Pati v Ghuznee Holdings Limited [2014] NZCA 482 (1 October 2014)

Last Updated: 13 October 2014

IN THE COURT OF APPEAL OF NEW ZEALAND
CA407/2014 [2014] NZCA 482
BETWEEN	PENE SUMULETO PATI AND RICARDO OSCAR MARQUES Applicants
AND	GHUZNEE HOLDINGS LIMITED Respondent

Court:	Harrison, Stevens and Wild JJ
Counsel:	D R Bigio and J M Pidgeon for Applicants H P Holland for Respondent
Judgment: (On the papers)	1 October 2014 at 2 pm

JUDGMENT OF THE COURT

1. The application for an extension of time to appeal is dismissed.

2. The applicants are to pay the respondent’s costs of the application on a band A basis with usual disbursements.

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REASONS OF THE COURT

(Given by Wild J)

Introduction

[1] The applicants apply under r 29Aof the Court of Appeal (Civil) Rules 2005 for an extension of time to appeal.
[2] The application is opposed, primarily on the ground that the proposed appeal lacks any merit.
[3] We need not set out the well established factors relevant on an application such as this. The respondent accepts the delay here was minimal. There is nothing in the conduct of either party arguing for or against the grant of an extension of time. In deciding where lie the interests of justice, we consider the two critical factors are the merits of the proposed appeal and, to a lesser extent, whether the delay has or may prejudice the respondent. Some background is necessary before we deal with these two factors.

Background

[4] The applicants are the registered proprietors of Unit C in what previously was the Culverden Retirement Village in Mangere East. They purchased it in 2009 from the estate of the elderly owner, Mrs McLuckie, who had died in 2008. The retirement village ceased operating in 2010. The respondent purchased 40 of the 41 units in a mortgagee sale in 2012. It was not able to purchase the applicants’ unit, Unit C, because it was not mortgaged to the previous owner and operator of the retirement village, Culverden Retirement Village Ltd (Culverden).
[5] On 24 June 1998 Culverden and Mrs McLuckie entered into a Deed of Modification of Covenant. The Deed modified a covenant that had been registered against the title to Unit C since Mrs McLuckie acquired it in June 1992. That Deed of Modification:

• (a) recited that Unit C was located in the “Culverden Retirement Village”;
• (b) recited also that Mrs McLuckie had, by her 1992 covenant, agreed not to sell Unit C other than to the owner of Unit Q (“the dominant owner”);
• (c) recorded that Culverden and Mrs McLuckie agreed to rescind the 1992 covenant restricting sale;
• (d) recorded Mrs McLuckie covenanting and agreeing with Culverden to observe and perform the stipulations contained in the First Schedule to the Deed of Modification “so as to bind the Unit for the benefit of Unit Q with the intention that each of the said stipulations and restrictions shall endure for the benefit of Unit Q ... forever”; and
• (e) contained the following in its First Schedule:

1. OPTION TO PURCHASE

The dominant owner shall have the option to purchase the Unit which shall be exercisable at any time:

(a) upon the Unitholder ceasing to occupy the Unit, or

...

[6] In his judgment Gilbert J dismissed the respondent’s application for summary judgment on its claim that it has exercised the option to purchase Unit C set out in [5](e[1] above.¹ While they are content with that outcome, the applicants wish to appeal against that part of the judgment in which Gilbert J held the 1998 covenant ran with the land, and so inured for the benefit of the respondent.
[7] The Judge referred to s 302 of the Property Law Act 2007 which provides that a covenant such as the one in issue here binds the covenantor’s successors in title “unless a contrary intention appears in the instrument”.^[2] The Judge stated:

[12] There was nothing in the Deed of Modification to suggest that the parties intended that the restrictions would no longer bind or benefit their successors in title. To the contrary, there are a number of indications that they intended that the covenant would continue to run with the land. First, the deed was registered against the title to Unit C. Second, Clause 2 of the Deed of Modification refers to the unit holder covenanting and agreeing with Culverden “so as to bind the unit” (Unit C) “for the benefit of Unit Q” with the intention that each of the restrictions would “endure for the benefit of Unit Q and every part thereof forever”. Third, the indemnity for any breach by the unit holder applies only while that unit holder is the registered proprietor of the unit. The indemnity is in favour of the dominant owner. Thus, the indemnity contemplates that subsequent unit holders may breach the covenant and attract a liability to the dominant owner from time to time but any particular unit holder will only be liable to the extent of his or her own breach.

[8] The Judge accordingly concluded the covenant ran with the land and the respondent was entitled to enforce it against the applicants. He stated “there can be no doubt that this covenant ran with the land”.^[3]
[9] The nub of the applicants’ proposed argument on appeal is that the covenant created only personal obligations as between covenantor and covenantee while the property was operated as a retirement village. The covenant did not run with the land and is not enforceable by the respondent against the applicants, as the property is no longer a retirement village. The applicants intend arguing that enforcement now of the covenant village is illogical. They seek to bolster their argument that the covenant does not run with the land with a submission that there was no legal ability to grant a covenant over a unit title prior to the enactment of the Unit Titles Act 2010.
[10] We see no merit in any of these arguments, nor any room to fault the Judge’s approach in interpreting the covenant. While its genesis may well have been the former retirement village, the Judge correctly pointed to several indications that the covenant was intended to bind successors in title, and to the lack of any contra indications.
[11] We view the submission that the covenant was not registerable prior to the 2010 Act as patently wrong. It is at variance with our understanding of conveyancing practice. It is based on this Court’s observation in Disher v Farnworth: “No restrictive covenant was registered, as apparently the District Land Registrar took the view that such a covenant could not be registered against a unit title.”^[4]
[12] All the Court was recording in Disher was the District Land Registrar’s (DLR) view. As the respondent points out, this Court’s summary, earlier in its judgment, of the way the Unit Titles Act 1972 operated is at variance with the DLR’s view. We refer particularly to the Court’s statement: “Once created a stratum title can be dealt with as if it were an estate in the land.”^[5] Section 126A of the Property Law Act 1952 was the notification provision in force when the Deed of Modification of Covenant was entered into in 1998. It enabled the DLR to enter a covenant on the land register.
[13] The respondent has also relied on the decision in Myers Park Apartments Ltd v Seahorse Investments Ltd,^[6] particularly [41] of Venning J’s judgment. That case is not in point because the redevelopment covenant in issue was registered against the titles to the base land immediately before the redevelopment plan was deposited and the new unit titles issued. As the covenant had been notified to the affected unit title holders before they purchased their units, Venning J held “there is no reason at law why effect should not be given to that covenant”.^[7]
[14] To summarise, we consider the primary ground of appeal raised by the applicants is unarguable and the proposed appeal has no prospect of success.

Summary and result

[15] The proposed appeal is hopeless. The interests of justice are not served by extending time for a hopeless appeal.
[16] For this reason, the application is dismissed.
[17] The applicants are to pay the respondent’s costs of the application on a band A basis with usual disbursements.

Solicitors:
Pidgeon Law, Auckland for Applicants
Bramwell Grosswell, Hastings for Respondent

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^[1] Ghuznee Holdings Ltd v Pati [2014] NZHC 1222.

^[2] Property Law Act 2007, s 302(2). The predecessor to s 302, s 64 of the Property Law Act 1952, was to the same effect.

^[3] At [10].

^[4] Disher v Farnworth [1993] 3 NZLR 390 (CA) at 397.

^[5] At 393.

^[6] Myers Park Apartments Ltd v Seahorse Investments Ltd [2006] NZHC 857; (2006) 7 NZCPR 454 (HC).

^[7] At [44].