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Court of Appeal of New Zealand |
Last Updated: 13 September 2017
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Brewer J)
Introduction
[1] This appeal concerns the desire of the second respondent (Children’s Health Camps the New Zealand Foundation for Child and Family Health and Development known as Stand Children’s Services (Stand)) to use a building on land it owns in Paraparaumu (the land) for the purposes of establishing a “Children’s Village” (a children’s health camp).
[2] In late 2015, Stand sought a declaration in the High Court to the effect that a restrictive covenant registered against the title to the land will not prevent it using the building for a children’s health camp. The appellants, together with six other immediate neighbours of the land, opposed the granting of the declaration. Simon France J made the declaration sought.[1] The appellants appeal his decision.[2]
The covenant
[3] The restrictive covenant provides:
No buildings may be constructed or used for commercial or industrial use unless such use is a predominant use under the code of ordinances of the Kapiti Coast District Council for such lot.
The issue
[4] The issue for Simon France J was, and is for us, whether the use of the building on the land as a children’s health camp would be a commercial use that is prohibited by the restrictive covenant.
The intended use
[5] We adopt Simon France J’s description of the intended use of the building:[3]
[6] The site would have children for 11 months of the year, there being a four week shut down over the Christmas/New Year period. It is anticipated there would be nine intakes a year, each lasting 35 days. Not all children of a particular intake will necessarily be there for the whole five week period. There would be some weekends between intakes, and also two training weeks per year, when no children are present.
[7] Whilst attending the facility, the children would live and sleep on site and be supervised at all times. However, no staff would sleep onsite — there would be night staff but they would be on active duty as opposed to sleeping onsite.
[8] The following extract from the evidence of Dr Anne Inkpen, the Chief Executive of Stand, provides a sufficient overview of what would be involved with the children’s stay:
[9] In terms of supervision, it is anticipated the maximum number of staff on site at any one time would be 17. However that occurs at the changing of shifts, and the more regular situation would be six to eight staff during weekdays, and two to four during weekends.
[10] The children or their families do not pay for the time spent at a Children’s Village. Stand has contracts with government departments which fund these services and that is their primary funding source. The staff are paid employees as opposed to volunteers.
[11] As for the site itself, it presently has a very large dwelling of 1120 m2 on a 1.8 ha allotment. It is proposed to do major internal modifications. The defendants emphasise, among other aspects, the fact there would be a reception area, meeting room, and office space which together would occupy about 204 m2.
The High Court judgment
[6] In the High Court, Stand argued that the covenant was to be given its ordinary meaning. The first part of that is to ask whether the use in issue is commercial or industrial. If it is not, then the covenant does not apply. If it is, then the second part is to see whether the use is authorised as a predominant use by the Kāpiti Coast District Council (the Council) Code of Ordinances.
[7] The appellants submitted that the covenant must be read as a whole and interpreted having regard to the currently applicable Council planning documents. That would mean a single inquiry focused on the rules of the Council District Plan (it being the replacement for the Code of Ordinances), including the principle that if a use is only partly commercial then the use is nevertheless commercial for planning purposes.
[8] Simon France J preferred Stand’s approach:
[29] The [appellants’] approach is an example of working backwards from a preferred outcome. It also illustrates why courts have placed emphasis on beginning with the plain and natural meaning of a word, and only delving deeper if that meaning is ambiguous or appears to create unexpected situations. The restrictive covenant here is a relatively simple provision that can be analysed in a straightforward way exactly as the plaintiffs contend. Is the proposed use a commercial use? If not, that is the end of the inquiry. If so, it is prohibited unless it can be shown it is a predominant use under the code of ordinances.6 There is no need to resort to the District Plan at all until one answers the first question in the affirmative.
[9] The Judge considered the proposed use and concluded:
[31] Stand is a charitable trust that seeks to provide a temporary residential respite for children in need. During the short period they live at the site, Stand will seek to give the children some life skills and a good time. The children also need, to varying degrees, professional help, and that is provided. But primarily the use of the building will be to provide them with a temporary home. The children and their families are not charged for the assistance. It is paid for by the charitable trust. There is nothing commercial about all this.
The appeal
[10] The appeal is by way of rehearing. We must come to our own view of the case and if our view differs from that of Simon France J, then it is our view that must prevail.[4]
[11] We turn to the interpretation of the restrictive covenant. Simon France J and the parties agreed that the approach to be taken is that applicable to the interpretation of contracts.[5] We concur. We accept, of course, that the covenant is on a public register and creates interests which bind the owners for the time being of both the servient tenement and the dominant tenements. As the Judge noted, there are decisions that suggest public documents must be construed having regard only to the document itself, since that is what the public sees.[6]
[12] In Big River Paradise Ltd v Congreve, which also concerned the interpretation of a restrictive covenant, this Court doubted that all extrinsic factors should be ignored.[7] Like the Court in Big River, we prefer to go no further than that because here the extrinsic background is not important.[8]
[13] The current approach to the interpretation of contracts, applied to a restrictive covenant, is to construe its words as a whole, according to their natural meaning, read in the light of the surrounding circumstances when the instrument came into being.[9] Words should be given a meaning in tune with the environment in which the document is intended to function.
The appellants’ submissions
[14] In this case, the covenant came into being in the context of a subdivision of land into some 200 lots. All but about 25 of the lots are zoned residential. The remaining lots (of which the land is one) are either zoned rural and adjoin the Paraparaumu aerodrome, or are zoned commercial and are located at the entrance to the subdivision precinct. All, or most, of the rural zoned properties are in the 1 ha to 2 ha area range. The land in question is about 1.8 ha in area. Each rural and residential lot has the restrictive covenant registered against its title.
[15] Mr Maassen for the appellants submitted that, broadly speaking, New Zealanders know that land use classes fall into four basic categories — residential, commercial, industrial and rural. They know that land which is zoned residential is where people live and that the other three categories are working and economic activity zones. Therefore, the purchasers of lots in the subdivision anticipated that they would be in an area for residential living, with a small part being rural residential, which would not become a place of commercial or industrial activity unless the underlying zoning permitted it.
[16] To this point we agree with Mr Maassen. But then his submission becomes that the broad understanding of New Zealanders as to what constitutes commercial use fits well within the current District Plan definition of commercial activity. The District Plan provides:
Commercial activity means any activity involving commercial transactions, or providing commercial or administrative services, and includes retail trade premises, non-school activities, offices, and banks; but excludes premises or activities involving industrial manufacture or production.
[17] Mr Maassen points out that this definition does not have regard to the nature of the entity doing the commercial activity. It is irrelevant whether the actor is in the public, private or “third” sector. Likewise, the definition does not speak to purpose. A commercial activity is a commercial activity regardless of whether it is carried out for private profit or to achieve charitable goals.
[18] This is the nub of the appellants’ appeal. Simon France J erred, Mr Maassen submits, in taking into account the charitable purpose of the use of the building as a children’s health camp. Instead, the Judge should have considered the definition provided in the District Plan and concluded that the proposed use would be a commercial use. On this definition, even if part of the use would be commercial, and it is, they submit, then the Judge should have found the whole of the use to be commercial, and Stand’s proposed actions prohibited by the covenant.
Our analysis
[19] We accept, as did Simon France J, that Stand’s proposed use is not residential in the ordinary meaning of that term. We accept also:
- (a) Stand provides its services pursuant to contracts with the Crown. It intends to achieve a financial surplus, and its rules require any such surplus to be applied to its charitable purposes.
- (b) The use of the building would include use as a regional service centre. It would provide office and administrative support for a regional manager whose role includes coordinating community outreach activities performed by eight community service workers.
[20] However, the appellants’ case still depends on whether Simon France J was wrong to construe the restrictive covenant by looking for its natural meaning rather than by having regard to the definitions in the current District Plan and the underlying planning principles.
[21] It is clear that the covenant was intended to help maintain the character of the overall subdivision. How it was to accomplish this could have been expressed more clearly. First, the phrase, “used for commercial or industrial use”, is not defined or further explained. Second, “commercial or industrial use” is not a term defined in resource management legislation, with no definition of these terms provided in either the Town and Country Planning Act 1977 or the Resource Management Act 1991. Then there is the proviso: “unless such use is a predominant use under the code of ordinances”. This necessarily imports resource management concepts.
[22] In our view, the first part of the covenant must be given its ordinary meaning. The language used is not congruent with the planning document referred to in the proviso, or with the relevant resource management legislation. If the first part had been intended to be interpreted on a planning document/resource management basis then the language would have reflected that.
[23] The proviso qualifies the ordinary meaning of “commercial or industrial use” by exempting uses which would be permitted as of right by the applicable planning/resource management regime. In other words, it is the scope of the exemption that is determined by the applicable regime.
[24] It follows that we agree with the submissions for the Council that the strongest indicator that “commercial use” was not intended to have a specialised meaning is that the Code of Ordinances in force at the time the covenant was drafted did not contain or define that term. Instead, the Code used zoning to demarcate areas of land and set out “predominant uses”, specifying the activities that could be undertaken on land in a zone without a consent. For commercial zones, the Code specified predominant uses often using the word “commercial”, but without defining it. As the Council put forward in its written submissions:
... the code did not elaborate on its reference to “commercial” or define “commercial use”. Put simply, a reader of the code interpreting “commercial” had to do so by reference to the ordinary meaning of that word.
It follows that if the parties to the Covenant had intended the prohibition on “commercial use” to be understood by reference to the code, ultimately that exercise would have led to the same endpoint — the ordinary meaning of the words.
[25] In Big River Paradise Ltd v Congreve, the restrictive covenant at issue was:
No subdivision of the Servient Lot shall permit the creation of more than three separate allotments nor permit more than one dwelling to be erected on each such allotment.
[26] The parties there argued the applicability of different definitions of “subdivision” in iterations of the Resource Management Act. However, this Court held:
[32] If it were right to construe the restrictive covenant by reference to the definitions in the Resource Management Act, we have no doubt that, in the absence of contrary wording, this would be to the definitions as they stood in June 2001 when the covenant was executed. But we can see no good reason why the covenant should be construed by reference to the Resource Management Act. As Texaco Antilles Ltd v Kernochan illustrates at p 621, statutory definitions of words are often unhelpful in ascertaining their “ordinary meaning” when used in a contractual setting. The Resource Management Act defines “subdivision of land” for the specific purpose of identifying the types of subdivision which are subject to control under that Act. There is no obvious logic in applying that definition to “subdivision” when used in the restrictive covenant given the very different context.
[27] The same can be said here. The District Plan definition of “commercial activity” is in a specialised context. Its purpose is to facilitate understanding of how the District Plan governs the use, development, and protection of land and other resources within the district.
[28] Accordingly, we find that whether Stand’s proposed use is a commercial use is to be determined by having regard to the natural meaning of that term read in the light of the fact that this was a mostly residential and partly rural subdivision of considerable size. If Stand’s use is not commercial in this sense then the proviso does not need to be considered. Of course, if it is a commercial use in its natural meaning then the proviso, however interpreted, will not assist Stand.
[29] In our view the focus of the inquiry has to be on the use for the building which Stand proposes. It is the use that is the focus of the covenant. The use as a children’s health camp, and the activities within the use, are explained at [5] above. The inquiry is whether such use would be commercial. The[10]udge said:10
The task is not to define the scope of commercial but to determine if the proposed activity is prohibited by the covenant.
[30] With respect, that begs the question somewhat. Unless the scope of commercial has been defined — at least to an extent — then it is not possible to determine if the proposed use is prohibited by the covenant for being commercial.
[31] Mr Maassen takes issue with the Judge having regard to the Oxford English Dictionary’s definition of “commercial”. But we think he was right to do so. It is a useful starting point when one is seeking the normal meaning of a term.[11] It is, as set out in the judgment:[12]
1. engaged in or concerned with commerce; 2. having profit as a primary aim rather than artistic etc.
[32] In our view, the second part of that definition captures the commonly understood meaning of “commercial”. It is commerce for profit. A business. For the reasons given by Simon France J,[13] we do not consider that Stand’s proposed use of the building would be a commercial use within the meaning of the covenant. The proposed use is one of providing accommodation and therapeutic services to children and housing some of the necessary administrative operations that go along with that. We do not see that this can be characterised as being engaged in commerce for profit.
[33] We accept that a different answer might be reached on a resource management analysis. The Council appeared before us because it considers that there is no linkage between “commercial use” as contained in the covenant and “commercial activity” as defined in the District Plan. We agree and make it explicit that this judgment concerns the interpretation of a restrictive covenant and does not purport to interpret the Council’s District Plan.
[34] Finally, the appellants submitted, as a preliminary point, that the covenant must be read using “updated terminology”. That is because when the covenant was executed in 1999 it used terms applicable under the Town and Country Planning Act. However, by that date the Resource Management Act applied. There was no longer a Code of Ordinances and no such concept as predominant uses. The inference is that the drafter of the covenant did not realise that the law had changed.
[35] The appellants submitted that the covenant should be read:
No buildings may be constructed or used for commercial or industrial use unless such use is a permitted use under the District Plan rules of the Kapiti Coast District Council for such lot.
[36] A very similar submission was made to Simon France J.[14]
[37] In the footnote which we quote at [8] above, the Judge accepted that predominant use would have to be updated. He referred to the “mobile interpretation” approach discussed by this Court in Big River Paradise Ltd[15] Congreve.15 The Judge’s acceptance of Stand’s interpretation argument meant he did not have to consider the content of the District Plan (or Code of Ordinances).
[38] For us, the point as to whether a mobile interpretation is warranted is moot. If the appellants’ argument for the unitary interpretation of the covenant was correct then neither the previously applicable Code of Ordinances nor the District Plan would allow Stand to use the building as a children’s health camp without some form of consent.
Result
[39] The appeal is dismissed.
[40] The appellants must pay the second respondent costs for a standard appeal on a band A basis and usual disbursements.
[41] The Council appeared for its own purposes and is prepared to bear its own costs. That is appropriate and we make no order of costs in favour of the Council.
Solicitors:
Cooper Rapley,
Palmerston North for Appellants
Greenwood Roche, Wellington for Second
Respondent
Buddle Findlay, Wellington for Ninth Respondent
[1] Doak v Rollander [2016] NZHC 1741.
[2] The other neighbours who were defendants in the High Court are listed as the third to eighth respondents in the appellants’ notice of appeal. These respondents took no part in the appeal.
[3] Doak v Rollander, above n 1.
[4] Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [5].
[5] Doak v Rollander, above n 1, at [13].
[6] At [14], referring to Opua Ferries Ltd v Fullers Bay of Islands Ltd [2003] UKPC 19, [2003] 3 NZLR 740 (PC) and Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA 45, [2007] 233 CLR 528.
[7] Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 at [19]–[21]. The particular discussion was with reference to the decision of the High Court of Australia in Westfield Management Ltd, above n 6.
[8] The Supreme Court took a similar approach in Lakes International Golf Management Ltd v Vincent [2017] NZSC 99.
[9] See Bonner v Summerland Property Development Ltd (2002) 8 NZCPR 616 (HC) at [33]–[37], applying Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 (HL) and Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 (CA).
[10] Doak v Rollander, above n 1, at [30].
[11] See Lord Sumption, Justice of the Supreme Court of the United Kingdom “A Question of Taste: The Supreme Court and the Interpretation of Contracts” (Harris Society Annual Lecture, Keble College, Oxford, 8 May 2017) at 9: “I find the belittling of dictionaries and grammars as tools of interpretation to be rather extraordinary. Language is a mode of communication. Its efficacy depends on the acceptance of a number of conventions that enable people to understand each other. Dictionaries and grammars are simply reference books which record these conventions. If we abandon them as the basic tools of construction, we are no longer discovering how the parties understood each other”.
[12] Doak v Rollander, above n 1, at [34]. See also Tony Deverson and Graeme Kennedy (eds) The New Zealand Oxford Dictionary (Oxford University Press, Melbourne, 2008) at 219.
[13] Doak v Rollander, above n 1, at [31]–[37].
[14] The appellants at that time thought that the equivalent of predominant was permitted and controlled. The Judge doubted that and on reflection the appellants concur that the equivalent is simply permitted.
[15] Big River Paradise Ltd v Congreve, above n 7.
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