IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-000537

BETWEEN	PARIHOA FARMS LIMITED Plaintiff

AND	RODNEY DISTRICT COUNCIL Defendant

Hearing:	13 August 2010

Appearances: S J Mills QC for the Plaintiff
T R Fischer for the Defendant
M Casey QC for the Auckland Regional Council

Judgment:	18 August 2010

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on
18.08.10 at 2:30pm, pursuant to
Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar
Date……………

Solicitors/Counsel:
S J Mills QC, Barrister, Auckland – Stephen.mills@shortlandchambers.co.nz
S Anderson, Anderson Creagh Lai, Auckland – Stephen@acllaw.co.nz
T Fischer, Simpson Grierson, Auckland – tim.fischer@simpsongrierson.com
M Casey QC, Barrister, Auckland – matt@casey.co.nz

PARIHOA FARMS LIMITED V RODNEY DISTRICT COUNCIL HC AK CIV 2009-404-000537  18 August
2010

[1]       This hearing concerns the application by the Auckland Regional Counsel

(ARC) to be joined as a defendant.

[2]       The  issue  between  the  plaintiff,  Parihoa  Farms  Limited  (PFL)  and  the defendant, Rodney District Council (RDC) concerns PFL’s application for an order to discharge an encumbrance registered over its land.  The encumbrance, dated 22
October 1998 is between Kumeu Country Estate Limited (KCEL) and RDC.  On 28

September 1998 KCEL entered into an agreement to sell the land and by deed dated

28 October 1998 PFL was nominated as the purchaser and did complete that purchase.

[3]       PFL claims that about mid-February 1999 it became aware of the existence of the encumbrance and the fact that it was registered against the title of the land.

[4]       The encumbrance is a mortgage within the meaning of s 2 of the Land Transfer Act 1952 and s 4 of the Property Law Act 1952.  By it KCEL encumbered the land for the benefit of RDC for a term of 999 years with an annual rent charge of
$.05 cents to be paid annually.

[5]       By the terms of the encumbrance KCEL covenanted that:

No further subdivision will be undertaken of either parcel of land described in the schedule unless such is specifically agreed to in the form of a written approval by the council and the Department of Conservation (or subsequent relevant organisations).

[6]       PFL wishes to redeem the mortgage land on payment of the amount secured by the mortgage, being $49.95(999 years times $.05 cents per year).

[7]       The issue for trial is whether PFL can redeem the mortgage in consideration of making that payment.   If it can then the issue concerns whether the covenant limiting further subdivision continues to be legally binding on PFL following its discharge.  If it does continue to bind PFL then the issue concerns on what basis it does so.

Background

[8]       In October 1995 the land was owned by Mr Ian Barron.   It is situated at Constable Road, Murawai and comprises 354 hectares.  In October 1995 Mr Barron applied for and obtained consent from RDC to subdivide the land into 12 titles.  The subdivision did not proceed and in 1997 an application was made by Smith Earth Movers Limited for a transfer of the development rights held in connection with the property at Constable Road, to a property at Old North Road, Kumeu, owned by it.

[9]       Consent for the transfer was the subject of an application made by Smith Earth  Movers  Limited  under  the  Transferable  Title  Rights  (TTR)  provisions contained in RDC’s district plan.

[10]     That  application  was  publicly  notified  and  ARC  lodged  a  submission indicating qualified support for it.   ARC had concerns about the Old North Road proposal but it considered that the detriments of that development were out weighted by the benefits that would be achieved by the restriction of any further development on the Constable Road property.   In July 1997 RDC gave consent to Smith Earthmovers  Limited  to  subdivide  the  land  in  Kumeu  using  TTR’s  from  the Constable Road property, with the condition requiring encumbrance against further subdivision of the Constable Road property.

[11]     The Constable Road property was sold to KCEL in February 1998.  In April

2005 RDC provided subdivision consent to PFL for the purpose of a boundary relocation.   On 27 January 2009 PFL tendered to RDC the sum of $49.95 with a request  to  discharge  the  encumbrance.    On  3  February  2009  RDC  notified  its rejection of that tender and its refusal to discharge the encumbrance.  Two days later this proceeding issued.  One year later on 16 February 2010 the ARC applied for an order under Rule 4.56 to be joined as a defendant.   PFL opposes that application. RDC does not support or oppose the application.  It abides the decision of the Court.

[12]     The proceeding has a trial scheduled for four days beginning 4 October 2010. That date was allocated on 10 July 2009.  The setting down date was 12 July 2010. Briefs of evidence have been served and evidence in reply is due by 20 August 2010.

[13]     On 19 April 2010 Duffy J heard PFL’s pre-trial application for the exclusion of all or part of the evidence of RDC’s witness Mr Barton.   Judgment upon that application was given on 23 April 2010.

[14]     PFL’s primary concern with its application was to exclude from Mr Barton’s affidavit certain paragraphs containing evidence of facts that had been pleaded and admitted in RDC’s statement of defence.  As well irrelevance objections were raised upon the application.   Duffy J noted that from RDC’s perspective the issues of concern in this proceeding extend beyond the legal character of the mortgage as a security for the rent charged, and how that mortgage might be discharged.   RDC wanted to ensure that the covenant and, therefore, the mortgage remained on the title to the property.  It argues it is not required to discharge the mortgage on the tender of the sum it secures because the purpose of the mortgage was to ensure the covenant in clause 2 would run with the land, rather than to ensure the land would provide security for the payment of the rent charged.   In short, the issue is whether the covenant is a clog on the equity of redemption.

[15]     Concerning PFL’s irrelevancy claims RDC contended Mr Barton’s affidavit contained evidence of relevance to assist the Court in interpreting the purpose of the mortgage.   The Learned Judge noted the traditional view had been that the interpretation of a public document should be confined to a consideration of no more than the document itself.   She also noted there were recent cases suggesting it is permissible to use extrinsic evidence as an aid in interpreting public documents such as registered mortgages.  She added that none of the cases she referred to involved covenants  in  gross  as  in  this  case.    She  said  prior  case  authority  did  involve registered  instruments  under  the  Land  Transfer  Act  and  commented  that  the principles which led to a result in those cases may well lead to the same result in this case.   She commented “the present proceeding is going to be a test case for determining whether the purpose of a registered instrument containing a covenant in gross can be ascertained by resort to extrinsic evidence”.  She noted that the cases to which she referred all had some of the aspects contained in this proceeding.   She commented further “the trends they reveal open the way to argue that the type of

analysis approved in Boat Park Ltd v Hutchinson  for the interpretation of a contract may now be available for interpreting registered mortgages under the Land Transfer Act.  She said therefore it would be wrong especially at a pre trial stage to exclude evidence that is relevant to a Boat Park type of analysis of the subject mortgage. Those comments notwithstanding she ruled to exclude from Mr Barton’s affidavit evidence which was “only remotely connected to the factual matrix surrounding how the mortgage came to be on the title”.  Also she ruled as being irrelevant claims of the property having a “landscape sensitivity value” and said it was hard to see how that evidence could be relevant to the interpreting of the mortgage.  She added “the approach the Court takes to interpreting the effectiveness of the mortgage, regarding its long term retention on the property’s title, cannot turn on the conservation value of the subject land.

The application for joinder as a defendant

[16]     The ARC makes this application under Rule 4.56(1)(b)(ii).   By that rule a Judge at any stage of the proceeding can order that a party be added as a defendant if the persons presence before the Court may be necessary to adjudicate on and settle all questions involved in the proceeding.

[17]     By Rule 4.1 the number of persons joined as parties to a proceeding must be limited,  as  far  as  practicable,  to  persons  whose  presence  before  the  Court  is necessary to justly determine the issues arising.

[18]     By Rule 4.3 persons may be joined as a defendant against whom it is alleged there is a right to relief in respect of, or arising out of, the same transaction, matter, or event.

[19]     The ARC asserts that it is entitled to be joined under Rule 4.56 because its presence is necessary to justly determine the issues arising between PFL and RDC. It says it ought to be joined because of the affect that an outcome in the case may have on the interests that ARC represents.  It matters not Mr Casey submits whether

ARC is a party to the encumbrance if in the Court’s just and proper determination the ARC ought to have a voice from the viewpoint of the greater public interest.

[20]     Mr Casey refers the Court to recent decisions where this has occurred.  In the case of Chamberlains v Lai , the Supreme Court considered whether in civil proceedings concerning a defence of barristerial immunity it was proper for professional bodies to intervene.  The Supreme Court said they could because it was desirable for the Court to have their assistance on the questions of law and legal policy that arise.

[21]     In the case of Wilson v Attorney General & Ors , the Court considered applications by Sir Edmund Thomas who applied to be joined as a defendant, and by Saxmere Co Ltd which sought leave to intervene.  The Court held that although Sir Edmund should not be joined as a defendant he and Saxmere should be joined as interested parties with rights limited to receiving a copy of the Agreed Bundle of Documents, to make written submissions and to appear at the hearing to, with the Court’s leave, make oral submissions in connection with complaints about Justice Wilson to the Judicial Conduct Commissioner.  Those complaints were, and continue to be, the subject of extensive media coverage.

[22]     Mr  Casey submits  that  the  Court’s  have  increasingly taken  a  broad  and inclusive approach where matters of public interest are involved.

[23]     Mr Casey invites me to consider adopting a similar approach as was taken by the Supreme Court when dealing with Sir Edmund’s application for joinder.  If the Court considers it not appropriate to make an order for joinder as a defendant it could instead authorise a more limited kind of participation as an intervener. Unquestionably the Court has an inherent jurisdiction to give leave to intervene particularly where the issues at stake are broader than the interests of the immediate parties.

 
[24]     Considerations of whether the presence of the ARC is necessary for the Court to effectively and completely “adjudicate upon and settle all questions involved in the proceeding” requires considerations of whether ARC’s rights or liabilities in respect of the subject matter of the proceeding will be directly affected by any order which may be made in the action.

[25]     Citing McKendrick Glass MFG Co Ltd v Wilkinson  Mr Casey submits it is not necessary that the interest claimed is of a monetary value.  Rather, an indirect legal interest will suffice.

[26]     The ARC says it has a direct interest in the outcome of this proceeding because:

a)        It made a submission to the RDC on the Resource Consent Application that ultimately led to the encumbrance in issue in this proceeding; and

b)        It relied on the encumbrance being effective in changing its position on that application from qualified support to support.

[27]     It   relies   upon   an   affidavit   by   Mr   Jarvis,   Group   Manager:   Policy

Implementation.  He asserts:

a)        There are significant environmental issues involved in the proceeding and in the importance of the ARC being heard on these.

b)        That the Court should be aware of the views of the parties who made submissions to the RDC on the resource consent that led to the encumbrance.

[28]     Mr Casey submits that ARC has an interest in the following respects:

a)         It has interests protected by consent conditions reliant in turn on the terms of the encumbrance being upheld.   If the Court

should  find  in  favour  of  PFL  then  those  interests  will  be adversely affected.

b)        The  environmental  values  of  concern  in  this  case  are  the natural character of the Coastal environment and the regionally significant ‘outstanding landscape’, both of which the subject land forms a part.  The protection of such natural character and landscape against inappropriate subdivision use and development are matters of national importance by reason of provisions of the Resource Management Act (RMA).

c)        Although   RDC   is   the   consent   authority  responsible   for granting subdivision consent under its district plan the ARC has responsibilities under the RMA and through its Regional Policy Statement to control regionally significant effects of the use, development or protection of land.

d)        The different role and responsibilities of the ARC vis-a-vis RDC are relevant to ARC’s reasons for joinder.   When application  was  made  in  1997  to  subdivide  the  Kumeu property, ARC originally submitted in opposition.  Its position altered  when  the  encumbrance  precluded  any  future subdivision of the barren land.   Its expectation was that the transfer  of  the development  rights  from  Constable Road  to Kumeu would be on the condition that no further subdivision would be carried out on the Constable Road land.

e)        While ARC is not privy to the encumbrance it was a ‘party’ (as a submitter) to the proceeding in respect of which the encumbrance was agreed to and imposed as a condition.

f)         Both  in  terms  of  it  having  changed  its  position  (from opposition to support) in reliance on the encumbrance the ARC is a person whose rights or interests will be affected if PFL obtains the relief it seeks.

[29]     ARC also claims to represent the broader public interest in the outcome of this proceeding both in respect of the protection of regionally significant matters of national importance, and because of reliance by councils in the Auckland region on covenants, supported by registered encumbrances in cases similar to this one.

[30]     In her decision ruling on admissibility for the substantive hearing Duffy J doubted the relevance of evidence concerning the “landscape sensitivity values” of the land, holding that the interpretation of the encumbrance was unlikely to turn on the conservation value of the subject land.  Mr Casey argues however that in terms of what it is PFL seeks, a person representing the public interest affected by the values must be an appropriate party.  He submits it would likely be impossible in most if not  in  all  cases  to  reverse  the  consequences  of  a  finding  that  encumbrances supporting covenants and other conditions, such as in the present case, can readily be discharged as PFL contends.

Summary of ARC’s application position

[31]     It is that ARC is directly affected because it was a submitter to the original application in 1997 whose position changed when the values it protects were secured by the encumbrance.

[32]     By the provisions of the Resource Management Act the ARC is required to observe and enforce observance of its regional responsibilities to ensure the values it represents are given proper effect.

[33]     Extensive use is made of encumbrances for the purpose of protecting those values.

[34]     ARC also represents the broader public interest throughout the country in its day to day conduct of business.

[35]     Although Duffy J refers to matters which were unlikely to be relevant to the question of the interpretation of the encumbrance it did not mean that someone else would not be affected by the outcome.   Therefore a party that was going to be

affected by the outcome ought to be a party even though they were not a party to the particular issue.  The Learned Judge indicated that this case may prove to be a test case involving the use of extrinsic evidence to determine the purpose of a registered instrument containing a covenant in gross.

[36]     If this will be a test case then the Court may enquire into the circumstances when the encumbrance was entered into and recourse may be given to the circumstances then prevailing.

Considerations

[37]     In  the  outcome  of  matters  considered  by Duffy J  counsel  agreed  to  the excision of a number of paragraphs which gave evidence of facts pleaded about which there was no dispute.  However there was also an excision of significant parts of  Mr  Barton’s  affidavit  because  they  were  considered  irrelevant.    Such  parts included reference to landscape and visual qualities as those were reflected in ARC’s policy statement and in RDC’s District Plan.  Also excluded were statements:

a)	Commenting on the general objective of the area of which the land formed part.

b)	Of the affect of the grant of subdivision consent in 1997 and of the process by which that occurred.

c)	Of the values of submitters at the hearing application.

[38]     For the purposes of the present application the ARC relies upon Mr Jarvis’ affidavit which describes ARC’s consideration in changing its position as an objector to one providing support.  ARC claims to be in a position of being directly affected because it was a submitter at the application hearing.   In that respect it was an objector which like a number of others representing environmental interests, were entitled to be heard because of their claim of being adversely affected.

[39]     Before me the ARC asserts this claim of a direct interest because it was a submitter.   If from this ground alone the ARC was permitted to assert a claim of

special interest then it appears that any number of other objectors asserting environmental interests could claim an interest to join this proceeding.

[40]     The ARC claims it changed its position from objection to support on the basis that the encumbrance protected the interests it represented.  But, it is clear from the wording of the encumbrance that it does not future proof further subdivision development because with the consent of the covenanting parties further subdivision may be permitted.  The Barton affidavit excisions were completed following a clear indication by Duffy J that evidence regarding the views of the parties who submitted doing the Resource Consent application, and evidence relating to the conservation value of the subject land, would be inadmissible.  It seems to me, upon a review of Mr  Jarvis’  affidavit  that  the  ARC  seeks  by  its  joinder  application  recourse  to evidence of a similar kind to that which Duffy J ruled was inadmissible.  I think Mr Mills submission is correct when he says that if Mr Jarvis was to give evidence about the affect the encumbrance had on the sale value of property in order to lay a foundation for a submission that PFL was aware of the encumbrance when it bought the land, a need for discovery and further evidence from the plaintiff would be required.  The balance of Mr Jarvis’ evidence appears to provide an endorsement of the evidence of Mr Barton, most of which was excluded by Duffy J.

[41]     The encumbrance is a contract to which ARC is not a party.   It derives no interest from it save in general terms claimed in the name of the public interest and for the purpose of enforcing its perception of public values.  Counsel have referred to a  number  of  case  authorities  which  discussed  the  circumstances  affecting  third parties  in  order  to  justify  the  rights  of  those  third  parties  to  be  represented. Invariably each authority refers to those rights being confined to interests “directly affected”.   Obviously that will occur if a third party’s pocket or property will be affected in the outcome.   The present case has similarities to that dealt with by
Barker J in Proprietors of Taharoa C v Maori Trustee .  The case concerned the

Crowns desire to sell to sell its shareholding in a Maori incorporation.  The Maori Congress applied to be joined to that proceeding.   It claimed to represent Maori interests and wished to be heard upon the issue of whether or not the shares ought to be sold.  Barker J stated:

It is difficult to see in law what cause of action can be alleged by the plaintiff against these persons who wished to be added as defendants; clearly the plaintiff  wishes  to  sue  only  the  defendant  with  whom  it  says  it  had  a contract.  However the absence of a cause of action is not necessarily fatal to an application for joinder as a party made by a non party. [P 238]

It  is  difficult  to  see  on  a  simple  contract  claim  how  the  input  of  the applicants could affect the result.  The defendant is competently represented. I have no doubt that at the substantive hearing all proper issues and evidence will be presented to me.   So that to some extent, apart from the technical considerations, it is difficult to see how the presence of the applicants could assist towards the resolution of this matter. [p 239]

[42]     In this case the ARC says it needs to be represented at the trial so that the Court can understand all the issues involved.  In my view the Court will otherwise be well informed of all the other implications raised by the proceeding.

[43]     The case is not about resource consent issues although it was a resource consent application that gave rise to and was dealt with by an encumbrance.  What this proceeding addresses is a challenge relating to the rights of a subsequent owner of the property.   The parties agree that encumbrance is a mortgage.   The issues arising concern the rights to have that mortgage discharged.

Summary

[44]     At the heart of this case is a contract entered into as part of a resource management process.  That, it seems to me confines the process for a review of the contract.  I do not think the ARC’s case is improved by it having been a submitter to the original application hearing.  I am cautious of claims of actions in the name of the public interest and consider those ought to be viewed circumspectly in circumstances where it appears, the Courts have not been prepared in similar circumstances to go before.

[45]     I am not in the alternative prepared to consider permitting the ARC rights as an intervener.   In the special circumstances of the Wilson case the High Court adopted that option but significantly circumscribed the rights of participation.

[46]     As Fogarty J noted in Meridian Energy Ltd v Central Otago District Council and Anor , there may be an inherent power of the Court to allow a third party to be heard without strictly being a party but the claim to intervene ought to be considered as a discreet application for separate consideration.  That entails providing the Court with guidelines upon which an application be considered, and not leaving to a Court to guess the extent of parameters within which such participation should be confined.
I consider claims to represent the public interest to be much less certain than the claims considered in the Chamberlains and Wilson cases.

[47]     Also of concern to the Court is the potential for prejudice that would be caused if the joinder application was to be granted.  The trial has been set for four days.  PFL wishes to cross examine four of the plaintiff’s five witnesses.

[48]     From the beginning Mr Mills has advised the Court he considers seven days will be required for trial.  Moreover the plaintiff’s subdivision consent is at risk if this proceeding is not completed by early 2011.

[49]     Even if I was to consider that the ARC’s application met the jurisdiction requirements of Rule 4.56 I would have used the Court’s discretion to refuse joinder for reasons associated with the risk caused by the potential delay that has occurred pending this application for joinder being filed.  That it might have been filed was heralded in July 2009 but the application was not made until February of this year.

Result

[50]     The application is dismissed.  The ARC is to pay PFL’s costs on a 2B basis. [51]     Leave is reserved to apply if the parties cannot agree upon the quantum of
costs.

Associate Judge Christiansen