Gray v Fox

[2024] NZHC 750

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2024-488-000012

[2024] NZHC 750

BETWEEN

MATTHEW STEVEN GRAY

Applicant

AND

SARAH JANE FOX

Respondent

Hearing:

9 April 2024

Appearances:

P Rice for the Applicant

C Smith for the Respondent

Judgment:

19 April 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 19 April 2024 at 11.00 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Land Law Ltd, Auckland St Mark Law, Auckland

P Rice, Auckland C Smith, Auckland

GRAY v FOX [2024] NZHC 750 [19 April 2024]

Introduction

[1]    Sarah Fox is the registered owner of 6.3850 hectares of land at an address at Mountain Road, Maungaturoto. She and Matthew Gray entered into a written agreement on 30 April 2022 for the sale and purchase of a portion of that land (the SPA). The intention was that the land would be subdivided into two lots, and Mr Gray would buy the new smaller lot. This portion of the land was described as “the Property” in the SPA.

[2]The SPA specified a purchase price of $425,000 for the Property, a deposit of

$50,000 and that Mr Gray was to take possession of the Property on the date of payment of the deposit. $5,000 of the deposit was payable on 3 April 2022, and the remaining $45,000 was payable within five working days after the date of the SPA. The balance of the purchase price was to be satisfied by a vendor loan to be repaid at a rate of $300 per week commencing one week after Mr Gray took possession of the Property. The settlement date was to be 10 working days after issue of the new title. If the subdivision was not completed by 31 October 2022 through no fault of Mr Gray, he was entitled to cancel the agreement or require Ms Fox to transfer legal title to a one-sixth share in the land to him.

[3]    Mr Gray paid the alleged deposit of $50,000 to Ms Fox and made several payments of $300 to Ms Fox, ostensibly to reduce the vendor loan. However, the subdivision was not completed by 31 October 2022.

[4]    On 17 February 2023, Mr Gray commenced proceeding in this Court.1 He seeks a declaration that Ms Fox is bound by the SPA, and an order for specific performance requiring Ms Fox to perform her obligations under the SPA.

[5]    Ms Fox filed a statement of defence and counterclaim on 28 June 2023. The counterclaim contains eight causes of action: (a) misrepresentation; (b) no intention to be legally bound; (c) non est factum; (d) repudiation by the plaintiff; (e) breach of an essential term; (f) mistake; (g) undue influence; and (h) unconscionable bargain.

1      CIV-2023-488-000021

Ms Fox purported to cancel the SPA, essentially on the grounds of misrepresentation, repudiation by the plaintiff and breach of an essential term, on 9 June 2023.

[6]    Mr Gray’s statement of defence to the counterclaim was due on 3 August 2023. In the absence of a statement of defence, Ms Fox sought judgment by default on her counterclaim and requested a formal proof hearing. After a formal proof hearing was set down Mr Gray purported to file a statement of defence to the counterclaim.  On  8 April 2024, Edwards J gave Mr Gray leave to file a statement of defence to the counterclaim.2

[7]    In the meantime, on 23 June 2022, Mr Gray lodged a caveat against dealings against the entire unsubdivided parcel of land owned by Ms Fox.

[8]    In February 2024, Mr Gray was notified that Ms Fox had applied to the Registrar-General of Land for the caveat to lapse. Mr Gray now applies for an order that the caveat not lapse.

[9]    The fundamental issue is whether Mr Gray has demonstrated that he has a reasonably arguable interest in the land sufficient to support the caveat. Ms Fox makes two specific objections:

(a)that the definition of “Land” in the SPA refers to the wrong record of title reference; and

(b)that the caveat wording is defective, as it does not limit Mr Gray’s claimed interest to the share of the land that he agreed to buy.

Legal principles

[10]   An application to sustain a caveat is determined on summary basis in which the Court has regard to the following principles:

2      Gray v Fox [2024] NZHC 729.

(a)The applicant caveator bears the onus of demonstrating that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively. It is enough if they present a reasonably arguable case. 3

(b)The process by which these applications are determined is ill-suited to resolving disputed questions of fact. An order for a caveat’s lapse will only be made if it is patently clear it cannot be maintained — either because there was no valid ground for lodging it in the first place or, alternatively, because such ground has now ceased to exist.4 A conflict between affidavits will generally be resolved in the caveator’s favour.5 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.6

(c)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat.7 The Court will exercise this discretion cautiously and must be satisfied removal would not prejudice the caveator’s legitimate interest.⁸

Mr Gray’s interest

[11]   Section 138 of the Land Transfer Act 2017 confers the right to lodge a caveat against dealings with an estate or interest in land upon any person who (amongst other things) claims an estate or interest in the land, whether capable of registration or not.9

3      Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813 at [24]; Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].

4      Botany Land Development Ltd v Auckland Council, above n 4, at [23]–[24]; Philpott v Noble Investments Ltd, above n 4, at [26].

5      Bethell v Rickard [2013] NZCA 68 at [22]. See also Macrae v Rapana HC Auckland M633/94, 17 June 1994, at 3.

6      Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].

7      Botany Land Development Ltd v Auckland Council, above n 4, at [24].

8      Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.

9      Land Transfer Act 2017, s 138(1)(a).

[12]   Under the SPA, Ms Fox agreed to sell, and Mr Gray agreed to buy, the “Property”. The “Property” is defined in the SPA as “that part of the property located at, and known as, 227 Mountain Road, Maungaturoto, shown on the attached Scheme Plan as Lot 2 comprising an area of approximately 1.0340 Hectares”.10

[13]   The attached Scheme Plan for the “Proposed Subdivision of Lot 3 DP 155529” shows the existing Lot 3 (total area 6.3840 hectares) divided into:

(a)Lot 1 – an area of 5.3410 hectares; and

(b)Lot 2 – an area of 1.0430 hectares.11

[14]   The agreement is unconditional; therefore Mr Gray is potentially entitled to the equitable remedy of specific performance. It is settled law that if a purchaser of land is potentially entitled to the equitable remedy of specific performance on entry into a binding contract, that purchaser obtains an immediate equitable interest in the land.12 The purchaser is therefore entitled to lodge a caveat against the title, to protect that interest.13

[15]Mr Gray’s caveat describes the estate or interest claimed as:

Agreement for Sale and Purchase dated 30/04/2022 between the Registered Owner Sarah Jane Fox as vendor and the Caveator, Matthew Stephen Gray, as purchaser. The Agreement expressly grants the Caveator as purchaser the right to take immediate possession of the land and the right to register a caveat against dealings.

[16]   Although Ms Fox granted Mr Gray the right to lodge a caveat over “the Equitable Share” of “the Land” by clause 22.1(d) of the SPA, that clause, and reference

10 Also defined under the Further Terms of Sale as “an estate in fee simple in that part of the Land shown on the attached Scheme Plan as Lot 2, comprising an area of approximately 1.0340 Hectares”.

11   There is a discrepancy between the Particulars of Sale and Further Terms of Sale which describe the area of the “Property" as 1.0340 ha; and the Scheme Plan records the area of the intended Lot 2 as 1.0430ha.

12 Foreman v Hazard [1984] 1 NZLR 586 (CA) at 594.

13 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 114 .

to it in the caveat, is otiose. 14 As explained, the effect of the SPA, quite apart from this clause, was to confer a caveatable interest in the Property on Mr Gray.

[17]   On the face of it, then, the caveat should be sustained. Mr Gray has an arguable beneficial interest in the Property as the purchaser of the Property under an unconditional agreement for sale and purchase. The caveat describes the estate or interest claimed by Mr Gray as arising under that agreement for sale and purchase. The unnecessary reference to the contractual right to register a caveat does not detract from the preceding correct description of the basis for the caveat.

[18]I now turn to the two objections raised by Ms Fox.

Definition of “Land”

[19]    “Land” is incorrectly defined in the SPA as “all that parcel of land containing 6.3850 hectares, more or less, being an estate in fee simple comprising Lot 3 on Deposited Plan 155529 BLK XIII) Waipu SD, comprised in Identifier NA92D717”. Identifier NA92D/717 was the prior reference for the land. It was replaced by the current Identifier NA119D/599, on 16 April 1999.

[20]   Ms Smith for Ms Fox submits that this error is significant because Mr Gray was entitled, pursuant to cl 22.1(d) of the SPA, to lodge a caveat against the “Land” (limited to his Equitable Share). Because the “Land” as defined by the SPA is the land in “Identifier NA92D717”, Ms Fox submits that Mr Gray had no basis to lodge a caveat over the land in Identifier NA119D/599.

[21]   I reject this argument. I acknowledge that Mr Gray’s originating application that the caveat not lapse gives the ground that he has “a beneficial interest in the Land as purchaser of [sic] under a sale and purchase agreement”. To the extent that refers to clause 22.1(d) of the SPA, it is misconceived. As explained, Mr Gray has an arguable beneficial interest in the Property, independent of that clause. The Property is described by the Particulars of Sale and Further Terms of Sale of the SPA and identified in the Scheme Plan attached to the SPA as proposed Lot 2 of existing Lot 3,

14     D W McMorland and others Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [10.009(y)].

DP155529. The misdescription of the Identifier for “the Land” in the SPA is irrelevant to that arguable beneficial interest.

Defective caveat wording

[22]   Alternatively, Ms Fox claims that the caveat is defective because it does not limit Mr Gray’s caveatable interest according to the SPA.

[23]   Mr Gray’s beneficial interest concerns only a portion of the land in record of title NA119D/599 – the approximate one-sixth share of the land which was intended to be subdivided into Lot 2 (the “Property” as defined by the SPA). However, he has lodged a caveat over the whole of the land in the record of title. Ms Fox says that he should not have done so; or should have stated that his claimed interest was limited to the approximate one-sixth share.

[24]   Ms Smith refers to reg 5(2) of the Land Transfer Regulations 2018, which defines the “core information” that must be included in an instrument (including a caveat).15 Under reg 5(2)(f), “ if the instrument applies only to a part or share of the estate or interest in a record of title, instrument, or document”, the core information includes “a description of that part or share”.

[25]   Ms Smith submits that Mr Gray should have defined the land over which he claimed an interest with greater particularity in the caveat, either as the “Equitable Share” or “the Property” as defined in the SPA; or by referring to the Scheme Plan attached to the SPA. She looks to distinguish Howard v Resort Developments Ltd,16 where Doogue AJ upheld a caveat lodged by a purchaser of a future lot against the whole unsubdivided title, on the basis that in that case there was a chance that the area of land in question might change. She refers to commentary in Hinde McMorland & Sim that in the absence of such a factor, a purchaser should ordinarily be able to obtain sufficient protection by lodging a caveat that asserts an interest only in the lot that is to be purchased, which can be defined by annexing a proposed subdivision plan to the

15     Land Transfer Regulations, 2018, sch 2.

16     Howard v Resort Developments Ltd (2007) 5 NZConvC 194,569.

caveat.17 She also relies on Lu Trustee Limited v Parklane Infrastruct Ltd18 in which the Court of Appeal overturned this Court’s decision upholding a caveat that extended over land beyond that which was the subject of the claimed interest.

[26]   I do not accept that Mr Gray was not entitled to lodge a caveat against record of title NA119D/599 because he only claimed to have a beneficial interest in a portion of that land. As the subdivision had not taken place and there was no separate record of title for the intended Lot 2, he had no option but to lodge a caveat over the “master” title to protect his interest.

[27]   As the learned authors of Hinde McMorland & Sim Land Law in New Zealand observe, there is a line of authority in Australia “establishing that a purchaser of part of a parcel of land has an interest in the whole parcel which justifies the lodgement of a caveat prohibiting dealings with the whole parcel until the subdivision of the parcel is completed.”19 Doogue AJ adopted this reasoning in Howard v Resort Developments Ltd, concluding that as a title had not yet issued for the lot the caveator had agreed to purchase, lodging a caveat against the whole unsubdivided title was the only way the purchasers could protect their beneficial interest. I do not see the reasoning of this judgment as being limited in the way contended by Ms Smith.

[28]   The more nuanced issue is whether the caveat is defective and should be allowed to lapse because the instrument does not expressly state that the claimed interest affects only part of the land to which the record of title relates.

[29]   It is important to note that there is no suggestion made by Ms Fox that the caveat does not comply with the information required by s 138, and reg 5(1) and Schedule 2 of the Land Transfer Regulations 2018, for caveats.20 Rather, the argument is that it does not comply with the generic requirement for any instrument to which reg 5 applies, that “if the instrument applies only to a part or share of the estate or

17     McMorland and others, above n 14, at [10.013(e)].

18     Lu Trustee Ltd v Parklane Infrastruct Ltd [2020] NZCA 682, (2020) 21 NZCPR 740.

19     McMorland and others, above n 14, at [10.013(e)].

20 The information required under reg 5(1) and Schedule 2 of the Land Transfer Regulations includes “A description of the nature of the estate or interest claimed by the caveator” and “Details of how the estate or interest claimed is derived from the registered owner”.

interest in a record of title, instrument, or document”, that instrument must contain “a description of that part or share.”

[30]   Arguably the caveat does meet this requirement because it describes the claimed interest with reference to the SPA, which concerns the “Property” portion of the land only. Thus, while the caveat does not explicitly state that it is confined to “the Property” or a one-sixth portion of the land as defined in the SPA, it is implicit that the interest is only claimed over the portion of the land to which the SPA relates.

[31]   In Zhong v Wang, an issue was whether the caveats adequately described the interest claimed by the caveator or the derivation of that interest. The Court of Appeal said that “…the question is one of degree. Did the caveats describe adequately the land and the interest (and its derivation) claimed?”21 The Court reviewed the relevant authorities concerning the standard of specificity required and rejected the strict approach taken by the Australian courts and one New Zealand case. The Court stated that “What is important is that the registered proprietor and the Court understand the nature of the interest claimed and the basis of that claim.”22 The Court also commented that:

[58] The purpose of the caveat procedure is to enable those with proper claims to proprietary interests to protect themselves against loss by forbidding dealing with the land pending resolution of substantive claims. The underlying purpose of the caveat regime could be undermined if too strict an approach were taken to the detail required to describe the interest claimed and its derivation from the registered proprietor.

[32]   It would have been clear to Ms Fox, and it is clear to the Court, that Mr Gray’s claimed interest concerns only the portion of the land to which the SPA relates (the “Property”). It is questionable whether the addition of a reference to the “Equitable Share” or “the Property” or a “one-sixth share” would have added any greater clarity, as these terms only have meaning with reference to the SPA.

[33]   In Lu Trustee Ltd v Parklane Infrastruct Ltd, the Court of Appeal concluded that there was not a proper basis for sustaining the caveat insofar as it protected a claimed interest in land beyond that which was the subject of the claimed easement.

21     Zhong v Wang (2006) 7 NZCPR 488 at [46].

22 At [53].

The Court then considered “what steps might be taken to preserve [the caveator’s] claimed caveatable interest while ensuring that the land affected by it is not overly broad”.23 After considering whether the Court had the power to amend the caveat so as to reduce the area to which it applied, the Court made orders preserving the caveat until the deposit of the plan creating separate titles for the land in the subdivision; and granting the caveator leave to lodge a further caveat in respect of the newly created lots at that point.24 Thus, despite the caveat overreaching in terms of the area affected, the Court was not prepared to permit the caveator’s legitimate caveatable interest to go unprotected.

[34]   I do not consider that Mr Gray’s failure to describe his interest with greater specificity than by reference to the  SPA to be fatal to his caveat.  While arguably  Mr Gray should have defined his interest by annexing the Scheme Plan, it is implicit from the reference to the SPA that his claimed interest was confined to the area depicted in that Scheme Plan attached to the SPA.

[35]   Furthermore, it would in my view be most unjust for the caveat to lapse because of this issue when it is not contested that Mr Gray has a caveatable interest over the area that is the Property; and when he has instigated specific performance proceedings which will determine the substantive rights of the parties.

[36]   I canvassed with the parties whether orders of the kind made in Lu Trustee Ltd v Parklane Infrastruct Ltd could be made but as there is no prospect of the subdivision proceeding while the parties are in dispute, they are not suitable. Furthermore, allowing the caveat to lapse and giving Mr Gray leave to lodge a second caveat identifying the specific area over which he claims a beneficial interest would be prejudicial to that interest as others have registered instruments over the property in the meantime.

Result

[37]I order that:

23     Lu Trustee Ltd v Parklane Infrastruct Ltd, above n 18, at at [53].

24     At [65]–[66].

(a)caveat 12492922.1 as comprised in Record of Title NA119D/599 not lapse; and

(b)Mr Gray is to prosecute his specific performance claim with due diligence, failing which Ms Fox has leave to apply for an order that the caveat lapse.

[38]   Ms Fox is to pay Mr Gray his costs on a 2B basis and reasonable disbursements to be fixed by the Registrar.

Associate Judge Gardiner