Cowan v Cowan - [2022] NZSC 43

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI O AOTEAROA

SC 130/2021
[2022] NZSC 43

BETWEEN	CHRISTINE MARAMA COWAN First Appellant TE RAHUI JOHN COWAN Second Appellant
AND	JOHN ARTHUR COWAN First Respondent KURT THOMAS GIBBONS AND 170 QUEENS DRIVE LIMITED Second Respondents

Hearing:	15 February 2022
Court:	William Young, Glazebrook, O’Regan, Ellen France and Williams JJ
Counsel:	J Mason for Appellants R C Laurenson and C D Batt for First Respondent D M Salmon QC and M R C Wolff for Second Respondents
Judgment:	12 April 2022

JUDGMENT OF THE COURT

AThe appeal is dismissed.

BCosts are reserved.

____________________________________________________________________

REASONS
(Given by William Young J)

Table of Contents

Para No.
Introduction	[1]
A brief outline of the dispute	[5]
The legal principles	[14]
The statutory provisions	[14]
The general principles which apply to the application of ss 142 and 143	[22]
Undertakings as to damages	[23]
Impecunious caveators	[24]
The factual background in more detail	[26]
Tikanga	[37]
The losses that the lodging of the second caveat may cause	[39]
The primarily relevant decisions of the Courts below	[43]
Preliminary comments	[43]
The first Court of Appeal judgment	[44]
The judgment of Associate Judge Lester	[49]
The second Court of Appeal judgment	[54]
The progress of the substantive litigation	[58]
The resolution of the appeal	[61]

Introduction

Under the land transfer system, registered title to an interest in land is indefeasible. Indefeasibility means that, subject to limited exceptions, a registered owner takes title free from any unregistered interests.[1] Such unregistered interests can, however, be protected by caveats. Section 138 of the Land Transfer Act 2017 (the Act) provides that a person who claims to have an interest in land may lodge a caveat. Such a caveat, while extant, prevents the registration or recording on the register of any instrument or matter adversely affecting the claimed interest.[2]
[1]Land Transfer Act 2017, s 51(2).
[2]Section 140(1).
There are statutory mechanisms for the removal and lapse of caveats (ss 142 and 143 of the Act). Where a caveat has been removed or has lapsed, a second caveat protecting the same interest may not be lodged without the permission of the High Court (s 146).
If the caveator’s claim to an interest is disputed, the existence or otherwise of the interest is usually determined in separate substantive proceedings brought by the caveator. In this situation, the effect of the caveat (if neither removed nor lapsed) is to maintain the status quo pending substantive determination of the dispute in the separate proceedings.
Preserving the status quo can be disadvantageous to a registered owner. Some protection is provided by s 148 of the Act, which imposes liability to pay compensation for lodging a caveat without reasonable cause.[3] This protection, however, is limited. For this reason, a registered owner may argue that maintenance of the status quo by caveat should be made conditional on the caveator undertaking to pay damages for any losses caused by the caveat.

A brief outline of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZSC 43
Decision Date: 12 April 2022

CaseChat Overview and Summary

Cowan v Cowan is a family property dispute between the children of deceased parents, John and Marama Cowan. The case centres on the family home in Lyall Bay, Wellington, which was jointly owned by John and Marama. After Marama's death, John became the sole legal owner by survivorship. John subsequently entered into an agreement to sell the property to a developer, 170 Queens Drive Ltd, for $1.1 million. Christine and Te Rahui Cowan, two of John and Marama's children, lodged a caveat against the title to the property, claiming an interest in the property by virtue of an implied trust. They subsequently lodged a second caveat after the first was removed, subject to an undertaking as to damages. John applied to the High Court for an order that the second caveat be removed, which was granted. The children appealed, arguing that the requirement for an undertaking as to damages was inappropriate. The Court of Appeal dismissed the appeal, and the children appealed to the Supreme Court. The Supreme Court dismissed the appeal, holding that the requirement for an undertaking was appropriate and that the undertaking provided was not substantial enough to protect John from financial loss. The Court also held that tikanga principles were not relevant to the consequences of the children's breach of the requirement to provide a substantial undertaking. The Court emphasised the importance of fairness to all parties and the need for prompt and diligent prosecution of substantive proceedings.

Orders