Escrow Holdings Forty-One Ltd v District Court At Auckland

• Jurisdiction: New Zealand
• Judge: Elias CJ,William Young,Glazebrook,Arnold,O'Regan JJ
• Judgment Date: 20 December 2016
• Neutral Citation: [2016] NZSC 167
• Docket Number: SC 108/2015
• Court: Supreme Court
• Date: 20 December 2016

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

[2016] NZSC 167

Court:

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

SC 108/2015

IN THE SUPREME COURT OF NEW ZEALAND

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.

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

• 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 required that easements be registered over the part of Lot 4 that was part of a formed driveway running down the side of Lots 2, 3, 4 and across Lot 44 onto Hargreaves Street to permit the owners of Lot 5 and Lot 44 to use it. (The owners of Lots 2 and 3 did not need an easement over this part of the driveway as they were to own Lot 4.) The following diagram provides a simplified illustration of this arrangement.

10 On 14 August 1989, the encumbrance and the deed of covenant were entered into.

• (a) The encumbrance was executed by Upland and Lakeland as owners of Lot 1 6 (which became Lots 4 and 5) and by City Realties (No 6) Ltd (City Realties) as owner of Lot 2 in favour of the Council in consideration for the Council's consent to the subdivision. Under it, the owners encumbered Lot 4 for the benefit of the Council for a term

  of 999 years with an annual rent-charge of five cents to be paid if demanded. They covenanted with the Council 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” except with the prior permission of the Council.

• (b) The deed of covenant 7 was made between City Realties as the registered proprietor of Lot 2 and of a half share in Lot 4 and Upland and Lakeland as registered proprietors of Lot 3 and of the other half share in Lot 4. Under the deed, the owners of Lots 2 and 3 agreed to meet the operating expenses and outgoings for the car park in the proportions in which they were to have access to parking spaces. As Lot 2 was to have 24 of the 39 parking spaces available, it was to meet a 24/39 share of the expenses, while Lot 3 was to meet a 15/39 share reflecting its entitlement to use the remaining 15 spaces. 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. The deed annexed a plan of the parking building, which consisted of a basement level and an upper level. The plan identified where the car parks for Lots 2 and 3 were to be located. We were advised that the basement area was to be used by Lot 2 and the upper floor by Lot 3. 8

11 In accordance with the Council's requirements, the title to one half share in Lot 4 was amalgamated with the title to Lot 2 and the title to the other half share in Lot 4 was amalgamated with the title to Lot 3. The amalgamated certificates of title noted that they were subject to ss 308(4) and (5) of the Local Government Act 1974 (now repealed), which restricted the disposal of Lot 2 (or Lot 3) independently of the relevant half interest in Lot 4 without Council consent. This mechanism gave effect to the Council's requirement that there be a restriction to prevent Lot 4 being owned by other than the owners of Lots 2 and 3. 9 The encumbrance was registered, and the deed of covenant was noted, against the amalgamated titles on 11 December 1989.

12 In November 1990, the first appellant, Escrow, acquired the amalgamated interest in Lot 3 and half of Lot 4. Later, in 2003, Central Strata Management Ltd (CSM) acquired the amalgamated interest in Lot 2 and half of Lot 4. In 2005, CSM made a non-notified subdivision...