Campbell v Johnston

[2016] NZHC 121

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000001 [2016] NZHC 121

UNDER	the Land Transfer Act 1952
IN THE MATTER OF	an application to sustain a caveat
BETWEEN	MARK IAN CAMPBELL Applicant
AND	WILLIAM RONALD JOHNSTON Respondent

Hearing:	9 February 2016
Appearances:	M I Campbell (Applicant) in person O T Alpers for Respondent
Judgment:	9 February 2016

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

ON APPLICATION TO ORDER THAT CAVEAT NOT LAPSE

The contract

[1]      The respondent, Mr Johnston, is the registered proprietor of a twelve-hectare bare block of land at West Eyreton.  On 30 September 2013, Mr Johnston entered into an agreement with the applicant, Mr Campbell, to purchase four hectares of land to  be  subdivided  from  the  twelve-hectare  block.    The  agreement  for  sale  and purchase recorded that the purchaser was “Mark Ian Campbell and/or nominee as agent of the Ruru Trust”.

[2]      The twelve-hectare block was held by Mr Johnston in a single title which was issued in 2006.  The total area is described as comprising Lot 1 on Deposited Plan

321709 and Lots 4 and 5 on Deposited Plan 341272.   Mr Campbell’s Trust was

CAMPBELL v JOHNSTON [2016] NZHC 121 [9 February 2016]

buying Lot 4 but Mr Johnston failed to complete the subdivision so as to enable separate titles to be issued.

The contract

[3]      Significant terms of the contract were:

(a)      the purchase price was $180,000;

(b)      the purchaser was to pay a deposit of $30,000 (comprising cash of

$21,000 and goods and services valued at $9,000);

(c)      the vendor at his own cost and with all reasonable speed and diligence was required to arrange the issue of a separate Certificate of Title for the purchased property in compliance with the terms and conditions of the subdivision consent of the Waimakariri District Council;

(d)the balance of the purchase price ($150,000) was to be satisfied by a vendor mortgage over the property; and

(e)      the vendor granted a right of first refusal to the purchaser in relation to his adjoining land should he desire to sell that land at any time during the (twenty year) term of the vendor mortgage.

[4]      Mr Campbell satisfied the deposit in terms of the contract in October 2013.

The caveat

[5]      On 24 September 2015, Mr Campbell lodged a caveat against the title to the land pursuant to s 137 Land Transfer Act 1952 (the Act).  In the caveat, Mr Campbell claimed the following estate or interest:

I have an equitable interest as Purchaser, Mortgagor, and have an Option to Purchase an estate/land, or part thereof, namely 340 Worlingham Road, West Eyreton, RD 6, Rangiora 7476.  This property comprises the following Lots

– Lot 1 DP321709, Lot 4 DP 341272, Lot 5 DP341272 CT 169744

The interest is Pursuant to an Agreement for Sale and Purchase of Real Estate (“the agreement”) in writing dated 30 September 2013 between William Ronald Johnston (Registered Owner) as Seller and Mark Ian Campbell, (Trustee, Ruru Trust) as Buyer.

Pursuant to “the agreement” is a contract to purchase in writing dated 30

September 2013 between Registered Owner William Johnston as Seller and

Mark Campbell, as Buyer.

Pursuant to “the agreement “ Clause 20 is an agreement to Mortgage. Pursuant to “the agreement” Clause 25 is an Option to Purchase.

[6]      In December 2015, Mr Johnston initiated the caveat lapsing procedure under s 145A of the Act.

The application

[7]      Mr Campbell applies for an order that his caveat not lapse.     Mr Johnston opposes the application on three grounds:

(a)      Mr Campbell was not the purchaser but was an agent for the trustees of the trust which entered into a conditional contract to purchase part of the respondent’s land;

(b)there  is  no  evidence  that  the  condition  of  the  contract  was  ever satisfied; and

(c)      while  the  contract  contained  provision  for  a  right  of  first  refusal during the term of a proposed mortgage, the term of the proposed mortgage has never commenced and Mr Campbell has never had an option to purchase any of Mr Johnston’s land.

Application that caveat not lapse – the principles

[8]      The principles which I adopt in relation to Mr Campbell’s application are these:

(a)      the burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator;

(b)the caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or  an  instrument  or  transmission,  or  of  any  trust  expressed  or implied;1

(c)      the summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact – an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as once existed no longer does so;

(d)when  an  applicant  has  discharged  the  burden,  there  remains  a discretion as to whether to remove the caveat, which will be exercised cautiously; and

(e)      the Court has jurisdiction to impose conditions when making orders.

An estate or interest created by the contract

[9]      For Mr Johnston, Mr Alpers accepted that the contract created an estate or interest.  In his written synopsis, Mr Alpers recorded:

Purchasers who are trustees of a trust will take title in the names of the trustees and the trustees of the Ruru Trust are clearly persons entitled to, or beneficially interested in, the land or estate  or interest  by  virtue of the contract. (emphasis added)

[10]     Mr Alpers’ concession was appropriately made – the contract conferred upon the purchasers an estate or interest in the land.  Against that background, I then turn to examine the three particular matters which Mr Alpers had asserted made the caveat unsustainable.

Ground 1: the applicant was not the purchaser but was an agent for the trustees of a trust which entered into the contract

[11]     Mr Alpers invokes  the  provisions  of s  137(1)(a)  of the Act  1952  which provides:

137      Caveat against dealings with land under Act

(1)       Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—

(a)       claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; …

[12]     Mr Alpers submitted that, in his capacity as agent, Mr Campbell had no entitlement to lodge a caveat.   Mr Alpers referred to authorities which recognise clearly established principles as to the position of an agent. For instance, there is the observation of Thomas J in L C Fowler & Sons Ltd v St Stephens College Board of Governors where his Honour stated:2

The essence, to my mind, of the agent’s position is that he or she is only an intermediary between two other parties (see 1 Halsbury’s Law of England (4th ed) para 701, at p 418).

There is also the judgment of Reed J in Turnbull & Jones Ltd v Amner & Sons establishing that the law generally holds that where a person has contracted only as agent for another he or she cannot sue as principal.3

[13]     These authorities led Mr Alpers to submit:

Mr Campbell cannot act in the capacity as an agent for himself but can act as an agent for trustees including himself and could have lodged a valid caveat in the names of all the trustees of the trust to protect their interest as Purchasers.

2      L C Fowler & Sons Ltd v St Stephens College Board of Governors [1991] 3 NZLR 304 (HC) at

306.

3      Turnbull & Jones Ltd v Amner & Sons [1923] NZLR 673 (SC).

[14]     The  single  correct  point  in  this  part  of  Mr  Alpers’  submissions  is  the proposition that, in terms of s 137(1) of the Act, it is the person who by caveat claims the interest or estate who must be the holder of that interest or estate.

[15]     Thereafter, there are fallacies in Mr Alpers’ line of argument.   Mr Alpers implicitly identifies Mr Campbell as possessing only one relevant capacity.   He submits that because Mr Campbell had the capacity of agent, he had therefore no entitlement to lodge a caveat.  But this is to ignore Mr Campbell’s other status which is not in dispute.   Mr Campbell is one of the trustees of the Ruru  Trust.   Mr Campbell, in entering into the contract, entered as agent for himself and his co- trustee as principals.

[16]     The Register, which the Registrar of each district is required to keep in terms of Part III of the Act, records only the names of the persons taking benefits under instruments and the like.  It does not record any status or capacity claimed by such a person.  It is concerned with legal ownership.  This is reflected in the commentary in Hinde McMorland & Sim Land Law in New Zealand, where the authors write:4

9.114    Trusts must be kept off the register

It has come to be regarded as a basic principle of the Torrens system that no notice of any private trust may be entered on the register, and that no instrument may be registered which declares or contains such a trust. In Wolfson v Registrar-General of New South Wales Rich and Evatt JJ said:

… [T]he declared policy of the [Torrens] system is to keep trusts off the register … The register was not to present a picture of legal ownership trammelled by all sorts of equitable rights in others, which those who dealt with the registered proprietor must take into account.

Section 128(1) of the Land Transfer Act 1952 gives effect to this principle by providing that “no entry shall be made in the register of any notice of trusts, and no such entry, if made, shall have any effect”.

The general rule that private trusts must be kept off the register is subject to certain statutory exceptions, but these are not numerous enough to constitute a significant departure from the basic principle.

(footnotes omitted)

[17]     Accordingly, when Mr Campbell signed his caveat in his own name, it was neither required nor appropriate that the caveat state his capacity.  It is sufficient that he was in fact the purchaser.

[18]     The final fallacy in Mr Alpers’ argument as developed on this point is a proposition that the caveat is invalid because it was not lodged in the names of both trustees.  As a matter of law, it did not have to be.  It matters not that Mr Campbell has a co-trustee with whom he shares the interest or estate.  If he has an interest or estate, as he has, then he is entitled to protect it by caveat.

[19]     Accordingly, I hold against Mr Johnston’s first ground of opposition.   Mr

Campbell was a purchaser.

Ground 2: there is no evidence that the condition of the contract was ever satisfied

[20]     This was a ground stated by Mr Johnston in his notice of opposition.   In neither  of  his  synopses  of submissions  nor his oral  submissions  did  Mr Alpers address any submissions to this ground.   Today he has formally abandoned this ground.

[21]     Had this ground been pursued in argument, I would have found against it.  It is established that a conditional contract for the sale and purchase of land may confer an estate or interest capable of supporting a caveat.  I adopt the law as summarised by Tipping J in McDonald v Isaac Construction Co Ltd, where his Honour said: 5

It has recently been held by the Court of Appeal in Bevin v Smith [1994] 3

NZLR.  648  that  equitable interests  in land  can  be acquired  pursuant  to conditional contracts. The nature of the condition may be important. If it is

such that until fulfilment it can be said that the parties did not intend to

create any interest in land there will be no caveatable interest unless and until the condition is fulfilled. But, in the usual case where the parties intend

to be bound and to remain bound subject to the fulfilment of the condition,

equitable interests in land can arise by means of such a conditional contract.

[22]     In  this  contract,  the  parties  adopted  the  standard  form  of  REINZ/ADLS

contract (ninth edition) which provides at clause 9.8(1) that all conditions in the

contract are conditions subsequent.  There is nothing in this contract to suggest that the parties did not intend Mr Campbell to have an interest in the land pending the contract becoming unconditional.

[23]     It therefore matters not that the contract has yet to become unconditional. The material point is that the contract remains on foot, having not been effectively cancelled.

Ground 3:  the right of first refusal over adjoining land is not yet operating and

Mr Campbell does not have an option to purchase any land

[24]     In this aspect of the case, Mr Alpers’ focus shifts from the four hectare block to be subdivided off for Mr Campbell to Mr Johnston’s adjoining land, being that referred to on the title as Lots 4 and 5 of Deposited Plan 341272.  The contract, as quoted above at [3](e), grants Mr Campbell a right of first refusal in relation to that land.

[25]     The right of refusal under the contract is expressed as arising “during the term of the mortgage”.   Mr Alpers’ proposition in relation to the adjoining land is that the right of first refusal has therefore not arisen because the vendor mortgage has yet to be put in place (that is because the subdivision is incomplete, titles not having issued, and the sale and purchase not having settled).

[26]     It happens that Mr Johnston has yet to effect a subdivision of his twelve- hectare property in such a way as to make a title to Lot 1 available for transfer.  Mr Campbell’s caveat was therefore appropriately lodged against the title as it exists.  It is sustainable upon that basis alone.6

[27]     I therefore do not examine further the third ground of opposition as it is pleaded, other than to note that Mr Campbell may also have had other grounds on

which to defeat this third ground of opposition.7

6      Howard v Resort Developments Ltd (2007) 5 NZConvC 194,569 (HC).  See also Brookers Land

Law (looseleaf ed, Thomson Reuters) at 2.8.07.

7      Mr Johnston may not be able to rely on arguments as to the timing of the grant of mortgage given his failure to achieve the subdivision necessary to complete the contract.  That is a matter for trial and not one capable of resolution in this summary jurisdiction.  Mr Campbell certainly has an arguable basis on which to resist Mr Johnston’s point of opposition.

[28]     I add this in relation to the drafting of Mr Campbell’s caveat.   Mr Alpers criticised the drafting as failing to meet the requirements to clearly identify the land which the caveator is entitled to caveat.  Although Mr Campbell lodged the caveat himself without a lawyer, I do not find the scope of the caveat inappropriate.   It covers all the land in the title because the contract was both a contract to sell Lot 1 and a contract to provide a right of first refusal over the adjoining Lots 4 and 5, that is to say, all the land in the title.  This is not a case where the caveator had in relation to a particular portion of the land no arguable interest.

Outcome

[29]     I am satisfied that, by the contract dated 30 September 2013, Mr Campbell as one of the trustees of the Ruru Trust acquired an estate or interest in land which is the subject of the caveated title.  I am satisfied that he has a reasonably arguable case for the interest he claims.

Costs

[30]     This is a case in which costs and disbursements would normally follow the event.  However, as Mr Campbell is self-represented, therefore the only recoverable items are his disbursements incurred in filing his application ($200), the hearing fee ($640) together with the two sets of sealing fees of $50 each.

Orders

[31]     I order that:

(a)       Caveat CA 10201536.1 shall not lapse; and

(b)      the respondent is to pay the applicant’s disbursements which I fix at

$940.00.

Associate Judge Osborne

Solicitors:

Alpers & Co, Northwest Law Office, Christchurch

Copy to: M Campbell, Christchurch