Synlait Milk Ltd v New Zealand Industrial Park Ltd

• Jurisdiction: New Zealand
• Judge: O'Regan J
• Judgment Date: 22 December 2020
• Neutral Citation: [2020] NZSC 157
• Docket Number: SC 50/2019
• Court: Supreme Court

Between

Synlait Milk Limited

Appellant

and

New Zealand Industrial Park Limited

First Respondent

Ye Qing

Second Respondent

[2020] NZSC 157

Court:

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

SC 50/2019

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

Property — appeal against a Court of Appeal decision which reinstated two restrictive covenants — extinguishment of modification of easements under s317 Property Law Act 2007 — grounds for modification — whether modification would not cause substantial injury — whether there had been a change in the neighbourhood — whether the covenant would impede the reasonable use of the burdened land — disentitling conduct

Counsel:

J G Miles QC, A J Horne and J T Hambleton for Appellant

A R Galbraith QC and D T Broadmore for Respondents

• A The appeal is allowed.

• B There is no order as to costs.

JUDGMENT OF THE COURT

REASONS

(Given by O'Regan J)

Table of Contents

	Para No.
Introduction	[1]
Synlait's status as appellant and leave to appeal	[3]
Settlement	[4]
Burdened land and benefited land	[11]
Covenants	[15]
Modify or extinguish?	[20]
Fresh evidence	[28]
Facts	[36]
Planning changes	[54]
Commercial and residential development	[60]
Summary of changes	[63]
Relevant law	[65]
Court of Appeal's approach	[68]
Legislative history	[73]
The effect of the broadening of the power	[76]
Synlait's grounds of appeal	[91]
No substantial injury: s 317(1)(d)	[92]
High Court	[92]
Court of Appeal	[96]
Limited modification	[101]
Substantial injury	[103]
Quarry development	[107]
Obtaining resource consent for quarrying on the NZIPL land	[113]
Summary and conclusion	[135]
Covenant ought to be modified because of changes: s 317(1)(a)	[138]
Change in nature or extent of use: s 317(1)(a)(i)	[139]
High Court	[139]
Court of Appeal	[140]
Our assessment	[141]
Change in character of neighbourhood: s 317(1)(a)(ii)	[143]
High Court	[143]
Court of Appeal	[144]
Our assessment	[145]
Other relevant changes: s 317(1)(a)(iii)	[156]
High Court	[156]
Court of Appeal	[157]
Our assessment	[158]
Impediment to reasonable use: s 317(1)(b)	[159]
High Court	[159]
Court of Appeal	[160]
Our assessment	[161]
Conclusion: grounds for modification made out	[167]
Discretion	[168]
Compensation	[176]
Costs	[183]
Is resisting an application for modification “enforcement” of the covenants?	[189]
Does “enforcement” include an unsuccessful attempt at enforcement?	[197]
Is there a public policy reason not to award indemnity costs?	[200]
The award of costs in this Court and the Courts below	[201]
Result	[208]
Appendix

Introduction

1 This case concerns the power in s 317 of the Property Law Act 2007 for a court to extinguish or modify an easement or covenant registered on the title for one or more parcels of land. The contrasting outcomes in the High Court and Court of Appeal in this case illustrate the varying approaches that have been taken to the power conferred on the court by s 317. In the High Court, the application made by the predecessor in title of the land now owned by the appellant, Synlait Milk Ltd (Synlait), to extinguish or modify the two covenants at issue in this case was granted. 1 The Court refused to order the payment of compensation to the first respondent, New Zealand Industrial Park Ltd (NZIPL), but awarded NZIPL costs on an indemnity basis. 2 The Court of Appeal allowed an appeal by the respondents and reinstated the covenants. 3

2 The covenants restrict the use of the land that is subject to the covenants (the burdened land) to farming and forestry operations. Synlait has built a dairy factory (an infant formula manufacturing plant which we call “the Synlait plant”), part of which is on the burdened land. The location of part of the Synlait plant on the burdened land is a breach of the covenants. This was important background to the application.

Synlait's status as appellant and leave to appeal

3 Synlait was not a party to the proceedings in the High Court and Court of Appeal, which were conducted by Stonehill Trustee Ltd (Stonehill), the then owner of the land now owned by Synlait (we will call this “the Synlait land”). However, having purchased that land, Synlait was substituted as applicant for leave to appeal to this Court. At the same time, leave to appeal was granted. 4

Settlement

4 After the hearing of the appeal, counsel filed a joint memorandum advising the Court that the parties had reached a conditional settlement that would resolve the dispute that gave rise to the present appeal. They indicated that it was expected that, once the settlement became unconditional, the appeal would be abandoned. They requested that the Court not issue its judgment pending the outcome of the settlement discussions.

5 The judgment was in the final checking process when this memorandum was received. The Court did not issue the judgment in light of counsel's request. But we issued a minute indicating to counsel that we were considering issuing the judgment even if the settlement became unconditional and the appeal was abandoned. We sought their views on that possibility.

6 Counsel filed a joint memorandum in which they indicated that the terms of the settlement required the parties to request that the Court not issue its judgment, and they made such a request in accordance with that agreement. As is apparent, we have decided to deliver the judgment. Our reasons for doing so are set out below. Counsel requested that, if the Court nonetheless decided to issue the judgment, this not be done until the settlement was concluded. We have deferred the delivery of the judgment accordingly. 5 They also asked that it be made clear in the judgment that a settlement was reached and the judgment does not therefore determine the respective rights and interests of the parties in relation to the matters at issue in the appeal. We confirm that is the case.

7 In its decision in Osborne v Auckland Council, this Court observed that, where a settlement occurs after the hearing of an appeal, the Court has a discretion whether to deliver judgment. 6 It decided in that case to do so, given the issues involved were matters of public importance that were likely to affect people other than the parties and the questions had been fully argued. The Court noted that the outcome would have been reasonably apparent from the way the argument went. 7

8 The principles outlined in Osborne were applied in Zurich Australian Insurance Ltd v Cognition Education Ltd 8 and PricewaterhouseCoopers v Walker. 9

9 In this case, our reasons for delivering the judgment despite the settlement are:

• (a) the issues raised by the appeal are matters of general importance;

• (b) the Court has heard full argument on those issues; and

• (c) this Court's views differ markedly in some respects from those of the Court of Appeal in the decision under appeal.

10 The remainder of this judgment sets out what we would have done if no settlement had been reached.

Burdened land and benefited land

11 The covenants at issue in this appeal relate to land at Pokeno, on the outskirts of Auckland.

12 When the covenants were entered into, the benefited land 10 was one large block over 140 ha in area. 11 Within this block was an area containing a basalt resource, which made the benefited land a potential site for a commercial quarry. As outlined below, the benefited land has been subdivided and now has four separate owners. The area containing the basalt resource is owned by NZIPL (we will call the land now owned by NZIPL “the NZIPL land”).

13 The burdened land, at the times the covenants were entered into, was a block of 9.74 ha. As a result of various transactions described later, the burdened land is now split across three titles. Part of the burdened land has been amalgamated with the

part of the benefited land (the Synlait benefited land) to form the Synlait land. Another part has been amalgamated with part of the benefited land to form a block of land owned by Stuart PC Ltd (Stuart PC) (we will call the land now owned by Stuart PC “the Stuart PC land”). A small part of the burdened land is now part of the NZIPL land (the NZIPL burdened land)

14 A map provided by the respondents depicting the relevant areas of land is reproduced in the appendix to this judgment. 12

Covenants

15 There are two covenants, one entered into in 1998 and one entered into in 2000. They are virtually identical in form. 13

16 The covenant entered into in 2000 recites that the owner of the benefited land proposes to carry out quarrying activities “which result in or are likely to result in noise, vibration, earth movement, dust, effects of explosion and the usual incidences of Quarrying which may have consequences beyond the boundaries of the [benefited land]”. This makes it clear that the purpose of the covenant is to protect the ability of the owner of the benefited land to carry on quarrying activities on the benefited land.

17 The covenant then provides, in relevant part, as follows:

The Covenantor for itself and its successors in title to, and assigns and lessees of, the [burdened land] or any part of it, hereby covenants and agrees with the Covenantee, its successors in title and assigns and the occupiers and the operators of the [benefited land] or any part of it, from time to time, as a positive covenant for the benefit of the registered proprietors and users from time to time of the [benefited land], that the Covenantor will henceforth and at all times hereafter observe...