Burmeister v Registrar-General of Land

[2014] NZHC 2033

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2008-470-000912 [2014] NZHC 2033

IN THE MATTER	of the Land Transfer Act 1952
AND IN THE MATTER	of a claim for compensation pursuant to s 172 of the Land Transfer Act 1952
BETWEEN	KENNETH SIDNEY BURMEISTER and VALERIE JOAN BURMEISTER Plaintiffs
AND	REGISTRAR-GENERAL OF LAND Defendant

Hearing:	on the papers
Counsel:	D Chesterman for Plaintiffs JR Burns for Defendant
Judgment:	26 August 2014

JUDGMENT OF ASHER J (Quantum of damages)

This judgment was delivered by me on Tuesday, 26 August 2014 at 3.00pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Sharp Tudhope, Tauranga.

D Chesterman, Auckland. Crown Law, Wellington.

BURMEISTER v REGISTRAR-GENERAL OF LAND [2014] NZHC 2033 [26 August 2014]

Introduction

[1]      In  the  decision  of 1 April  2014,  judgment  was  entered  in  favour of  the

Burmeisters who were entitled to compensation from the Registrar-General of Land.1

The entitlement arose because the Burmeisters were barred by the Land Transfer Act

1952 from bringing an action for recovery.   The determination of the quantum of compensation was reserved for further submissions.   The parties have now filed those further submissions.

[2]      Section 179 of the Land Transfer Act 1952 sets out the measure of damages when compensation is payable under s 172(b).  Section 179 provides:

179 Measure of damages

No person shall, as against the Crown, be entitled to recover any greater amount for compensation in respect of the loss or deprivation of any land, or of any estate or interest therein, than the value of that land, estate, or interest at the time of that deprivation, together with the value of the messuages and tenements erected thereon and improvements made thereto (if any) prior to the time of that deprivation, with interest at the rate of 5 percent per annum to the date of judgment recovered.

[3]      In the judgment of 1 April 2014, a submission from Mr Chesterman that the Burmeisters  should  be  awarded  the  full  amount  required  to  discharge  the ASB Bank’s mortgage over their property, registered as a consequence of a fraud of the O’Briens and Mr Geoffrey Clayton, was rejected.   It was concluded that the plain words of the section applied and the amount of compensation was limited by the words of the section.2    The consequence of this conclusion is that the Burmeisters can only recover compensation from the Crown based on the value of the land, estate or  interest  at  the  time  of  the  deprivation,  together  with  the  value  of  any

improvements.  Section 179 operates as a cap on the amount payable, limiting it to the value of the land and improvements at the stated time.

Date of deprivation and value of deprivation

[4]      Mr Chesterman for the Burmeisters and Mr Burns for the Registrar-General agree that the Burmeisters’ deprivation occurred when the ASB Bank’s mortgage

1      Burmeister v Registrar-General of Land [2014] NZHC 631.

2 At [68].

was fraudulently registered by the O’Briens on 14 November 2001.  It is also agreed

that the market value of the Burmeisters property at that date was $215,000.

[5]      It is not in dispute that the market value of the property today is much more than that sum, probably $420,000.  The amount presently owed to the ASB Bank is approximately $641,000.   That being the amount required to clear the title of the mortgage, it seems likely that, subject to any credit for monies received from the O’Briens or associated entities, the Burmeisters loss at its highest is that $641,000, together with any general damages.

[6]      However, on the interpretation of s 179 in the judgment of 1 April 2014 the Burmeisters cannot recover either of the higher sums (the current market value or the amount owed under the mortgage), and are limited by their entitlement under that section to the value of the land and improvements at 14 November 2001.

[7]      The parties have agreed that this issue is to be determined on the papers.

Submissions

[8]      Mr Chesterman for the Burmeisters submits that in light of the 1 April 2014 judgment the Burmeisters are entitled to the full value of the land and improvements as at the date of deprivation on 14 November 2001.  This is $215,000, together with interest at the rate prescribed by s 179 of five per cent from that date to the date of hearing of $134,374.98, a total of $349,374.98.

[9]      The Burmeisters received a $7,000 initial payment and weekly payments of a further $19,000 after the fraud was implemented.  Mr Chesterman submits that those monies received should not be deducted from the $215,000 plus interest and should be accounted for if at all between the Burmeisters, and the O’Briens and Mr Clayton who were the fraudsters.  He points out that because of the limit placed by s 179 the Burmeisters will not recover anything like the amount they owe to the ASB Bank, and have lost much of the market value of their property in any event because of inflation.  He submits that s 179 does not create a discretion to reduce damages, and the formula it imposes should be strictly applied.  If there is a discretion it should be exercised in favour of the Burmeisters.

[10]     Mr Burns for the Registrar-General relies on statements by Professor Sim in his article The Compensation Provisions of the Act to the effect that the common law principles for assessment of damages apply to a s 179 calculation.3   He also relied on Australian observations to the effect that any damages under the Western Australian equivalent of s 179 must be damages commensurate with the loss sustained.4

[11]     He submitted that s 179 expressly provided that the amount of $215,000 was the equivalent in monetary terms to the land and should be treated therefore as commensurate with the starting point of the damages entitlement.  He also submitted the Burmeisters, in addition to receiving the weekly payments totaling $19,000 and lump sum of $7,000, received an additional lump sum of $15,000.  He argued that the plaintiffs had never disclosed their bank statements showing the amounts they had in fact received, and this was a further factor supporting a reduction of the

$15,000 as the circumstances of the receipt of that amount were unclear.   He submitted that the Burmeisters had been dilatory in initiating proceedings against the Registrar-General and that they were not entitled to interest over the full period since November 2001.

Discussion

[12]     Section 179 is headed “Measure of damages”.  A person is entitled to recover compensation in respect of the loss or deprivation of land and improvements, but a statutory limit is imposed capping the amount for which the Crown can be liable to the value of the land and improvements as defined.

[13]     I see no basis for inferring that a new damages regime is created by s 179 as suggested by Mr Burns.   That would involve a two-stage process where first the starting point is the value of the land and improvements, and second deductions are made from that starting point in relation to monies received.   The words of the section do not support such an interpretation and it would in my view run contrary to

what the legislature intended.

3      PBA Sim The Compensation Provisions of the Act in GW Hinde (ed) The NZ Torrens System

Centennial Essays (Butterworths, Wellington, 1971), 138 at 157.

4 Transfer of Land Act 1893 (WA), s 201.

[14]     Section   179   was   intended   to   limit   liability  by  imposing   a   cap   on compensation.  Presumably when the section was drafted in the nineteenth century the present inflationary movements in the value of land were not anticipated and it was seen as a fair formula.   I have commented on the rigidity of the section.5    It operated as a cap on compensation that was otherwise payable.  However, it was not intended to substitute an entirely new regime for calculations of loss.  It was to place

a cap.

[15]     The approach adopted by the Registrar-General is contrary to the approach adopted by Professor Sim.  Professor Sim referred to restitutio in integrum and that the ordinary common law principles relating to damages apply.6   A claimant is to be put in the same position as far as money can do it as if the wrong complained of had not been done.   Griffiths CJ in Registrar of Titles v Spencer adopted the same approach, stating that:7

… damages [should be] commensurate with the loss … sustained, that is to say, [the plaintiff] is to be put in the same position, so far as money can do it, as if the wrongful act complained of had not been done.

[16]     So the orthodox assessment of loss is made and then the cap is applied.  If the Burmeisters were put in the same position so far as money could do it as if they had not been defrauded, they would be entitled to compensation to the value of the ASB Bank’s mortgage, the sum of approximately $641,000.  Only by receiving that sum and paying out the mortgage could they be returned to the position they previously enjoyed of owning the home mortgage-free.   It is clear that their entitlement to damages is well in excess of $215,000.

[17]    To accept the defendant’s submission that $215,000 is the equivalent in monetary terms to the value of the land that the Burmeisters have been deprived of, and for deductions for amounts received to be made from that figure, would be to insert an artificial concept into the calculation of loss, that would run against the ordinary principles of the award of damages.  So that $215,000 as the starting point

for deductions would be a fiction.  It is a far more satisfactory to view s 179 as not

5      Burmeister v Registrar-General of Land, above n 1, at [68].

6      PBA Sim, above n 3, at 157.

7      Registrar of Titles v Spencer (1909) 9 CLR 641 at 645 (HCA).

creating a new damages regime, but simply providing a cap on the quantum of damages that are calculated otherwise in the usual way.

[18]    The Land Transfer Act’s compensation provisions are in themselves an acknowledgement of the detriment that can arise under the Torrens system when the provisions of the Act prevent a plaintiff from challenging subsequent registrations. Section 172 provides mitigation against the harshness of that scheme by providing for compensation from the Registrar-General.   There would seem to be no policy reason   for  the  legislature  to   then   allow  for   deductions   that   might   reduce compensation beyond the statutory cap when the actual loss already exceeds the cap even taking the deductions into account.  The cap in s 179 is the only limit on the ordinary principles of compensation.

[19]     The Burmeisters loss, even taking into account the payments they received, far exceeds $215,000.  Therefore their recovery should be $215,000.  There should be no deductions.

The deductions

[20]     I go on to consider whether the deductions sought by the Registrar-General should be made, if the primary submission that deductions can be made from the

$215,000 had been upheld.  It was proven and accepted by the Burmeisters that the lump sum of $7,000 and the weekly payments of $19,000 were received.   They would be deducted.  The Registrar-General argued that the Burmeisters received a further lump sum of $15,000.  Mr Burns for the Registrar-General strongly submitted that the evidence was this amount was received.

[21]     The  evidence  does  not  support  this  submission.    Mr  Burmeister  in  his evidence in the trial last year stated that he received the $7,000 and $19,000 payments,  but  stated  he had  not  received  the  $15,000  lump  sum.   He was  not challenged on this assertion in cross-examination.  For this reason only the assertion that there would be a further $15,000 deduction is not accepted.

[22]     Moreover, in Burmeister v O’Brien I concluded that the total received by the Burmeisters was $7,000 and $19,000.8     No mention was made of $15,000.   The submission of the Registrar-General effectively contradicts that finding.  The parties had agreed prior to the hearing in this proceeding on 7 November 2013 that all the findings in the Burmeister v O’Brien decision would be accepted for the purposes of these proceedings.  It was not therefore open for the Registrar-General to assert that

this further $15,000 should be deducted.

[23]     I also record that I do not accept the Registrar-General’s submission that the Burmeisters failed to discover relevant bank accounts in relation to the payments they received.  The Burmeisters provided full discovery and there was no complaint about the discovery until 25 November 2013.   Prior to that counsel had filed memoranda recording that there were no outstanding discovery issues.   The Burmeisters have provided satisfactory evidence indicating that they were not able to recover the bank statements.  They were not challenged in cross-examination on the bank statements or their efforts to obtain them.

[24]     The Crown has raised an issue about the payment of rates and insurance. Again, this is not an issue on which Mr Burmeister was questioned in cross- examination, and I do not consider the payments for rates and insurance can be challenged in submissions at this late stage.

Interest

[25]     The Registrar-General argues that the Burmeisters interest claim should be reduced because they delayed the initiation of a claim against the Registrar-General and were guilty of delays.

[26]     It is stated in s 179 that a claimant is entitled to recover compensation as set out “… with interest at the rate of 5 percent per annum to the date of judgment recovered”.  Given the formulaic nature of s 179 this would appear to be an absolute

entitlement.  There is no suggestion in the words themselves that the interest rate is

8      Burmesiter v O’Brien HC Tauranga CIV-2005-470-396, 1 December 2009.

discretionary.  The position can be contrasted to that in the High Court Rules where a

Court is specifically given a discretion.9

[27]     I  have  already  construed  s  179  as  setting  out  a  cap,  and  rejected  the submission for the Burmeisters that it should be interpreted sympathetically to a claimant to allow the full recovery of damages and compound interest.10   The section means what it says.   Interest is at five per cent.   There is nothing to indicate a statutory intention to provide a discretion to award less than the five per cent.  It is a conservative interest rate if compared to the interest rate provided for in the High Court Rules of 7.5 per cent.11

[28]     Section 179 provides that the loss is to be calculated at the “time of [the] deprivation …  with interest …  to the date of judgment  recovered”.   The plain meaning would appear to be that interest is calculated with the date of deprivation as the start date and the date of judgment as the end date.  Thus, the Burmeisters are entitled to recover that amount of interest for that period.  There is no provision for an inquiry as to their actions in the intervening period.

[29]     Even if there was a discretion I would not have reduced the time period for the calculation of interest, as Mr Burns has suggested.  Undoubtedly the Burmeisters could have acted with more alacrity at times.  However, they had been subjected to a complex fraud, and they were of modest commercial and litigation experience. After they fully understood they had been defrauded they issued proceedings.

[30]     There is no onus on plaintiffs to bring an action against the Registrar-General within any particular time, providing it is within the six year limitation period.  In the

2005 proceedings that the Burmeisters issued they joined seven parties, one of which was  the ASB  Bank.    If  they  had  succeeded  against  the ASB  Bank  no  further proceedings would have been necessary and the Registrar-General would have been

saved considerable time and cost.

9      High Court Rules, r 11.27(2) and s 87(1) of the Judicature Act 1908.

10     Burmeister v Registrar-General of Land, above n 1, at [63]–[71].

11     High Court Rules, r 11.27(2) and s 87(3) of the Judicature Act 1908.

[31]     The Registrar-General was asked to join the substantive civil proceedings in November 2008 and declined to do so.  Further, the Registrar-General did not agree to abide the factual findings in the earlier Burmeister v O’Brien judgment until shortly before the hearing in November 2013.  One of the reasons for the delay was that the Registrar-General raised a limitation point against the Burmeisters, and after

an adverse judgment in this Court appealed that issue to the Court of Appeal.12   This

extended the time for trial by approximately 18 months.

[32]     Therefore, I do not see any particular fault on the Burmeisters part in the conduct of this litigation that would have warranted a shorter period for the calculation of interest, even if I had a discretion to do so.

Result

[33]     The defendant is to pay the plaintiffs as compensation in damages under s 179 of the Land Transfer Act the sum of $215,000 together with interest at five per cent of $134,374.98, a total of $349,374.98.

[34]     I reserve the question of costs on this issue, but hope that as with costs in relation to the earlier hearing the parties will resolve the matter.

……………………………..

Asher J

12     Registrar-General of Land v Burmeister [2012] NZCA 340, (2012) 13 NZCPR 504.