Clearspan Property Assets Limited v Spark New Zealand Trading Limited [2017] NZHC 277 (28 February 2017)

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BETWEEN	CLEARSPAN PROPERTY ASSETS LIMITED Appellant
AND	SPARK NEW ZEALAND TRADING LIMITED First Respondent VODAFONE NEW ZEALAND LIMITED Second Respondent
AND	KORDIA LIMITED Third Respondent

Hearing:	13 October 2016 with supplementary submissions filed on 14 November 2016
Appearances:	D J Chisholm QC and J C Brabant for Appellant M M Casey QC and R M Devine for First Respondent J Caldwell for Second Respondent H J Ash and M A J Wood for Third Respondent
_Judgment:	_{28 February 2017}

This judgment is delivered by me on 28 February 2017 at 2 pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

CLEARSPAN PROPERTY ASSETS LTD v SPARK NEW ZEALAND TRADING LTD [2017] NZHC 277 [28 February 2017]

[1] This appeal concerns the boundary between the law of property rights and the law regulating the use of land. Clearspan Property Assets Ltd (Clearspan) has bought rights to land under cell towers leased by telecommunications companies (Telcos). Clearspan bought an undivided share of a landowner’s land, as tenants in common with the landowner. Clearspan and the landowner also entered mutual covenants conferring on Clearspan exclusive use of the land under the towers. This put Clearspan in a more powerful negotiating position with the Telcos than would be each individual landowner.

[2] Spark New Zealand Trading Limited (Spark), Vodafone New Zealand Limited (Vodafone) and Kordia Limited (Kordia) say that Clearspan is required to abide by the regulatory provisions of the Resource Management Act 1991 (RMA) which govern subdivisions. The legal issue is the scope of the words “disposition by way of sale ... of the fee simple to part of the allotment” in s 218(1)(a)(ii) of the RMA. If Clearspan’s arrangements fall within that, as the Environment Court found, they are subject to regulatory requirements under the RMA. Otherwise they are not.

[3] I find the arrangement here is an artificial contrivance to achieve a similar substance and effect to division of fee simple ownership without falling within s 218. But s 218 defines the subdivisions of land to be regulated by the RMA specifically and exhaustively. In referring to fee simple to part of an allotment, s 218(1)(a)(ii) invokes long-established property law concepts. Clearspan’s arrangement is not, technically, within those concepts. I consider it would strain the words of the statute too much to interpret Parliament’s specific and exhaustive definition, referring to well known and relatively certain property law concepts, as extending to these arrangements, even using a purposive approach to interpretation.

[4] I consider s 218 of the RMA does not capture the arrangements here. I therefore uphold the appeal from the Environment Court. The result may mean individuals will attempt to contract around s 218 in marginal cases, as Clearspan has done here. If Parliament wishes to prevent that it will need to extend its definition of what may be regulated as a “subdivision” by the RMA.

[5] Spark, Vodafone, Kordia, Team Talk and Two Degrees operate cell towers and telemetric transmission towers at various locations throughout New Zealand. They are generally on relatively small (less than 100 square metre) sites leased for the purpose by the Telcos from a landowner.

[6] Clearspan was incorporated in 2007 for the purpose of aggregating the sites upon which cell towers are situated. Clearspan has in recent years negotiated with a number of the landowners an arrangement whereby Clearspan becomes responsible, and collects the rentals, for the land occupied by the towers. Clearspan’s evidence is that there are some 85 such arrangements as at early 2016.¹Clearspan also has other interests in Telco cell tower sites through utility subdivisions, where they are allowed under a district plan, or concurrent lease arrangements.²Clearspan suggests there are 4,000 communication sites operated by the three major Telcos in New Zealand, and Clearspan has interests in around 150 of those.

[7] Two specific test arrangements are the subject of this proceeding: a commercial property in Three Kings, Auckland, and a rural property in Waiuku; leased by Spark and Vodafone respectively. The essence of the arrangement involves:

(a) The landowner selling, and Clearspan purchasing, an undivided share of the property as tenants in common. Under s 72 of the Land Transfer Act 1952 (LTA) this entitles each to a separate certificate of title.

(b) The amount of Clearspan’s and the landowner’s (undivided) shares are determined by a survey plan deposited with the Land Transfer Office. The proportion of the survey area to the total allotment is the share that is transferred as tenants in common e.g. 21 out of 400

share generally corresponds to the proportion of the property taken up by the Telco lease.

(c) Each of Clearspan’s and the landowner’s interests are encumbered by a Memorandum of Encumbrance that is registered, to bind future owners. It includes cl 5:³

In the event the Encumbrancee transfers or alienates the land in the Encumbrancee’s Certificate of Title the Encumbrancee will transfer this memorandum of encumbrance to the same party who acquires an interest in the Encumbrancee’s Certificate of Title.

(d) Each Memorandum of Encumbrance incorporates a reciprocal Deed of Covenant in favour of the other tenant in common. In the covenant in favour of Clearspan the landowner agrees: ⁴

the Covenantor, their tenants, agents, licensees and invitees will not at any time use, occupy, enter or remain upon the Exclusive Use Area to the intent that the Covenantee will at all times be entitled to exclusive use, occupation and enjoyment of the Exclusive Use Area.

Under clause 2.2 Clearspan may grant rights over the area. The landowner has the same rights in respect of the balance of the land. Effectively, each agrees not to exercise their right of possession over the other’s covenanted area.

[8] The arrangement does not change the formalities of the Telco lease. But the landowner’s role as lessor to the Telco is assigned to Clearspan. Through the arrangement, Clearspan effectively becomes the party the Telcos have to negotiate with, and pay, for the sites they lease. The Telco’s negotiation of renewal of a lease, on expiry, would be with Clearspan, as it was in respect of the Three Kings site at issue here. The more such sites Clearspan have rights to, the more negotiating power Clearspan has with the Telcos. As a counter-measure, Clearspan suggests some Telcos are now negotiating clauses with landowners prohibiting dealing with the

[9] Spark and Vodafone sought a declaration under s 311 of the Resource Management Act 1991 (RMA) about whether a test arrangement constitutes a subdivision under s 218 of the RMA. A Full Court of the Environment Court decided it does. The consequence is that regulatory provisions of the RMA, including planning and consenting requirements, apply to the arrangement.

[10] Strictly speaking, subdivision of land relates to its ownership and alienation rather than its use. But the activities of the New Zealand Company in planning and implementing European settlement, and the Liberal Government’s breakup of the great estates in the 1890s, demonstrates the practical effects subdivision of land can have. Dating from provincial times there is a long history of subdivisions being governed by local government legislation in New Zealand. A succession of Land Acts from 1877 governed the sale and purchase of land, including its subdivision.

[11] The original objective of planning legislation in governing subdivision of land was to ensure adequate access and lot sizes.⁵Over time, subdivisions also came to be required to accord with the district planning scheme. The Municipal Corporations Act 1954 and the Land Subdivision in Counties Act 1946, which governed subdivisions, were consolidated in pts 20 and 21 of the Local Government Act 1974 (LGA). The Town and Country Planning Act 1977 (TCPA) provided for

district schemes which governed consents for subdivisions. Together, these Acts constituted the regulatory regime for subdivisions before the RMA. Most relevantly, s 271 of the LGA “deemed” a continuous area of land to be a subdivided if:

(a) The owner of land under the LTA, comprised in one certificate of title, “by way of sale, disposes of any specified part thereof less than the whole” or advertises or offers for sale any such part, or applies to a District Land Registrar for a certificate of title for any part less than

⁵Kenneth A Palmer Planning Law in New Zealand (Sweet & Maxwell, Sydney, 1977) at ch 8.

(b) The owner of land not under the LTA “disposes by way of sale of any specified part thereof less than the whole” or advertises or offers for sale any such part (s 271(1)(b)).

(c) “[A]ny division of land, whether into 2 or more allotments, shall be deemed to be a subdivision of that land for the purposes of sale if at least one of those allotments is intended for sale.” (s 271(3)).

1960s as a way to benefit from exceptions to subdivision controls in 1958 amendments. Section 271(4) excepted from the LGA subdivision under the Unit Titles Act 1972, cross-leasing or company leasing. The RMA captures all of these methods of subdivision, subject to exceptions outlined below.

[13] As provided in its long title, the RMA is “an Act to restate and reform the law relating to the use of land, air and water”. Its purpose is “to promote the sustainable management of natural and physical resources” (s 5(1)). Section 5(2) defines “sustainable management” to mean:

managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural well-being and for their health and safety while—

(a) sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and

(b) safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and

[14] The Supreme Court noted in Environmental Defence Society v New Zealand King Salmon Co Ltd that, in his third reading speech on the Bill, the then sponsoring minister, Hon Simon Upton, said “the Government has moved to underscore the shift

in focus from planning for activities to regulating their effects . . .”.⁶In the same decision the Court outlined how the RMA seeks to achieve its purpose by establishing, in pt 3, certain restrictions on the use of land and water. The Act then provides for a cascading series of plans, formulated at different levels of central and local government, in pts 4, 5 and 6 that govern categories of uses and the granting of specific consents to uses.

In achieving the purpose of this Act, all persons exercising functions and powers under it, in relation to managing the use, development, and protection of natural and physical resources, shall recognise and provide for the following matters of national importance:

(a) the preservation of the natural character of the coastal environment (including the coastal marine area), wetlands, and lakes and rivers and their margins, and the protection of them from inappropriate subdivision, use, and development:

(b) the protection of outstanding natural features and landscapes from inappropriate subdivision, use, and development:

(f) the protection of historic heritage from inappropriate subdivision, use, and development:

[16] In Environmental Defence Society v New Zealand King Salmon Co Ltd the Supreme Court noted the reference in s 6(a) to “inappropriate subdivision, use or development” replaced a reference in s 3(c) of the TCPA to “unnecessary subdivision and development”.⁸The Court held that “inappropriateness” should be assessed by reference to what it is that is sought to be protected or preserved.⁹

[17] Relevantly, in pt 3 of the RMA, s 11 legislates a general prohibition on the subdivision of land unless it is permitted in specified ways. Section 11(1) states “[n]o person may subdivide land, within the meaning of section 218” unless one of

(a) The general avenue, under s 11(1)(a), is that the subdivision is both expressly authorised by a national standard, plan rule or resource consent and shown on a deposited or approved survey plan. To be deposited, s 224 requires approval of the plan by the relevant consent authority.

(b) More specifically, under ss 11(1)(a) to (d), subdivision may be effected by any of: taking part of an allotment under the Public Works Act 1981; establishing a reserve under Te Ture Whenua Maori Act

1993; transferring or resuming land under the State-Owned Enterprises Act 1986; vesting or gifting to the Crown or local authority for the purposes of the Conservation Act 1987; transferring or gifting to Heritage New Zealand Pouhere Taonga or the Queen Elizabeth the Second National Trust; or transferring for access to landlocked land under the Property Law Act 2007 (PLA).

[18] The arrangements here are not expressly allowed under the general avenue and are not shown on such a survey plan and are not open to a specific avenue. If they fall within s 218, therefore, they are subject to the planning and consenting regime of the RMA.

[19] Some specific provisions of the RMA regime relate directly to subdivisions:¹⁰

(a) One of the five types of consents under s 87 of the RMA is a subdivision consent: “a consent to do something that would otherwise contravene section 11”.

(b) Section 106(1) empowers a consent authority to refuse, or impose conditions on, subdivision consents if:

(i) land or a structure on it, is likely to be subject to material damage including by erosion;

¹⁰Brookers Resource Management (online looseleaf ed, Brookers) at [APt10.Intro.02].

(ii) subsequent use is likely to accelerate, worsen or result in such material damage; or

(iii) there is not sufficient provision for legal and physical access to each allotment.

(c) Section 220 provides for 10 specific conditions that may be imposed on subdivision consents. Some of these concern esplanade strips, the coastal marine area or lake or river beds. Others concern requirements to amalgamate adjoining land or hold land as tenants in common for the purpose of access and requirements on compaction and filling of land and easements.

(d) Section 406, a transitional provision before district plans were formulated under the RMA, empowered a territorial authority to refuse to grant a subdivision consent if it considered the land was not suitable or the subdivision would not be in the public interest or there is not adequate provision for storm water drainage, disposal of sewage or supply of water or electricity.

[20] Section 218 is the first section in pt 10 and defines the subdivisions that are caught by the RMA:

(i) by an application to the Registrar-General of Land for the issue of a separate certificate of title for any part of the allotment; or

(ii) by the disposition by way of sale or offer for sale of the fee simple to part of the allotment; or

(iii) by a lease of part of the allotment which, including renewals, is or could be for a term of more than 35 years; or

(iv) by the grant of a company lease or cross lease in respect of any part of the allotment; or

(v) by the deposit of a unit plan, or an application to the Registrar-General of Land for the issue of a separate certificate of title for any part of a unit on a unit plan; or

(b) an application to the Registrar-General of Land for the issue of a separate certificate of title in circumstances where the issue of that certificate of title is prohibited by section 226,—

and the term subdivide land has a corresponding meaning. (2) In this Act, the term allotment means—

(a) any parcel of land under the Land Transfer Act 1952 that is a continuous area and whose boundaries are shown separately on a survey plan, whether or not—

(i) the subdivision shown on the survey plan has been allowed, or subdivision approval has been granted, under another Act; or

(ii) a subdivision consent for the subdivision shown on the survey plan has been granted under this Act; or

(b) any parcel of land or building or part of a building that is shown or identified separately—

(a) subject to the Land Transfer Act 1952 and is comprised in 1 certificate of title or for which 1 certificate of title could be issued under that Act; or

(b) not subject to that Act and was acquired by its owner under 1 instrument of conveyance—

shall be deemed to be a continuous area of land notwithstanding that part of it is physically separated from any other part by a road or in any other manner whatsoever,

unless the division of the allotment into such parts has been allowed by a subdivision consent granted under this Act or by a subdivisional approval under any former enactment relating to the subdivision of land.

(4) For the purposes of subsection (2), the balance of any land from which any allotment is being or has been subdivided is deemed to be an allotment.

[21] Sections 223 to 228 concern the approval and deposit of survey plans pursuant to consents. Sections 224 and 226 require a certificate by a territorial authority that it has approved a survey plan and the conditions have been complied with, for the survey plan to be deposited under the LTA. Deposition is required before a District Land Registrar may issue a certificate of title for subdivided land. Sections 219 to 222 of the RMA concern subdivision consents, consent conditions and completion certificates.

[22] Several court decisions have touched on subdivisions under the RMA but none have analysed its definition in depth.

[23] In 2004 Randerson J, in Waitakere City Council v Kitewaho Bush Reserve Co Ltd, considered arguments about the meaning of s 11.¹¹He was satisfied that “the RMA provides a “complete code” or “comprehensive code” for the control of the subdivision of land in New Zealand.¹²He considered that was supported by s 11’s reference to subdivision being effected under alternative enactments.¹³Randerson J rejected an argument that subdivision was a mere exercise in drawing lines on a map, noting “it is well recognised that the subdivision of land enables a more intensive use of the land than previously existed” in terms of numbers of dwellings, roading and infrastructure as is recognised in various provisions of the RMA such as s 106.¹⁴He considered these were reasons why subdivisions had ramifications for the

_{environment which are properly considered in plans and decisions under
the RMA.}¹⁵

¹¹_{Waitakere City Council v Kitewaho Bush Reserve Co Ltd
[2005] 1 NZLR 208 (HC).}

[24] In Big River Paradise Ltd v Congreve Williams J noted that, while the RMA provides a code for the subdivision of land, it does not apply to divisions of land that do not fall within the s 218 definition of subdivision.¹⁶In the appeal of that decision, William Young J for the Court of Appeal considered whether the terms “subdivision” and “allotments” in a restrictive covenant should be construed by reference to the RMA.¹⁷The Court could “see no good reason” why it should,¹⁸saying:¹⁹

A division of property accomplished by depositing a survey plan under the Land Transfer Act 1952 and the obtaining of separate titles is perhaps the core meaning of the word “subdivision”. But when the legislature has set out to regulate land development, it has customarily done so by reference to concepts of subdivision which go well beyond that core meaning, a proposition which is exemplified by the terms of s 218 of the Resource Management Act and the authorities cited by Williams J in the judgment under appeal.

[25] The Court interpreted the covenant there in light of its purpose of preserving the amenities of one property from the adverse effects of extensive and intensive development of the other property.²⁰

[26] In Horokiwi Holdings Ltd v Registrar-General of Land, the Court of Appeal considered technical arguments about the survey plan element of the definition of subdivision in s 218.²¹In a brief judgment, Ellen France J for the Court upheld a non-technical meaning of “division of land” being given to the word “subdivision” used in the definition of “survey plan” in s 2 of the RMA, in order to avoid circularity in the operation of ss 2 and 218.²²However it did not consider the meaning of s 218 itself. The Court concluded with reference to the s 271 LGA predecessor to s 218:

The two regimes are quite different. It is necessary to focus on the words used in the RMA and the statutory purpose. What has occurred in this case plainly fits within the statutory definitions.

²¹_{Horokiwi Holdings Ltd v Registrar-General of Land
[2008] NZCA 233, [2009] NZRMA 40.}

[27] In Mawhinney v Waitakere City Council the Court of Appeal considered questions about the effect of s 11 in restricting subdivision.²³In another brief judgment Robertson J, for the Court, observed that s 218(1)(a)(iv) captured subdivision by cross-leasing and a resource consent was required. He rejected the application for special leave to appeal as not raising arguable points of law, noting that s 11 presumptively prohibits subdivision. Of s 218, the Court stated “it is clear

that subdivision is not a purely technical matter and that the council is entitled to consider an application [for a subdivision consent] in light of the impact the subdivision will have on the management of associated resources”.²⁴

[28] A Full Court of the Environment Court, comprising Judges Dwyer and Smith, concluded the arrangement at issue here involves a division of the allotment because of the following factors:²⁵

(a) an agreement for sale and purchase indicates an intent to create a separate allotment;

(c) the transfer as to tenants in common is to be in the share to which each area bears to the total area of the land; and

(d) the covenants divide the operational responsibility for the areas as a matter of fact.

[29] The Court considered, because of the significant number of additional clauses

required, the arrangement here “clearly involves disposition beyond the simple transfer of a share in the tenants in common”.²⁶It considered:²⁷

²⁴At [27] citing Lakes District Rural Landowners Society Inc v Queenstown Lakes District

When we examine the Agreement for the disposition as a whole, it is clear that, without the plan and its consequent survey and deposition, none of the other dispositions contained in the agreement could occur. More particularly, the land transfer of the fee simple, as tenants in common, could not occur because the land area could not be fixed. It is this element which makes the allotment and partition envisaged by the attached plan critical to the entire agreement between the parties.

[30] The Court concluded the disposition by way of sale was made up of a number of elements, which do not constitute disposition by sale of part of the allotment individually but which do together.²⁸It considered “[i]n the end, the question is, whether on a proper construction of the entire Arrangement a disposition of rights sufficient to constitute a sale of the fee simple to part of that allotment has occurred in terms of s 218(1)(a)(ii) of the Act”.²⁹It was reinforced in this view by references to subdivision on Clearspan’s website and its correspondence.

[31] The Court was concerned the arrangement “would have the effect of avoiding

any oversight by the consent authorities, and particularly the provisions of s 225 and

226 of the Act”.³⁰It considered the broader purpose of the arrangement was “intended, by the parties, to effect a subdivision in all but legal sense”.³¹It concluded the parties did divide the allotment in such a way as to fall within s 218(1)(a)(ii) by:

(a) the centrality of the plan dividing the land to be surveyed and registered along with the other agreements entered into;

(b) the agreement for sale and purchase has the Plan and the new allotment at its centre;

We acknowledge that this is a matter of degree, and each element when analysed disparately cannot of itself support such an outcome. However, neither do they prevent such an outcome. So a tenants in common transfer can be utilised for a subdivision, often prior to the creation of the new allotments. Similarly, encumbrances are frequently parts of a subdivision.

Nevertheless, when combined the clear intent and effect of this Arrangement is to achieve a subdivision under s 218(1)(a)(ii). We conclude the agreements have derogated from the unity of possession fundamental to a tenancy in common, and led not only to a partition of the land and creation of a new allotment under the RMA, but a disposition by offer of sale of part of the fee simple.

(a) there has been a relinquishing of unity of possession as between the parties and the creation of permanent rights contrary to such unity of possession necessary for tenancy in common;

(b) secondly, that the parties intended to divide the land into distinct parts, with different rights accruing to each part;

(c) that the survey and deposit of the Plan with separate titles is required to support the tenancy in common transfer. The disposition requires the creation of a new allotment being part of the defined allotment. Accordingly, there is a disposition by sale of part of the allotment; an agreement to sell by way of offer for sale (actual sale) to part of the allotment.

(a) The Property Arrangements constitute a subdivision within the meaning of section 218 of the Act.

(b) Subdivision of the land does not come within the exceptions to the prohibitions on subdivision in section 11(1)(a) of the Act.

[35] Clearspan was a party to the Environment Court proceeding under s 274 of the RMA. Clearspan appeals under s 299 of the RMA on the question of law as to whether its arrangement is a “subdivision” as defined by s 218 of the Act.

[36] Mr Chisholm QC, for Clearspan, emphasises property law concepts. He says the Environment Court treated the arrangement as a subdivision in substance even

_{though it did not meet the legal requirements to constitute a
subdivision under}

s 218(1)(a)(ii). Rather, there has been a sale of an undivided share of the fee simple to the whole allotment. He submits the Court must focus on the statutory definition rather than Clearspan’s marketing material.

[37] Mr Chisholm submits the co-owners’ use of their land is the subject of contractual arrangements creating personal exclusive use rights. They do not grant the absolute exclusive use rights of a fee simple estate. He submits:

(a) The arrangements are secured by use of registered encumbrance instruments which are statutory mortgages only and do not create or transfer an estate in land which is what fee simple is.

(b) The covenants do not necessarily “run with the land”. It is only the statutory overlay of the LTA and PLA that allow the contractual rights under an encumbrance instrument to be potentially enforceable against future owners. A purchaser must, under s 97 of the LTA, expressly agree for them to be able to be sold with the tenancy in common.

(c) The encumbrance instrument could be discharged and the covenant could be defeated. The covenant would not inhibit the landowner from granting easements over Clearspan’s exclusive use area, or maintain existing easements or services under the land, providing doing so did not interfere with Clearspan’s reasonable use. Both co- owners jointly own all structures and buildings on the land. Breach of the encumbrance instrument is actionable in contract only. Each co- owner could sue third parties in trespass. And each co-owner can still be sued by third parties as owner of the whole of the land, including under s 9 of the RMA.

subdivision, which is defined to mean one of the five categories of division of an allotment in s 218(1)(a). He submits the words “part of the allotment” used in four of those five categories must have the same meaning, which refers to a specific physical part or portion of the property rather than an undivided share.

(b) Submits that “disposition” in s 218(1)(a)(ii) is expressly qualified by the words that follow it which means there must be a disposition of the fee simple to part of the allotment, which there is not here.

[39] Mr Chisholm also seeks to make something of the Registrar-General of Land having accepted the encumbrance instruments for registration but I do not consider that bears on the question of law I have to determine.

[40] In supplementary submissions on the legislative history Clearspan does not accept the intention of the RMA was to ensure all forms of land division were captured by the definition. Rather, Clearspan submits the intent was only to capture the types of land division which were specifically defined in s 218. Clearspan also submits the expression “part of the allotment” in s 218(1) of the RMA does not represent a significant change from s 271’s use of “specified part thereof” which reflects the language of the Registrar’s obligations under s 167(1) of the LTA.

[41] Mr Casey QC emphasises the purpose of the RMA on behalf of both Spark and Vodafone. He submits the tenant in common ownership is substantially (if not entirely) overridden by the reciprocal covenants which are intended to destroy the unity of possession fundamental to a tenancy in common. He emphasises Clearspan’s intention is to acquire full ownership of the land and take full control of the Telco lease. The arrangement confers on each of the parties the characteristics of exclusive, divided, fee simple ownership of their respective areas. He says the motivation is that using such arrangements is cheaper and faster than a conventional subdivision and, inferentially, avoids the potential that consent is declined or granted subject to unwelcome conditions.

[42] Mr Casey submits the RMA is a complete code for the control of subdivision. He submits that the arrangements constitute a subdivision as a matter of a purposive interpretation of the RMA. The arrangement is a smoke-screen which would undermine achievement of the purpose of the RMA. In respect of the text of s 218 he submits:

(a) The arrangements result in the “division of an allotment” in terms of the chapeau of s 218(1)(a) because the divided parts of the land are delineated on the survey plan for the purpose of exclusive use covenants which displaces the unity in possession of the tenancy in common. And there has been a “disposition by way of sale” under the sale and purchase agreements.

(b) The sale is of the fee simple to “part of” the allotment because the arrangements divide the fee simple rights in the allotment between the co-owners as to each of the separate parts. The covenants confer on each of the owners all the incidents of fee simple ownership of the Exclusive Use Area and take away all those incidents in respect of the other’s. The rights are completely divided, illustrated by the sale agreements and covenants providing for “common areas” between the landowner and Clearspan. The exclusive use provision is absolute.

(a) The intention, purpose and effect of the arrangements is essential to determining whether the legal criteria for a subdivision under s 218(1)(a)(ii) are met via consideration of the context of the RMA.

(b) The Environment Court did not fail to consider that the disposition had to be to the fee simple of part of the allotment and was correct in its view that it was.

(c) The arrangements result in disposition by way of sale of the fee simple to that part of the land under the Telco leases.

(d) The registered encumbrances and covenants cannot be dismissed as merely personal or a private agreement. By s 203 of the PLA they are enforceable by and against successors in title. Under s 62 of the LTA they attract indefeasibility. Under s 2 of the LTA “estate or interest in land” is defined to mean “every estate in land, also any mortgage or charge on land”. The vulnerabilities of the use of encumbrance instruments do not detract from the intent and effect of the sale.

(e) Many of the rights and liabilities Clearspan claims are retained by the tenants in common are unfounded or uncertain and are not a necessary incidence of fee simple.

[44] Ms Ash, for Kordia which appeared as an interested party in the Environment

(a) The key element of the definition of subdivision in s 218 is the reference to “fee simple”. In substance and effect, the arrangements constitute a sale of offer of sale of the fee simple, entirely different in substance to transfer of a share as tenants in common. This is because the arrangements involve the right to exclusive possession as against the other co-owner, the exclusive right of use and enjoyment of the exclusive area and the unrestricted right of alienation of the interest which are the key elements of an estate in fee simple. They are a package of interests, in perpetuity, which must always be held in the same ownership by virtue of cl 5 of the Memorandum of Encumbrance.

(b) The arrangements are a device to enable the sale of property interests giving rise to the division of fee simple land while avoiding the necessity of obtaining subdivision consent. As such the Environment Court was correct to conclude that the effect is to remove the control by the Council through the s 224(c) certificate and to seek to avoid the effect of s 225 and 226 of the RMA. If found lawful, such an

arrangement could easily be used in other situations which would undermine the code for subdivision established by the RMA.

[45] In supplementary submissions about the legislative history the Telcos submit that, in passing the RMA, Parliament may be considered to have had at least two purposes: adopting more modern drafting methods; and extending the scope of the provisions as a matter of policy to reach forms of subdivision that might not have been covered under previous legislation. Section 218(1)(a)(i) and (ii) retained the inclusion of conventionally understood forms of subdivision. Section 218(1)(a)(iii) to (iv) widened it to include subdivision by leases, cross-leases, company leases and unit titles. The Telcos submit the reliance in s 218 on the term “allotment” is more precise and consistent than the s 279 reliance on “certificate of title”. They note there is no explanation for why the term “fee simple” was introduced into s 218 and that it was not necessary. They submit it is unlikely Parliament would have intended to narrow the ambit of the conventional subdivision by doing so.

[46] Conceptually, the case lies at the intersection of the law of property rights and the law regulating the use of land. Legally, the question comes down to whether the definition of “subdivision” in s 218 of the RMA should be interpreted:

(a) with a wide meaning extending to arrangements with the same substance and effect of those that are explicitly caught?; or

(b) more strictly according to the text of the words it uses, and the legal concepts to which it explicitly refers?

[47] I have set out the parties’ submissions at some length because there is validity

[48] I agree with Clearspan that what is disposed of by way of sale in its arrangement is not technically the same as “the fee simple to part of the allotment”.

A fee simple estate is well understood as “the largest estate known to the law”.³⁴As Mr Casey and Ms Ash submit, fee simple ownership carries the exclusive right to possess, to use and enjoy and to alienate. Tenants in common acquire the fee simple to the undivided whole of the land they buy – “in common” with the other owners – to the extent of their share.³⁵They have “unity of possession” – the equal right to occupy, use and enjoy all the land. This is a form of co-ownership to the fee simple of the whole of an allotment, not of “part of” an allotment. As Mr Casey acknowledges, a sale of fee simple to tenants in common does not fall within the definition. I accept fee simple “to part of” an allotment refers to a specific physical portion of the property rather than an undivided share. It is different from fee simple to the whole of an allotment. Indeed, court orders of further division of property

owned by co-owners are explicitly subject to the requirement not to contravene the s 11 restrictions on subdivision.³⁶

[49] The Environment Court’s judgment implicitly acknowledges the arrangement does not technically fall within the legal definition when it:

(a) notes the disposition by way of sale was made up of a number of elements which do not achieve that status individually but which do together;³⁷

[50] Here the tenants in common have negotiated a further set of contractual arrangements that replicate most of the characteristics of them each having a fee

simple estate in part of the land. But the arrangements do not replicate all of the characteristics. There is a fundamental conceptual difference in law between an estate in land compared with an interest in land or a set of personal contractual arrangements. Mr Chisholm is correct that an encumbrance instrument is a statutory mortgage only – an interest in land - and does not create or transfer an estate in land. I do not agree with Mr Casey’s submission that personal contractual arrangements can fully “negate” an estate in land. The unity of possession of a tenancy in common is not “destroyed” by personal contractual arrangements, even though it may be subject to a heavy contradictory overlay.

[51] Rather I accept, as Mr Chisholm submits, that there are a (small) number of potential differences in practice between the rights and obligations of the co-owners effected by the arrangement and those that would be effected by transfer of a fee simple estate. For example, compared with Clearspan having fee simple ownership of the land under the cell tower, the landowner here can: grant easements; jointly own the structures and buildings; sue Clearspan only in contract; sue third parties for trespass; and be sued by third parties as owner of the land. And the covenants do not necessarily “run with the land” in the same sense as the attributes of fee simple do.

[52] At the same time, I agree with the Telcos that Clearspan’s arrangement is an artificial contrivance to avoid an undesired set of regulatory requirements. It attempts to achieve the substance and effect of a subdivision while attempting, technically, to fall outside the provisions of s 218. Clearspan’s own evidence is that it is referred to as a “Clearspan subdivision” in its marketing materials and on its website.⁴⁰

[53] Arguments that favour form over substance are not usually attractive. In the field of taxation law such arguments are addressed in New Zealand by statutory anti- avoidance clauses as canvassed by the Supreme Court in Ben Nevis Forestry

_{Ventures Ltd & Ors v Commissioner of Inland
Revenue.}⁴¹_{In England a similar
effect}

is achieved by purposive statutory interpretation as favoured by the minority in Ben

[54] There is force to Mr Casey’s submission that Parliament’s purpose in passing the RMA was to regulate all modes of subdivision and the courts should honour that through purposive interpretation of s 218. Parliament itself has mandated a purposive interpretation of statutes in New Zealand, in s 5(1) of the Interpretation Act 1999 which instructs the courts to ascertain the meaning of an enactment “from its text and in light of its purpose”. This has been given emphasis in the often-cited passage by the Supreme Court in Commerce Commission v Fonterra Cooperative Group Ltd that “[e]ven if the meaning of the text may appear plain in isolation of purpose that meaning should always be cross checked against purpose in order to

observe the dual requirements of s 5”.⁴³And the potential effects of inappropriate

subdivision on land use provide a potential reason for Parliament to provide an expansive definition of subdivision in the RMA.

[55] But there are limits to the capacity of a purposive approach to expand on the text of law. Meaning is ascertained “from” its text and only “in light of” its purpose. I agree that “purpose is there to help ascertain the meaning of text and not to override or dominate it”.⁴⁴The Supreme Court emphasises the starting point is the text. A court’s view of Parliament’s purpose is a cross-check. That can lead to ambiguity being interpreted in line with Parliament’s purpose. But it cannot change the text

itself and does not, in my view, justify judicial interpretation that is inconsistent with the text. The rule of law must still stand for the proposition that it is the law that rules, not those who make the law or apply the law or interpret the law. The law is the text. In the search for certainty of meaning the statutory text cannot be stretched beyond breaking point.

[56] What is the correct purposive interpretation of s 218? I agree with Randerson

_{J in Waitakere City Council that the RMA is intended to be a code
to regulate}

⁴²At [2], citing W T Ramsay Ltd v Inland Revenue Commissioners [1981] UKHL 1; [1982] AC 300 and Furniss

⁴³Commerce Commission v Fonterra Cooperative Group Ltd [2007] NZSC 36, [2007] 3 NZLR

⁴⁴Justice Susan Glazebrook “Do they say what they mean and mean what they say? Some issues

in statutory interpretation in the 21st century” [2015] OtaLawRw 7; (2015) 14 Otago Law Review 61 at 67-68.

subdivisions because they can affect the use of land which is the core focus of the RMA.⁴⁵But the definition of “subdivision” itself, in s 218, is relatively tight. It is defined exclusively to “mean”, rather than to “include” six specified means of subdivision in s 218(1)(a) and (b). The words chosen by Parliament to specify those six forms are specific to the forms of subdivision known at law on the enactment of the RMA. It would have been a reasonably simple task for legislative drafting to

make the definition non-exhaustive. Parliament could have included an anti- avoidance clause, or included some catch-all clause such as “or other arrangement with similar substance and effect” or used the sort of “deeming” clause in the predecessor s 271(3) or even used a non-exhaustive verb such as “includes” rather than “means”. It did none of these things.

[57] Instead, Parliament opted for the relative certainty of reference to five specified means of subdivision using different legal techniques in relation to “part of” an allotment or unit: a separate certificate of title; sale of the fee simple; lease for more than 35 years; a company lease or cross-lease; a unit plan. In referring to “the disposition by way of sale or offer for sale of the fee simple to part of the allotment”, in s 218(1)(a)(ii), Parliament invoked the certainty of a long-established concept in property law. It echoed its predecessor in s 271(1)(a). As William Young J noted in Big River Paradise, s 218 of the RMA goes well beyond “the core meaning of the

[58] I consider that, in choosing to limit its definition of “subdivision” in s 218 to an exhaustive list of specified and relatively certain legal means of subdivision, Parliament did not intend to capture other arrangements of similar substance and effect which do not fall within those specified meanings. The wider contextual purpose of Parliament in regulating the use of land that can flow from inappropriate subdivision was not accompanied by an open-ended definition of what subdivisions are regulated.

[59] The particular arrangement at issue here does not implicate the wider underlying purpose of the RMA in regulating effects of inappropriate subdivision on

the use of land. The arrangements here do not alter the use of land. They are not associated with the sort of subdivision of land that results in the intensification of land use that accompanies a residential subdivision. What is sought to be protected or preserved is unaltered by this form of subdivision, in this context.

[60] Whether or not the legal arrangement used here could be used commercially to underpin a residential subdivision, or some inappropriate subdivision with effects on the use of land, is not clear to me and is not at issue here. But even if someone might attempt it, such a precedent implication does not change my interpretation of s 218. If Parliament changes its view, and wishes to add a different legal means of effecting a subdivision to its definition of those that are caught by the RMA, it can pass an amendment accordingly. In my view, the Telcos cannot rely on the RMA as a means of countering the commercial challenge posed by Clearspan’s aggregation of responsibility for the land under cell towers.

[61] I allow the appeal and dismiss the respondents’ applications for declarations.

[62] I award costs to the appellant. If issues as to costs cannot be resolved between the parties I give leave for the parties to submit brief (five page) memoranda within 20 working days of the date of this judgment.

[63] Under r 20.19(1)(c) of the High Court Rules 2016 I invite the Environment Court to reassess the costs of the proceedings in that Court based on the findings of law in this judgment.

High Court of New Zealand Decisions

Clearspan Property Assets Limited v Spark New Zealand Trading Limited [2017] NZHC 277 (28 February 2017)