WAITAKERE FARMS LTD v MAWHINNEY [2023] NZHC 1397

WAITAKERE FARMS LTD v MAWHINNEY [2023] NZHC 1397 [7 June 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-1499[2023] NZHC 1397UNDER the High Court Rules, DeclaratoryJudgments Act and Property Law Act 2007BETWEEN WAITAKERE FARMS LIMITEDPlaintiffAND PETER WILLIAM MAWHINNEY andSIXTY-SIX AUCKLAND LIMITEDDefendantsHearing: 10 and 11 May 2023Appearances: AAH Low for plaintiffP W Mawhinney for himself and second-named defendantDate of judgment: 7 June 2023JUDGMENT OF JAGOSE JThis judgment was delivered by me on 4 July 2023 at 1.00pm.Pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarCounsel/Solicitors:Alexandra Low, Barrister, AucklandCook Morris Quinn, AucklandCopy to:Defendants[1] The plaintiff (Waitakere Farms) owns land in Auckland's Waitākere, over partof which (the subject land)1 the defendants claim benefit of a 50-year encumbrancesupporting their 30-year registered forestry right, both dating from20 September 2010. The forestry right includes an option to purchase an embeddedforestry block on the subject land, the exercise of such option requiring the subjectland's subdivision.[2] In this proceeding Waitakere Farms seeks orders:(a) under s 339 of the Property Law Act 2007 requiring it to acquire thedefendants' interest in the subject land, or for the subject land's sale anddivision of the proceeds among the parties; alternatively, either:(b) under the Declaratory Judgments Act 1908, rendering the encumbranceredundant and the forestry right extinguished; or(c) under s 317 of the 2007 Act, extinguishing the encumbrance,and by counterclaim, also under s 339, the defendants seek orders subdividing thesubject land otherwise than in compliance with the conditions applicable to anapplicable subdivision consent. Otherwise, the defendants' evidence and submissionsdo not address the relief sought by Waitakere Farms.Background[3] Waitakere Farms acquired the subject land as ancillary to its primarylandholding, in anticipation it may be used to satisfy conditions for the primarylandholding's subdivision, for which Waitakere Farms now has consent on terms notrequiring recourse to the subject land.[4] The subject land no longer being required for its ancillary purpose,Waitakere Farms wishes to sell it — according to Waitakere Farms' sole director andshareholder, Joe Duncan, "to free up capital", inferentially to settle "debt that needs to1 The subject land is that described under the identifier 1050478 (formerly NA139A/725) in theNorth Auckland Land Registration District, comprising Lot 323 Deposited Plan 210991, Lot 9Deposited Plan 166619 and Lot 200 Deposited Plan 210991.be repaid" — but perceives the encumbrance and forestry right to be a hindrance tosale, particularly as no longer serving any material purpose.[5] The encumbrance and forestry right both were created on 20 September 2010as between Forest Trustee Limited as each encumbrancer and encumbrancee andgrantor and grantee respectively. The forestry right defines 'grantee' and 'grantor' asmeaning "Forest Trustee Limited at Auckland as trustee of the Forest Trust togetherwith its successors in title". The 'Forest Trust' is undefined and unevidenced (althoughthe identity of its trustee(s) is the subject of some narrative in Mr Duncan's andMr Mawhinney's evidence). Forest Trustee Limited had acquired the subject land fromMr Mawhinney on 8 June 2010. On 28 September 2010, the land was transferred toSarah Jane Noble Lowndes and S J Lowndes Trustee Services Limited and then on20 March 2019 to Waitakere Farms.[6] Forest Trustee Limited (since liquidated on 13 March 2015, and removed fromthe Companies Register on 12 September 2019) was a company of whichMr Mawhinney was sole director. In July 2012, the encumbrance and forestry rightwere registered as having been transferred to Mr Mawhinney and Zebra CrossingsTrading Limited, and thereafter to Mr Mawhinney and Sixty-Six Auckland Limited(the present defendants).[7] Under cross-examination, Mr Mawhinney asserted he held the encumbranceand forestry right personally, together with Sixty-Six Auckland Limited as trustee ofthe Sixty-Six Auckland Trust (if that may be intended a reference to the Forest Trust).A necessary inference from the forestry right's definition of grantor and grantee maybe Mr Mawhinney and the two companies were at the relevant dates of transfertrustees of the Forest Trust, if they are to have succeeded to Forest Trustee's title. Onthe dates of each the encumbrance's and forestry right's creation and transfers,Mr Mawhinney was (and remains) registered as an undischarged bankrupt (althoughMr Mawhinney disputes the register's current accuracy). I cannot determine on theevidence before me if that may have consequences for his trusteeship.[8] Clause 2.1 of the memorandum granting the forestry right granted the grantee: for a term of thirty (30) years from and inclusive of the date of thisMemorandum as a Forestry Right in gross the rights set out following:(a) the non exclusive right to enter upon, occupy and maintain, the ForestryBlock and the Access Lands;(b) the exclusive right to plant, maintain, release, cultivate, graze withanimals of all kinds including poultry, protect, harvest, carry away, selland otherwise utilise trees of all kinds and species and any by productsthereof that grow or may been grown on the Forestry Block;(c) for the purpose of and to such extent as may be necessary or convenientfor gaining access to and egress from the Forestry Block and from and toany other land the full free and unrestricted though nonexclusive right atany and all times by day to go, enter, pass and repass upon the ForestryBlock and Access Lands with or without any aircraft, machinery, vehicles(empty or laden), implements, horses, plant of all kinds or any other thingwhatsoever;(d) the right to, entirely at its own cost, construct, install, maintain, improveand use roadways, skids, tracks, bridges, culverts, other works and othermeans of access upon the Forestry Block for the purpose of exercising therights conferred in this Clause 2.1.[9] Clause 1.1(a) of the encumbrance requires the encumbrancer, at theencumbrancee's expense, to: do all things and sign all documents required to:(i) establish a sustainable forest management plan under the Forests Act 1949in respect of the Land ("sustainable forest management plan"); and/or(ii) enable the putting into effect and the carrying out of a vegetation and weedmanagement plan which is the subject of a condition of a subdivisionconsent under the Resource Management Act 1991 for the Land or landcontiguous or conterminous [sic] with it or is amalgamated or is to beamalgamated with any such land or any combination of the aforesaid("vegetation and weed management plan").The 'Land' is the subject land. Clause 1.1 relevantly continues to require theencumbrancer to:(b) Allow access to the Land to the Encumbrancee and its workmen, servants,agents, and contractors, and the functionaries of any statutory authority,for the purposes of the sustainable forest management plan or thevegetation and weed management plan at any time between 6am and 9pmon any day during the terms of those plans.(c) Not enter into any other covenants or grant any forestry right other thanto the Encumbrancee in respect of vegetation including shrubs and treeson or in the Land without the prior written consent of the Encumbrancee,such consent to be at the sole and unfettered discretion of theEncumbrancee.(d) Not destroy, damage, clear, cut down, trim or remove any native orindigenous vegetation from the Land except as provided for and inaccordance with the sustainable forest management plan and/or thevegetation and weed management plan ("indigenous" as defined in thedefinitions rule of the version of the Waitakere City Council's DistrictPlan that is operative on the date of this Instrument).(e) Upon the written request of the Encumbrancee, execute and deliver to theterritorial authority a covenant in favour of the territorial authority in grossor in which the [subject land] is dominant tenement, provided always thatthe covenant shall be on terms in accordance with any condition ofsubdivision consent issued by the territorial authority to enable thesubdivision of the Land and/or any land conterminous [sic] with it or landthat is amalgamated or is to be amalgamated with any such land or anycombination.[10] The forestry right thus entitled the grantee to use the subject land until 2040 aspermitted, but the bulk of trees growing on its internal forestry block since have beenharvested and sold and the right to replant said to have been transferred toEpsom Woods Limited, since liquidated. Waitakere Farms comprehends trees cannotnow be planted for harvest by anyone before the right expires.[11] The defendants argue the forestry right is not spent, as remaining available togrow trees until 2040. Whether or not that is the case in practical reality, the forestryright confers in its terms greater utility than for forestry alone through at leastcl 2.1(b)'s reference to "graze with animals of all kinds including poultry". I amunclear how it is contended the right to replant has been transferred. The forestry rightdoes not appear expressly to confer a right to replant. If such right is to be inferredfrom cl 2.1(b)'s "exclusive right to plant", the agreement with Epsom Woods appearsto have been to provide access to and sell the timber subject to the forestry right ata price including planting "a total area of 12 hectares of land within 100 kilometres ofthe subject land in pinus radiata". Epsom Woods' solicitors only acknowledged it"owns the trees on the block of land together with all associated access rights over theproperty and the adjoining properties to extract the forestry". I do not see cl 2.1(b)'s"exclusive right to plant" in the forestry block necessarily to have been transferred toEpsom Woods except if by some unusual implication from the planting component ofthe purchase price. I may misunderstand something.[12] The defendants also argue the subject land may be subdivided to enable theiracquisition of the forestry block (if conditions associated with the subject land's 2012subdivision consent were cancelled, as Mr Mawhinney pursues on separate appeal andhere before me under s 339). The defendants say they have exercised the option topurchase the forestry block.[13] Mr Mawhinney appears to consider the encumbrance's cl 1.1(a)(ii) and (e) mayenable him to combine other land (albeit no longer owned by him or his interests) withthe subject land, to achieve a minimum lot size for my division under s 339. I do notfollow that logic so far as the option to purchase is concerned, which is limited to theforestry block, but acknowledge if the subject land is co-owned by the parties somedifferent division may be achievable under s 339. Mr Mawhinney accepted undercross-examination his s 339 proposal "requires the division of the land and that thedivision of the land requires a consent", but argued the consent's present conditions— contended contrary to s 84(1) of the Resource Management Act 1991, as notobserving relevant policy statements or plans — "have no effect", meaning they wereunlawful.Property owned by co-owners?[14] Section 339 gives me broad discretion to make sale or division orders toresolve differences "in respect of property owned by co-owners".2 Under the Act,unless the context otherwise requires, "co-owner means a tenant in common or a jointtenant", possibly including present equitable tenancies,3 but nonetheless meaningco-ownership.[15] But the parties here are not co-owners on any basis. The Forestry RightsRegistration Act 1983, which enables the creation of forestry rights, provides"[n]otwithstanding any rule of law or equity to the contrary, every forestry right shallbe deemed to be a profit à prendre".4 A profit à prendre confers no tenancy in land,but only a right to take from it.5 The Land Transfer Act 2017's definition of 'land' as2 Lo v Lo [2021] NZCA 693, (2021) 22 NZCPR 721 at [21]–[27].3 See Fraser v Butler [2017] NZHC 120, (2017) 18 NZCPR 358 at [44]–[54], predominantly inreliance on GW Hinde and others (eds) Butterworths Land Law in New Zealand (Butterworths,Wellington 1997) at [9.050] and GW Hinde and others (eds) Hinde McMorland & Sim Land Lawin New Zealand (2nd ed, LexisNexis, Wellington 2004) at [13.021(a)], citing Fleming vHargreaves [1976] 1 NZLR 123 (CA) at 127 (citing Halsbury's Laws of England (1912) vol 21Partition at 840, n l).4 Forestry Rights Registration Act 1983, s 3(1).5 Halliday v Bank of New Zealand [2012] NZHC 3099, [2013] 1 NZLR 279 at [39], citing DWMcMorland and others (eds) Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed,including "plants, trees, and timber on or under land" takes matters no further becauseof the final 'land', which a right to take does not attach.[16] It "firmly" is established "the grantee of an option to purchase acquires animmediate equitable interest capable of supporting a caveat".6 Only if and to the extentexercise of the option to purchase crystallises in a sale of the subject land might anylegal interest in that land be said to arise, but then not in common or jointly withWaitakere Farms. By extrapolation, whatever present equitable interest may arise fromthe unexercised option, neither can it arise in common or jointly with Waitakere Farms.[17] Nonetheless, Mr Mawhinney's most recent affidavit, sworn 13 April 2023 inreply to that of Tim Duncan for Waitakere Farms sworn 30 March 2023, asserts "[t]hatoption has now been exercised, by the posting of the 2 copies of the sales and purchaseagreement to Waitakere Farms". What is said to have been posted is not in evidence.[18] However, the forestry right — while setting out at its cl 6.2 a mechanism forexercise of the option by such post — identifies "[a]ny sale and purchase agreemententered into as a result of the exercise shall be conditional, as a precondition ofsale" upon obtaining such consents as are necessary to enable completion ofsubdivision, completion of subdivision accordingly and provision of access, all at thedefendants' expense. There is no evidence the contended posted sale and purchaseagreement made provision for any of those preconditions, or they could or would bemet, particularly as the forestry block is 2 hectares in area and the Waitakere DistrictPlan Rules appear to require a minimum lot size of 4 hectares (althoughMr Mawhinney disputes the requirement as without jurisdiction). As such, any presentequitable interest in the subject land arising from the option to purchase must be slim.[19] At the hearing, I queried if Mr Mawhinney's pursuit of the subdivisionconsent's conditions' unlawfulness on both his appeal and before me may be abusive.Pursuit of the same relief in duplicate proceedings is an abuse of process: "improperLexisNexis) at [16.008]; Ford v Ensor [2015] NZHC 1459 at [17], citing Rebecca Hofmann (ed)Land Law (online looseleaf ed, Westlaw) at [9.2.01] (citing Alfred F Beckett Ltd v Lyons [1967]Ch 449 (CA) at 482).6 Bevin v Smith [1994] 3 NZLR 648 (CA) at 665, citing Morland v Hales (1910) 30 NZLR 201(CA).use of [the court's] machinery";7 use of that process "for a purpose or in a waysignificantly different from its ordinary and proper use".8 Duplicate proceedings areabusive in themselves, even if the former proceeding remains undetermined.9[20] In response, in closing, Mr Mawhinney advised the appeal would bediscontinued. After the hearing concluded he instead enquired, by memorandum of15 May 2023 addressed to the registrar of this Court, of "the status of the appeal",plainly contending for its continuation in saying "[t]he appellants don't accept [it isdetermined]". If the appeal is not discontinued, it is an abuse to seek the same relief inthis proceeding. I will not indulge it. But, even if the appeal was discontinued, unders 339, I may not subdivide land contrary to s 11 or pt 10 of the Resource ManagementAct 1991.10 In respect of the subject land, that means any order must comply with thesubdivision consent's conditions.11 Given Mr Mawhinney's desire the conditions becancelled, and the lack of any evidence they are met, sale remains wholly conditional.Exercise of the option alone confers no tenancy.[21] As the parties are not co-owners, s 339 has no application.The encumbrance and forestry right[22] The intended connection between the forestry right and the encumbrance is notentirely clear. Sections 67C, 67D and 67DB of the Forests Act 1949 prohibit export,milling and felling of indigenous timbers except in accordance with a registeredsustainable forest management plan. I infer a 'vegetation and weed management plan'may similarly be a condition to be imposed under the Resource Management Act 1991.7 Simon Goulding, DB Casson and William Blake Odgers Odgers on Civil Court Actions (24th ed,Sweet & Maxwell, London, 1996) at [10.15] as cited in Commissioner of Inland Revenue vChesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [87].8 Attorney-General v Barker [2000] 1 FLR 759 (QB) at 764.9 Mahon v Waimauri Ltd [2022] NZCA 96 at [65]–[66]; Paul Finance Ltd v Commissioner of InlandRevenue HC Auckland CP65-SD00, 17 August 2000 at [35], citing Buckland v Palmer [1984] 1WLR 1109 (CA), Otis Elevator Co Ltd v Linnell Builders Ltd (1991) 5 PRNZ 72 (HC), Fraser vRobertson [1991] 3 NZLR 257 (CA) at 260 and Bank of New Zealand v Rada Corp Ltd (1989) 2PRNZ 147 (HC) at 150; and Cowley v Shortland Publications Ltd (1991) 5 PRNZ 76 (HC). Seealso Jessica Gorman and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at[HR15.1.05(2)(c)].10 Property Law Act 2007, s 340(1).11 Resource Management Act 1991, s 11(1)(a).[23] As the forestry right is not an interest in the subject land, its utility may havedepended upon such plans being specified in relation to the subject land.(Mr Mawhinney said under cross-examination "a sustainable forestry plan has notbeen drafted" and "[t]here isn't a formal written [weed management] plan".)Presumably the encumbrance was intended to obtain such specification of plans ifrequired, under s 101 of the Land Transfer Act 1952 (now s 100 of the Land TransferAct 2017), as conditions attaching to encumbering the land to secure its rentcharge of$100 per annum. There is dispute if the rentcharge ever has been paid. Be that as itmay, the encumbrance includes mandatory dispute resolution by arbitration, whichI do not understand to have been initiated.[24] Although Waitakere Farms argues the parties to the encumbrance do notinclude successors in title, the 1952 Act required certificates of title to be issuedsubject to registered encumbrances, as the present encumbrance was in relation to thesubject land. For Waitakere Farms, Alexandra Low argues the encumbrance was givenas part of a separate venture involving the Lowndes interests to whom the land wastransferred in September 2010, a few days after the encumbrance's creation, withoutintending application to the subject land. I am not prepared to reach that conclusionby inference from the limited evidence drawn from Mr Mawhinney undercross-examination as to the Lowndes interests' involvement, particularly given theencumbrance registered on Waitakere Farms' title.[25] To the extent the encumbrance comprises "a promise expressed in aninstrument" — that is, a 'covenant' as defined — s 317(1) of the Property Law Actrelevantly entitles the Court to extinguish it if satisfied:(a) the covenant ought to be extinguished (wholly or in part) becauseof a change since its creation in all or any of the following:(i) the nature or extent of the use being made of the benefited land, theburdened land, or both:(ii) the character of the neighbourhood:(iii) any other circumstance the court considers relevant; or(b) the continuation in force of the covenant in its existing form wouldimpede the reasonable use of the burdened land in a different way, or to adifferent extent, from that which could reasonably have been foreseen bythe original parties to the covenant at the time of its creation; or(c) (d) the proposed extinguishment will not substantially injure any personentitled; or(e) the covenant is contrary to public policy or to any enactment or rule oflaw; or(f) for any other reason it is just and equitable to modify or extinguish thecovenant, wholly or partly.A "two-stage approach" generally is taken — first, if any of s 317(1)'s grounds is madeout; then, if the discretion should be exercised12 — but "in cases solely based ons 317(f) a blended approach may be appropriate".13[26] There only is 'burdened', not 'benefited', land at issue here, being the subjectland. I am unclear what 'use' was made of the subject land in reliance on theencumbrance at any time since its creation. Plainly the forestry block on the land wasforested and harvested. But there is no evidence if any of that was in reliance on theencumbrance (although presumably not if the plans were not developed). AccordinglyI can identify no 'change' in use — or, notwithstanding the deforestation, in the area'scharacter, despite subdivision — as may justify the encumbrance's extinguishment.[27] Neither then can I see the encumbrance's impediment to reasonable use of theland from what may reasonably have been foreseen at the time of its creation. Such'reasonable use' may not extend to its sale but, even if it does, sale must reasonablyhave been foreseen at the outset. Similarly I am unable to assess if extinguishment will(or will not) substantially injure the defendants. And, on the "just and equitable"ground: it is not for me to revisit the encumbrance's justification and fairness;14Waitakere Farms acquired the land encumbered, and cannot now seek to avoid theregistration as inconvenient to its wishes to sell, presumably at the best priceachievable.15[28] I am not satisfied of any of s 317(1)'s grounds here.12 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157, [2020] 1 NZLR 657 at[67].13 Hürlimann v Lilley [2023] NZCA 173 at [22].14 At [39].15 At [40].[29] The same analysis applies to the extent the option to purchase in the forestryright is a covenant to which s 317 applies. Plainly no use was made of the encumberedland in reliance on the option to purchase. Thus there is no qualifying 'change'.Neither can I identify any intervening impediment. Without determination ofMr Mawhinney's intended reliance on the option, if his appeal remains pursued,I cannot say the defendants will not be substantially injured by the option'sextinguishment. And, again, Waitakere Farms acquired the land subject to the optionto purchase; its claimed inconvenience now on desired sale does not cross the 'justand equitable' threshold.[30] So far as the forestry right itself is concerned, the Registrar's limited powersto record its extinguishment — as a profit à prendre under ss 113 and 114 of the LandTransfer Act 2017, respectively through lapse of a fixed period of time or onoccurrence of some other terminating event — have no application here. Ms Low isright to acknowledge the Registrar has no power to record its extinguishment as"redundant" under s 115, which power only is in relation to those easements remainingon titles of formerly adjoining land as having "no practical effect".16 If extinguishmentremained available at common law on grounds of abandonment or implied release,17neither is made out on the evidence. To the contrary, given Mr Mawhinney's relianceon the forestry right, he cannot be said to have either abandoned or impliedly releasedit. If his present (but disputed) registration as an undischarged bankrupt makes itimplausible he will be able to exercise it now, that requires to be seen at least in thecontext of the right's remaining 17 years.Result[31] Waitakere Farms' July 2022 claim, and the defendants' October 2022counterclaim, both are dismissed.16 Land Information New Zealand's advice at "Redundant Easement Applications and ForestryRights" <https://www.linz.govt.nz> "A Forestry Rights Agreement under the Forestry RightsRegistration Act 1983 can be the subject of an application to extinguish an easement under s 115 of the Land Transfer Act 2017" is inaccurate, unless the forestry right somehow falls withins 115's definition of a redundant easement, in which "all or part of the benefited land no longeradjoins the burdened land". In the usual course a forestry right engages no 'benefited land'. Neitherhere does the encumbrance.17 DW McMorland and others (eds) Hinde McMorland and Sim Land Law in New Zealand (onlineed, LexisNexis) at [16.102].Costs[32] In my preliminary view, given neither party has succeeded, costs should liewhere they fall or fell; that is, expenses to be borne by the party incurring them. If myview is not accepted by the parties, or they cannot otherwise agree, I reserve costs fordetermination on short memoranda each of no more than five pages — annexinga single-page table setting out any contended allowable steps, time allocation and dailyrecovery rate — to be filed and served by the party claiming them within ten workingdays of the date of this judgment, with any response or reply to be filed within fiveworking day intervals after service.—Jagose J