Escrow Holdings Forty-One Ltd v District Court At Auckland

JurisdictionNew Zealand
CourtSupreme Court
JudgeElias CJ,William Young,Glazebrook,Arnold,O'Regan JJ
Judgment Date20 December 2016
Neutral Citation[2016] NZSC 167
Docket NumberSC 108/2015
Date20 December 2016

[2016] NZSC 167

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ

SC 108/2015

BETWEEN
Escrow Holdings Forty-One Limited
First Appellant
Kallina Limited
Second Appellant
and
District Court At Auckland
First Respondent
Body Corporate 341188
Second Respondent
George Victor Wilkinson And Jeremy Kay Collinge And Others
Third to Twelfth Respondents
Auckland Council
Thirteenth Respondent
Chang Tjun Chong And Others
Fourteenth to Thirty-Ninth Respondents
Counsel:

J G Miles QC, T J Herbert and R P Thomas for Appellants

G J Kohler QC and T M Bates for the Second to Twelfth Respondents

Appeal against a Court of Appeal (“CA”) decision which held that a deed of covenant and encumbrance entitled Lot 2 to utilise parking spaces on Lot 4 — the appellants submitted that the CA had failed to give effect to the plain language of the deed of covenant which was negative and did not confer positive rights of access or parking on Lot 4 to Lot 2 — whether the CA had failed to give effect to the plain language of the deed of covenant.

The issue was whether the CA had failed to give effect to the plain language of the deed of covenant, which was negative and did not confer positive rights.

Held: The encumbrance was designed to ensure that the Council's requirements concerning the provision of parking were met. The owners of Lots 2 and 3 (who were together to be the owners of Lot 4) undertook not to allow Lot 4 to be used “for any purpose other than car parking or access for the benefit of Lots 2 and 3” without the Council's prior permission. The deed of covenant was the mechanism adopted by the owners of Lots 2 and 3 to give effect to their obligations to the Council under the encumbrance.

All parties to the deed had positive obligations which involved spending money to keep the parking building in existence; properly maintained and operating. Under the combination of the encumbrance and the deed, the allocated parking spaces were available only to the owners of Lots 2 and 3. The various responsibilities and powers that the owners of the three lots had under the deed were all premised on that requirement. While the owners of Lot 4 were not permitted to allow anyone other than the owners of Lots 2 and 3 to use the parking building, the use rights of the owners of Lots 2 and 3 were not co-extensive with ownership of Lot 4. Rather, they were regulated by the deed in accordance with the Council's requirements. So the owners of Lot 3 had no right to use the parking spaces in the basement allocated to Lot 2 without the consent of the owners of Lot 2. It did not appear to be disputed that if Escrow and Kallina were to allow access to, or use of, the parking building in a way that was inconsistent with the deed, they could be stopped, by way of injunction if necessary.

The deed did not require continued commonality of ownership between the lots and was expressed in perpetual terms. If the deed was intended to continue to operate in the absence of commonality of ownership, as the Court considered it was, that could only be on a meaningful basis. An interpretation of the deed which required the owner of Lot 2 or of Lot 3 to continue, after de-amalgamation, to pay for the upkeep and operation of the parking building but without any entitlement to access or use the building could not possibly have been intended.

Escrow could be prevented, by injunction if necessary, from denying the owners of Lot 2 the use of, and therefore access to, their designated parking spaces in the basement of the parking building on Lot 4. That did not create some new species of right or enhanced interest in land, nor was it contrary to the numerus clausus principle. Easements and covenants differed in legal form. Once it was accepted that Parliament had provided that covenants, whether positive or negative, could be notified on the title, run with the land and were enforceable in equity, there was no sensible reason why a party bound by a covenant could not be prevented by injunction from acting inconsistently with the promise it contains even if the practical effect of that was that the party must allow another onto its land.

The appeal was dismissed.

  • A The appeal is dismissed.

  • B The appellants must pay the second to twelfth respondents costs of $25,000 plus reasonable disbursements, to be fixed by the Registrar if necessary. We certify for two counsel.

JUDGMENT OF THE COURT
REASONS

(Given by Arnold J)

Table of Contents

Para No

Introduction

[1]

Background

[7]

The Courts below

[19]

Basis of appeal

[25]

The legal context

[27]

Interpretation of the deed of covenant

[41]

The principles

[41]

The deed

[44]

Decision

[60]

Introduction
1

The first and second appellants jointly own a parking building on what is referred to as Lot 4. The first appellant, Escrow Holdings Forty-One Ltd (Escrow), also owns an adjacent lot, referred to as Lot 3. The second respondent, Body Corporate 341188 (the Body Corporate), is the body corporate for a residential unit title development on another adjacent lot, Lot 2. Apart from the District Court at Auckland and the Auckland Council (the Council) 1 (neither of whom took any part in the appeal), the other respondents are proprietors of units in the unit title development. An issue has arisen as to the Body Corporate's rights (if any) to access and use certain parking spaces in the parking building.

2

The issue arises because when Lot 4 was created, it was owned as to a half interest each by the owners of Lots 2 and 3 and was intended to provide parking for those lots, allocated in accordance with the Council's requirements. A memorandum of encumbrance between the Council and parties who owned Lots 2 and 3 (the

encumbrance) and a memorandum of land covenants, to which the owners of Lots 2,
3

and 4 were parties (the deed of covenant or deed), set out the applicable arrangements. The titles to Lot 2 and its half interest in Lot 4 and to Lot 3 and its half interest in Lot 4 were amalgamated.

3

However, before the unit title development was undertaken on Lot 2, the title to Lot 2 was de-amalgamated from the title to Lot 2's half share in Lot 4, with the result that, eventually, Lot 2 and its half interest in Lot 4 fell into different ownership. That precipitated a dispute between the appellants as the current owners of the two half interests in Lot 4 and the Body Corporate as proprietor of Lot 2 as to the Body Corporate's rights to access and use the parking spaces allocated to it in the parking building. This raised the question of the scope and meaning of the deed of covenant.

4

Before the split in ownership, the owner of Lot 2 was entitled to go onto Lot 4 and utilise its allocated parking spaces as an incident of its ownership of Lot 4 – it did not need an easement or any similar right. But once the ownership link between Lot 2 and Lot 4 was broken, there was a question as to the basis on which the Body Corporate could go onto Lot 4 and utilise the parking spaces.

5

In the High Court Peters J found against the unit owners, holding that the deed of covenant did not create positive rights of either access or use. 2 The Court of Appeal overturned her decision. 3 We consider that the Court of Appeal was right to do so. There was no suggestion in argument that the effect of the de-amalgamation of the titles to Lot 2 and Lot 2's half share in Lot 4, or the split in ownership that subsequently occurred, brought the deed of covenant to an end. Rather, the appellants took the view that the deed continued in force and they required the Body Corporate to meet its financial obligations under it. We consider that on a proper interpretation of the deed, the appellants can be prevented from denying the Body Corporate access to and use of Lot 2's allocated parking spaces in the parking building on Lot 4.

6

This conclusion is based on the application of the deed of covenant to the particular circumstances that have arisen, taking into account relevant statutory provisions. We do not mean to suggest that, as a matter of conveyancing practice, covenants and easements can or should be seen as wholly interchangeable. Our decision simply relates to this deed applied to the circumstances of this case.

Background
7

Upland Holdings Ltd (Upland) owned a site at what was then 17 Hargreaves Street, College Hill, Auckland. In 1987, the Council granted Upland consent to subdivide the property into three lots, Lots 1, 2 and 3, in order to develop three office buildings. A condition of the subdivision was that a parking easement would be granted over part of Lot 1 in favour of Lot 2.

8

In 1988, Lakeland Properties Ltd (Lakeland), 4 which had acquired a part interest in Lot 1, 5 applied to divide Lot 1 into two new lots, Lots 4 and 5. Lot 4 was to be used for parking for the occupants of the office buildings on Lots 2 and 3. Lot 5 would contain the third office building. At the same time, a right of way was to be registered on the title of a vacant site on Hargreaves Street, Lot 44, to give access from the back of the lots to Hargreaves Street. The effect of the change was that some of the car parks for the office buildings on Lots 2 and 3 were to be located in the parking building on Lot 4. It was proposed that Lot 4 would be jointly owned by the owners of Lots 2 and 3 as the primary beneficiaries of the arrangement.

9

The Council approved the further subdivision subject to the condition:

That proposed Lot 4 … have registered on its title a restriction that is to the satisfaction of the City Solicitor to prevent:

  • (a) it being used for other than car parking and accessways for the relevant lots concerned (as per submitted plans) without prior consent of Council,

  • (b) Lot 4 being owned by other than the owners of Lots 2 and 3.

The Council also...

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