Bruce v Edwards

IN THE COURT OF APPEAL OF NEW ZEALAND

CA19/02

BETWEEN	ROWAN JOHN BRUCE AND OTHERS
Appellants

AND	BRIAN JOHN WHAKARUA EDWARDS AND ANOTHER
First Respondents

AND	MAORI LAND COURT OF NEW ZEALAND
Second Respondent

AND	HORITAMAKITERANGI MANUIRIRANGI AND RAMON HANATANA TITO
Third Respondents

Hearing:	17 and 18 September 2002
Coram:	Keith J Blanchard J Glazebrook J
Appearances:	R C Laurenson for Appellants R T Wilson for First Respondents G J J Stanish for Second Respondent (leave to withdraw) J M Dawson and K L Broughton for Third Respondents
Judgment:	18 November 2002

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

Introduction

This is a case of some complexity about the consequences of the making by the Maori Land Court of an order changing the status of some farmland in South Taranaki from Maori freehold land to General land. In its simplest terms, what happened is this. The Maori owners, Mr and Mrs Edwards, the first respondents, agreed to sell their farm to non-Maori purchasers, Mr and Mrs Bruce, subject to the making by the Maori Land Court of an order changing the land’s status to General land. The Maori Land Court was not told by the Edwards’ solicitor of the intention to sell the land. The Court did not require notice of the application for change of status to be served on the members of the preferred classes of alienees (the PCA), being the hapu to which the Edwards belong. So long as the land remained Maori freehold land the PCA had by virtue of s147(2) of the Te Ture Whenua Maori Act 1993 (the Act) a right of first refusal if it was to be alienated.
The change of status order was registered against the title to the land under the Land Transfer Act 1952. As a result, the land ceased to be Maori freehold land. The right of first refusal no longer applied. Mr and Mrs Bruce paid a substantial deposit to the Edwards, confirmed the sale of their own farm, purchased extra livestock and made ready to move on to the land. They nominated two family trusts as purchasers. The appellants are the trustees of those trusts. On the settlement date, but before settlement could occur, the Bruces discovered that some members of the PCA had caveated the title and were applying to the Maori Land Court for a rehearing of the change of status application seeking annulment of the change.
Settlement did not occur for that reason. But the Edwards and the Bruces came to an interim arrangement under which the Bruces took possession of the farm as lessees from the Edwards and provided the Edwards with funds, secured by second mortgage of the farm, with which the Edwards could meet commitments to buy other properties which they had made in reliance on the sale.
The Maori Land Court decided that there should be a rehearing, but the appellant trustee purchasers sought in the High Court a judicial review of that decision. The appellants counterclaimed seeking an order for specific performance of the sale and purchase contract, which the Edwards have not resisted. The High Court set aside the order for the rehearing made by the Maori Land Court on the ground that the Maori Land Court had failed to consider whether the application should be allowed to be brought out of time and had not heard from the Edwards. But the High Court then had to determine whether, in the event that a rehearing did take place in the Maori Land Court and the status order were reversed, the Edwards would, when the matter came back to the High Court, inevitably be ordered to transfer the land to the Bruce trustees. A crucial issue was whether by virtue of a saving provision in the Act (s88) the Bruces’ interest was protected against any annulment.
The High Court decided that the Maori Land Court should be allowed to consider the application for the rehearing and, if it thought fit, the substantive application to annul the change of status order. It made no decision on the specific performance application, adjourning that matter until the views of the Maori Land Court were known. The High Court ordered that if the Maori Land Court were to annul the change of status order, no party should attempt to register the annulment order until the matter had been referred back to the High Court and it had further considered the specific performance application in light of the decision of the Maori Land Court.
Although the caveat against the title to the farm has lapsed, the Edwards, through their solicitors, have undertaken to the Maori Land Court that in the meantime there will be no registration of any transfer to the Bruce trustees.
In essence, the Bruce trustees, supported by the Edwards, now come to this Court appealing the decision of the High Court to adjourn their specific performance application. They say that they are bona fide purchasers for value who have relied upon the current state of the title to the farm as General land, i.e. upon registration of the change of status order, and are entitled to be registered as its proprietors with that status continuing. They say that they have changed their position to their detriment. They point out that they confirmed the sale of their existing farm when they knew the order had been made. There has been a very large increase in the value of dairy farms since the contract with the Edwards was entered into. If the transaction cannot proceed, they say they will suffer considerable hardship.
On the other hand, the third respondents, Mr Manuirirangi and Mr Tito, who are members of the PCA, say forcefully that the land remains ancestral land in their minds, whatever the land transfer title may show and that, if the transaction proceeds, a great injustice will have been done to the PCA, who will have been deprived of their right of first refusal upon an alienation, and their right to have the land remain Maori land, because of the concealment from the Maori Land Court by the Edwards’ solicitor of the proposed sale to the Bruces.
Regrettably, whichever way this matter is resolved there is likely to be a substantial measure of injustice for the losing party.
The Maori Land Court itself is named as second respondent to the appeal but abides the decision of the Court.
It is now necessary to turn to the facts and the applicable statute law in greater detail.

The facts and statutory provisions

Before the Taranaki wars in the 1860s the land which became known as the Oeo Block was communally held by the Ngati Tamaahuroa and Ngati Titahi hapu. It was confiscated by the Crown but in 1881 it was granted to Hone Pihama in six separate titles. His three daughters each inherited two of the pieces of land. Most of the Oeo Block has remained Maori freehold land in the ownership of descendants of Hone Pihama, although some has become General land and has been sold outside the hapu.
The Edwards farm is called the Oeo B2 Block. Its area is 132.7484 hectares. Mr and Mrs Edwards began farming the land as lessees in the 1970s. He inherited some shares in it in 1982, and in 1993 he and his wife purchased all the other shares with the approval of the Maori Land Court. This required funding of a purchase price of $1.46 million for which the Edwards raised a substantial mortgage. Unfortunately from 1997 onwards Mr Edwards experienced ill health which adversely affected his ability to farm efficiently. The farming business was running at a loss. None of the Edwards children was interested in taking it over. Mr Edwards approached his immediate neighbours, members of the hapu, but they were not in a position to buy the farm. So, apparently with reluctance, the Edwards decided that the farm would have to be sold outside the hapu.
On 21 February 2000 the Edwards entered into a conditional agreement to sell the Oeo B2 Block and associated dairy company shareholding for $2.2 million to the Bruces who in turn had previously sold a farm at Toko conditionally, as we understand the position, on their being able to acquire a replacement farm. Both transactions had settlement dates of 1 June 2000. The Edwards/Bruce agreement was conditional upon the Edwards obtaining by 20 March 2000 an order from the Maori Land Court changing the status of the land from Maori freehold to General land.
Section 135 of the Act confers jurisdiction on the Maori Land Court to make a status order declaring that land shall cease to be Maori customary land or Maori freehold land and shall become General land. Section 136 provides:
136     Power to change status of Maori land owned by not more than 10 persons
The Maori Land Court may make a status order under section 135 of this Act where it is satisfied that—
(a)       The land is beneficially owned by not more than 10 persons as tenants in common; and
(b)       Neither the land nor any interest is subject to any trust (other than a trust imposed by section 250(4) of this Act); and
(c)       The title to the land is registered under the Land Transfer Act 1952 or is capable of being so registered; and
(d)      The land can be managed or utilised more effectively as General land; and
(e)       The owners have had adequate opportunity to consider the proposed change of status and a sufficient proportion of the owners agree to it.

Paras (a), (b), (c) and (e) were met but it was necessary to convince the Maori Land Court that the land could be managed or utilised more effectively as General land.

What the Edwards and the Bruces were engaged upon would not involve an alienation of Maori freehold land as such since there would be no completion unless the land first became General land. Nonetheless it could be expected that the Maori Land Court would be concerned to know of any such proposal because a change of status order would remove the rights of the PCA upon an alienation. The PCA are defined in s4 as follows:
preferred classes of alienees, in relation to any alienation (other than an alienation of shares in a Maori incorporation), comprise the following:
(a)       Children and remoter issue of the alienating owner:
(b)       Whanaunga of the alienating owner who are associated in accordance with tikanga Maori with the land:
(c)       Other beneficial owners of the land who are members of the hapu associated with the land:
(d)      Trustees of persons referred to in any of paragraphs (a) to (c) of this definition:
(e)       Descendants of any former owner who is or was a member of the hapu associated with the land:
Section 147(1) and (2), as they stood in 2000, were as follows:
147     Alienation of whole or part of block
(1)       Subject to this Act,—
(a)       The sole owner of a block of Maori freehold land has the capacity to alienate the whole or any part of the land; and
(b)       The joint tenants of a block of Maori freehold land acting together have the capacity to alienate the whole or any part of the land; and
(c)       The owners in common of a block of Maori freehold land have the capacity to alienate the whole or any part of the land –
(i)By agreement of all the owners; or
(ii)Pursuant to a resolution carried at a meeting of assembled owners held under and in accordance with Part IX of this Act.
(2)        Where any Maori freehold land is to be alienated by sale, gift, or lease, the alienating owners shall give the right of first refusal to prospective purchasers, donees, or lessees who belong to one or more of the preferred classes of alienee, ahead of those who do not belong to any of those classes.

Section 150(3), as it stood in 2000, prohibited an alienation other than by an instrument of alienation confirmed by the Maori Land Court or by a vesting order made by the Court. Section 152, as it stood in 2000, required the Court not to grant confirmation unless satisfied (inter alia) that the alienating owners had given the right of first refusal as required by s147(2). Section 153 gave the Court a general discretion and s154 in part provided:

154. Grounds on which Court may refuse confirmation
Without limiting the general discretion conferred by section 153 of this Act, the Court may decline an application for confirmation if the Court is satisfied that the alienation would not be consistent with the objects of this Act, having regard to the following matters:
(a) In all cases:
(i) The historical importance of the land to the alienating owners or any of them, and their historical connection with it:
(ii) The nature of the land, including its location and zoning, and its suitability for utilisation by the owners or any of them:
(iii) The question of whether or not the owners have had an adequate opportunity to give the proposed alienation proper consideration:
(iv) The question of whether or not the owners have demonstrated a proper assessment and understanding of the present value and the future potential value of the land:
(v) The application by the owners of the principles of ahi ka:

By virtue of s156(1), no instrument of alienation required to be confirmed has any force or effect until confirmed. (It would be relevant upon any rehearing that as from 1 July 2002 the Maori Land Court’s residual discretion to refuse consent to an alienation has been removed. It now must grant consent if the conditions in the section, including the right of first refusal, which is now found in s147A, have been satisfied. Sections 153 and 154 have been repealed. It would not, however, follow that the status of the land in the hands of an alienee would be changed, unless the Court were also satisfied that the criteria in s136 were met.)

The Bruces left the obtaining of the necessary change of status in the hands of the Edwards who had it attended to by their solicitor, Mr Bulfin of Halliwells, a Hawera firm. He filed an application supported by affidavit which did not mention the agreement to sell to the Bruces. The application was advertised in the Panui but the members of the PCA were not served. Curiously, the Act does not in express terms require any notification of a s135 application other than by publication in the Panui, but it is well established since the decision of the Maori Appellate Court in Re Cleave (1995) 3 NZ ConvC 192, 245 that it is unwise and not in accord with the objectives of the Act (namely, retention of Maori land and General land owned by Maori in the hands of the owners and its effective use, management, and development – see s17) for a s135 application to be heard without specific notice to the PCA. (Section 67 provides a mechanism for this to be done.) The Maori Appellate Court said that “any order sought by the Court the effect of which could endanger the continued relationship with the land of whanau and hapu associated with it must be treated as being of grave concern”. It considered that where there was objection to a status change by the preferred class, there must be compelling reasons for making an order changing status. This Court in Valuer-General v MangatuInc [1997] 3 NZLR 641 at 651-2 saw the Act as imposing a significant barrier on alienation and considered that the Maori Land Court would be likely to refuse an application for change of status to General land even if the purchaser was within the PCA, and even more likely to do so if the purchaser was from outside those classes. (That opinion may require re-visiting in light of the amendments made to the Act this year.)
When the Edwards’ application was first called before Judge Marumaru on 8 March 2000 the Judge questioned the adequacy of the information given to the Court and also directed Mr Bulfin’s attention to the Cleave decision. Mr Bulfin referred to some of the history of how the Edwards became owners, saying that they felt that “they would be able to deal with their asset in a freer way to assist themselves and their family without the restrictions of it being Maori land”. The Judge referred to the criterion of the land being able to be better managed and utilised as General land and asked whether the status really needed to be changed for the raising of finance.
The matter was then adjourned until the next day when, in the presence of Mr & Mrs Edwards, Mr Bulfin addressed submissions directed to the Cleave decision and affidavits were tendered from Mr Edwards, dealing very briefly with the farming operations, and from a valuer concerning the lower value of land held as Maori freehold compared with its value as General land, with reduced borrowing capacity and marketability. Mr Bulfin submitted to Judge Marumaru that the property was of such a size and value that members of the PCA would be unlikely to have the resources to be able ever to purchase such a property “should the opportunity arise”. He said that this submission, which notably omitted any mention of the actual sale, was made “in answer to the obiter dicta of the Maori Appellate Court in the Cleave case to the effect that any court considering an application of this nature should address the right of the [PCA]”. Mr Bulfin referred to Mr Edwards’ state of health and said that the Edwards wanted to stop milking. He said that they had to consider their options
which are leasing or sharemilking…They really want to be in a position where they can make those decisions for themselves. If they decide for example that they want to lease and a person that meets their requirements turns up and says he’s prepared to lease, they want to be able to lease just like that and secure the arrangements…

The Judge asked Mr Bulfin whether such a lease and sale of the Edwards’ herd was a possible option. Mr Bulfin replied: “It is a possible option”, adding that sharemilking was another.

We must express our agreement with the Judge’s view that these remarks by counsel to Judge Marumaru were misleading because of the omission to mention the sale contract with the Bruces. Judge Marumaru was on this incomplete view of the position persuaded to make the change of status order as sought.
An extension of time for fulfilment of the condition in the agreement until 24 March to enable a written minute of the Court’s order to be obtained was arranged between the solicitors. A short-form minute issued and on 23 March Mr Bulfin sent it to the solicitors for the Bruces, advising that the contract was unconditional. He added:
One word of caution however – Change of Status Orders can be overturned and it would be unwise to publicise too widely that the transaction between our respective clients is going through until the transfer to your clients has been registered against the title. Once that happens – it is the writer’s view that there is no way that the Maori Land Court could then try and reverse the Change of Status.

Mr Bulfin also asked for payment of the deposit of $100,000. It was paid the next day. The Bruces confirmed to their own purchaser that the Toko transaction was also unconditional. They nominated their own trusts to take title to the Oeo land.

The Bruces made preparations to move to the Oeo B2 Block and vacate their Toko farm on 1 June. They purchased additional livestock. On 12 May 2000 the change of status order was registered against the title. Section 142 of the Act provides that upon registration a change of status order has the effect of giving to the land the particular status specified in the order.
Meanwhile, Mr Manuirirangi had heard rumours of the sale. He rang Mrs Bruce on 15 April and 17 April and, without identifying himself, expressed an objection to the sale. It was Mrs Bruce’s unchallenged evidence that the caller did not make reference “to any claimed legal right or claim by him to the property”.
On the settlement day the Bruces learned that some members of the PCA – sisters of Mr Edwards – had lodged a caveat against the title and that an application was to be made for a rehearing of the change of status order. It was not possible for the Bruces to pull out of the sale of the Toko farm. Their stock had to be moved. The Edwards and the Bruces negotiated a holding arrangement by which the Bruces entered into possession of the Oeo B2 Block as lessees and lent $250,000 to the Edwards to satisfy their immediate needs in relation to transactions to which the Edwards had committed themselves. A mortgage for this sum from the Edwards to the Bruces over the farm was presented for registration on 2 June. The caveat lapsed and the mortgage was registered on 27 June.

In the meantime applications for a rehearing had been made both by the caveators (on 2 June) and by Mr Manuirirangi and Mr Tito (on 16 June). Both applications were well out of time. Section 43 of the Act provides:
43       Rehearings
(1)       Subject to subsection (2) of this section, on an application made in accordance with the rules of Court by any person interested in any matter in respect of which the Court has made an order, the Judge by whom the order was made or any other Judge may order a rehearing to be had upon such terms as the Judge thinks reasonable, and in the meantime may stay the proceedings.
(2)       A rehearing under this section shall not be granted on an application made more than 28 days after the order, unless the Judge is satisfied that the application could not reasonably have been made sooner.
(3)       An application under this section shall not operate as a stay of proceedings unless the Judge so orders.
(4)       The rehearing need not take place before the Judge by whom the proceedings were originally heard.
(5)       On any rehearing, the Court may affirm its former determination, or may vary or annul that determination, and may exercise any jurisdiction that it could have exercised on the original hearing.
(6)       When a rehearing has been granted, the period allowed for an appeal to the Maori Appellate Court shall not commence to run until the rehearing has been disposed of by a final order of the Court.
Nevertheless, the third respondents’ application was heard by the Maori Land Court on 18 September 2000 when Judge Marumaru granted the application for the rehearing without adverting to the time limit in subs(2). He later declined to impose a condition that opposition to the change of status should be confined to persons able to make an unconditional offer for the land on terms as favourable as the existing agreement.
The Edwards brought the present proceeding in the High Court seeking judicial review quashing the order that there be a rehearing. The Bruce trustees, who had been joined as a party to that application, counter-claimed seeking specific performance against the Edwards, which the latter did not oppose.

The High Court judgment

Ronald Young J delivered a reserved judgment on 11 December 2001. He had no difficulty in concluding that grounds for judicial review of the Maori Land Court’s decision to grant a rehearing had been made out. Judge Marumaru had made no reference to the fact that the application for a rehearing was out of time and had failed to turn his mind to that question. There is no appeal against Ronald Young J’s order quashing the order for a rehearing.
The more difficult question for the High Court was whether, if the Maori Land Court was satisfied that there was a reasonable excuse for the lateness of the rehearing application, it should have the opportunity of considering the substance of that application before the High Court ruled on the Bruces’ application for specific performance. An important matter, which might resolve the case, was whether the Bruce trustees’ equitable interest under the sale and purchase agreement was protected against any reversal of the status order by s88 of the Act:
88       Amendment or cancellation of orders not to affect acquired rights
(1)       Where, whether pursuant to any provision of section 86 or section 87 of this Act or otherwise, any order, warrant, record, or other document is amended or cancelled, the amendment or cancellation shall not take away or affect any right or interest acquired in good faith and for value before the making of the amendment or cancellation.
(2)       If any order or other document so amended or cancelled has previously been registered by a District Land Registrar, the order of amendment or cancellation shall be transmitted to that Registrar, who shall make all necessary consequential amendments in the registration of the title to any land affected by the amendment or cancellation.

(In the High Court the Bruces also claimed to have indefeasible rights as mortgagees which were protected by the Land Transfer Act. In this Court, Mr Laurenson, for the appellants, elected to disclaim any reliance upon his clients’ mortgage and we need not refer any further to that question.)

The Judge had to determine whether the expression “or otherwise” in s88 had the effect of applying the section, inter alia, to orders made on a rehearing under s43(5). He noted that s43 appears in Part I (the powers of the Maori Land Court) which does not contain a general “saving” provision, although there is one in s48 relating exclusively to an exercise of powers of the Chief Judge. Nor is there a saving provision in Part II of the Act which deals with the powers of the Maori Appellate Court. Part III of the Act is headed “Provisions relating to both Courts”. Section 88 appears in that part.
The Judge concluded that s88 had no application to orders annulled or varied on a rehearing. He considered that the language of s88 and s43(5) is significantly different. Section 88 is concerned with orders that are amended or cancelled. Section 43(5) is concerned with orders that are varied or annulled. It had to be assumed, he said, that the use of different words had a reason and a purpose.
He found in s73, in Part III, an instance of the words “amend or cancel” being used, to which s88(1) could apply. He took the view that s88 by its language was clearly intended to apply where the Appellate Court exercises a power under s73(3) to amend or cancel its earlier order because of a failure to comply with a condition it has imposed.
The Judge then considered whether s125 applied to change of status orders. It reads:
125Alterations in registration of title – If any order that is annulled or revoked or varied, or if any other order or any instrument affected by the annulment or variation, has been registered by the District Land Registrar in respect of the title to any land, the later order shall be transmitted to that Registrar for registration, and all necessary consequential amendments in the registration of any title shall be made by the Registrar accordingly.
The Judge was satisfied that s125 did apply to and authorise, in appropriate circumstances, amendment to the registration of status orders. He supported this view by referring to s140 which provides for registration of status orders under the Land Transfer Act by a process provided for in Part VI of the Act. Section 125 was within Part VI. Status orders are subject to the registration regime. Part of that regime is the power to alter registration of orders in respect of the title to any land. This conclusion by the Judge has not been challenged on appeal.
In dealing with the argument of Mr Manuirirangi and Mr Tito that, as members of the PCA, they had a right to be notified of the application for a change of status order, Ronald Young J rejected the view that there had in effect been a sale of Maori freehold land and thus an “alienation” triggering rights of first refusal. The Judge was of the opinion that the land was being sold as General land. There was only to be a sale if the land became General land. But he proceeded to review the circumstances in which the change of status order had been made, including the submissions which had been made by Mr Bulfin to Judge Marumaru. He found that counsel’s failure to mention the contract to sell the land in the context of the discussion with Judge Marumaru was misleading. He was in no doubt that the fact of a conditional sale was relevant to the residual discretion of the Maori Land Court in s136. That discretion could be exercised properly only after all the facts were known. The Maori Land Court needed to know all transactions affecting the land and would wish to know about the views of the PCA.
Ronald Young J’s assessment of the Act led him to the conclusion that the PCA were entitled to be notified of applications for change of status orders, to appear thereon and to raise matters of importance to them that might influence the Court’s discretion under s136. But they were not entitled to first refusal rights similar to or through s147(2). He said that an order changing the status of the land would, while the land remained General land, remove the rights of the PCA to exercise in the future their s147(2) rights of first refusal. Those rights existed only while the land was Maori freehold land. The change of status therefore significantly affected the rights of the PCA. They should be served with such proceedings and provided with the opportunity of raising matters of relevance. Their views as to the change of status order were relevant factors for the Maori Land Court to take into account. The Judge also expressed the view that the registration of a status order brings that order within the indefeasibility provision of s62 of the Land Transfer Act. The status of land is part of the estate or interest in the land, the Judge said. Registration of the status order would protect the registered proprietor against claims that the land enjoyed another status or that the status of the land was wrongfully obtained, “outside of the statutory exceptions allowing disputation.” Once registered, the order was susceptible to attack only by statutory authority, here the Land Transfer Act (e.g. fraud, wrongfulness) and the Act (e.g. annulment).
Ronald Young J was in no doubt that the Bruce trustees had an equitable interest in the land by virtue of the unconditional agreement for sale and purchase. It had become unconditional on 23 March 2000. He saw that as the appropriate time to consider whether they had obtained their interest bona fide. (There was no question that they had given value. The price was market price of the land.) He was satisfied that by 23 March the Bruces knew nothing that could or should have caused them to question the change of status order. They were thus bona fide purchasers. They had understandably left the application for the status order entirely up to the Edwards. The third respondents had been unable to point to any factual material which would have been in the hands of the Bruces prior to 23 March that should have caused them concern about the change of status order made on 9 March. The telephone calls from Mr Manuirirangi had occurred well after that date.
The Judge then considered whether the PCA also had an equitable interest in the land and concluded that they did not. They did not have first refusal rights in respect of the change of status order. Their rights were to be heard at a court hearing. That was not an equitable interest. Therefore this was not a case of competing equitable interests.
The next matter for the Judge was whether specific performance should, in light of these conclusions, now be granted to the Bruce trustees. He said that, unless there were compelling reasons, they should be entitled to fully enforce their contractual rights. At a rehearing, if permitted before the Maori Land Court, the third respondents would wish to raise the historical importance of the land to local Maori. On the other hand, Mr and Mrs Edwards would be able to point out that they had purchased at value all the shares owned by others in the land and obtained the approval of the Maori Land Court in so doing. The Maori Land Court would have to balance the interests of the hapu who advocate retention of the land as Maori land based on historical connection against those of the Edwards who because of their financial and health problems simply have to sell it. An opportunity had been given at the hearing in the High Court to the third respondents to propose a purchaser of the land who could afford to buy and who wished to retain the land within the hapu. “While obvious and genuine efforts had been made by the hapu there was at the date of the hearing nothing more than hope.” There was no evidence to contradict the Edwards’ assertion that they approached and were rejected by the only two hapu members who could contemplate buying the land. Over the last three years the farming venture had made a loss. The land was heavily mortgaged. The Edwards were unable to continue farming the land themselves for health reasons. There was therefore a prospect of a mortgagee insisting on a sale of the property.
The Judge said that the alternatives were now for the High Court to balance the competing equities or for the matter to be referred back to the Maori Land Court to enable it to consider the competing interests, with the action for specific performance being adjourned until the result of the hearing. The Judge traversed the possible outcomes. The Maori Land Court might refuse to allow a rehearing or might undertake a rehearing but confirm the change of status order. The first respondents would have had their day in court and “apart from delay in settlement” the sale could proceed. Or, the Court might annul the order for change of status and purport to return the land to Maori freehold. If it did this, the High Court would need to resolve whether it was prepared to grant specific performance. If it did so, the Judge said, the annulment would not be able to be registered. If the High Court refused specific performance then the Edwards would no longer be in a position to settle the sale as a sale of General land.
The Judge reached the view that the best course was to refer the matter to the Maori Land Court. He made certain observations for the purpose of assisting the Maori Land Court Judge who might reconsider it. In doing so he made two observations about the Maori Appellate Court’s conclusions in Re Cleave. First, he said that while the emphasis in the objectives section of the Act (s17) was substantially on the retention of Maori land or other land in the hands of Maori, the wishes of the owners of such land were not to be entirely ignored. Secondly, he considered that the Maori Appellate Court went too far in saying that where there was an objection to a status change by the PCA there must be compelling reasons before the Maori Land Court would make an order changing status. Ronald Young J commented that it was not helpful to attempt to lay down a rule which effectively said change of status would not be granted if opposed by the PCA. It was not required by the statute. There would be situations where the application was consistent with the principles of the Act and the applicant’s rights would be seen as more important than those of the PCA.
Having quashed the order of the Maori Land Court and referred the application for leave to bring an application for rehearing back to the Maori Land Court, the Judge adjourned the Bruce trustees’ action for specific performance sine die to be brought on for hearing in the High Court upon the resolution of the Maori Land Court litigation. He directed that should the Maori Land Court ultimately annul the change of status order, no party to the proceedings should attempt to register the annulment until the matter had been referred back to the High Court to consider the action for specific performance.

Submissions

For the Bruce trustees, Mr Laurenson relied upon what he called the indefeasibility rules of the Land Transfer Act, saying that these entitled his clients to become the registered proprietors of the land with the status of General land. Upon registration, he said, the status order had acquired “indefeasible effect”. He expressly disclaimed any reliance upon the Bruces’ position as registered mortgagees. He accepted that his clients had not become registered as purchasers, arguing that they had acquired an equitable interest under the agreement for sale and purchase at a time when they were unaware of the circumstances in which the change of status order was obtained and of the claims made by the PCA. They were bona fide purchasers for value without notice. He also supported the Judge’s finding that the PCA did not have an equitable interest and that this was not a case of competing equities.
It was also submitted that s125, authorising the transmission to the District Land Registrar of an order annulling, revoking or varying an earlier order, is subject both to the “indefeasibility rules” and to s88(1). Mr Laurenson said that s88(1) was more than a mere slip rule. It applied not only to corrections under ss86 and 87 but “or otherwise”, and would apply where a status order was reversed (“annulled”) under s43(5) after a rehearing.
Mr Laurenson argued that no circumstances existed to disentitle the purchasers from having the High Court order specific performance. They had clean hands. They were not seeking to take advantage of any wrong committed by them. The Edwards were not in a position to resist, and did not resist, specific performance. The Bruces had changed their position in reliance on the contract becoming unconditional and would suffer very considerable hardship if it were not completed. Even if the PCA obtained at a rehearing in the Maori Land Court a reversal of the status order, that would give them no more than a statutory right of first refusal which did not create any equitable interest in the land. The PCA had not shown that they had any prospect of being able to exercise that right if they obtained it. Counsel described the third respondents’ tentative proposals for funding a purchaser on behalf of the hapu as having a very low level of realism. He said that the Judge’s decision to adjourn the specific performance application was a clearly wrong exercise of discretion. It would create great uncertainty, expense and delay for the Bruces and would give the PCA no more than a slight hope of retaining the land. In the end, it was inevitable that the High Court would make an order for specific performance.
For the Edwards, Mr Wilson supported the position of the Bruces and submitted that there should have been no referral back to the Maori Land Court because it could never reasonably exercise its discretion in favour of a rehearing. He said that the High Court had either failed to exercise its discretion concerning specific performance or had exercised it wrongly. The High Court would be in no better position to decide the specific performance application after any rehearing in the Maori Land Court. Any annulment of the status order would not be able to be registered, as the High Court Judge had in fact recognised, and the hardship to the Bruces made it inevitable that specific performance would be ordered.
For Mr Manuirirangi and Mr Tito, Mr Dawson said that the Judge’s decision to adjourn the specific performance claim was one which was reasonably available to the Court and the most appropriate in the circumstances. It was a decision of an interim nature. The appeal was premature. The steps directed by Ronald Young J should be allowed to occur before the matter came before the High Court. The Bruce trustees did not have indefeasible rights based on the agreement for sale and purchase. Section 88(1) did not apply so as to protect their unregistered interest. The Maori Land Court should be allowed to reconsider the position and explore the possibilities for the PCA being able to exercise the right of first refusal which would be reinstated if the status order were reversed. The position of the Bruces was protected in the meantime by the arrangements they had in place with the Edwards and by their right to have the specific performance hearing once the Maori Land Court had made a determination. The order made by the High Court that any amendment should not be registered in the meantime was accepted and was not subject to appeal.
Mr Dawson submitted that there would be a considerable injustice to the PCA if, as a result of the misleading of the Maori Land Court and the Court’s failure to notify the PCA of the status order hearing, this ancestral land was sold out of the hapu. What had occurred was contrary to the policy of the Act for retention and control of Maori land by Maori land owners. The Act provided a range of protections in the case of a proposed alienation. It was because the Maori Land Court had been misled that these protections had been circumvented.

Mr Dawson further submitted that the decision whether to grant specific performance should not depend exclusively on the “alleged” innocence of the Bruces, but on all the circumstances. Consideration of the circumstances should be deferred until the Maori Land Court had had an opportunity of considering the present position. That Court was not being asked to perform a function equivalent to that of the High Court. Its determinations in its specialist area would assist the High Court in the exercise of its discretion. It could do that more effectively following a further Maori Land Court hearing. Hardship to third persons, such as the PCA, or to the public in general was a matter which could be taken into account in determining whether to order specific performance. One important matter to be considered was the assurances given by Mr Edwards to the members of his hapu in 1993 that the land would remain “in the family”.
Counsel submitted that, although he was not yet able to point to any commitment by the Government, there remained a realistic possibility that the PCA would be able to achieve their plan for reacquiring the ancestral Oeo Block land and bring it under a form of communal ownership. He drew the Court’s attention to correspondence with various Government ministers on the subject and to a consultant’s report which had formed the basis for that approach. The Court was assured that ongoing efforts were being made to try to put the PCA in a position to exercise a right of first refusal. Contrary to the submissions for the appellants and the Edwards, it was by no means inevitable that the High Court would, taking into account what might occur in the Maori Land Court, order specific performance.

Discussion

At the time when the Edwards/Bruce agreement was entered into the land had the status of Maori freehold land, defined in s2 as land that in terms of Part VI has the status of Maori freehold land. The PCA had a statutory right to be offered the land if the Edwards desired to “alienate” it while it continued to have that status. “Alienate” is a term applicable only to Maori land, including Maori freehold land. Any alienation could not be confirmed by the Maori Land Court unless the right of first refusal had been given as required by s147(2). The PCA could of course decline to take up the offer. The land could then be alienated subject – at that time – to the Court’s general discretion under s153, guided by the considerations in s154. After any alienation the land would, in the absence of an order for change of status under s135, remain classed as Maori freehold. The PCA would therefore continue to enjoy the right to be again given the first refusal if the alienee in turn wished to alienate it.
If, however, an order were made changing the status of the land to General land, there would no longer be any continuing right of first refusal. And where, as happened here, the intention of the Maori owners was to sell the land if, and only if, it had first had its status changed, i.e. the intention was not to make any alienation of the land as Maori freehold, neither entry into an agreement conditional as to performance on the prior making of such a status order nor the filing of an application in the Maori Land Court would trigger the statutory right of first refusal which applies only where land is to be “alienated” by transfer or assignment. We agree with Ronald Young J that this did not occur in the present case. Nevertheless, because a change of status would have the serious consequences that the right of first refusal would be bypassed and removed and that the controls on alienation, as they were in 2000, would not apply (the matter being governed instead by s136), the s135 application ought not to have been processed in the absence of the PCA or, at least, without their having an opportunity to make fully informed submissions to the Maori Land Court.
The prevailing judicial opinion is that a right of first refusal does not give rise to an interest in land before the occurrence of a triggering event – in this case a decision to alienate. Accounts of the differing views are given in Butterworths Land Law in New Zealand (1997), para 2.148 (k), Megarry & Wade’s The Law of Real Property, 6th ed (2000), para 12-061 and Professor Wade’s casenote on Pritchard v Briggs [1980] Ch 338 at (1980) 96 LQR 488). But the question is not finally settled and was not the subject of argument. On the basis most favourable to the PCA, we will therefore assume for present purposes that their statutory right of first refusal was an interest in land and that it antedated the agreement to sell to the Bruces - that it was an interest in the land which existed at all times whilst the land remained Maori freehold.
The Bruces certainly acquired an equitable interest in the land no later than the time at which the change of status order was registered. In fact, we think that it is likely that, in accordance with Bevin v Smith [1994] 3 NZLR 648, they acquired such an interest contingently as soon as the sale contract was formed, although, as this Court put it in Bevin (as p665), specific performance in the strict sense would not then have been available, since the land was still Maori freehold. We heard no argument on this question either and so we will again make the assumption most favourable to the PCA: that the Bruce trustees’ interest did not exist until registration of the status order on 12 May 2000.
Ronald Young J held that the purchasers’ equitable interest was acquired by them in good faith and for value. In our view the Judge was correct. There is no evidence which demonstrates any lack of good faith by the Bruces. In contending to the contrary the only matters to which Mr Dawson was able to draw attention were the cautionary paragraph in the letter of 23 March from Mr Bulfin to the solicitors for the Bruces when he advised that the contract was unconditional (see para [22] above) and the telephone calls to Mrs Bruce by Mr Manuirirangi in April 2000. The Bruces had, quite properly, left the obtaining of the change of status order entirely to the Edwards. They had played no part in the application to the Maori Land Court and, unlike the Edwards, had not been present at the hearing. They had no reason to suspect that the Court had been misled. It has not been shown that they were aware, or even had reason to suspect, that notice of the hearing had not been given to the PCA. The terms of Mr Bulfin’s letter, about which neither the Bruces nor their solicitor were questioned in the High Court trial, would most probably have been taken to be merely a warning that some members of the PCA, not having attended the hearing, may not have been aware of the sale. There was no reason for the Bruces to suspect that the PCA were unaware of the application or that the Judge had been kept in the dark about the sale. They were entitled to assume that all necessary notices had been duly given and that Mr Bulfin had observed his professional duty to disclose all relevant matters to the Judge. The short-form minutes sent to their solicitor by Mr Bulfin with the letter of 23 March contained nothing to indicate any possible irregularity. There was likewise nothing said in the two telephone calls to alert Mrs Bruce to any more than the existence of discontent on the part of the caller that the land was being sold out of the hapu.
So, even on assumptions which favour the PCA, the present position is that the Bruce trustees have an untainted equitable interest in the land and, as a consequence of the making and registration of the status order, the PCA themselves no longer had any competing equitable interest. Furthermore, if the Maori Land Court were now to rehear and refuse the Edwards’ application and if it were to make an order annulling the change of status order, that annulment order could not be backdated. Section 42(2) stipulates that every order of the Maori Land Court must be dated as of the date of the minute of the order “and shall relate back to that date”. It could not therefore relate back to 9 March 2000 (the date of the minute of Judge Marumaru) or even to 12 May 2000 when the registration of the status order effected the change of status (s142). Hence the right of first refusal could, at best, revive only from the date of the minute of the annulment order. The revived right would thus, whatever its character, be an interest later in time than the equitable interest of the Bruce trustees. Arguably, because the order would not effect the change of status back to Maori freehold until registration, the PCA’s interest might not revive unless and until the annulment was registered.
The Bruce trustees’ interest could of course be adversely affected, perhaps even destroyed, if the annulment order were then to be registered. Would it be proper for the order to be registered in such circumstances? If s125 alone governs the situation, and there is no statutory protection for the Bruces’ unregistered interest, the answer to that question might be that this could be done. If, however, in terms of s88(1), the annulment order would operate as a cancellation of the status order which would “take away or affect a right or interest acquired in good faith and for value before the making of the… cancellation,” the Court should not permit registration. An important question is therefore whether Ronald Young J was wrong to find that s88 has no application to orders made under s43(5).
On the face of it s88, which is in Part III whose provisions are said by s65 to apply in respect of both the Maori Land Court and the Maori Appellate Court, would appear to place a qualification or restriction upon the operation of an order made under the authority of s43. It is stated to apply to actions taken under ss86 and 87 “or otherwise”. It will be remembered that Ronald Young J reached his conclusion because of the difference in terminology (“amended or cancelled” in s88 and “vary or annul” in s43). If that view is correct, the Act would, rather surprisingly, contain no saving provision relating to the consequence of a rehearing. Yet it might have been expected that an order made on a rehearing would not override or remove rights or interests acquired bona fide and for value in the meantime.
The High Court did not have the benefit of any submissions on the legislative history of ss43 and 88. At our request during the hearing, counsel researched that history and made submissions on it. We are grateful to them for that work. We believe that if the Judge had been referred to the materials it revealed, he would have come to the opposite conclusion.
The Maori land legislation has, as is notorious, a long and tangled history. Many drafters have worked on consolidations and amendments over a period not far short of 150 years. Some inconsistency in the choice of language is therefore only to be expected. It is also to be expected that if very subtle distinctions of the kind now asserted by the third respondents were really intended, that would have been highlighted by definitions. “Annul” and “cancel” are synonyms. The Oxford English Dictionary (2ed) defines each by reference to the other. Mellinkoff’s Dictionary of American Legal Usage (1992) says concerning the expression “null and void” that “annul and annulment still have the pristine sense of void in the context of marriage and divorce; but elsewhere, annul doubles itself as annul and set-aside and mingles haphazardly with rescind and cancel”. In the absence of a clear indication in the statute to the contrary, and even before inspecting the legislative history, we would have anticipated that the use of the differing words in ss43 and 88 would prove to be merely an example of haphazard mingling. The history of the provisions confirms this view.
The term “annul” appeared in the second version of the legislation (the Native Lands Act 1865), and at that time appeared to reflect the fact that a rehearing was granted by the Governor in Council, not by the Native Land Court. If a rehearing order was made, “all proceedings theretofore taken by the Court in such matter shall be annulled and the case shall commence de novo” (s 81). The position changed, however, under the Native Land Court Act 1880, which gave the Court the power to order a rehearing. On a re-hearing, the Court could “affirm the original decision, or reverse, vary, or alter” it (s47). The term “annul” was not used. Section 78 of the 1886 Act used the same terms.
In the consolidating legislation of 1909 (the Native Land Act 1909), drafted by Sir John Salmond in conjunction with Sir Apirana Ngata, the term “annul” was reintroduced into the rehearing provisions (s28(2)), and was also included in the powers available to the Appellate Court (s52), instead of the word “reverse”, which had appeared in the 1880 and 1886 Acts. Under both the rehearing and appeal provisions, a prior decision or determination could be affirmed, varied or annulled, as it can be under ss43 and 56 of the current Act.
It was not until 1925 that the first ancestor of s88(1) was introduced, protecting bona fide purchasers whose interest arose between an original court order and an order following a later hearing. It was introduced by way of amendment to the 1909 Act, appearing as follows in s9(1) of the Native Land Amendment and Native Land Claims Adjustment Act 1925:
If and whenever under any power or jurisdiction granted by the principal Act, or any amendment thereof, the Court shall make an order cancelling, varying, or amending any former order or proceeding, such cancellation, variation, or amendment shall not take away or affect any interest theretofore acquired in good faith and for value.
There appears to have been no debate on this provision when it passed through Parliament, but there are a number of indications which suggest that protection was to be afforded to bona fide purchasers in the context of rehearings and appeals. First, the provision refers to “varying” which is quite clearly an order a court could make on a rehearing or appeal. This term was dropped in 1953 (see s 61 Maori Affairs Act 1953), and remains absent today, probably because it was considered synonymous with the word “amending”. Secondly, although the word “annul” appeared frequently in the 1909 Act, there was only one reference to cancellation of a Court order (in s121 concerned with partition orders). Yet s9(1) was plainly intended to have very general application. Such a broadly worded provision could not have been meant to apply to a single provision only, in so far as it applied to the cancelling of orders. There was no reason to think that the action of the Court in cancelling a partition order was of a different character, or was to have a different effect on third parties, from any of the kinds of orders which the Court was empowered to “annul” under the 1909 Act. Thirdly, when the legislation was consolidated for the first time since the 1925 amendment (by the Native Land Act 1931), the saving provision (s37) appeared in the same part of the legislation as the rehearing provision (s39), indicating that the two were regarded as being related. Fourthly, there had been a change of drafter by 1925 which possibly explains the inconsistent choice of language.
As we have said, there was a further consolidation in 1931 in which the general saving provision introduced in 1925 was brought together with the slip and rehearing provisions (see ss36, 37 and 39). The saving provision applied “[i]f and whenever under any power or jurisdiction conferred by this or any other Act” the Court should make an order “cancelling, varying, or amending” any former order (s37(1)). Obviously this saving, like s9(1) in 1925, was not confined to the correction of slips.
Then, when there was a further consolidation by the Maori Affairs Act 1953, the slip provision and the saving provision again appeared together as ss60 and 61, the latter of which was noted to have s37 of the 1931 Act as its predecessor:
61. (1) Where, whether pursuant to section sixty hereof or to any other authority, any order, warrant, record, or other document is amended or cancelled, the amendment or cancellation shall not take away or affect any right or interest acquired in good faith and for value before the making of the amendment or before the cancellation.

It will be observed that the language is very similar to the present s88(1). The present section refers to two slip provisions and uses the words “or otherwise”, instead of “or to any other authority”. But all that has happened is that the drafter has resorted successively from 1931 to 1953 to 1993 to a rather more terse mode of expressing the same idea. We see no indication that the application of the saving provision has been reduced since its original introduction as a general provision in 1925.

We mention also that the 1953 Act contained a rehearing provision (s28) in the same terms as in the 1931 Act. That section has been brought forward to the present Act as s43. Apart from the introduction of a time limit for the making of an application for a rehearing, there are no presently significant differences in the various versions of the section.
We are aware that s48 contains a saving provision relating exclusively to orders made by the Chief Judge under s44 or by the Appellate Court on appeal from any such order. Section 48 directs that no such order “shall take away or affect any right or interest acquired for value and in good faith under any instrument of alienation registered before the making of any such order”. Thus the protection applies only to registered interests. It would appear merely to confirm the position which would in any event pertain under the Land Transfer Act. The protection afforded by s48 is narrower than was given by its predecessor, s452(8) of the Maori Affairs Act 1953, to “any instrument of alienation executed before the making of any such order”. Subsection (8) specifically permitted any such instrument to be “perfected, confirmed or registered as if no order had been made” under s452. We have found no explanation for the narrowing of the protection but do not see in s48 anything supporting the view that s43(5) orders are under the 1993 Act to override intervening equitable interests, which they could not do under its predecessors. The successive sections enabling the Chief Judge to make orders have long had their separate saving provision, which is distinct from that applicable to orders made on a rehearing. The present inconsistency in the degree of protection may be curious but it is not an indication that in the case of s43(5) the previous protection of unregistered interests is no longer to apply.
We therefore conclude that s88(1) does operate to protect the Bruce trustees’ equitable interest against the consequences of any reversal (annulment) of the change of status order at a rehearing. Accordingly, it would not be proper for the Maori Land Court to make such an order and send it for registration.
That being the case, the appellants must be entitled to an order for specific performance of their contract with the Edwards, and to be registered as proprietors of the land as General land, unless there is some circumstance which should lead the High Court, in the exercise of its discretion, to decline to make such an order. The hardship to the PCA, resulting from the misleading of the Maori Land Court and the failure of that Court to have them notified of the hearing of the change of status application, are put forward as reasons against specific performance. The PCA will lose their association, through ownership by a member of the hapu, with ancestral land. Whilst we can have nothing but sympathy for their position, however, they do not have an equitable interest in the land. The Bruces, who do, would also suffer considerable hardship if refused specific performance. They would have to vacate the farm where they have been living for the past two years and would have to relocate their livestock. They are farmers by occupation but would have no farmland. They would be put in the position of having to try to acquire a comparable farming property at current market values. At the time of the hearing in the High Court last year, the expert evidence was to the effect that the value of dairy farms in Taranaki had risen by about one-third since the contract was made. We have been provided with no updating evidence concerning whether that increase in value has been sustained. But, even if there has since been some reduction, it is clear that the Bruces would be considerably disadvantaged if they now had to acquire another farm. They would, it is true, have an ability to claim damages from the Edwards, as well as recovering from them the deposit and mortgage money totalling $350,000. (The mortgage advances seem to have been made as a reasonable good faith effort to provide an interim solution to a problem not created by the Bruces.) They may well have a claim also for their litigation expenses which must be quite considerable.

There would be a very real doubt concerning whether the Edwards would readily be able to satisfy the Bruces’ claims, and thus over whether damages would prove to be an adequate remedy. The farm is mortgaged by the Edwards to their bank, as a first charge, to an extent where in 2000 the farming business was running at a loss. A forced sale at the behest of the bank or the Bruces would be a very real possibility. Despite Mr Dawson’s submissions, we can find nothing in the material before us suggesting that the PCA will be able to fund a purchase. Their approaches to the Government have been turned down. Their own consultant reports that the farm can service only 60% of its value. The hapu has no funding at all for the balance, nor has it any livestock. We fully agree with Ronald Young J’s assessment that the PCA have nothing more than a hope that funding can be obtained. We bear in mind also that if specific performance were refused the Maori Land Court might then reverse the status order. But, although that could have the effect of reducing the amount the PCA might have to fund, because the land would be likely to have a lower value as Maori freehold, it would increase the risk for the Bruces and could well be disastrous for the Edwards. (We have not taken account of the possibility of a claim by the Edwards against their former solicitors as we have no knowledge of what may have occurred between them; and the Bruces should not have to await resolution of any such claim.)
In summary, we have concluded that the Bruces are likely to suffer considerable hardship unless specific performance is ordered. We recognise the sorrow the loss of the land will cause to the PCA, but their prospects of obtaining it if specific performance is denied are not good. The Court cannot properly in the exercise of its discretion refuse specific performance. The Judge therefore erred in declining to make an order on the Bruce trustees’ counterclaim and in adjourning their application.

Result

The appeal is accordingly allowed and the matter remitted to the High Court for entry of judgment in favour of the appellants. The terms of the specific performance decree can if necessary, be settled by the High Court but, as the Edwards are desirous of settling, we imagine that this will not be necessary. There was some discussion at the hearing about the possibility of a contractual right of first refusal being granted to the PCA by the Bruces, subject to their ability to transfer the farm to their own family members. Because of the complexity of any such arrangement we do not consider that the granting of such a right should be made a condition of the order.
In the circumstances there will be no order for costs against the third respondents in this Court but the Edwards must pay the appellants’ costs in the sum of $5,000 together with their reasonable disbursements in connection with the appeal, to be fixed if necessary by the Registrar. Costs in the High Court were reserved and should now be fixed by that Court in light of this judgment.
The Edwards are released from the undertaking given on their behalf to the Maori Land Court (see para [6] above), but the transfer to the Bruce trustees is not to be presented for registration for 21 days from the date of delivery of this judgment or, in the event of an application for leave to appeal made during that period, until further order of this Court.

Solicitors:

Thomson O’Neil & Co, Stratford for Appellants

Till Henderson King, New Plymouth for First Respondents
Crown Law Office, Wellington, for Second Respondent
Russell McVeagh, Wellington, for Third Respondents

[2002] NZCA 294

18 November 2002