldhave to be discharged off-site. Against that background, it is understandable it wasnot thought necessary to extend the definition of services to stormwater. So far allthe discharge has been on-site. It is still not clear discharge off-site will be arequirement, although it may well become a requirement in the future.[40] Accordingly, we conclude the Associate Judge was correct in finding it is notreasonably arguable that the agreement obliged Noble to provide stormwater servicesto Lot 4, and nor is it reasonably arguable that the correspondence in March addedsuch an obligation. The interpretation sought by the appellants is untenable.[41] The Lindsays may or may not have to find a way to discharge stormwateroff-site. If that situation arises, they will have to take such commercial opportunitiesas are available. This may mean the Lindsays will have to negotiate with Noble toget access to the stormwater system if they wish to complete a subdivision. Thismay have serious consequences for the Lindsays. However, it is no reason to now,13 years later, read a term into the contract that the parties did not consider necessaryto include in 2002.Result[42] The appeal is dismissed.[43] The appellants must pay the respondent's costs for a standard appeal on a band A basis, and usual disbursements.Solicitors:Dallison Stone, Christchurch for AppellantsK J McMenamin & Sons, Christchurch for Respondent