Garton Holdings Limited HC Wellington CIV 20087-485-1234
[2008] NZHC 2526
•26 August 2008
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2008-485-1234
UNDER The Land Transfer Act 1952
IN THE MATTER OF an application pursuant to section 145A of the Land Transfer Act 1952
BETWEEN GARTON HOLDINGS LIMITED Applicant
ANDTHE NGAHINA TRUST Respondent
Hearing: 28 July 2008
Memoranda: 12 August 2008 – Joint memorandum of counsel for both parties
Appearances: D.J.S. Parker & I. Feisst for Applicant
J.W. Tizard & A.J. Hughes for Respondent
Judgment: 26 August 2008 at 4.00 pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by the Registrar on 26 August 2008 at
4.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.
Solicitors: Parker & Associates, Barristers & Solicitors, PO Box 23 270, Wellington
Oakley Moran, Solicitors, PO Box 241, Wellington
GARTON HOLDINGS LIMITED V THE NGAHINA TRUST HC WN CIV 2008-485-1234 26 August 2008
Introduction
[1] The applicants (“Garton Holdings”) apply under s 145A of the Land Transfer
Act 1952 (“the LTA”) for an order that caveat B454900.1 does not lapse.
[2] Caveat B454900.1 purports to claim an interest over a property in or near
Paraparaumu, being lots 4 & 5 of DP 72985, Certificates of Title 40D/131 and
40D/132 Wellington Registry owned by the respondent (“the Ngahina Trust”). The interest claimed in the caveat is said to have arisen by virtue of an option to purchase in an agreement for the sale and purchase of land the land in question dated 18 July
1991. A problem which has only just been identified arises here, however. The option to purchase contended for by Garton Holdings arises with respect to a different piece of land – Lot 2 DP72985. More on this shortly at paras. [4] to [8] below.
[3] In any event the present application is opposed by the Ngahina Trust.
Preliminary
[4] As I have mentioned above, subsequent to the hearing of this matter on 28
July 2008 it was noticed for the first time that caveat B.454900.1 for which the present application was made was not registered against the certificate of title to lot 2
DP72985 (Certificate of Title 40D/129), the land for which the option to purchase was granted. Indeed the title to this lot 2 DP72985 is the subject of a caveat but this is a different caveat No. B399784.1.
[5] As a result, on 11 August 2008 I issued a minute to counsel for both parties in this proceeding pointing out what appeared to be an error in the application which was before the Court and seeking memoranda from counsel in response. Counsel for Garton Holdings and counsel for the Ngahina Trust have now filed a joint memorandum dated 12 August 2008 regarding this issue.
[6] The memorandum confirms that caveat B.399784.1 is the correct caveat in issue here, it is still lodged against the title to lot 2 DP72985 and has not lapsed.
[7] Counsel for both parties suggest and request at para. 5 of their memorandum that the Court should determine Garton Holdings’ present application as if it related to caveat B.399784.1 rather than caveat B. 454900.1.
[8] I accept that this pragmatic suggestion is a useful way to proceed in this matter and I now give my judgment on this basis. It will relate to caveat B.399784.1 as if a notice that this caveat was to lapse had been issued.
Background Facts
[9] In 1991 the Ngahina Trust approached a Mr Andrews, the sole director and shareholder of Garton Holdings, through a real estate agent to ascertain whether he would be interested in purchasing two lots of Mäori freehold land (lots 1 and 3 DP
72985) from the Ngahina Trust. Ms Taylor, a trustee of the Ngahina Trust (both at the time, as K M Teira, and now), says that there were two reasons for the Trust subdividing all the land which comprised DP 72985 – the Trust’s need for cash to meet accrued liabilities and anticipated roading requirements.
[10] At the time, it seems that it was a possibility that another lot on the plan lot 2
DP 72985 containing 9.6370 hectares would be required by the Kapiti Coast District Council (“the Council”) or Transit New Zealand (“Transit”) for the purposes of a proposed express way. My understanding of the position at the time is that the Ngahina Trust wanted to retain this Lot 2 for a designated time so as to afford it the opportunity to sell Lot 2 to Transit.
[11] As a result, Garton Holdings and the Ngahina Trust entered into an Agreement for Sale and Purchase (“the agreement”) on 18 July 1991. Under the agreement, Garton Holdings purchased lots 1 and 3 DP 72985 for $300,000. Also in the agreement at clause 14.8 was an option (“the option”), exercisable by either party, enabling Garton Holdings to purchase or to be required to purchase lot 2 DP
72985 (“Lot 2”) for $60,000. The terms of this option were as follows:
“14.8 This contract has been entered into on the understanding shared by the vendors and the purchaser that it is probably the intention of either Transit New Zealand or the Kapiti Coast District Council to acquire the areas shown as Lots 2, 4 and 5 on the plan of subdivision
referred to in paragraph 1 of this clause 14 under the Public Works Act 1981 but if these areas are not so acquired or agreed to be to acquired by the 20th day of November 1993, being the date then either the vendor or the purchaser hereunder may by Notice either require the other party hereto to take all such steps as may be necessary to have Lot 2 on the said plan conveyed to the purchaser or his nominee at and for a consideration of $60,000.00, being the same price per hectares as the price offered for Lots 1 and 3 on the said Plan having regard to special conditions 2 and 3 hereof, or else to negotiate a new agreement in respect of the said Lot 2.”
[12] Mr Andrews says that, before entering into the agreement, the Ngahina Trust had made him aware of independent valuation advice received from a Mr M J Robertson. Mr Andrews maintains that this advice was the basis for the sale price for Lots 1 and 3 and the nominated purchase price for Lot 2. As such, it is said that these prices were market values at the time.
[13] On 22 November 1991, the Ngahina Trust signed a memorandum of transfer for Lots 1 and 3. This transfer was confirmed by the Mäori Land Court pursuant to
224 of the Mäori Affairs Act 1953 (“the MAA”) on 5 December 1991 and the transfer was subsequently executed.
[14] On 15 November 1993, five days before the option could be exercised, Garton Holdings’ solicitor, Mr Killalea, wrote to the Ngahina Trust’s solicitors. In relation to the option Mr Killalea stated:
“In terms of the contract our client believes that he can seek specific performance and is looking to exercise that right. However he would prefer to complete the purchase amicably with the owners and looks forward to your confirmation that the sale can now proceed. We understand that Council has shelved any intention to purchase the land from Transit New Zealand and that Transit New Zealand have already indicated that they have insufficient funds to proceed with the development. It therefore means that in terms of the contract between our respective clients there will be a sale and purchase upon the terms and conditions as previously agreed.”
[15] Mr Andrews also maintains however that Garton Holdings’ solicitors notified the Ngahina Trust’s solicitors of its intention to exercise the option after 20
November 1993 and that various unsuccessful attempts were made to negotiate the transfer of Lot 2.
[16] In addition, Mr Andrews says that, in a letter dated 14 January 1994, Garton Holdings’ solicitor Mr Killalea again notified Ngahina Trust of its intention to purchase Lot 2. The letter sets out “the various options that appear to be available in respect of the contract between your client trust and Garton Holdings Limited”. These options appear to list the problems associated with the Ngahina Trust retaining the land in the event that the express way was to proceed, was not to proceed, or if the Kapiti Coast District Council (“the Council”) decided on a “through road” only. The letter concludes:
“We would draw to your attention that the contract of the 18th July 1991 provided under special conditions of sale 14(8) that the purchaser would acquire the land mentioned in the particular sub-clause as Lots 2, 4 and 5 at a consideration of $60,000.00. As Lots 4 and 5 have been acquired for roading purposes it now means that the balance of land being Lot 2 could be renegotiated which appears to be the steps desired to be taken by your client trust. Clearly if the negotiation is for Lot 2 only then it is less land than was originally anticipated and the consideration of $60,000.00 would be reduced. The basis on which the figures were provided under sub-clause 8 is clearly set out in that clause. As stated our client has exercised the option of wishing to acquire the land. The purchase price he has indicated could remain at
$60,000.00 although he believes he is acquiring land which is less than was originally anticipated and should therefore be reassessed to a lower figure.
…
We would ask that you refer this letter to your trustees and we would further ask that you obtain their views within say one calendar month so that our client can determine what steps he should take next…”. (my emphasis)
[17] Mr Andrews and Mr Killalea, Garton Holdings’ solicitor at the time, say that no response was received to this letter. Mr Killalea also goes on to say that he does
“not recall at any time before or after sending the 14 January 1994 letter representatives of the Ngahina Trust ever (until recently) disputing that Garton Holdings Limited held an option to purchase the land in question or challenging the validity of the exercise of that option” (Affidavit dated 30 June 2008 at [8]).
[18] On 17 October 1994, caveat B399784.1 was registered against Lot 2 in favour of Garton Holdings. This caveat claimed an interest “as Purchaser by virtue of an agreement for sale and purchase dated 18th July 1991 with the registered proprietors”. Subsequently, Mr Parker, as solicitor for Garton Holdings, also arranged a spite strip to be lodged in respect of the part of the property adjacent to Milne Drive, so as to provide further protection.
[19] Mr Killalea says that the caveat was lodged by Garton Holdings to protect its interest and thereby ensure that it “would acquire the land in due course”. He again says that he does not recall the Ngahina Trust making any challenge to the caveat, a caveat which would have been brought to the Trust’s attention.
[20] It seems that nothing more was done about the option and/or the caveat until late in 2007 when the Ngahina Trust’s solicitors and the Council made enquiries of Garton Holdings as to the basis of the caveat. On 28 November 2007 Garton Holdings’ solicitors received a letter from Mansell Associates. Mansell Associates is apparently a development company in which the Ngahina Trust has a fifty percent shareholding. The letter itself however noted that Mansell Associates are chartered accountants and it referred to the Ngahina Trust as being their “clients”. Nothing turns on this. The letter stated, inter alia, that the Ngahina Trust had been negotiating with the Council for the sale of Lot 2 for roading purposes for almost three years. The letter indicated that this negotiation could give rise to “quite a substantial settlement sum” and so “it is going to be quite important to resolve the matter of the caveats as soon as possible so that my clients are not out of pocket for the interest”. Mr Andrews has stated that he understood the transfer settlement price for Lot 2 with the Council to be in the region of $10 million.
[21] On 20 March 2008, Garton Holdings’ solicitors received a letter from the
Ngahina Trust’s solicitors stating that the Ngahina Trust did not accept that Garton
Holdings had an enforceable option to purchase Lot 2. The letter gave the following reasons:
•Neither party had ever purported to exercise the respective options conferred by clause 14(8); in the absence of an express time limit, any exercise of the option had to be within a reasonable time; and a reasonable time had well and truly lapsed rendering the options “no longer exercisable, time having elapsed years ago”.
•The purchaser’s option in clause 14(8) was an “alienation” under s 2 of the MAA and so, to have any force or effect, required confirmation from the Mäori Land Court (s 224 of the MAA) and that it was out of time. No application was ever made and there is simply no prospect that the Mäori Land Court would confirm the alienation at this date.
As such, the Ngahina Trust’s solicitors requested removal of the caveat or they would lodge an application under s 145A of the LTA for it to lapse.
[22] Garton Holdings’ solicitors responded on 16 May 2008. They stated essentially that Garton Holdings had an enforceable caveat; that there was no implied term that the option had to be exercised within a reasonable time; that, if there was such a term, a reasonable time had not expired as the Ngahina Trust had never indicated their view that time would expire on any set date or had ever given notice that time was now of the essence. They went on to note that Garton Holdings had maintained an unchallenged caveat protecting their interest since 1994 and that there were no insurmountable barriers to having the transfer confirmed.
[23] The Ngahina Trust then lodged an application under s 145A of the LTA to lapse caveat. B454900.1 which as I have noted is not the caveat in issue here. Nevertheless, as discussed earlier, this judgment proceeds at the request of the parties on the basis that the s. 145A lapse application did relate to caveat B.399784.1.
[24] On 11 June 2008, Garton Holdings’ solicitors again wrote to the Ngahina
Trust’s solicitors, stating, inter alia:
“We refer to the sale and purchase agreement between Garton Holdings and the Ngahina Trust dated 18 July 1991 and the option to purchase Lot 2 of DP
72985 in the Wellington Registry contained in clause 14(8) of that agreement.
Our client reiterates previous notice that it wishes to exercise that option and purchase the land. Our client required the trust to take all such steps as may be necessary to have Lot 2 transferred to Garton Holdings Limited for the consideration of $60,000 as set out in that agreement.”
[25] Mr Finlayson, the solicitor for the Ngahina Trust since 1993, says (in his affidavit dated 26 June 2008) that the Trust has finally completed negotiations with the Council for the sale of Lot 2 for roading purposes. He says the Trust resolved to sell Lot 2 to the Council on 14 June 2008 but the agreement is yet to be approved by seventy-five percent of the beneficial owners of the land and confirmed by the Mäori Land Court. Mr Finlayson says that the terms of this agreement are confidential. These points are all confirmed in a supporting affidavit of a Mr Lim dated 28 July
2008.
Caveatable Interest
[26] It is well established that the applicant has the burden of establishing a reasonably arguable case that it has a caveatable interest in the property in question: Sims v Lowe [1988] 1 NZLR 656 (CA); Wellesley Club Inc v Wellesley Property Holdings Ltd (2007) 8 NZCPR 421 at [20].
[27] A caveat is not to be allowed to lapse unless it is patently clear that it cannot be maintained because there was no valid ground for lodging it or no such ground exists now: Re Graham (1912) 14 GLR 806; New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA); Sims v Lowe at 659. Moreover, as stated by Somers and Gallen JJ in Sims v Lowe (at 659), the “summary procedure for the removal of a caveat against dealings is wholly unsuitable for the determination of disputed questions of fact”.
[28] Thus in Hinde McMorland & Sim Land Law in New Zealand at para
10.020(a), the authors state:
“It is clear that on an application under sections 143, 145 or 145A the Court ought not finally to determine the rights of the parties unless both parties consent or unless the facts are not in dispute and the law has been fully argued.”
[29] Similarly, Somers J in New Zealand Limousin Cattle Breeders Society Inc v
Robertson said (at 43):
“The proceedings upon such an application (under s.145) are quite unsuitable to determine the rights of the parties.”
(See also Re Ede (1882) NZLR 1 SC 258, 259.)
[30] Once the applicant has met the initial onus, there remains a discretion as to whether to remove the caveat (Hinde McMorland & Sim Land Law in New Zealand at para 10.020(c)). In Pacific Homes Limited (in receivership) v Consolidated Joinery Limited [1996] 2 NZLR 652 (CA) Blanchard J (delivering the judgment of the Court) commented on this discretion at 656:
“We are of the view that in the dictum in Sims v Lowe Somers and Gallen JJ were concerned with the situation which was then before the Court and were not putting their minds to a situation in which there is no practical advantage in maintaining a caveat lodged by someone who could properly claim a caveatable interest. In such circumstances the Court retains a discretion to make an order removing the caveat, though it will be exercised cautiously.
An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of the case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator’s interests can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to
be removed notwithstanding that the right to the claimed interest is undoubted.”
[31] At this stage, the onus is on the Ngahina Trust to show why the discretion ought to be exercised: Wellesley Club Inc v Wellesley Property Holdings Ltd at [55]. This is because the Court must be “completely satisfied” that removal would not prejudice the caveator’s interests. In the absence of evidence on this point, therefore, the caveat should be preserved. On this see also Hinde McMorland & Sim at para
10.020(c).
The issues
[32] Whether Garton Holdings has a caveatable interest in Lot 2 will depend on the following questions:
(1) Did the agreement create an enforceable option to purchase? (2) Did Garton Holdings exercise this option?
(3) What were the terms of any contract thus created? (4) Will the Mäori Land Court confirm the contract?
[33] I will address each of these questions in turn.
Did the agreement create an enforceable option to purchase?
[34] The Ngahina Trust questions whether an option was ever granted. In support, Ms Taylor confirms that the beneficiaries of the Ngahina Trust approved the sale of Lots 1 and 3 but says that, as far as she can determine, there was never any resolution to grant an option. The position as she understood it was that the Trust would negotiate with Garton Holdings if by 20 November 1993 it turned out that neither the Council nor Transit required the land for roading. She says that after this date the Council did still want to proceed with a road (although there remained uncertainty as to what sort of road and how much funding the Council could obtain). Ms Taylor says that, as far as she was concerned, there was never any question of the Ngahina Trust selling Lot 2 to Garton Holdings.
[35] In response, Garton Holdings says that the option was contained in the agreement and was validly granted for good consideration. Mr Killalea maintains that “it is apparent from the agreement itself that an option has been granted”. Garton
Holdings notes that Ms Taylor, herself then known as K M Teira, signed the agreement containing the option and the later transfer of Lots 1 and 3 under the agreement.
[36] Mr Andrews particularly contests Ms Taylor’s evidence that there was never any resolution to sell the land subject to the option. He refers to evidence from injunction proceedings against the agreement to sell Lots 1 and 3 that were instituted by one of the beneficiaries of the Ngahina Trust. Garton Holdings refers to certain exhibits to an affidavit of Mr Tapuke (dated 15 November 1991) in support of this injunction to make the following points:
• First, that the objects and powers conferred under the order declaring the Ngahina Trust are consistent with the development and sale – eg. an object is to “hold, use, develop and dispose of the said lands for the general benefit and financial advantage of the beneficial owners thereof”, and the powers to enter into contracts with developers and to dispose of any of the trust lands by sale on such terms as the trustees think best.
• The minutes of the Ngahina Trust’s annual meeting on 19 May 1990 show “general business” of Mr Andrew’s offer to pay cash for the land or complete a joint development, and the agreement that further negotiations be entered into with Mr Andrews.
• Included as an exhibit is the agreement, including the option.
• Correspondence exists to and from the trustees of the Ngahina Trust in relation to the sale referring to, inter alia, discussion at annual meetings of the Trust relating to the sale; that the Trust would use the proceeds of the sale to build up the Trust’s interest in the Coastlands area; and that valuation advice had been obtained.
[37] In oral submissions, I understood counsel for the Ngahina Trust to question whether the wording of clause 14.8 did create an option. Any difficulty seems to be with the last phrase – “or else to negotiate a new agreement in respect of the said Lot
2” – the rest of the clause ostensibly creating an option. In my view, a proper interpretation is that these words do not detract from the earlier part of the clause
which provides an option for either the purchaser Garton Holdings or vendor Ngahina Trust to require the other party to take such steps as are necessary to convey Lot 2 to the purchaser Garton Holdings for a consideration of $60,000. The clause can be read as enabling the purchaser or vendor to require either one of these alternatives.
[38] I am of the view that there is a reasonably arguable case that the agreement did include the asserted option to purchase and that this was properly approved by the Ngahina Trust. To the extent that this is a disputed fact, it will need to be determined on the evidence and it is not a matter that should be determined on an application such as the present to preserve the caveat.
Was the option validly exercised?
[39] Garton Holdings says that its notice of intention to exercise its option was validly exercised at the following times:
• On 15 November 1993 with the letter of that date;
• On 14 January 1994 with the letter of that date;
•On 17 October 1994 with the unchallenged registration of the caveat on that date; and
• Unequivocally again on 11 June 2008 with the letter of that date.
[40] It is contended that Garton Holdings exercised its rights under the option from the time it became enforceable after 20 November 1993. Once Garton Holdings became aware that the Ngahina Trust was not responding to its notice of intention to purchase, it lodged the caveat to protect its interests. Garton Holdings’ position is that it received no correspondence from the Ngahina Trust indicating that the Trust questioned the validity of the caveat until 20 March 2008.
[41] The Ngahina Trust denies that Garton Holdings has exercised the option (if it has one). Mr Finlayson argues that the 14 January 1994 letter acknowledges that it was yet unclear at that time whether the proposed expressway would go ahead and whether and how much of Lot 2 would be required for roading purposes. He says that, as far as he was concerned, there was never any question of Garton Holdings
having exercised the option, nor did he get the impression that Garton Holdings thought it had.
[42] It is not contested that the agreement on its face did not provide for the exercise of the option within a specified time. Therefore, the Ngahina Trust also submits that there is an implied term in the agreement that the option must be exercised within a reasonable time after 20 November 1993. It says that a reasonable time had elapsed before Garton Holdings purported to exercise its option.
[43] In response, Garton Holdings maintains again that it exercised its option in November 1993 and January 1994 and that it could not in any way be said that a reasonable time had then elapsed. If these acts were not enough to exercise its option Garton Holdings goes on to say that the Ngahina Trust has at no time given notice making time of the essence for exercise of the option. Mr Killalea deposes that, if the Ngahina Trust was of the view that any option had “well and truly lapsed”, this was never communicated to him or to Garton Holdings. Mr Andrews goes further and denies that there was an express or implied term that the option needed to be exercised within “a reasonable time” and says that there was nothing in the agreement or surrounding negotiations to indicate that this term was needed or intended by the parties.
[44] Lastly on this point, the Ngahina Trust points to a series of correspondence between Mr Finlayson and Mr Killalea in 1996, beginning with a letter from Mr Killalea dated 14 June 1996. The letter is written on behalf of MaiMai Properties Limited, the owner of a neighbouring property. It refers to Lot 2 as a portion of land owned by the Ngahina Trust and being the subject of a caveat by Garton Holdings. The purpose of the letter however is to obtain the Trust’s agreement to MaiMai Properties filling in a large hole in the land comprising Lot 2 and thereafter maintaining the land in a clean and tidy condition.
[45] Mr Finlayson replied by letter dated 18 June 1996. This letter said that the
Trust would consider the request and went on to state:
“We note that you have registered a caveat against the title by Garton
Holdings Limited. We have previously indicated to you that in our view your
client does not have any interest to caveat. Sooner or later however the matter will come to a head.”
[46] Mr Finlayson says that, as far as he can recall, nothing more was heard from
Garton Holdings until 2007.
[47] Mr Killalea says that the 14 June 1996 letter was written in his capacity as solicitor for MaiMai Properties Limited and that neither Garton Holdings nor Mr Andrews (or any company he is associated with) had any interest in that company. This is also the evidence of Mr Andrews. Mr Killalea says that Mr Finlayson’s letter of 18 June 1996 was a response to his letter. He says that, contrary to the comment in that letter, he does not recall any previous indication that the Ngahina Trust considered that Garton Holdings did not have any interest to caveat. Both Mr Killalea and Mr Andrews say that this matter concerned MaiMai Properties Limited and that the letters were not disclosed, to or discussed with, Mr Andrews.
[48] I am satisfied that Mr Killalea’s actions and knowledge, while acting for another client, cannot be attributed to Garton Holdings. The letter does raise a question as to whether the Ngahina Trust did challenge the caveat but there is no further evidence before the Court of this and in addition this is not a dispute of fact to be determined on this application. I therefore place no weight on this 1996 correspondence.
Implied term that the option had to be exercised within a “reasonable time”?
[49] In order for delay in the performance of a contract to give rise to a right of cancellation by the other party, time must be made of the essence (s 90 Judicature Act 1908) – either by an express or implied condition to that effect or by the cancelling party giving notice to the defaulting party making time of the essence: Laws of New Zealand, “Contract” at [284]; Chitty on Contracts (29ed, 2004) from para 21-011). And, an option to purchase property must be exercised strictly within the time stated, otherwise the option will lapse: Bell v Hobbs [1956] NZLR 1005; Laws of New Zealand, “Contract” at [286].
[50] The option itself does not specify an end date after which it cannot be exercised. Nor am I persuaded by an argument which counsel for Garton Holdings
purported to advance before me that s 17 of the Perpetuities Act 1964 provides a default period in which an option must be exercised. The effect of this section is merely to prevent options which are exercised within twenty-one years being voided by virtue of breaching the rule against perpetuities. It does not purport to provide, either expressly or implicitly, a period in which, absent a specified time limit, an option may be exercised.
[51] An option is variously described as an offer coupled with a contract not to revoke the offer and or as a contract conditional on one party exercising the option so as to bind the other party to the terms of the contract: see Burrows Finn & Todd Law of Contract in New Zealand (3ed 2007) at para 3.7.4. As such, whether the law will imply a term relating to its exercise within a reasonable time might be considered by analogy to the law relating to offers and/or contracts.
[52] Where a contract does not expressly stipulate a time for performance, the law implies that performance must be completed within a reasonable time, having regard to the circumstances of the case: Mt Pleasant Estates Co Ltd v Withell [1996] 3
NZLR 324, 329; Peddle v Orr [1906] 26 NZLR 1240, 1251. The same is normally true with regard to acceptance of an offer: Kean v Dunfoy [1952] NZLR 611; Burrows Finn & Todd at para 3.5.4. What constitutes a “reasonable time” will depend on the nature of the transaction, conduct of the parties subsequent to the making of the offer and, with respect to an option, the nature of the consideration for the option: Burrows Finn & Todd at para 3.5.4.
[53] Where the time limit is to be determined as “reasonable time”, a party wishing to cancel a contract on the basis of delay will ordinarily be required to give notice requiring the defaulting party to perform the contract within a stated reasonable time: Hunt v Wilson [1978] 2 NZLR 261, 273; Steele v Serepisos [2007]
1 NZLR 1 (SC), 8; Mt Pleasant Estates Co Ltd v Whithell at 329. This is because “[w]here the contract fixes no date and everything is governed simply by the implication of reasonableness, [the requirement of a notice] makes for clarity and justice”: Hunt v Wilson at 273 per Cooke J. And, in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 555 Mason J said:
“…it is undesirable that the rights of the parties should rest definitely and conclusively on the expiration of a reasonable time, a time notoriously difficult to predict.”
[54] There are “extreme” circumstances in which giving notice will not be required in order to cancel a contract for breach of an implied ‘reasonable time’ term: Hunt v Wilson at 273; Mt Pleasant Estates Co Ltd v Whithell at 329. For example, notice may not be required where the defaulting party has persistently and over a long period refused to perform the contract (Farrant v Oliver (1922) 127 LT
145, 146); where there are “incurable defects” such that the defaulting party could not remedy the delay even had notice been given (Hayes v Ross (No 2) [1919] NZLR
777, 784; Establissements Chainbaux v Harbormaster Ltd [1955] 1 Lloyd's Rep 303,
312); or where the cancelling party can prove that, even with notice, the defaulting party would not have been able to perform their obligations within a reasonable extension of time: (Hunt v Wilson at 273).
[55] However, these represent a small category of cases. In situations where the delay is not yet “flagrant or intransigent” and the defaulting party might well perform the required activities within a short time of notice being given, this will not be the sort of exceptional case where notice is not required: Hunt v Wilson at 273.
[56] It seems clear then that the law does imply a reasonable time term where an option does not specify an end date. This was the conclusion of the Australian High Court in Ballas v Theophilos (No 2) [1957] HCA 90, in which Dixon J commented at
197:
“The partnership deed limits no time for the exercise of the option. The implication of law is that it must be exercised within a reasonable time. … The question what is a reasonable time is of course a question of fact depending upon circumstances …”.
And on this see also Macarthur v Georgamlis (No 1) (1990) ANZ Conv R 106, 113-
114.
[57] However, Hunt v Wilson and Perri v Coolangatta indicate that the party wishing to avoid an option on the grounds of delay must give notice of the expiration
of this “reasonable time” so that there is clarity and justice in the determination of the rights of the parties. In this respect, the Court in Macarthur v Georgamlis notes (at 114) that the plaintiff had been put on notice that its interest might be lost. It seems there was no such notice in Ballas v Theophilos, but I note that Dixon J quotes the lower Court Judge as finding the delay there had been outside an “extreme limit”. As such, I am of the view that it is reasonably arguable that notice is required unless the situation is one of extreme (or flagrant, intransigent or irremediable) delay.
[58] Here, it seems that such notice was never given. As far as I can tell, at no time did the Ngahina Trust specify that a time for exercising the option would cease at any particular point. I take the view therefore that Garton Holdings here has a reasonably arguable case that the exercise of the option at any time was valid, albeit subject to the “extreme” case scenario of intransigent, flagrant and irremediable delay.
[59] On this basis, I will now consider the contention by Garton Holdings that it validly exercised the option to purchase.
The 15 November 2003 letter
[60] The option was exercisable from 20 November 2003. In my view, the 15
November letter can be, at most, an indication of Garton Holdings’ intention to exercise the option – it cannot be an exercise of the option as the option was not yet exercisable.
The 14 January 1994 letter
[61] The letter of 14 January 1994, and particularly, the sentence I have emphasised in the quote above – namely, “As stated our client has exercised the option of wishing to acquire the land” – appears to be a notice of Garton Holdings’ exercise of the option. However, the letter does exhibit a misconception as to Lots 4 and 5 on the plan (not of relevance to Lot 2 here) but then goes on to propose variations to the contract to be formed, raising the possibility that the parties might “renegotiate” with respect to Lot 2. This is done as I see it as a possible suggestion that the purchase price might be reduced. But, on the other hand, the letter does explicitly state that the purchase price could remain at $60,000. The letter concludes
with a request for the Ngahina Trust’s views so that Garton Holdings “can determine what steps he should take next”.
[62] To be valid and effective, the exercise of an option to purchase land must accept and comply with the exact terms of the offered option, as contained in the agreement: Laws of New Zealand, “Contract” at [25]. This is based on a line of Court of Appeal authorities including Reporoa Stores Ltd v Treloar [1958] NZLR
177, Buckland v Bay of Islands Electric Power Board (1980) 1 NZCPR 217, and, most recently, Gulf Corporation Ltd v Gulf Harbour Investments Ltd [2006] 1 NZLR
21.
[63] In Gulf Corporation Ltd v Gulf Harbour Investments Ltd the party purporting to exercise the option had sent a letter to the other party, which included the following statements:
“2.Gulf Harbour Investments Limited hereby gives notice of its intention to exercise the Option and complete the purchase. Please consider this correspondence as notice required by clause 5.1(b) of the Easement.
3.We note that the terms of the Easement require the parties to enter into an agreement for sale and purchase in the form of the Auckland
District Law Society and Real Estate Institute of New Zealand 7th Edition (2) July 1999 form, and further that the subdivision necessary to effect the separation of title to the Eastern Marina Car Park is to be completed at our cost.”
[64] The terms of the offer were such that the parties did not need to enter into a further agreement for sale and purchase. As such, the letter was proposing a variation to the contract. Moreover, there were two more small variations in the agreement enclosed with the letter.
[65] McGrath J, dissenting, held (at [10] to [11]) that the option was “an unqualified and absolute assent to the exact terms of the option” in that the error was a “simple misconception that is not a proposal of different contract terms” and “that there could not realistically be any doubt that it was accepting the stipulated terms of
the option rather than what it thought those terms required”. However, the majority disagreed.
[66] O’Regan J summarised Reporoa Stores Ltd v Treloar and Buckland v Bay of Islands Electric Power Board. Although His Honour was sceptical as to the extent of the differences between the contract which would arise from a simple exercise of the option, and that which would arise from the execution of the agreement enclosed with the letter, he accepted that there were differences. Thus he felt the case was “in the same category” as Reporoa Stores and Buckland (at [78]) and the letter was not an effective exercise of the option.
[67] Hammond J agreed, for the following reason:
“One principle of property law which I had understood to be long settled is that an acceptance must be exactly in terms of the offer. A purported acceptance which varies that offer in any particular is not an acceptance. This is true of the law of contract generally (see Smith v Taylor [1988] ANZ ConvR
110 (CA)); and the principle also applies to the exercise of options (Reporoa Stores Ltd v Treloar [1958] NZLR 177 (CA) and Buckland v Bay of Islands Electric Power Board (1980) 1 NZCPR 217 (CA)).”
[68] His Honour implied that the Court might in the future be prepared to ameliorate the strict Reporoa approach, but considered that it was inappropriate to disturb “a property rule of that antiquity and standing” on the limited argument before them. O’Regan J acknowledged that Reporoa Stores and Buckland involved “strict applications of the requirement for ‘exact compliance’” and that there was “scope for argument that a more benign approach, along the lines of that adopted by Adams J in his dissenting judgment in Reporoa Stores, could be adopted”. His Honour noted that such an approach is supported by some Australian authority, including Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR
673. However, Reporoa Stores and Buckland were “clear authority of this Court”
and neither party had suggested departing from them.
[69] A similar indication is given by Blanchard J in the Supreme Court’s judgment in Southbourne Investments Ltd v Greenmount Manufacturing Ltd [2008]
1 NZLR 30. Counsel had unsuccessfully argued that it was unnecessary to tender the
deposit alongside the exercise of the option, as was required in the contract. His
Honour noted at [13]:
“We are not persuaded by this argument. It is not a natural or commercial reading of cl 47.1. Moreover, if all that needed to be done was to present an agreement form, that which was tendered was non-compliant concerning the deposit, for reasons we will shortly give, and therefore amounted to a counteroffer. That would be so even if a more tolerant view were to be taken than in the line of cases concerning exercise of options which begins with Reporoa Stores Ltd v Treloar.”
[70] In the present case, the 14 January letter proposed consideration of a possible reduction to the purchase price. This was really based upon a misconception that the option may originally have applied not only to Lot 2 but also to Lots 4 and 5 on the plan. The letter went on to acknowledge that only Lot 2 was then affected by the option and although raising the issue of a possible price reduction, it did state the option was exercised and the price of $60,000 could remain. In my view it is reasonably arguable that this is in reality an unqualified and absolute assent to the terms of the option and thus an exercise of the option on its precise terms. The purchase price of $60,000 as an obviously integral part of the contract was confirmed and, looking at the letter as a whole, I am satisfied the parties were thus ad idem as to the terms of the contract to be created, albeit Garton Holdings solicitor had asked whether a voluntary price reduction might be considered as a possibility. As such, I am satisfied that this letter was a valid exercise of the option. Moreover, in my view, this would be even clearer if a more “tolerant” view (hinted at in the cases I have noted above) was taken rather than the “strict compliance” approach noted in the Gulf Corporation Ltd v Gulf Harbour Investments Ltd line of cases.
Subsequent conduct – the caveat
[71] Later, Garton Holdings went on to register the caveat on 17 October 1994 and it seems that there was little if any challenge to this caveat (or, indeed, Garton Holdings’ purported exercise of the option) until 20 March 2008.
[72] In my view, there are two difficulties with the caveat itself being regarded as an exercise of the option however:
(a) The interest claimed in the caveat is that which is said to arise under the agreement, as opposed to pointing to any exercise of the option. As such, it might be taken to refer to the existence of an option not yet exercised (which is itself a caveatable interest: Bevan v Smith [1994] 3 NZLR 648,
665).
(b) Clause 14.8 requires the option to be exercised “by Notice” and, again, an option must be exercised in accordance with its precise terms: Gulf Corporation Ltd v Gulf Harbour Investments Ltd.
[73] Neither of these issues were argued before me and both are likely to involve disputed issues of construction of these documents. As such, they are not matters that should be determined on this sort of application.
[74] However, in my view the parties’ conduct in this period – and, in particular, their inaction – is subsequent conduct that impacts on what might be considered to be a “reasonable time” to exercise the option in the circumstances prevailing here. Both parties seem to have been prepared to sit back and wait to see how matters would evolve. The Ngahina Trust was undoubtedly on notice that Garton Holdings intended to exercise the option, but arguably did not dispute this and evidently did not challenge the caveat. The continued existence of the caveat could be seen as a continued assertion of Garton Holdings’ rights – it cannot, as suggested by counsel for the Ngahina Trust, be taken to have accepted that it had no rights and abandoned its alleged option. In my view, the “reasonable time” for the exercise of the option is likely to be extended in this context.
14 June 2008 letter
[75] This letter is a clear and unequivocal confirmation and if I was required to decide the issue, must be seen as a valid exercise of the option, if indeed it is not out of time. As stated, no notice was given by the Ngahina Trust of the expiration of the time to exercise the option and so, in my view, it is reasonably arguable that the option was still open – provided that this was not seen as intransigent or flagrant delay or delay based on an irremediable problem.
[76] To be intransigent is defined as being “unwilling to negotiate or make any concessions; obdurate; uncompromising” and flagrant means “glaring, notorious, scandalous” (Shorter Oxford English Dictionary). With respect to the former, I note that there was never a request for Garton Holdings to exercise the option promptly – both parties it seems were happy for the matter to be resolved in time. In addition, although many years have elapsed between 20 November 1993 and this June 2008 letter, it is arguable that the delay is not so glaring and notorious in the overall context as to be fatal. I say this bearing in mind a range of factors: the subject of the contract (real estate rather than something impermanent), the unchallenged registration of the caveat, the parties’ mutual willingness to wait-and-see, and the fact that the terms of the contract can still be effected. On this I note however the Ngahina Trust’s argument that the consideration for the option is now entirely out of date. It is clear however that both parties knew that the option was for a fixed price (and could have given notice of the expiry of the option) and, conversely, the Ngahina Trust has had the use of the land for the intervening years. I am not completely satisfied that, in these circumstances, the changed value of a fixed price by effluxion of time mandates a finding that the option is therefore flagrantly out of time.
[77] In my view, it is a matter of fact, in the circumstances of this case, whether the option was exercised within time. To decide this matter would be to finally determine the rights of the parties on the basis of disputed facts. As such, for the purposes of this application, I find that there is a reasonably arguable case that Garton Holdings did exercise the option.
Terms of the Contract / Limitation Act
[78] The Ngahina Trust says that, if the option was exercised on or about 14
January 1994, and the contract was enforceable, then Garton Holdings has failed to take any steps to enforce the contract and any action now to enforce the contract would be barred by virtue of s 4(1)(a) of the Limitation Act 1950.
[79] In a similar vein, counsel for the Ngahina Trust submitted that, if the option was exercised, many of the terms of the resulting contract would need to be implied. He submitted that the fixed price indicated that settlement had to occur within a
reasonably short time and that, since Garton Holdings has never tendered the purchase price, they cannot possibly enforce the contract now. Counsel submits that the Ngahina Trust was entitled to simply allow time to pass and, after a reasonable time, the contract becomes unenforceable.
[80] In response, Garton Holdings argues that there has been no notice of breach of contract nor accrual of a cause of action for breach of contract such as to trigger the limitation period. It contends that the Ngahina Trust did not, until recently, challenge its option, the exercise of its option or the validity of the caveat.
[81] Section 4(1)(a) provides that actions founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrues. The cause of action accrues “when every fact exists which it would be necessary for the plaintiff to prove in order to support its right to the judgment of the Court”: Williams v Attorney-General [1990] 1 NZLR 646 at 678. Section 4(9) states that the limitation does not apply to “any claim for specific performance of a contract
… except in so far as any provision thereof may be applied by the Court by analogy”.
[82] The concept of an analogous time bar for an equitable claim is extensively discussed by Tipping J for the Court of Appeal in Johns v Johns [2004] 3 NZLR 202 (albeit in obiter). Tipping J commented on the test at [80] to [81]:
“There will be a bar by analogy only when the fiduciary claim parallels the statute-barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked by the fiduciary claim. In order to determine how close the parallel is the Court must examine not only the underlying facts but also the nature of the relationship between the parties and the policy and purpose of the different causes of action. If there is a sufficient difference in any material respect, the suggested parallel is unlikely to be close enough to make it appropriate in equity to apply an analogous bar…
The judgments in Matai Industries and S v G should not be read as suggesting that the issue can be concluded solely by reference to the degree of concurrence of the factual allegations. That of course must be the first focus because, if there is no sufficient degree of concurrence in that respect,
the suggested analogy is likely to fail at that point. If, however, there is factual concurrence in the sense that the different causes of action are simply different ways of putting the same factual complaint, and there are no policy or other reasons militating against it, the case for an analogous bar is likely to have been made out.”
[83] If an equitable action is not barred by analogy, it may nevertheless be barred by the separate general equitable defence of laches: No 68 Ltd v Eastern Services Ltd [2006] 2 NZLR 43 (CA) at [61]. In this case (which was affirmed on appeal), McGrath J provides a useful summary of the defence of laches. His Honour concluded (at [56]) as follows:
“By way of summary, the defence of laches, deriving as it does from the old maxim “that equity aids the vigilant, not those who slumber on their rights”, bars an action by reason of the staleness of a claim in situations where the limitations legislation does not apply, either expressly, or by analogy. This reflects a similar public interest to that which is recognised in the limitation Acts, namely that people should be able to organise their affairs without the constraint of the threat of exercise against them of rights that have long remained dormant with the result that it has become inequitable to enforce them. The application of the defence of laches necessarily turns on the balance of justice or injustice in granting or refusing relief in the circumstances of the particular case, including the time which has elapsed. The relevant inequity, which on balance outweighs the plaintiff’s rights, will normally be founded on some change in the condition of property or the relationship of the parties which has occurred over the period of delay. Situations giving rise to laches are never closed, but the vast majority of cases fall into one of two categories: first, a party inappropriately refrains for an excessive period from seeking redress once he or she knows his or her rights have been violated, giving rise to the inference of acquiescence; and secondly, because of a party’s unreasonable delay, significant prejudice is caused to the other party.”
[84] Here, it is reasonably arguable that the Limitation Act does not apply –
directly or by analogy – on the basis (albeit disputed) that the Ngahina Trust did not
challenge the exercise of the option until 2008. Similarly, in terms of laches, I am of the view that it is reasonably arguable for the purposes of the present application that it is not inequitable for Garton Holdings to seek to enforce the option by reason of delay. Garton Holdings says it has made its position clear throughout. This is not (at least on undisputed facts) a situation where it knew that the Ngahina Trust disputed its right to exercise the option and acquiesced in this. Nor, in my view, is it established that Garton Holdings’ delay significantly prejudiced the Ngahina Trust. The Trust’s obligations have not grown more onerous. It has been said that the Trust has entered into another (conditional) agreement to sell Lot 2, but there is no further evidence as to the terms of this sale or the proposed date of settlement. In these circumstances, I am of the view that it would be unjust and inequitable to determine Garton Holdings’ claim on the basis of delay.
[85] On the alternative argument – that the contract is now unenforceable because of the lapse of a reasonable time – I repeat the authorities relied on above that establish that notice is normally requisite before cancellation of a contract on the grounds of the lapse of an implied “reasonable time to enforce” term may occur. The Ngahina Trust has not given such notice. In the circumstances of Garton Holdings lodging a caveat and, to all intents and purposes, appearing able and willing to execute and complete the purchase contract, I am not convinced that this is a situation where it can be said the contract lapsed without the Ngahina Trust making time of the essence.
Will the Mäori Land Court confirm the alienation?
[86] Lot 2 is Mäori freehold land as defined in s 2 of the MAA and s 4 of Te Ture Whenua Act 1993 (“TTWA”)). An alienation of Mäori freehold land by way of transfer or agreement to transfer is of no force or effect unless and until it is confirmed by the Mäori Land Court: s 224 of the MAA (see also ss 146 and 150A of TTWA).
[87] An alienation, as defined in both Acts (s 2 MAA; s 4 TTWA) includes the transfer, sale or other disposition of, or affecting, Mäori freehold land, and any contract to make such an alienation. The meaning of “alienation by way of transfer” is discussed by Cooke J in Murray v Scott [1976] 1 NZLR 643. His Honour found
that the phrase did not cover the grant of an option and therefore, there was no requirement that an option be confirmed under s 224 of the MAA. It was only once the option was exercised and an agreement to alienate by way of transfer arose. (I note that, on the facts, this also required an agreement to be drawn up.)
[88] Thus, here, the alienation requiring confirmation is the agreement arising on the exercise of the option. As I see it, this is important because, on my understanding, the Ngahina Trust disputes whether the original agreement containing the option was confirmed by the Court (as opposed to just the transfer which does not mention the option). In my view, the grant of the option in the agreement did not require confirmation. It is only once the option is exercised that the question of confirmation arises.
[89] The Ngahina Trust submits that Garton Holdings does not have a reasonably arguable interest as the Mäori Land Court would never confirm the alienation.
[90] Garton Holdings says that arguable grounds exist to show that the Mäori Land Court would hear and confirm the alienation. Moreover, it is submitted that it is not appropriate for the outcome of Mäori Land Court proceedings to be predetermined in the context of an application to this Court to preserve a caveat.
[91] I agree that it is not for this Court to pre-empt the Mäori Land Court’s decision in this respect. The jurisdiction to determine whether an alienation is to be confirmed has been given to that specialist Court. Therefore, I do not propose to address this argument in detail beyond being satisfied that Garton Holdings has a reasonably arguable case that the Mäori Land Court might confirm the alienation.
[92] In summary, the Ngahina Trust’s argument that the Mäori Land Court would not confirm the alienation appears to rest on two main grounds: (1) confirmation must be made at the time that the alienation occurs; and (2) the Mäori Land Court must be satisfied that the consideration is adequate.
[93] Sections 225 of the MAA and 151 of TTWA specify when confirmation may be sought and granted as follows:
“225 Application for confirmation
(1) Except as provided in subsection two hereof, confirmation of an alienation of Maori land by way of transfer by a Maori shall not be granted unless application for confirmation is made by or on behalf of a party to the instrument of alienation within 3 months after the date of the execution of the instrument by that Mäori …
(2) Notwithstanding anything in subsection one hereof, the Court may, in its discretion, and subject to such terms and conditions as it thinks just, confirm any alienation by way of transfer for the confirmation of which application was not made within the time limited by that subsection, if, in all the circumstances of the case, the Court is of opinion that the alienation should be confirmed.
151 Application for confirmation
(1) An application to the Court for confirmation of an alienation of any interest in Maori freehold land may be made,—
(a) In the case of an instrument of alienation, by or on behalf of any party to the instrument; …
(2) The Court may decline to consider an application for confirmation if it is made,—
(a) In the case of an instrument of alienation, later than 3 months after the date on which the instrument was executed by the alienor …”.
[94] As such, although there is a prima facie time period for seeking confirmation, the Mäori Land Court has a discretion to extend this (or, in the case of the TTWA, a discretion to decline to hear applications outside this period). The time since the alienation obviously depends on when (and if) Garton Holdings exercised its option, which I have found to be a matter unsuited for determination on the present application. Moreover, the discretionary nature of the Mäori Land Court’s decision in this respect indicates that it is not something that this Court should preempt on an application to preserve a caveat.
[95] On the consideration point, ss 227(1)(e) of the MAA and 152(d) of the 1993
Act provide:
“227 Conditions of confirmation
(1) No alienation by way of transfer of Maori land shall be confirmed unless the Court is satisfied—
…
(e) That, having regard to the relationship (if any) of the parties and to any other special circumstances of the case, the consideration, if any, is adequate.
152 Court to grant confirmation if satisfied of certain matters
(1) The Court must grant confirmation of an alienation of Maori freehold land if it is satisfied—
…
(d) that, having regard to the relationship (if any) of the parties and to any other special circumstances of the case, the consideration (if any) is adequate; …”.
[96] Although the terms of the 2008 agreement for sale and purchase between the Ngahina Trust and the Council are said to be confidential, Mr Finlayson suggests that the consideration “so far exceeds that which the Applicant contends is provided for under the alleged option that I see no realistic prospect that the Mäori Land Court would approve the alienation of the land to the Applicant even if it had lawfully exercised the option”.
[97] What little evidence is before me as to the current value of Lot 2 might suggest that the Mäori Land Court will not be satisfied that the $60,000 consideration under the option is “adequate”. However, I note that this determination is to be made in the context of the relationship between the parties and the circumstances of the case – which might well include, for example, the valuation evidence at the time of entering the contract, the value of the total agreement to the Ngahina Trust at the time and subsequently, and the parties’ mutual willingness to delay resolution. More importantly, the provisions in question require the Mäori
Land Court to be so satisfied – it is not something that this Court should determine on the present application.
[98] In addition, the Ngahina Trust argues that it has no capacity to alienate the land unless it has the consent of those who together own seventy-five percent of the beneficial freehold interest in the land: s 150A of TTWA. There is no equivalent provision in the MAA. The Ngahina Trust says that there is no possibility that this can be achieved – Ms Taylor deposes that there is “absolutely no prospect whatsoever” that the beneficiaries of the Ngahina Trust would approve the sale of Lot 2 to Garton Holdings on the terms claimed.
[99] Garton Holdings notes that the MAA was in force when the agreement containing the option was entered into in July 1991. As such, the transitional provisions of the 1993 Act apply. Section 355 of that Act states that the MAA continues to apply to an unconditional agreement entered into before the 1993 Act came into force. Garton Holdings submits that the grant and the terms of the option were unconditional at this time and cannot be reopened in the context of confirmation under the 1993 Act. As such, Garton Holdings questions what application the 1993 Act has to the grant (as opposed to the exercise) of the option. I am of the view that it is certainly arguable that the MAA continues to apply. Garton Holdings says that it appears that the trustees obtained the necessary consent and were properly authorised to alienate the land when entering into the agreement in
1991. To the extent that this is disputed, it is not something that is to be determined in the context of this application.
[100] Overall, I am satisfied that Garton Holdings has an arguable case that the
Mäori Land Court might exercise its jurisdiction to confirm the alienation of Lot 2.
Does Garton Holdings have a reasonably arguable interest?
[101] For the reasons outlined above, I am satisfied that, there are central factual matters here in dispute and, without being able to determine these, this Court is not in a position to finally determine the rights of the parties.
[102] I find therefore that Garton Holdings has satisfied its burden to establish a reasonably arguable case that it has an interest in Lot 2 by virtue of having validly exercised the purchase option contained in clause 14.8 of the agreement.
Should the caveat be preserved?
[103] Lastly, I turn to consider the Court’s residual discretion to allow a caveat to lapse, even where the applicant has a reasonably arguable case.
[104] As stated above, the onus at this point is on the Ngahina Trust to establish that the Court can be “completely satisfied” that removal would not prejudice the caveator’s interests – that there will be no practical advantage to maintaining the caveat.
[105] In this respect I note the argument advanced by the Ngahina Trust that Lot 2 is now the subject of an agreement under s 17 of the Public Works Act 1981. The Trust says that this agreement was reached in recognition of the Council’s right and power to acquire the land for roading purposes. As such, the Ngahina Trust says that even if the option was valid, it would be pointless enforcing it as Garton Holdings would not be able to retain title to the land in any event – all Garton Holdings would have is an entitlement to compensation. Thus, the Ngahina Trust says that, if Garton Holdings thinks it has a remedy, it can sue for damages.
[106] In support of this argument, the Ngahina Trust handed up an affidavit dated
28 July 2008 of Mr Lim confirming this agreement, stating that the terms are confidential, and noting that the agreement is still subject to confirmation from the Mäori Land Court. Counsel for the Ngahina Trust could not advise me of the date of settlement and therefore whether and to what extent the preservation of the caveat would impede this agreement.
[107] Removal of the caveat will enable the Ngahina Trust to transfer Lot 2 to a third party. This would significantly (and probably fatally) prejudice Garton Holdings’ interests in obtaining specific performance of the purchase contract flowing from its exercise of the option.
[108] I am not completely satisfied here that there would be no practical advantage to Garton Holdings by the preservation of the caveat on the basis of the Public Works Act agreement. In particular, I note that Garton Holdings would not be bound to the agreement entered into between the Ngahina Trust and the Council. As such, specific performance might be ordered and thereafter Garton Holdings might be able to negotiate its own agreement with the Council, perhaps on terms that better suit its particular circumstances.
[109] As such, the Ngahina Trust has failed to completely satisfy me that any legitimate interests of Garton Holdings will not be prejudiced by the removal of the caveat in the terms outlined in Pacific Homes Ltd (in receivership) v Consolidated Joinery Ltd at 656. I am satisfied that this is not an appropriate case for the Court to exercise its residual discretion to make an order for the removal of the caveat.
Decision
[110] The application by Garton Holdings therefore succeeds. An order is to be made that the caveat is not to lapse.
[111] However, the Court in exercising its jurisdiction under s145A of the LTA has power to make orders on conditions – BP Oil New Zealand Limited v Van Beers Motors Limited [1992] 1 NZLR 211, 218 and Hinde McMorland & Sim at
10.020(g). I am of the view in this case that it is appropriate here to impose conditions on the preservation order that is to follow particularly in light of the delay that has already occurred.
Orders
[112] An order is now made that caveat B399784.1 lodged against Certificate of
Title 40D/129 Wellington Registry shall not lapse until further order of this Court.
[113] The order made above that caveat B.399784.1 shall not lapse is subject to the following conditions:
• By 9 September 2008 Garton Holdings is to commence proceedings seeking specific performance to enforce the alleged obligations on the part of the Ngahina Trust with respect to the option.
• Thereafter Garton Holdings is to pursue those proceedings with all reasonable diligence.
• If Garton Holdings is successful in those proceedings it is to do all other things necessary to effect the purchase contract with due diligence, including applying to the Mäori Land Court for confirmation.
• In the event that any of these conditions are not satisfied, leave is reserved to the Ngahina Trust at any time to apply to this Court on notice to seek a discharge of this order.
[114] As to costs, Garton Holdings has been successful in its application and, in my view, is entitled to an order for costs in the normal way. Costs are therefore awarded to Garton Holdings against the Ngahina Trust on this application calculated on a Category 2B basis, together with disbursements if any as approved by the Registrar.
‘Associate Judge D.I. Gendall’
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