Cookeson Properties Limited v Gray

[2016] NZHC 2112

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000614 [2016] NZHC 2112

BETWEEN

COOKESON PROPERTIES LIMITED

Applicant

AND

COREY FRANCIS GRAY, LYNELLE TONI GRAY AND LATIMER TRUSTEES 2011 LIMITED

First Respondents

AND

DENNIS ALAN CHAPMAN, DEBORAH BEATRICE CHAPMAN and ALISTAIR JOHN CHAPMAN

Second Respondents

AND

ANDREW JOHN ROBERTSON and PAULA JANE MEAD-ROBERTSON Third Respondents

AND

ZANE BARRY LOW and ANGELA MARIA LOW

Fourth Respondents

AND

GARETH HOWARD MILTON and NICOLA ANNETTE CHIVERS Fifth Respondents

AND

REGAN CHARLES GRAHAM and

KELLY SUSAN DUNNE Sixth Respondents

AND

BLAIR ANDREW WILLIAMS and KARYN TERESA WILSON Seventh Respondents

AND

IAN DOUGLAS ORMANDY and JEANETTE ANN ORMANDY Eighth Respondents

AND

STEPHEN ROBERT RICKERBY and JANFREY LOUISE RICKERBY Ninth Respondents

AND

RONAN JUDE PHELAN and LISA ALISON PHELAN

COOKESON PROPERTIES LTD v GRAY, & ORS [2016] NZHC 2112 [6 September 2016]

Tenth Respondents

AND

CHRISTOPHER GRAHAM LANG and

VIRGINIA JADE LANG Eleventh Respondents

AND

BEVERLY ANNE LETHLEAN, ANTHONY JAMES LETHLEAN and NEW ZEALAND TRUSTEE SERVICES LIMITED

Twelfth Respondents

AND

MAREK KUZIEL, KATARINA KUZIEL and ATTORNEYS & TRUSTEES LIMITED

Thirteenth Respondents

AND

CHRISTOPHER KEITH O'LEARY and SUZANNE DEIDRE O'LEARY Fourteenth Respondents

AND

LUKE DYLAN UEDA-SARSON and

KEIKO UEDA-SARSON Fifteenth Respondents

AND

CRAIG RUSSELL FARRANT and SARI LOUISE FARRANT

Sixteenth Respondents

AND

STEPHEN ANTHONY MOORE and

BETSIE VAN DE KOOT Seventeenth Respondents

Hearing:	29 August 2016
Appearances:	W J Hamilton for the Applicant No appearance for the Respondents
Judgment:	6 September 2016

JUDGMENT OF NATION J

[1]      The applicant owns two lots in a residential subdivision at 6 and 8 School

Road, Tai Tapu, near Christchurch.  The subdivision is known as Hepworth Park and

is opposite the local primary school.  Until early 2016, the applicant ran a preschool and nursery centre from the lots.  The business was sold in 2016 with the purchaser leasing the premises from the applicant.

[2]      There are covenants over the certificates of title in the various lots to ensure the properties in the subdivision are used only for residential, non-commercial purposes with only a single dwelling and associated buildings on each lot.  In these proceedings,  the  applicant  seeks  a  modification  of  the  covenants  to  permit  the current  use  of  the  applicant’s  lots  to  continue  without  being  in  breach  of  the covenants which benefit the other lots in the subdivision.

The legal and evidential basis for the application

[3]      The Hepworth Park subdivision was created in September 2007 and is made up of 20 lots.  The applicant purchased lot 13 in 2007.  The purchase was conditional on  its  obtaining  a  resource  consent  from  the  Selwyn  District  Council  for  the operation of the preschool and nursery centre from lot 13.  That consent was granted on 5 March 2008 subject to certain conditions.  The purchase then proceeded.  The preschool and nursery centre was built and opened in October 2008.   Sonya Cookeson, the sole director of the applicant company, said that at the time of the purchase of lot 13, she was not aware of terms in the covenant over lot 13 which could potentially impact on the ability to operate the preschool and nursery from that site.  In contrast to the covenant over lot 12, the covenant over lot 13 did not prohibit the use of the land for a commercial purpose.  The covenant over lot 13 did however limit the height of fencing over the land and restricted building to “a single dwelling and appurtenances thereto”.

[4]      In  November  2009,  the  applicant  purchased  lot  12  from  the  developer. Again, the agreement for sale and purchase was conditional on its obtaining resource consent for the intended use of the lot.  That intended use was as a playground and a staff parking area for the existing preschool. A copy of the covenants affecting lot 13 was attached to the sale and purchase agreement.  The vendor and purchaser both crossed out particular provisions in the covenant that they thought would have to be removed for the preschool to operate from the site.   Having done that, they both

believed this was sufficient to render those terms of the covenant ineffective.  They were not advised that this assumption was wrong.  The resource consent proceeded on a non-notified basis and was granted on 16 March 2010, again on conditions.

[5]      Ms Cookeson explained in her affidavit that, in relation to lot 12, it is at least arguable that the playground structures, car park area and signs on lot 12 infringe:

·  the   restriction   that   only  a   “dwelling   and   appurtenances”   may  be constructed on the lot; and

·  the prohibition in the covenant on the evidence of use of the land for a commercial purpose.

[6]      In a memorandum, Mr Hamilton explained there could also be potentially a breach of the specific prohibition against traffic going to and from the lot at a higher density than for normal use of a residential section.  The applicant’s use of lot 12 as a car park area has resulted in increased traffic flows which may contravene this prohibition.

[7]      In relation to lot 13, Ms Cookeson explained that it is at least arguable that the play centre building on lot 13 is not a “dwelling” in terms of the generally accepted definition of “dwelling” in that it is a commercial building and not a place of  residence.    There  are  also  fences  over  1200  mm  high  as  required  by  the regulations applying to childcare centres.

[8]      In her affidavit, Ms Cookeson said she was asking the Court to vary the covenants to allow the preschool and nursery to continue to operate from the site.  In support of that request, she said:

·  resource consents to operate the centre and to develop the playground area and car parking were obtained without any objection being raised;

·  the centre has operated since October 2008 and she is not aware of any complaints or issues having been raised about the manner in which it has operated; and

·  13 of the 17 respondents who own lots in the subdivision purchased their properties after October 2008 when the preschool and nursery centre came into operation and, as such, bought their properties in the knowledge the centre was operating.

[9]      The application is made under s 317 of the Property Law Act 2007.   It provides that a covenant may be modified by the Court if it is satisfied, amongst other things, that:

(a)  the covenant should be modified because of a change since its creation in the nature or extent of the use being made of the benefited land, the burdened land, or both;1 or

(b)  the proposed modification or extinguishment will not substantially injure any person entitled.2

[10]     I accept that s 317(1)(a)(i) applies in respect of both lots 12 and 13 in that their use has changed from residential to commercial since the creation of the covenants.

[11]     I  am  also  satisfied,  given  the  evidential  background  provided  by  Ms Cookeson in support of the application and the lack of opposition from any of the respondents, that the proposed modification will not substantially injure any person who is entitled to the benefit of the relevant covenants over each lot.

[12]     I accept that s 317 is intended to be a remedial provision.   The power to modify should not be so restrictively applied that the section ceases to have the remedial effect intended.3

Service on other parties

[13]   The applicant filed a without notice application for leave to commence proceedings by way of originating application and for directions as to service dated 7

1      Property Law Act 2007, s 317(1)(a)(i).

2      Section 317(1)(d).

3      Harnden v Collins [2010] 2 NZLR 273 (HC) at [44].

July 2016.  Orders were made accordingly by Associate Judge Matthews on 27 July

2016.

[14]     The documents which had to be served on other parties were:

(a)  the notice of application for leave to commence proceedings and for directions as to service;

(b)  the affidavit of Sonya Lee Cookeson in support of that application;

(c)  the  affidavit  of  Sonya  Lee  Cookeson  in  support  of  the  notice  of originating application for modification of covenants;

As already referred to, this affidavit provided details of the nature as to the precise terms of the covenants, the way in which the preschool and nursery had been established on lots 12 and 13 and the reasons why modification of the covenants was sought.

(d)  notice of originating application for modification of covenants;

This document notified those served with the application that it was to be called in Court on 29 August 2016 at 11.45 am.  The application stated that the modifications to the covenants were sought to ensure the covenants could not impede the continued use of lots 12 and 13 for the existing preschool and nursery centre.  It asserted the nature of the use of the burdened land had changed since its creation and the proposed modification would not substantially injure any person entitled to the benefit of the covenants.  The application detailed the certificates of title which had the benefit of the covenants which the applicant was seeking to  have  modified.     Attached  to  the  application  was  a  schedule highlighting the changes which the applicant was seeking.

Relevantly, the changes sought to covenant 7540081-6 over lot 13 were:

2     Not to construct or permit to be constructed or placed on the land any building, structure or other improvements other than a single dwelling child care centre or similar building and the appurtenances thereto.

…

8     No fencing over 1200mm 1800mm high shall be erected closer than 5 metres to any road frontage boundary provided that for the avoidance of doubt this restriction shall not apply to the western boundary of the Grantor’s land.

The changes sought over covenant 7540081-7 affecting lot 12 were:

2     Not to construct or permit to be constructed or placed on the land any building, structure or other improvements other than a single dwelling and the appurtenances thereto.  This condition shall not, however, apply to Lot 12.

…

10   To ensure that no evidence of use of the land for commercial purposes is visible.   This means the erection of any signs, or advertising or other use of the property for the land owner or occupiers own commercial gain.  By way of example, but without limiting the generality of this provision, evidence of use for commercial purposes includes traffic to and from any lot of a higher density than for normal use of a residential section.  Use of reasonable real estate signage for the purpose of the sale of any lot is permitted.  This condition shall not, however, apply to Lot

12.

(e)  memorandum of counsel for applicant, dated 7 July 2016.

This memorandum succinctly explained why it was necessary for the application to be served on other parties.  It explained the modifications which the applicant was seeking and referred to the possibility that there could be an objection to the application, although none was anticipated.

[15]     At  the  hearing  on  29  August  2016,  I  was  presented  with  an  affidavit confirming that copies of all documents filed with the Court had been delivered to the owners of the 17 lots that had the benefit of the relevant covenants, in accordance with  the  directions  for  service  as  made  by  Associate  Judge  Matthews.    The documents were delivered to all respondents in the manner required on 17 August

2016.  None of the respondents filed any document with the Court or took any other steps to indicate they were opposed to the application.

[16]     Mr Hamilton appeared for the applicant.   In a memorandum filed with the

Court, he asked for the orders sought to be amended so that, in respect of covenant

7540081-6 applying to Lot 13, clause 2 would read:

Not to construct or permit to be constructed or placed on the land any building, structure or other improvements other than a dwelling or child care and/or nursery centre or similar building and the appurtenances thereto.

The modification sought in respect of clause 8 remained the same.

[17]     In respect of covenant 7540081-7 affecting lot 12, the order sought was as follows:

Clause 2 be amended to read:

Not to construct or permit to be constructed or placed on the land any building, structure or other improvements other than a single dwelling and the  appurtenances  thereto.    This  condition  shall  not,  however,  apply  to prevent Lot 12 being used for the purposes of a childcare and/or nursery centre.

Clause 10 be amended to read:

To ensure that no evidence of use of the land for commercial purposes is visible.  This means the erection of any signs, or advertising or other use of the property for the land owner or occupiers own commercial gain.  By way of example, but without limiting the generality of this provision, evidence of use for commercial purposes includes traffic to and from any lot of a higher density than for normal use of a residential section.  Use of reasonable real estate signage for the purpose of the sale of any lot is permitted.   This condition shall not, however, apply to prevent Lot 12 being used for the purposes of a childcare and/or nursery centre.

[18]     Counsel explained that the crux of the changed amendments was to clarify that lots 12 and 13 could be used for the commercial purpose of the childcare and nursery centre  that  operates  from  those  lots,  and not  for any other  commercial purpose.   The amendments were sought to accommodate representations that had been made on behalf of certain respondents.

[19]     I am satisfied the modifications sought in the amended form are consistent with the amendments of which all respondents were given notice.  The amendments will not reduce the extent to which the respondents’ properties benefit from the covenants to any greater extent than they would have anticipated with the application as it was brought to their attention.

[20]     The applicant has also asked for the names of various respondents, as set out in the intituling and in proposed orders, to be amended so that they are consistent with the names appearing on the respective titles.4

[21]     Mr Hamilton provided the Court with draft orders as attached to counsel’s memorandum.    Given  there  has  been  no  opposition  to  the  application  and  the grounds for modification have been made out, I make an order for modification of covenants in accordance with the draft order filed with the Court but with an additional order that the costs of the applicant in making this application and any reasonable costs incurred by any of the respondents in giving effect to these orders and in facilitating registration of the modification against the certificate of title to their land are to be paid by the applicant.

[22]     Leave is reserved to the applicant to seek any further or consequential orders that may be required to give effect to this judgment.

Solicitors:

Duncan Cotterill, Christchurch

4      I have also corrected the names of five other respondents so they match the names of the respondents on relevant titles.