Huband v Wharepuke Property Limited
[2018] NZHC 2695
•15 October 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2018-488-45
[2018] NZHC 2695
BETWEEN ROGER TERRENCE HUBAND and JILLIAN FLORENCE HUBAND
ApplicantsAND
WHAREPUKE PROPERTY LIMITED
Respondent
Hearing: 15 October 2018 at 2:15pm Appearances:
J F Armstrong for the Applicants P J Magee for the Respondent
Judgment:
15 October 2018
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Armstrong Murray (John Armstrong), Takapuna, for the Applicants Thomson Wilson (Peter Magee), Whangarei, for the Respondent
HUBAND v WHAREPUKE PROPERTY LIMITED [2018] NZHC 2695 [15 October 2018]
[1] The applicants apply to sustain caveat 11060515.1 lodged against the title of Wharepuke Property Ltd in identifier NA24B/1159. The interest claimed under the caveat is:
A claim by the caveator of a beneficial interest over part of the land of the registered proprietor of Wharepuke Property Limited in Certificate of Title NA24B/1159 affecting an area of approximately 3.4 hectares on the south- eastern boundary of allotment 4 Parish of Wairau CT NA50/245 being the caveator’s property and the north-western boundary of allotment 6 Parish of Wairau and s.w. part allotment 10 Parish of Wairau being land devised in CT NA2B/1159 in the name of the registered proprietor Wharepuke Limited as cestui que trust in which the registered proprietor Wharepuke Property Limited is trustee pursuant to an oral agreement between the registered proprietor and the caveator affecting part of the land as specified.
[2] This case is being decided under the Land Transfer Act 1952. The Land Transfer Act 2017 has not yet come into force.1
General principles on caveat applications
[3] In Holt v Anchorage Management Ltd, McMullin J stated the purpose of a caveat against dealings under the Land Transfer Act 1952:2
Once lodged, a caveat is notice to all who search the title to the land against which it is registered and to the registered proprietor of the land (to whom notice of its receipt is given pursuant to s 142) that the caveator claims the estate or interest the subject of the caveat. It is both a warning to the persons mentioned that the caveator asserts rights against the land and a protection of those rights. (Section 143(1) uses the phrase "protected by the caveat".) Once the caveat is lodged the Registrar is prohibited from making any entry on the register which has the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat (s 141).
[4] In caveat applications under ss 143, 145 and 145A of the Land Transfer Act, the caveator generally has the onus of showing a reasonably arguable case for the interest claimed. The interest must come within s 137(1) of the Act:
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—
1 Land Transfer Act 2017 Commencement Order 2018, cl 2.
2 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 113.
(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; or
(b)is transferring the land or estate or interest to any other person to be held in trust.
[5] A personal or contractual right is not enough. The caveator must show an entitlement to a beneficial interest in the land under the caveat.3 It is not necessary for the caveator to have a registrable interest in the land. A purely equitable interest may be protected.4 The caveat must also comply with the formal requirements of s 137(2):
(2)A caveat under this section must contain the following information:
(a)the name of the caveator; and
(b)the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and
(c)how the land or estate or interest claimed is derived from the registered proprietor; and
(d)whether or not it is intended to forbid the making of all entries that would be prevented by section 141 or a specified sub-set of them; and
(e)the land subject to the claim, which must be stated with sufficient certainty; and
(f)an address for service for the caveator.
[6] Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact, which calls for further investigation, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable it may be. For a caveat to be removed, it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset or because any such ground no longer exists.
3 Guardian Trust and Executors Company of New Zealand, Limited v Hall (No 2) [1938] NZLR 1020 (CA) at 1025; Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246.
4 See the discussion in D W McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online looseleaf ed, Lexis Nexis) at [10.006].
[7] In addition, the court has a residual discretion not to uphold a caveat. But that is exercised cautiously, as when the caveat could serve no useful purpose, or alternative safeguards are available. In Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd, the Court of Appeal said:5
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 a 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.
[8] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts.
Facts
[9] Mr and Mrs Huband are the trustees of the Huband Family Trust. They own a property at 159 Golden Stairs road, Maungaturoto, where they run a dry stock operation. Wharepuke Property Ltd owns an adjoining property. Its address is 113 Kirk Road, RD3, Maungaturoto. The certificates of title to both properties are “limited as parcels”. Neither side suggests that that is relevant to the issues in this case. The Hubands’ property is approximately 26 hectares in area. Its legal description is South East Part Allotment 3, Parish of Wairau, described in identifier NA24B/1160. The property originally belonged to Mr Huband’s father. The applicants became owners in April 1998, buying the property from the late Mr Huband’s estate.
5 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
[10] Wharepuke Property Ltd’s adjoining block is some 71 hectares in area. The legal description is Allotment 6, Parish of Wairau, and South West Part Allotment 10, Parish of Wairau, in identifier NA24B/1159. That property originally belonged to Mr Ross Finlayson. It was transferred to Mr Ross Finlayson and his wife as tenants in common in equal shares in 1986 and later to Wharepuke Property Ltd in January 2007. Ross Finlayson and his wife were the original directors and shareholders of that company. They later sold their shareholding to the current directors and shareholders, their son, Kenneth, and his partner, Terri Donaldson.
[11] The dispute concerns a give-and-take boundary fence. Mr Huband says that the boundary fence is a wire, post and batten fence put up in the 1970s when he was a teenager. The fence did not follow the legal boundary exactly. That was because of the contours of the land and because part of the land was covered in bush. He says that the fence line followed ridge lines as it was impractical to put the fence on the exact boundary. He refers to some of the areas of bush as “jungle”. He maintains that after his father bought the property, his father and Mr Ross Finlayson agreed that the fence would remain in the same place and would not be moved, that the land on the Huband side of the fence would for all intents and purposes be his father’s, and the land on the Finlayson side would to all intents and purposes be the Finlaysons’. This was done so that each of them could develop and improve the land on their side of the fence without having to worry about the fence line changing. Each owner would have the benefits of any improvements they made. While parts of the fence were replaced because of wear and tear and stock damage, the fence line has not changed over the last 40 years. The fence remains in the same place as when it was originally built.
[12] Because the fence did not follow the boundary line exactly, the Hubands had the use of approximately 3.4 hectares of the Finlayson property. I shall call that the “disputed land”. The Finlaysons had the use of part of the Huband property, but that area is much smaller. It appears that the part of the Huband property used by the Finlaysons has been left mainly in bush. Mr Huband says that his father cleared significant parts of the disputed land of bush. He installed access by creating roads, laying metal and also installed two culverts. He says that after he and his wife, as trustees of the Huband Family Trust, bought the property in 1998 Ross Finlayson assured him that the fence would never be moved and that Mr Huband could do what
he liked with the land on the Huband side of the fence. He says that Mr Finlayson made those comments when Mr Huband was carrying out improvements on the disputed land. He cites an incident around 2000 when he and his son were carrying out contouring work and installing drain-coil to parts of the disputed land. Mr Finlayson came to talk to them and made comments to the effect “It’s your land to do what you want with it”.
[13] In 2005 the Finlaysons granted an easement to the Hubands over part of their land to allow access to a new part of the Huband farm which they had purchased in 2004. Mr Huband says that in about October 2004 he suggested to Mr Finlayson that it would be a good time to record the trust’s interest in the disputed land, given that an easement was being registered at the same time. According to Mr Huband:
Mr Finlayson said he did not see the need for the parties to incur the additional survey and legal costs that would be involved in this, and that the fence would “always remain where it was and would never be moved.” I relied on this and many other assurances to this effect in deciding not to pursue this matter at that time.
[14] He notes the transfer of the Finlayson property to Wharepuke Property Ltd in January 2007 and that Mr Ross Finlayson was a director of the company. Mr Ross Finlayson passed away on 29 March 2008. Mr Huband refers to talking to Mr Finlayson early in 2008 when he was quite unwell. On this visit, Mr Huband and his mother talked about old times with Mr and Mrs Finlayson. Mr Finlayson commented that he and Mr Huband’s father had been great mates from way back. Mr Ross Finlayson complimented Mr Huband and his father for the work they had done in “getting rid of the jungle” and again commented that the boundary fence had always been there and would never change.
[15] Mr Huband says that in March 2017, Mr Ken Finlayson told him that he was intending to erect a new fence on the boundary line between the two properties. Mr Huband understood that he would lose much of the disputed land as a result. Since then, there has been correspondence and discussions. Letters have been sent between the parties and then between lawyers, but the matter has not been resolved. Mr Huband has lodged the caveat to protect the interest the trustees believe they have in the disputed land.
The applicant’s case
[16] The applicants put their case for an interest in the land in two ways. First, they say that they can claim under an institutional constructive trust. That is on the basis that the Hubands made improvements to the property under an expectation of obtaining an interest in the property. Wharepuke Property Ltd should reasonably be expected to yield the interest claimed. As authority in support, Mr Armstrong cited Cerney v Cerney.6
[17] Second, Mr Armstrong submitted that a caveatable interest could arise as a matter of equitable estoppel. The Hubands’ case is that since 1972 the registered proprietors of the neighbouring blocks have had an agreement under which each registered proprietor has exclusive use of the land on their side of the boundary fence notwithstanding the fact that that land is not within their title. The Hubands rely on the assurances from Mr Ross Finlayson, in his own right as owner of the property and later as director of Wharepuke Property Ltd once it became the registered proprietor. The general tenor of the applicants’ case is that the arrangements for the Hubands to have the use of the disputed land had been reinforced on multiple occasions and gave rise to a reasonable expectation in their minds that they could use the disputed land for all intents and purposes as if it were their own land and they have carried out significant improvements on the land. These contributions are said to have improved the value of the land as opposed to making it fit for them to use. They would not have carried out that work unless they had reasonable grounds to believe that would have an interest in the land. It would therefore be unconscionable to deny them that interest.
The case for Wharepuke Property Ltd
[18] Mr Ken Finlayson says that Wharepuke Property Ltd is operating an organic dairy farm on the Kirk Road property, a farm of 132 hectares. He says that his father sold the Hubands their land in the 1970s. A divisional fence was already in place and this was used as the boundary fence after the sale, although everyone knew that it was not on the correct boundary line. He confirms that the land was covered in regenerated scrub. He comments that modern machinery has made keeping the vegetation at bay
6 Cerney v Cerney [2015] NZHC 2256.
a lot easier. He says the fence was updated about 1980 to an adequate state, using new and some recycled materials. There is one area of the fence where remedial work is required. The part of the Huband property on the Finlayson side of the fence had little to no grazing value and was mainly a bush block. He refers to a boundary peg, and recalls a comment by his father that the peg was important. He says that the peg has now been removed. He cannot vouch for everything his father said, but he says that he had several conversations with Mr Huband where Mr Huband apparently accepted that the Hubands did not own the disputed land. He refers to about discussions of a land swap and a boundary adjustment, and says that those discussion were inconclusive. He points out that the Hubands have had over 40 years of free grazing. He says that there were discussions in 2017 to try to reach agreement on the matter but no agreement has resulted. He does not accept that the Finlaysons and Wharepuke Property Land have ever ceded any interest in the land. He wants the boundary fence to be reinstated to the correct boundary line. He is prepared to pay the costs of fencing himself because he says that the fence will be erected only on the land of Wharepuke Property Ltd.
[19] In written submissions, Mr Magee distinguished the Cerney case which involved a son carrying out work under an agreement with his parents, under which he was to receive a half share of the increased value of the home once it was sold. The work was substantial and the agreement was found to have the requisite clarity for an expectation of an interest. The submissions also referred to Rosser v Global Construction Services Ltd.7 That case can be distinguished. That was a case of a building contractor carrying out construction work under contract. That context does not suggest that a contractor obtains an interest in land purely for carrying out construction work. Mr Magee says that Wharepuke Property Ltd accepts that the Hubands have done work on the disputed land and have made it more suitable for grazing. Wharepuke’s case is that that work by itself does not generate a reasonable expectation of an interest in the land. There were no actions, discussions or agreements that could suggest to the Hubands that they could reasonably expect to have an interest in the land. At its highest the Hubands could only have some
7 Rosser v Global Construction Services Ltd HC Auckland, CIV-2004-404-2899, 28 April 2004 per Master Lang.
expectation as to the site of the fence. They point to the benefits the Hubands have had by using the land for grazing.
[20] On equitable estoppel, Mr Magee submitted that there is no clear evidence of an agreement between the parties and there was a looseness in the alleged assurances. Any representations by Mr Ross Finlayson were said to be unclear, informal and did not amount to a representation that the Hubands would have an interest in the disputed land. On that basis, there was not an arguable case for an interest in the land.
Discussion
[21] While the Hubands have put their case on alternate bases, I will consider the matter primarily as a question of equitable estoppel. The arguments advanced by Mr Armstrong of an institutional constructive trust are more commonly found in a family context and are less suitable in a case between neighbours operating at arm’s length.
[22] The starting point is that a give-and-take fence does not by itself confer any interest in the land. It does not alter the true legal boundary. Section 21(4) of the Fencing Act 1978 recognises that when the District Court has fixed the boundary of a give-and-take fence, no interest in the land is created by way of a tenancy or by way of adverse possession, and title and possession to the land is not affected. The Court of Appeal dealt with a give-and-take fence in York v Vincent.8 That decision is important as holding that aside from the fencing legislation a give-and-take fence does no more than create a revocable licence. The owner on whose land the fence is erected is entitled to move that fence at his own cost. Pennefather J went on to observe:9
I do not say whether, if one party, being under the erroneous impression that the land on his side of the fence had become his, had proceeded to erect expensive buildings upon it; and the other, knowing all the time the true state of affairs, had remained quiet and made no objection, he might not then be estopped from denying that the fence was the true boundary. …
8 York v Vincent (1898) 17 NZLR 292 (CA).
9 At 302.
Pennefather J noted that in that case there was no suggestion of expensive buildings and there had not been a great lapse of time, and there was no reason to impute knowledge to one party and ignorance to the other. However, his statement does recognise that equitable principles may intrude on the normal position that a give-and- take fence gives rise only to a revocable licence. Equity may intrude to prevent one owner from insisting on the strict application of the law. Even in the 19th century there were clearly established authorities recognising that interests in land may arise as a matter of proprietary estoppel: Ramsden v Dyson and Plimmer v Wellington City Corporation.10 The last case may be noted as involving a licence to occupy land where the Privy Council upheld the licensee’s claim to have an interest in the land for having carried out improvements with the acquiescence of the Wellington City Corporation. A formulation of the test for proprietary estoppel is found in the judgment of Fry J in Wilmott v Barber.11
[23] A current formulation is that the party alleging an estoppel must show these things:
(a)a belief or expectation, created or encouraged through some action, or a representation or omission to act by the party against whom the estoppel is alleged;
(b)a belief or expectation that has been relied on by the party alleging the estoppel;
(c)detriments suffered by the person holding the belief or expectation if that belief or expectation is departed from; and
(d)it would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.
[24] Under that test, I find that the Hubands have an arguable case that the conduct of Mr Ross Finlayson as owner, and later when he was a director of Wharepuke
10 Ramsden v Dyson (1866) LR 1 (HL) 129 – see the principles stated by Lord Kingsdown at 170- 171; and Plimmer v Wellington City Corporation (1884) 9 App Cas 699 (PC).
11 Wilmott v Barber (1880) 15 Ch D 559.
Property Ltd, did encourage the Hubands to believe that they would be able to continue using the land on their side of the fence. The Hubands arguably relied on that belief to carry out work to their detriment. While Pennefather J referred to “expensive buildings” in York v Vincent, there are no expensive buildings here. In rural New Zealand, work in clearing land and bringing it into production has been regarded as requiring a significant input of time and labour and as effecting an improvement to the land.
[25] Against that, there is the question of benefit. I note, for example, that the Hubands did not have to pay rates for this land they used for grazing. At this stage, it is a trial question whether the burden of upgrading the land exceeds the benefits they derived from it. There is certainly not enough evidence for me to say that the benefits and burdens generally equate.
[26] As to unconscionability, it is arguable for the Hubands that the Finlaysons are trying to take advantage of improvements to the land, which under their original ownership was in bush but has now been converted into pasture. That is sufficient for me to recognise that there is an argument for a caveatable interest in the land.
[27] Mr Magee submitted that a court is unlikely to order an interest in the land. That goes to remedy. As to whether the court would order a reliance-based relief or expectation-based relief, I refer to the decision of the Court of Appeal in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd:12
[113] … The cases show a wide variation of approach to the grant of appropriate remedies in cases of equitable estoppel. To attempt any definitive or exhaustive statement of the principles is likely to be elusive and may not be helpful given the fact-dependent nature of the cases coming before the Courts.
[114] Nevertheless some principles may be stated with a degree of confidence even if the application of those principles in particular cases may be a matter of some difficulty. The three main elements relevant to relief stem from the ingredients necessary to establish equitable estoppel in the first place. These are the quality and nature of the assurances which give rise to the claimant’s expectation; the extent and nature of the claimant’s detrimental reliance on the assurances; and the need for the claimant to show that it would be unconscionable for the promisor to depart from the assurances given.
12 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407; [2014] 3 NZLR 567 at [113]-[120].
[115] As a general approach, the clearer and more explicit the assurance is, the more likely it is that a court will be willing to grant expectation-based relief. That is because a clear assurance is more likely to engender an expectation by the promisee that it will be fulfilled. Similarly, the greater the degree and consequences of detrimental reliance by the claimant, the more likely it is that the court will be prepared to hold the defendant to the promise rather than make an award (generally of a more limited nature) designed to compensate for reliance-based losses.
[116] Unconscionability is the third key consideration. As Brennan J explained in Waltons Stores unconscionability is the element which both attracts the jurisdiction of a court of equity and moulds the remedy. In assessing the appropriate remedy, all the relevant circumstances are to be considered. The aim is not to satisfy the claimant’s expectation (although that may be what the relief requires in appropriate cases) but to satisfy the equity that has arisen in the claimant’s favour.
[117] While some authorities continue to refer to relief as being the minimum necessary to satisfy the equity, the emphasis in more recent cases has been on a broad consideration of the relief necessary to achieve a just and proportionate outcome.
[118] Where the claimant’s expectation is seriously disproportionate to the detriment suffered, the court will be unlikely to grant expectation-based relief. To do so would be to overcompensate the claimant and would be unjust to the defendant. In such a case, the court would consider whether there may be a means of satisfying the equity in another way. But that does not mean the court will simply compare in an arithmetical manner the extent of any reliance- based losses with the value to the claimant of the expectation. A broad assessment of all the relevant circumstances is to be made including losses or other detriment which cannot be quantified or measured in monetary terms.
[119] In choosing between reliance or expectation-based remedies, there is some support for the proposition that, subject to proportionality between the expectation and the detriment suffered, it will often be just to make an order to fulfil the expectation, but we do not consider it is appropriate to adopt a presumptive or prima facie approach one way or the other. That would not be consistent with the flexible approach to equitable remedies consistently emphasised in the cases.
[120] ….our preference is to avoid cluttering the available remedies by arbitrary rules, as McGechan J put it in Stratulatos.
Again, that is a question for a substantive hearing. I cannot determine it at this stage. I do not have enough to say unequivocally that the Hubands will not get any expectation-based belief.
[28] In summary, I find that the Hubands have an arguable case for a caveatable interest in the disputed land owned by Wharepuke Property Ltd. I uphold the caveat. That is, however, subject to conditions:
(a)The Hubands must promptly begin a proceeding in this court in which they must claim as relief the interest they have claimed in their caveat.
(b)The Hubands must give an undertaking as to damages. That is to protect Wharepuke Property Ltd if the Hubands fail at trial. The potential damages that the Hubands might have to pay is for the use of the land and for denying use of the land to Wharepuke Property Ltd. An owner of land may recover damages from a trespasser calculated as a reasonable charge for the use of the land.
[29] I reserve costs. The parties may come back if costs are required. Leave is reserved to apply for any other directions.
……………………………….
Associate Judge R M Bell
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