Green Growth No. 2 Ltd v Queen Elizabeth the Second National Trust

• Jurisdiction: New Zealand
• Judge: William Young,O'Regan JJ,William Young J,Elias CJ,Glazebrook J,Ellen France J
• Judgment Date: 17 August 2018
• Neutral Citation: [2018] NZSC 75
• Court: Supreme Court
• Docket Number: SC 84/2016
• Date: 17 August 2018

[2018] NZSC 75

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

Court:

Elias CJ, William Young, Glazebrook, O'Regan and Ellen France JJ

SC 84/2016

Between

Green Growth No. 2 Limited

Appellant

and

Queen Elizabeth the Second National Trust

Respondent

Counsel:

N R Campbell QC and W A McCartney for Appellant

R J B Fowler QC, F B Q Collins and P B Kirby for Respondent

Property — appeal against a Court of Appeal (“CA”) decision which upheld a finding that an open space covenant was valid — covenant incomplete — area only defined by photograph — whether the principles of indefeasibility apply to the covenant as notified — whether extrinsic evidence was admissible — whether covenant should be rectified

An open space covenant was an “encumbrance”. Therefore it was an “instrument” and a “dealing” for the purposes of s33 LTA (Registrar to keep register). The notification process resulted in such an instrument being deemed to be registered under s34 LTA (when instruments deemed registered). The person in whom the interest was vested was a registered proprietor for the purposes of s35 LTA (registered proprietor). The Trust was the registered proprietor of an interest in land created by the covenant as notified. The covenant, as notified, was effective and binding on Green Growth.

The covenant contained clauses that were not appropriate for what was proposed. Where the instrument to be construed created an interest in land and was on the register, the principles of indefeasibility were engaged.

Generally, registered documents should be construed without regard to extrinsic evidence. The definition of “protected area” in the covenant was ineffective which could be corrected under s80 LTA (errors in register may be corrected). There was a common intention between the Trust and the original owner concerning the area to be protected. Green Growth had been aware of the non-definition of the protected area before it acquired the land. It was on notice that something had gone wrong with the way in which the covenant had been completed. The effect of s182 LTA (purchaser from registered proprietor not affected by notice) was that Green Growth's acquisition of title with such notice was not fraud. A right of rectification in respect of an instrument creating an interest in land was itself for the purposes of: s62 LTA (estate of registered proprietor paramount), comprehended by the protection afforded by that section in respect of “all other encumbrances, liens, estates, or interests whatsoever and s182 LTA, within the expression “any trust or unregistered interest. The interest asserted was different from the one on the register. Rectification should not have been ordered.

The appeal was allowed to the extent only that the order for rectification was set aside. A declaration was given that the open space covenant references to “protected area” meant the whole block of land was subject to the covenant.

• A The appeal is allowed to the extent only that the order for rectification is set aside.

• B There is a declaration that for the purposes of cls 2 and 7 of the second schedule of the open space covenant references to “protected area” mean the whole block of land subject to the covenant.

• C The appellant is to pay the respondent costs of $25,000 and usual disbursements.

JUDGMENT OF THE COURT

REASONS

	Para No.
William Young and O'Regan JJ	[1]
Elias CJ	[105]
Glazebrook J	[151]
Ellen France J	[160]

William Young AND O'Regan JJ

(Given by William Young J)

Table of Contents

	Para No.
The appeal	[1]
How the controversy arose	[6]
The covenant as notified	[6]
How the covenant came to be notified in this form	[12]
How the dispute arose	[21]
Is the covenant binding?	[22]
The key issue	[22]
Do the principles of indefeasibility apply to the covenant as notified?	[29]
Conclusion as to binding effect of covenant	[46]
How should the problem of the undefined protected area be determined?	[47]
The construction problem	[56]
Preliminary comments	[56]
Admissibility of extrinsic evidence to construe a document which creates an interest in land under the Land Transfer Act – the leading authorities	[61]
Our approach	[73]
Construing the open space covenant in this case	[75]
Section 80 of the LTA	[79]
Rectification of the covenant	[82]
Preliminary comments	[82]
The cases relied on by the Courts below	[85]
The approaches taken in the Courts below	[95]
Our approach to rectification	[100]
Disposition	[104]

The appeal

1 The Queen Elizabeth the Second National Trust (the Trust) was constituted by the Queen Elizabeth the Second National Trust Act 1977 (the QEII Act) to encourage and promote the provision, protection, and enhancement of open space for the benefit and enjoyment of the people of New Zealand. 1 To this end it may enter into open space covenants with private landowners to protect and maintain open space values. 2 Such a covenant runs with and binds the land to which it relates and, as a deemed interest in the land for the purposes of the Land Transfer Act 1952 (the LTA, or where the context requires, the LTA 1952), 3 it may be notified on the title of the affected land. 4

2 This case concerns an open space covenant granted in favour of the Trust over a 404 hectare block of land near Tairua by its then owner, the late Mr Humphrey Mallyon Russell, which was notified on the title on 24 July 1997. As executed and notified the covenant is incomplete as it refers to a protected area defined by reference to an aerial photograph which is not attached. There are particular provisions in the covenant which are expressed as applying to the protected area but, there being no supporting photograph, the land to which these provisions apply is not defined. As well, it is said that there were irregularities in the execution and certification of the covenant.

3 The appellant (Green Growth) is the current owner of the land. In issue between Green Growth and the Trust is the validity of the covenant and, assuming it is valid, how it is to be applied. Both the High Court and Court of Appeal concluded that the covenant is valid, albeit for different reasons, and that it should be rectified to reflect what those Courts held to have been the common intention of the Trust and Mr Russell; in effect that the provisions of the covenant directed to the undefined protected area should apply to the entire block. 5

4 In determining the appeal, we must address two sets of discrete issues. The first concerns the validity of the covenant as notified and the second relates to the resolution of the problem of the undefined protected area.

5 Before we get to those issues, it is appropriate to explain how the controversy arose.

How the controversy arose

The covenant as notified

6 The second schedule to the covenant as notified contains the key provisions affecting the land. In this schedule “the land” is defined as “the property or part thereof defined as subject to this covenant”. The expression “protected area” is separately defined as meaning “the area of native trees shown as area [blank] on illustrative aerial photo attached”.

7 Clause 2 of the second schedule provides:

2. No act or thing shall be done or placed or permitted to be done or remain upon the land which in the opinion of the Board materially alters the actual appearance or condition of the land or is prejudicial to the land as an area of open space as defined in the Act.

In particular, on and in respect of the protected area, except with the prior written consent of the Board, or as outlined in the Third Schedule, the Owner shall not:

• (a) Fell, remove, burn or take any native trees, shrubs or plants of any kind.

• (b) Plant, sow or scatter any trees, shrubs or plants or the seed of any trees, shrubs or plants other than local native flora, or introduce any substance injurious to plant life except in the control of noxious plants.

• (c) Mark, paint, deface, blast, move or remove any rock or stone or in any way disturb the ground.

• (d) Construct, erect or allow to be erected, any new buildings or make exterior alterations to existing buildings.

• (e) Erect, display or permit to be erected or displayed, any sign, notice, hoarding or advertising matter of any kind.

• (f) Carry out any prospecting or exploration for, or mining or quarrying of any minerals, petroleum, or other substance or deposit.

• (g) Dump, pile or otherwise store any rubbish or other materials, except in the course of maintenance or approved construction, provided however that after the completion of any such work all rubbish and materials not wanted for the time being are removed and the land left in a clean and tidy condition.

• (h) Effect a subdivision as defined in the Resource Management Act 1991.

• (i) Allow cattle, sheep, horses, or other livestock to enter, graze, feed or otherwise be present provided, however, that they may graze up to any approved fenceline on the perimeter of the land.

8 Clause 3 of the second schedule is in these terms:

3. In considering any request by the Owner for an approval in terms of Clause 2 hereof, the Board will not unreasonably withhold its consent if it is satisfied that the proposed work is in accordance with the aim and purpose of the covenant as contained in the First Schedule.

9 Clause 7 of the second schedule requires “the Owner” to “keep all fences … on the boundary of the protected area in good order and condition” and to “accept responsibility for all repairs”.

10 The scheme of the covenant is that the second schedule is subject to the rights of the owner which are provided for in the third schedule in this way:

• 1. The Owner may maintain and upgrade the existing access track...