Parwati Chand, Ram Chand and Khan & Associates Trustee Company (No. 110) Ltd v Auckland Council

• Jurisdiction: New Zealand
• Judge: Miller J
• Judgment Date: 30 June 2021
• Neutral Citation: [2021] NZCA 282
• Docket Number: CA591/2020
• Court: Court of Appeal

Between

Parwati Chand, Ram Chand and Khan & Associates Trustee Company (No. 110) Limited

Appellants

and

Auckland Council

First Respondent

Chamroeun Kong, Kimheng Chhit and Sokchan Arun Kong

Second Respondents

Xuanyu He and Qiuyu Su

Third Respondents

Raad Elias and Sahar Jameel Bahnam

Fourth Respondents

Rajesh Prasad, Vijay Ragni Prasad and Dr Thomas Limited

Fifth Respondents

William Gordon Chiplin and Thuy Thi Chiplin

Sixth Respondents

Lim Thi Hoang, Trac Xuan Bui, Tong Duc Bui and Men Thi Luu

Seventh Respondents

[2021] NZCA 282

Court:

Miller, Venning and Peters JJ

CA591/2020

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Property — appeal against a High Court decision which declined an application to extinguish a covenant limiting subdivision and dwelling numbers on the grounds it would substantially injure the adjoining property owners — whether loss of light and views, increased traffic, increased noise, and decreased property values were losses may be included in the assessment of injury to the respondents — covenants against subdivision and building as property rights — Property Law Act 2007

Counsel:

R O Parmenter for Appellants

D J Neutze and P Moodley for Respondents

• A The appeal is dismissed.

• B The appellants must pay the third to fifth respondents one set of costs for a standard appeal on a band A basis with usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Miller J)

Table of Contents

The properties	[6]
The proposed subdivision	[9]
The covenants	[11]
The application under s 317	[13]
The evidence of injury	[14]
Section 317	[25]
Loss of property rights an injury under s 317(1)(d)	[31]
The covenants against subdivision and building are property rights	[31]
Synlait: property rights relevant and can be significant in the exercise of discretion	[32]
Compensation for loss of property rights at common law	[38]
Loss of property rights is compensable injury under s 317	[44]
Substantial injury in this case	[50]
Result	[62]

1 The parties to this appeal own properties at Manukau which were part of an 8-lot subdivision completed by former owners, the Smyths, between around February 2007 and February 2012. All of the titles are both subject to and beneficiaries of covenants limiting subdivision and construction.

2 The appellants, whom we will call the Chands, want to further subdivide their property, which is the Smyths' former home. It comprises approximately 2,229m ² and contains a single dwelling. They seek to extinguish the covenant so far as it precludes subdivision and dwelling numbers. They have put forward a proposal to subdivide into five lots.

3 A covenant may be modified or extinguished under s 317(1)(d) of the Property Law Act 2007, if a court is satisfied that “the proposed modification or extinguishment will not substantially injure any person entitled…”. If so satisfied, a court may order the applicant to pay “reasonable compensation as determined by the court”. 1

4 The Chands failed to persuade Palmer J that the modification would not substantially injure the third to fifth respondents. The Judge accepted the evidence of the respondents' valuer, Peter Bates, that the modification would have a significant effect of about $100,000 on the value of each of their properties and for that reason would substantially injure them. The Judge dismissed the application with costs. 2

5 On appeal, the Chands say the Judge was wrong in fact and law. He was wrong in law because the valuation evidence that he accepted included a substantial component representing gain from the subdivision. That cannot be treated as an injury to the respondents, nor may it be taken into account when assessing compensation. He was wrong in fact because the actual injury to the respondents from the proposed subdivision was trifling. It largely comprised loss of amenity value during the construction phase and ought to be valued at between $7,000 and $10,000 per respondent.

The properties

6 The properties depicted on the plan below are the lots formed through the Smyths' subdivisions. They range in area from 400 to 672 m ².

7 The properties are now owned as follows:

• (a) Lot No 41 is owned by the Chands. It is the property they want to subdivide. The Smyths sold it to the Chands in 2016 and no longer have an interest in any of the properties;

• (b) No 41E is owned by the fifth respondents;

• (c) No 41D is owned by the fourth respondents;

• (d) No 41C is owned by the third respondents;

• (e) No 41A and No 43 adjoin Redoubt Road and are owned by the Auckland Council, which acquired them for roading purposes;

• (f) No 41B is owned by the second respondents;

• (g) No 43A is owned by the sixth respondents; and

• (h) No 43B is owned by the seventh respondents.

8 We have listed the parties in this order because only the third to fifth respondents have taken part in this appeal. The Council and the sixth and seventh respondents have consented to the application and the views of the second respondent have not been disclosed.

The proposed subdivision

9 The evidence is that the Chands wish to subdivide Lot 41 into five lots with an average size of around 446 m ². Palmer J recorded that the development will comprise three two-level residential structures, two of which will comprise two units. 3 The proposal is depicted on the plan below:

10 It seems this proposal is not necessarily final. On the evidence, the Chands have not offered the respondents any commitment to it. On the contrary, there is evidence that they altered the proposal, changing it from three lots to five, after the respondents resisted removal of the covenant. Nor have the Chands sought resource consent, saying that they wish to avoid the associated costs until they know whether the covenants will be modified.

The covenants

11 A suite of rights was created via a memorandum of transfer from the Smyths to themselves. The transfer recites that it was their intention that the lots created would be subject to “a general scheme 4 applicable to and for the benefit of” each lot. The scheme would run with the land; the owners and occupiers of any of the lots from time to time would be bound by it and able to enforce it.

12 There followed a series of covenants: by way of example, not to use the land for any commercial purpose, not to permit any temporary building, not to use old materials when constructing any fence, to build within 12 months a house of superior design using modern materials, not to build more than one house, and not to subdivide (with the proviso that the Smyths might do so while they remained registered proprietors). The last of these covenants states that each owner agrees:

(j) Not to further subdivide the property, including by way of cross lease or unit title or otherwise, so that each lot shall always remain in one Computer Register and contain only one dwellinghouse PROVIDED that the said [Smyths] while still Registered Proprietors of any of the said Lots may further subdivide any of the said Lots provided that any additional Lots shall always remain in one Computer Register and contain only one dwellinghouse AND the Registered Proprietors of any of the said Lots hereby consent to any such further subdivision by [the Smyths] and acknowledge that such further subdivision may result in access Lot 8 being shared by more than 8 Lots and will if called upon sign any documents necessary to give effect to any such further subdivision.

The application under s 317

13 The application is described as an application to modify covenant (j), which we have just set out. It would do so by extinguishing the covenant so far as it binds Lot 41, leaving it in place with respect to the other lots. The application would permit the Chands or any future owner of their land to subdivide to the fullest extent permitted from time to time by the Auckland Unitary Plan.

The evidence of injury

14 Palmer J accepted the evidence of Mr Bates that the Chands' proposed subdivision would have “a significant effect on the property values” of the respondents. 5 For that reason, the proposed modification of the covenant would substantially injure the respondents. He observed that they bought their properties

with benefit of the covenant and the Chands bought theirs subject to it. He concluded that the statutory conditions for modifying the covenant were not fulfilled. 6

15 This approach to assessing injury requires that we turn to the valuer's evidence to establish what form the injury took.

16 The evidence of some of the respondents was that the injury to them would take the form of loss of light and views, increased traffic, increased noise, and decreased property values. One of the respondents, Vijay Prasad, stated that a double-story, three-duplex complex would be built right up against their boundary fence and anticipated that at least 10 further vehicles would use the shared driveway, which in her opinion is already overloaded. Mrs Prasad is a real estate agent, and in her opinion subdivision would diminish the value of her property by between $200,000 and $300,000. Both she and another respondent, Raad Elias, produced a number of photographs depicting the existing properties. He considered that there would be a loss of light and views coupled with significant increase in traffic and noise. The development would completely change the character of the subdivision, which in his opinion presently has the character of a lifestyle block.

17 Mr Bates did not characterise the respondents' properties as lifestyle blocks, preferring to describe them as residential lots. He characterised the impact as:

• (a) noise and headlight disturbance from vehicular and pedestrian traffic;

• (b) noise disturbance from post-construction use of the new dwellings;

• (c)...