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Webster v Doak - (08 Sep 2017)

A commercial activity is a commercial activity regardless of whether it is carried out for private profit or to achieve charitable goals


Present 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). 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. The restrictive covenant provides that, 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 is 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.

Words should be given a meaning in tune with the environment in which the document is intended to function. A commercial activity is a commercial activity regardless of whether it is carried out for private profit or to achieve charitable goals. Stand’s proposed use is not residential in the ordinary meaning of that term. 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. 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.

It is clear that, the covenant was intended to help maintain the character of the overall sub-division. 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.

The Court of Appeal is of 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. 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. It is the scope of the exemption that is determined by the applicable regime.

The Court of Appeal agreed 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 consent. For commercial zones, the Code specified predominant uses often using the word “commercial”, but without defining it.

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. 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.

Accordingly, it is found 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. If it is a commercial use in its natural meaning then the proviso, however interpreted, will not assist Stand.

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 task is not to define the scope of commercial but to determine if the proposed activity is prohibited by the covenant. 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. The second part of that definition captures the commonly understood meaning of “commercial”. It is commerce for profit. A business. 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. This cannot be characterised as being engaged in commerce for profit.

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. The appeal is dismissed. The Appellants must pay the second Respondent costs for a standard appeal on a band A basis and usual disbursements.


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