Bezett v Aspen Grove Limited HC Invercargill CIV 2005-425-60
[2005] NZHC 1643
•7 April 2005
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV 2005-425-000060
BETWEEN EDWARD GEORGE BEZETT
Plaintiff
AND
ASPEN GROVE LIMITED
Defendant
Hearing: 4 March 2005
Appearances: K Castiglione and S G Vidal for Plaintiff C S Withnall QC for Defendant
Judgment: 7 April 2005
JUDGMENT OF FOGARTY J
[1] This is an application for an order for removal of caveat under s 143 of the Land Transfer Act 1952.
[2]Section 143 provides:
143 Procedure for removal of caveat
(1) Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the [High Court] for an order that the caveat be removed.
(2) The Court, upon proof that notice of the application has been served on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the Court seems meet.
[3] The discretion conferred by Parliament on the Court is in broad terms. However, the case law indicates that the discretion is much more circumscribed. I
BEZETT V ASPEN GROVE LIMITED HC INV CIV 2005-425-000060 [7 April 2005]
refer to the decision of the Court of Appeal in Sims v Lowe [1988] 1 NZLR 656, 659-660:
It is clear that this summary procedure for the removal of a caveat against dealings is wholly unsuitable for the determination of disputed questions of fact. From this it follows, and has been consistently held, that an order for the removal of such a caveat will not be made under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so. See eg Plimmer Bros v St Maur, Re Caveat No 2538 (1906) 26 NZLR 294, 296; Catchpole v Burke [1974] 1 NZLR 620, 623-624, 625 (a
case under s 145); Mall Finance & Investment Co Ltd v Slater [1976] 2 NZLR 685, 686, 688. The patent clarity referred to will not exist where the caveator has a reasonably arguable case in support of the interest claimed. Catchpole v Burke, New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41, 43 …
[4]On 21 December last Aspen Grove Ltd lodged a caveat on these grounds:
As beneficiary pursuant to clause 4 in an Agreement for Sale and Purchase dated 9 December 2002 between the Caveator and Gillian Ann Nevitt (as agent for the registered proprietor of the land herein described, Edward George Bezett) as to the restrictive use of the land herein.
[5] The agreement dated 9 December 2002 was an agreement for sale and purchase of Lot 71 DP 25084 being a lot in a subdivision being developed by Aspen Grove Ltd. The agreement had a number of special terms under the heading “Restrictive Covenants”, of which Clause 4 was one.
[6]Clause 4 provides:
The Transferee, its executors, administrators and assigns shall:
Not for a term of fifteen years after the date hereof permit or suffer the Servient Tenement to be used as access to any other land except with the written consent of Aspen Grove Limited which consent may be withheld without the Company being required to give any reason. The consent maybe (sic) subject to such terms and conditions as the company may think fit including any requirement as to payment of the sum of money, the amount of which shall be entirely within the discretion of the company.
[7] This clause does not define the servient tenement or the transferee. However, from the context of the additional conditions and its place in the agreement for sale and purchase, it is plain that the transferee is the purchaser and the servient tenement is Lot 71.
[8] The clause does not define the dominant land. At the time Aspen Grove Ltd as the sub-divider was the registered proprietor of a number of nearby lots in the subdivision.
[9] Between the entering into of the agreement for sale and purchase in 2002 and the lodging of the caveat in December 2004, Aspen Grove Ltd, the caveator, took no steps to seek the registration of this covenant.
[10] Clause 4 is a personal covenant created by an instrument, the agreement for sale and purchase. Section 126A of the Property Law Act 1952 provides:
126A Notification of covenants
(1) Where a positive covenant or a restrictive covenant relating to any land under the Land Transfer Act 1952, the benefit of which is intended to be annexed to other land, is contained in an instrument coming into operation after the operative date, the following provisions shall apply:
(a) The District Land Registrar shall have power to enter in the appropriate folium of the register book relating to the land subject to the burden of the covenant [and the land with the benefit of the covenant] a notification of the covenant, and a notification of any instrument purporting to affect the operation of the covenant of which a notification has been so entered, and, if the covenant is revoked or modified, to cancel or alter the notification:
(b) A notification in the register book of any such covenant shall not give the covenant any greater operation than it has under the instrument creating it:
(c) Every such covenant notified on the appropriate folium of the register book shall be an interest within the meaning of section 62 of the Land Transfer Act 1952.
(2) For the purposes of subsection (1) of this section, the term the operative date,—
(a)In relation to positive covenants, means the 1st day of January 1987:
(b)In relation to restrictive covenants, means the 1st day of January 1953.
[11] The effect of s 126A includes enabling restrictive covenants recognised by the common law, by application of equitable principles, to be notified on the title. Paragraph (b) of subsection 1 is important. That notification does not give the covenant any greater operation than it has under the instrument creating it. Once
notified such a covenant becomes an interest within the meaning of s 62 of the Land Transfer Act.
[12] It is also relevant to notice that s 126A(1) provides for the notification of covenants where:
“the benefit … is intended to be annexed to other land”
[13] Accordingly, in the course of argument I invited counsel for the caveator to have prepared a draft notification which it would propose registering, to notify the restrictive covenant. Aspen Grove Ltd produced a draft easement interest to create a land covenant relying on ss 90A and 90F of the Land Transfer Act. Section 90F provides:
90F Creating and noting land covenants
(1) Any covenant that could be contained in an instrument to which section 126A of the Property Law Act 1952 applies may be created in the same way as an easement can be created under section 90A or section 90B, but has effect only as a deed inter partes.
(2) Sections 90A to 90E apply with any necessary modifications to covenants created under subsection (1), subject to the following exceptions:
(a) sections 90A(5) and 90B(6) operate only to create covenants with effect only as a deed inter partes:
(b)sections 90A(6) and 90B(7) do not apply.
(3) Sections 63 to 71, 126, 126A, and 126G of the Property Law Act 1952 apply to covenants created under subsection (1).
(4) A notification under section 126A of the Property Law Act 1952 does not give a covenant created under subsection (1) any greater force than it would have had if created in some other way.
(5)Subsection (4) is for the avoidance of doubt.
That instrument identified the dominant tenement as being Lot 5 on DP 339657.
[14] Lot 5 is not in any way contiguous to Lot 71. Lot 71 fronts on to Aspen Grove which is a long street. It links by way of another street, Richards Park, to a major road, Fernhill Road. Running on to the intersection of Richards Park and Aspen Grove is a lane, Chandler Lane. Lot 5 is sandwiched between Chandler Lane
and Hanley Street, both of which run on to the intersection between Richards Park and Aspen Grove. The lots are a considerable distance apart on separate sides of that intersection. There is no discernible traffic implication to Lot 5 if Lot 71 is used as access to any of the lots contiguous to it or in the nearby vicinity. Mr Withnall QC has not argued to the contrary.
[15] For the caveator an affidavit has been filed by a solicitor, showing the draft document intended to be registered and containing within it a report that a Mr James Mowat, a legal adviser of Land Information New Zealand, has advised:
The draft covenant meets our requirements as to form, in that we have a servient and dominant tenements (sic), they have physical proximity and the subject matter relates to the land.
[16] Mr Mowat’s opinion is not helpful. This is because the draft instrument contained as restrictive covenants, not only Clause 4, but also a large number of covenants in Clause 2 of the special conditions of the contract. The Clause 2 covenants included restrictions on the methods of construction of buildings that could be placed on Lot 71 and the planting on Lot 71. They are typical of restraints in modern subdivisions designed to maintain the amenity of the subdivision and thus maintain the value of other land in the subdivision. I am left unsure as to whether he turned his mind particularly to Clause 4.
[17] The issue in this case is only whether it is reasonably arguable that Clause 4 is notifiable as a restrictive covenant as claimed in the caveat. Equity identified and developed an equitable interest in land, flowing from some personal restrictive covenants. The leading case was and is Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143; [1843-60] All E.R. Rep 9. The law imposes a number of limits upon the recognition of restrictive covenants which will run with the land so as to bind successors in title of the original personal covenantor. (These limitations remain in effect under our Torrens system, preserved by s 126A of the Property Law Act, as discussed.) Potter J has set out these requirements in Ceda Drycleaners Ltd v Doonan [1998] 1 NZLR 224, at 234. She in turn has followed the law as set out in Hinde McMorland and Sim, Butterworths Land Law in New Zealand (1997) (Paras
11.015 – 11.018). The relevant criterion here is that the covenant must benefit the
dominant land. As Potter J says that is always a question of fact to be determined on the evidence (see page 237).
[18] Proximity is only a factor in support of an argument of benefit. It is not the test of benefit. Proximity is usually essential, for without proximity it will be almost impossible to argue benefit. It does not follow that if there is some proximity there will always be benefit. The concept of benefit depends upon the presence of an interest which unites the two pieces of land. A classic dictum is that of Pollock M R in Kelly v Barrett [1924] 2 Ch. 379 at 403-404:
It is agreed that for the purpose of enforcing covenants against the defendant it is necessary that those covenants should be attached to some land, and have some connection with it, in the sense of an interest which unites the two pieces of land, but at the present moment all that Sir Spencer Maryon- Wilson has is an interest in the subsoil. It is admitted that it would be impossible to attach the right to enforce the covenant to land, let us say, at Clapham, on the ground that it would be too remote and there would be no unity of interest whatever between the two pieces of land. I ask myself the question then: Is the interest which Sir Spencer at the present time has, subject to the rights of the local authority, anything like a sufficient interest to enable him at the present time to enforce these restrictive covenants? It seems to me by parity of reasoning with the decision which says that land at Clapham would be too remote and unable to carry a right to enforce the covenants in respect of this land at Hampstead, so too the interest which at present Sir Spencer has in the subsoil is of the same nature and is too remote and cannot carry with it the right which it is now sought to enforce, and that these restrictions which it is sought to enforce do not touch or concern the interest in the land such as he now has. I think, therefore, that Tomlin J is quite right in saying that the present Sir Spencer cannot maintain the action.
(Emphasis by underlining added)
(See also Megarry and Wade, The Law of Real Property, Charles Harpum, 6th Edition paragraph 16-044.)
[19] The caveator has not led any evidence of benefit beyond the opinion of Mr Mowat. That proximity, such as it is, does not identify any interest which unites Lots 71 and 5 so as to make Lot 71 servient to Lot 5 or, to put it another way, to provide any benefit to the use and enjoyment of Lot 5 if Lot 71 is not used as access to any other land.
[20] Mr Withnall QC argued that even if there is no sufficient connection now subsisting between the proposed dominant and servient tenements, that does not dispose of the defendant’s right to protect its interest by way of memorandum of
encumbrance. He argued that restrictive covenants in gross may be capable of being recognised in New Zealand, see Staples v Corboy (1899) 17 NZLR 734.
[21] Further, he referred to an opinion of the solicitor exhibiting the draft instrument as follows:
If for any reason the instrument is held not to be capable of conferring enforceable rights against the servient tenement in the terms originally intended by the agreement for sale and purchase, (for example because it has became a covenant in gross), I believe there is an alternative means of giving notice of the covenants, and enforcing them, by means of memorandum of encumbrance registered against the title. This is the usual conveyancing practice. I can, if required, provide such an instrument for the Court’s perusal.
[22] This appears to be a reference to a practice described in Adams’ Land Transfer, (Lexis Nexis) s 100.4.3 headed “Use of Encumbrances to Secure Performance of Covenants”:
For many years the encumbrance was employed to secure the performance of a restrictive covenant or a positive covenant: the securing of the sum of money in the prescribed form being merely the means by which that principal purpose was achieved. Advantage was taken of the rule laid down in Mahoney v Hosken (1912) 14 CLR 379 18 ALR 205 that in an encumbrance it is permissible to insert provisions for defeasance of the sum or monies otherwise payable if the terms of the covenant are duly observed. This method is not usually employed today because of the enactment of section 62, 64, 126 and 126A of the Property Law Act 1952.
[23] In 1970 Professor E M Brookfield pondered on reasons for the omission of restrictive covenants in gross from the ambit of s 126. See “Restrictive Covenants in Gross” 1970 New Zealand Law Journal 67 at 68-69. Staples v Corboy is a controversial decision of the Court of Appeal. In this case the purchaser of a hotel promised for himself, his heirs, executors administrators and assigns, that he and none of the others would purchase any ale other than a particular brand. Reluctantly the Court of Appeal held that the vendor was entitled to enforce this covenant against a subsequent purchaser with notice. The Court did so only because it thought that it was bound to follow a decision of the English Court of Appeal Catt v Tourle (1869)
L.R. 4 Ch App 654; 38 L.J. Ch 665 (see page 750). For the Court Williams J said:
If the matter were res integra, then, as such an extraordinary result would apparently follow, [ a perpetual personal servitude] we would decide against the construction of the plaintiff.
(Page 749)
[24] Professor Brookfield says the Court’s reluctance was justified as it became settled law in England that the doctrine in Tulk v Moxhay applies only where the covenant is for the benefit of the covenantee’s land. See London County Council v Allen [1914] 3 K.B. 642.
[25] Professor Brookfield refers to the use of memoranda of encumbrances to secure notice of restrictive covenants in gross, by way of a defeasible rent charge, (page 70). Such memorandum of encumbrance is within the definition of a mortgage. See s 2 of the Land Transfer Act.
[26] Mr Withnall QC essentially argued that because the law as to restrictive covenant in gross was uncertain in New Zealand therefore the caveat should be allowed to stay. However, it is the function of this Court in any proceedings to apply the law and if need be resolve doubt as to its content. The correct interpretation of s 126A is that the words in subsection (1):
… the benefit of which is intended to be annexed to other land
are deliberately inserted by Parliament as a threshold requirement. Statutory powers can be used only for the purposes intended by Parliament. Use of s 100 and s 33 and any other provisions of the Land Transfer Act enabling registration of mortgages in order to notify restrictive covenants in gross would an abuse of these powers. To use these sections in this way would be to use them in a manner not contemplated by Parliament. Rather, Parliament has settled on a restrictive policy in respect to the notification on Land Transfer Act Registers of positive or restrictive covenants, at the least since the enactment of s 126A, inserted by the Property Law Amendment Act 1986. It is not necessary to decide, even if this Court had the power to do so, whether Staples v Corboy is still good law. It is sufficient to find that covenants in
gross, if they exist as equitable interests in land, do not fall within the ambit of the notification facility enabled by s 126A.
[27] Mr Withnall argued as well that when Mr Patel’s solicitor confirmed the contract that Mr Patel was requisitioning the title for the removal of the unregistered equitable interest. This argument begs the question as to whether there is an equitable interest. That is not the question before the Court. The question before this Court is whether or not the caveator can sustain the caveat, that turns on the application of s 126A.
[28] Allied to this requisition point, and also independently of it, Mr Withnall also argued that it is at the very least unconscionable and equitable fraud for the plaintiff to seek to sell a title to the land which is free of the encumbrance in the face of the covenant in the agreement for sale and purchase. Again this proposition begs the question as to whether or not Clause 4 is a personal covenant or creates an equitable interest in the land and whether notice of it can be registered. Section 143 expressly allows the plaintiff as registered proprietor to challenge the caveat. The plaintiff is entitled to argue that the covenant was personal only. Mr Patel has no standing under s 143 to apply to remove the caveat. He could have requested a notice under s 145. His solicitor participated in a chambers conference and confirmed that his client was supporting the action of the registered proprietor, the vendor, challenging this caveat.
[29] The question of what are the equitable priorities between Mr Patel and Aspen Grove Ltd is irrelevant, at least in this case. That question also begs the question as to whether Aspen Grove Ltd has an equitable interest capable of being notified on the Register.
[30] Finally, it is not necessary to explore whether delay seeking notification has defeated any equitable interest created by Clause 4.
Conclusion
[31] In my view it is patently clear that this caveat cannot be maintained. This is because there is no reasonably arguable case that the enforcement of the covenant against successors of title of Lot 71 would benefit the use of Lot 5. Therefore there is no equitable interest to support registering a notification against the title, pursuant to s 126A.
[32] Settlement of the sale of the Patel contract was due on 1 April. It “seems meet”, s 143(2), to preserve an effective opportunity for the caveator to appeal this decision, particularly because of the covenant in gross point. However, that opportunity will be constrained because of the fact that settlement of the sale has already been delayed.
Judgment
[33] The judgment of this Court is that the caveat be removed at the expiry of three working days from and exclusive of the date of this judgment, unless the defendant, Aspen Grove Ltd, has lodged an appeal to the Court of Appeal and obtained from that Court or this Court a further stay of the order for removal, within the same three day period.
[34] The plaintiff is entitled to costs. The amount of costs is reserved. If there is no agreement submissions should be lodged in the usual way, following which costs will be fixed.
Fogarty J
Solicitors:
Berry & Co, Queenstown, (K Castiglione)Macalister Todd Phillips Bodkins, Queenstown (C S Withnall QC)
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