Body Corporate 341188 v District Court At Auckland

JurisdictionNew Zealand
JudgeCourtney
Judgment Date26 August 2015
Neutral Citation[2015] NZCA 393
Docket NumberCA185/2014
CourtCourt of Appeal
Date26 August 2015
Between
Body Corporate 341188
First Appellant
George Victor Wilkinson And Jeremy K Collinge And Others
Second - Eleventh Appellants
and
District Court At Auckland
First Respondent
Escrow Holdings Forty-One Limited
Second Respondent
Kallina Limited
Third Respondent
Auckland Council
Fourth Respondent
Chang Tjun Chong & Others
Fifth - Thirtieth Respondents

[2015] NZCA 393

court:

Ellen France P, Courtney and KÓs JJ

CA185/2014

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a decision of the High Court (HC) which held that the appellant did not have the right to use a car park located on an adjoining site — a land covenant noted on the titles of both sites required the appellant to pay for the upkeep of the car park — the covenant also precluded the owners of the car park from allowing anyone other than the body corporate unit owners and one other building to use it — the Memorandum of Encumbrance was executed in favour of the Council in consideration for the Council's consent to the subdivision — the car park was owned as to one half by each of the adjoining sites — the body corporate's title was uncoupled from the title to the half share in the car park and the respondents argued that the body corporate had lost the right to use the carpark — said that the covenant did not confer a positive benefit on the owners — the HC reversed the de-amalgamation but found that the land covenant did not create any positive rights of access or use, but equally the owners of the carpark could not permit anyone else to park there — whether the covenant could be read as conferring a positive right on the body corporate to use the carpark.

Counsel:

G J Kohler QC and T M Bates for First to Eleventh Appellants T J Herbert for Second and Third Respondents

JUDGMENT OF THE COURT
  • A The appeal is allowed.

  • B The judgment of the High Court is set aside.

  • C There are declarations in the terms set out at [53].

  • D The second and third respondents must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.

  • E Costs in the High Court are to be reconsidered by that Court in light of this judgment.

REASONS OF THE COURT

(Given by Courtney J)

Introduction
1

Ten unit owners of an apartment block claim the right to use a car park located on an adjoining site. A land covenant noted on the titles of both sites requires the owners of the apartment block to pay for the upkeep of the car park. The covenant also precludes the owners of the car park from allowing anyone other than the owners of the apartment block and one other building to use it. Nevertheless, the owners of the car park maintain that the unit owners have no right to use the car park.

2

The Body Corporate of the apartment block and the unit owners 1 applied for declaratory relief regarding their rights and obligations. In the High Court Peters J found for the owners of the car park and held that the land covenant did not create any positive rights of access or use. 2

3

The Body Corporate and the unit owners have appealed. 3 They assert error by the Judge in wrongly:

  • (a) taking a literal approach to the interpretation of the land covenant, notwithstanding the patently absurd result, and wrongly taking extrinsic evidence into account;

  • (b) failing to make orders that would enable the unit owners to access and use the car park; and

  • (c) alternatively, failing to make orders that would prevent the respondents from using or permitting the car park to be used for a purpose other than parking for the unit owners.

Background
The titles and the instruments
4

The subject properties are adjoining rear sites in Hargreaves Street, Ponsonby, referred to as Lots 2, 3 and 4. The land was originally part of Lot 1 DP 113758. In 1989 it was subdivided into Lots 1, 2 and 3 DP 121257. There was a further subdivision of the new Lot 1 into Lots 4 and 5 DP 126975. This case concerns Lots 2 and 3 DP 121257 and Lot 4 DP 126975.

5

The car parking building is located on Lot 4, closest to the road. Escrow Holdings Forty-One Ltd 4 (Escrow) and Kallina Ltd 5 (Kallina) each own an undivided half share of Lot 4. The apartment block is located on Lot 2, which lies to the rear of Lot 4 on its northern boundary. Lot 3, in turn, lies to the rear of Lot 2 on that site's northern boundary. There is a commercial building on Lot 3 owned by Escrow.

6

In 1989, when Lots 2, 3 and 4 were created by the subdivision, the title to each half share in Lot 4 was amalgamated with the titles to Lots 2 and 3 respectively.

This amalgamation of titles was required as a condition of the subdivision that created Lot 4
7

A Memorandum of Encumbrance ( CO79599.15) and Deed of Covenant 6 ( CO79599.12) were, respectively, registered and noted against the amalgamated titles on 11 December 1989. The Memorandum of Encumbrance was executed by the owners of Lot 4 in favour of the Auckland City Council in consideration for the Council's consent to the subdivision. Under it, the owners promised to pay five cents per annum for 999 years on demand and not to allow Lot 4 to be used “for any purpose other than carparking or access for the benefit of Lots 2 and 3”.

8

The Deed of Covenant was expressed to be between the registered proprietor of Lot 2 and one of the half shares in Lot 4 on the one hand, and the registered proprietor of Lot 3 and of the other half share of Lot 4 on the other. The owners of Lots 2 and 3 covenanted to meet the operating expenses and outgoings for the car park and the owners of Lot 4 covenanted not to allow Lot 4 to be used for any purpose other than car parking for Lots 2 and 3.

9

The title to Lot 3 and one undivided half share in Lot 4 is still amalgamated. Escrow is the registered proprietor. However, the other half share in Lot 4 has been de-amalgamated from the title to Lot 2. Now Lot 2 (owned by the unit owners) and the half share in Lot 4 (owned by Kallina) are registered on separate titles.

The procedural background
10

How the title to Lot 2 came to be uncoupled from the title to the half share in Lot 4 is complicated and it is unnecessary to go into the detail here; it is sufficient to say that in 2005 the Council consented to the de-amalgamation of the titles and in 2011 the District Court made an order on the application of Kallina and Escrow extinguishing all the covenants contained in Deed of Covenant. 7 Those decisions were the subject of a judicial review application brought as part of this proceeding.

11

In an interim decision Peters J quashed the District Court's order so that the covenant was restored to the title. 8 This background accounts for the presence of the Council and the District Court as respondents in this proceeding, though neither participated in the hearing, choosing to abide the decision of this Court. For convenience, when we refer to the respondents we mean only Kallina and Escrow.

The High Court decision
12

In the High Court the Body Corporate and unit owners sought declarations as to the parties' rights and obligations under the Deed of Covenant and Memorandum of Encumbrance. They also sought a declaration that the respondents were estopped from denying the appellants the use of the formed driveways on Lot 4, on the basis of an equitable easement.

13

Peters J rejected the argument advanced for the Body Corporate and the unit owners that because a literal reading of the covenant would result in an absurd outcome it should be interpreted as conferring positive rights on the owners of Lots 2 and 3 to enter and use Lot 4 for parking or, alternatively, that such rights should be implied. She accepted the argument advanced by Kallina and Escrow that the negative wording of the covenant indicated an intention not to confer any positive rights; had the parties to the covenant wished, they could have framed it in positive terms. 9

14

The Judge noted that it was common ground that the covenant did not confer an express right of parking or access on either of Lots 2 or 3 and that the issue was whether that omission should be cured by implication or otherwise. 10 She concluded that it could not:

  • [88] I accept the submission of counsel for Escrow and Kallina that it was never intended that the Land Covenant would confer a right to park on or provide access over Lot 4. That was unnecessary, given the amalgamation of the titles to each of Lots 2 and 3 with a half-share in Lot 4.

  • [89] I accept the submission of counsel for Escrow and Kallina that the rights of a registered proprietor of a fee simple title, such as the fee simple of

    an undivided half share in Lot 4, would include a right to travel over the land and to park anywhere thereon. 11
  • [90] The registered proprietors of Lot 2 enjoyed these rights as an incident of their fee simple title to a share in Lot 4 until 2006. The position changed as a result of the de-amalgamation …. Thereafter successors in title in respect of Lot 2, including the licensees, could only use the Carpark by a lease or licence from the registered proprietor(s) of Lot 4.

15

Peters J also considered that although the Memorandum of Encumbrance did not confer on Lot 2 or 3 a positive right to access or to park on Lot 4, in the absence of prior consent from the Council nor could the registered proprietors of Lot 4 themselves use Lot 4 other than for car parking or access for the benefit of both Lots 2 and 3. 12 This finding did not, however, result in any injunctive relief for the appellants.

Interpreting the land covenant
The issue on appeal
16

The parties accept that a literal reading of the covenant would produce an absurd result, namely that the unit owners must pay the costs associated with the car park without having any right to park there, while the owners of Lot 4 are prevented from allowing anyone other than the owners of Lots 2 and 3 to use the car park. Mr Kohler QC argued that a literal...

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