Joe & Co Builders Limited v Thompson
[2023] NZHC 224
•17 February 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-605
[2023] NZHC 224
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application pursuant to s 143
BETWEEN
JOE & CO BUILDERS LIMITED
Applicant
AND
CHARLES RONALD THOMPSON and SANDRA MICHELLE LESLEY
THOMPSON
Respondents
Hearing: 3 February 2023 Appearances:
J D Dallas for Applicant
M J Borcoski and C W Martin for Respondents
Judgment:
17 February 2023
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction and background
[1] This is an application by Joe & Co Builders Ltd for an order sustaining a caveat lodged by the company over a property owned by Mr Charles and Mrs Sandra Thompson in Lower Hutt.
[2] On 7 March 2022 the parties entered into an agreement for the sale and purchase of the property. The details of the contractual arrangement between the parties are not important. However, I record that the property was bare land of approximately 8,337 sq m; the purchase price was $175,000; and the (original) settlement date was 8 July 2022.
JOE & CO BUILDERS LIMITED v THOMPSON [2023] NZHC 224 [17 February 2023]
[3] The agreement for sale and purchase was based on the Real Estate Institute of New Zealand standard form document (11th ed, 8 February 2022) which provided in cl 6.1 as follows:
The vendor shall not be bound to point out the boundaries of the property except that on the sale of a vacant residential lot which is not limited as to parcels the vendor shall ensure that all boundaries markers required by the Cadastral Survey Act 2002 and any related rules and regulations to identify the boundaries of the property are present in their correct positions at the settlement date.
[4] After the parties had entered into the agreement for sale and purchase, the applicant, through its director, Ms Catherine Foot, became concerned about whether the boundaries of the property were correctly and completely marked with survey pegs.
[5] Ms Foot herself carried out some investigatory work. In her evidence, she describes what steps she took. This confirmed her in the view that the boundaries of the property were not correctly and completely marked.
[6] Correspondence between the parties and their solicitors followed in which the scope of cl 6.1 and the extent of a vendor’s obligations under that provision were canvassed. The important point is that, the issue having been raised, the respondents, presumably on the advice of their solicitors, engaged a firm of surveyors, Real Time Survey, to survey the property and if necessary regularise the position. The principal of Real Time Survey who was responsible for the job was a Mr Kieran McCarthy.
[7] Mr McCarthy surveyed the property on 19 July 2022 and provided the respondents with a report — in the form of a survey plan — on 5 August 2022. This was passed on to the applicant the same day.
[8] In a nutshell, the applicant says that the respondents have never complied with their obligations under cl 6.1. The respondents do not accept that. They say that, once Mr McCarthy had resurveyed the property and carried out the work he did, they had complied with their obligations under the clause.
[9] On 9 August 2022 the respondent issued a settlement notice requiring the applicant to settle within 12 working days from service of the same.
[10] The applicant refused to settle and continues to maintain that the respondents have not complied with cl 6.1.
[11] The applicant having refused to settle, on 26 August 2022 the respondents gave notice cancelling the agreement for sale and purchase.
[12] In the meantime, on 18 August 2022 the applicant had lodged a caveat against the title to the property pursuant to s 138 of the Land Transfer Act 2017 asserting an equitable interest as the purchaser of the same.
[13] On 8 September 2022 the respondents triggered the process requiring the applicant to either commence proceedings to sustain its caveat or abandon it.
[14] On 4 October 2022 the applicant commenced this proceeding by originating application in order to sustain its caveat.
The current application
[15] Before the Court for determination, then, is the applicant’s application pursuant to s 143 of the Land Transfer Act.
[16] As to the nature of the interest that an applicant must establish, s 138(1) provides:
(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—
(a)claims an estate or interest in the land, whether capable of registration or not; or
(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or
(c)is transferring the estate or interest in the land to another person to be held on trust; or
(d)is the registered owner of the estate or interest in the land and—
(i)has an interest that is distinct from that of registered owner; or
(ii)establishes to the satisfaction of the Registrar that at the time the caveat is lodged there is a risk that the estate or interest may be lost through fraud.
[17]Section 143 provides:
(1)The following persons may apply to the Registrar for the lapse of a caveat against dealings affecting an estate or interest in land:
(a)a person who wishes to register an instrument affecting the estate or interest protected by the caveat; or
(b)the registered owner or a person acting for or on behalf of the registered owner of the estate or interest affected by the caveat.
(2)The Registrar must give notice of an application under subsection (1) to the caveator.
(3)A caveat to which an application relates lapses unless,—
(a)within 10 working days after the date on which the Registrar gives notice of an application under subsection (1) to the caveator, the caveator gives notice to the Registrar that an application has been made to the court for an order that the caveat not lapse; and
(b)within 20 working days after the date on which the caveator gives a notice to the Registrar under paragraph
(a) (the relevant period), an order of the kind referred to in subsection (4) is served on the Registrar.
(4)The orders are—
(a)an order that the caveat not lapse:
(b)an interim order that the caveat not lapse:
(c)an order adjourning the application.
(5)The caveat lapses if the court makes an order to that effect before the close of the relevant period.
(6)If the court makes an order under subsection (4)(b) or (c), the caveat will not lapse if, after the close of the relevant period,—
(a)the court makes a final order that the caveat not lapse; and
(b)the order is served on the Registrar.
(7)If the court makes an order under subsection (4)(b) or (c), the caveat will lapse if, after the close of the relevant period,—
(a)the court makes a final order that the caveat lapse; and
(b)the order is served on the Registrar.
(8)An application under subsection (1) for the lapse of a caveat may be withdrawn—
(a)with the leave of the court only, if the caveator has applied to the court for an order that the caveat not lapse:
(b)without the need for leave of the court if—
(i)the Registrar has not yet given notice to the caveator under subsection (2); or
(ii)the Registrar has given notice to the caveator under subsection (2), but the caveator has not yet applied to the court for an order that the caveat not lapse.
[18] That brings me to the issue and the arguments advanced on behalf of the parties.
Issue
[19] Mr Dallas referred to and relied on Botany Land Development v Auckland City Council where the Court of Appeal set out the principles governing applications pursuant to s 143, which Mr Dallas summarised as follows:1
(a)The caveator bears the burden of establishing that the caveat should be sustained.
(b)In order to discharge that burden, the caveator must establish that he, she or it has a reasonably arguable claim to an interest in the land of the type described in s 138(1)(a) of the Land Transfer Act.
(c)Even if the caveator can establish a reasonably arguable case, the Court retains a residual discretion as to whether or not to make an order and will do so if no useful purpose would be served.
[20] Mr Martin, who, at Ms Borcski’s request, argued the case for the respondent, did not demur from that summary, and it certainly appears to me accurately to reflect Botany Land Development and other relevant authorities. I would add only that the broad sweep of the cases suggests that the “reasonably arguable case” that an applicant
1 Botany Land Development Ltd v Auckland Council [2014] NZCA 61 at [24].
must establish in the context of an application under s 143 of the Land Transfer Act does not present quite the same hurdle as an applicant faces in other areas, such as in applications for injunctive relief. My reading of the cases, including, by way of example, Cowan v Cowan,2 suggests that the applicant need only establish a tenable claim. That is not at all surprising, given that if the application fails the applicant will lose the opportunity to contend for an interest in real property.
[21] The core issue between the parties in this case is whether the respondents as vendors under the agreement for sale and purchase had, as at 9 August 2022, when they served their settlement notice, discharged their obligations pursuant to cl 6.1. Only then would they be able to say that they were themselves ready, willing and able to settle. Only then would they be entitled to cancel the contract in the event of the respondents not settling on the expiry of the notice, as they purported to do in their notice of cancellation dated 26 August 2022.
[22] However, the immediate issue for determination is whether the applicant has an arguable case to the effect that the respondents had not discharged their obligations under the clause.
Submissions
[23] Mr Dallas’ first submission was that, even if the respondents’ contention that the section was properly surveyed with all necessary survey pegs in place, that did not enable them to say that they had complied with the requirements of cl 6.1.
[24]Here is how Mr Dallas summarised this component of his argument:
3.3The respondents instructed RTS to locate the boundary markers for the property and RTS found some boundary markers, placed some boundary markers, and provided a set-out plan whilst recording their efforts. It is the applicant’s submission that the set-out plan:
a.has no legal basis
b.contains only part of the property as it does not take into account the leg of the property leading down to Ngahere Street
2 Cowan v Cowan [2021] NZCA 31.
c.shows that the boundary markers were placed on the property by RTS but the plan does not contain any Cadastral Survey Data Set (CSD) in compliance with the CSA and CSR
d. does not satisfy the requirements of clause 6.1 ASP [Emphasis added.]
[25]In the context of that submission he referred me to this Court’s judgment in
Kumar v Bahramitash.3
[26] There are similarities between that case and this. The factual background is recorded in the headnote to the judgment:
On 21 August 2003 the Kumars (Ks) as purchasers entered into an agreement for sale and purchase (in the REINZ/ADLS form (7th ed (2), July 1999)) of a vacant section in Auckland. Bahramitash (B) was the owner of the section and the vendor.
Clause 4.2 provided:
If, prior to the giving and taking of possession, the property is destroyed or damaged, and such destruction or damage has not been made good by the possession date, then the following provisions shall apply:
(2)If the property is not untenantable on the possession date the purchaser shall complete the purchase at the price less a sum equal to the amount of the diminution in value of the property.
Clause 5.1 provided:
The vendor shall not be bound to point out the boundaries of the property except that on the sale of a vacant residential lot which is not limited as to parcels the vendor shall ensure that the property is pegged at the possession date.
The agreement provided for possession 14 days from the date the agreement became unconditional and it was agreed that settlement date was 11 September 2003.
The Ks alleged that soil had been dumped on the section after the agreement had been entered into. By letter written on their behalf on 3 September 2003 the Ks’ solicitors wrote to B’s solicitors saying that if he was “unable to show the pegs then our clients require your client to have the property surveyed and marked with appropriate pegs”. The letter complained about the deposit of the soil, requiring its removal, and sought compensation at an estimated
$10,000. The letter concluded: “if all works are not done prior to settlement they [the Ks] will deduct this compensation amount and tender the balance”.
3 Kumar v Bahramitash (2004) 5 NZCPR 387 (HC).
On the same day B’s solicitors replied saying the pegs were shown to K on 29 August 2003 and that all the soil was on the property for inspection. An exchange of correspondence followed. A settlement statement for settlement as at 11 September 2003 was sent on 8 September 2003 and the Ks’ solicitors sent a transfer and associated documents for execution.
On 11 September 2003 Ks’ solicitors wrote saying that they had funds and were ready to settle but maintained the objection that there was a failure to point out the boundary pegs and that soil had been dumped. The letter repeated the estimate of compensation at $10,000 and that it was futile to tender settlement. The letter said “if we are wrong on this please advise otherwise no formal tender will be made”. B’s solicitors faxed a settlement notice on 12 September 2003 requiring settlement within 12 working days of service of the notice. On 15 September 2003 the Ks’ solicitors responded alleging that the settlement notice was invalid because of the unresolved questions of the pegs and the soil. The letter enclosed a settlement notice on the purchasers’ behalf requiring the vendor to point out the boundary pegs to the purchaser and requiring delivery of the property in the state initially inspected.
On the morning of 12 September 2003 a surveyor instructed by B resurveyed the property. He confirmed that he had checked and repegged the boundaries and that all boundary monuments were now in the correct position. A copy of this report was faxed to the Ks’ solicitors on 16 September 2003 reiterating the position about the soil and confirming that the settlement notice stood. The Ks did not accept this as resolving the matter, relying on both the dumping of the soil and the failure to put out the boundary pegs. The Ks’ solicitors letter of 17 September 2003 made a “without prejudice” offer of compensation of $5,000 plus solicitors’ costs of $1000. A second letter of the same date merely said that eh Ks’ extra expenses of approximately $1000 “will need to be addressed before settlement is finally achieved”. On 1 October 2003 B’s solicitors wrote cancelling the agreement for sale and purchase for failure to comply with his settlement notice.
The Ks sued for specific performance. They also sought related orders requiring B to remove soil dumped on the section, point out the boundary pegs or have the property pegged, or as an alternative pay $10,000 compensation for this work.
[27]In Kumar Williams J said:4
[42] Counsel were unable to point to any authority defining the word "pegged" but given the emphasis on precision in the Cadastral Survey Act 2002 and the Survey Regulations 1998 (preserved in force by the Cadastral Survey Act 2002 s 50) 12 "pegged" must be taken as meaning that all boundary markers required by the Act and the Regulations were present in their correct positions at possession date.
[43] It follows that even though Mr Bahramitash may have pointed out the pegs to Mr Kumar on 29 August and may genuinely have thought all were in their correct position, Mr Bowmar's evidence makes clear that two, however slightly, were not correctly located in accordance with the Act and the
4 At [42]-[43].
Regulations. The position at law must accordingly be that 2B Hastie Avenue was not "pegged" at possession date, 11 September, as required by clause 5.1 of the contract.
[28] Notwithstanding that the wording of cl 5.1 in the edition of the Real Estate Institute of New Zealand standard form agreement that governed the contractual arrangements between the parties in Kumar differs from cl 6.1 here, Williams J’s conclusions apply with equal force.
[29] As I understood Mr Dallas’ argument, he relied on Kumar only for the proposition that under cl 6.1, the respondents were only entitled to issue their settlement notice if the work carried out by Mr McCarthy resulted in them being able to comply in all respects with cl 6.1. Insofar as it goes, I accept that contention.
[30] On what bases, then, is it contended that the respondents cannot establish that they had not done so?
[31] Mr Dallas’ argument was that the obligation of a vendor pursuant to cl 6.1 is to ensure strict compliance with the Cadastral Survey Act 2002 and the Cadastral Survey Rules 2021.
[32] The only provision in the legislation to which Mr Dallas referred me was s 56 which is headed “False cadastral survey marks” and provides:5
56 False cadastral survey marks
Every person commits an offence and is liable on conviction to a fine not exceeding $2,000 who places in position in relation to any land a peg or mark—
(a)that is not a cadastral survey mark properly placed; and
(b)with the intention of causing any person to believe that it is a cadastral survey mark placed in that position for the purposes of a cadastral survey.
[33] Mr Dallas did not contend that the respondents had breached this section, and it is not at all obvious to me that there would be an evidential foundation for any such assertion.
5 Cadastral Survey Act 2002, s 56.
[34] However, Mr Dallas submitted that, once Mr McCarthy had ascertained that not all survey pegs were present and correctly placed, resurveyed the property and taken steps to rectify the position, the rules required a boundary reinstatement survey to be undertaken and a Cadastral Survey Data Set (CSD) to be completed and lodged with Land Information New Zealand. Those obligations, he said, arose from the pt 9 sub-pt 2.
[35]There is only one rule in that sub-pt, r 113, which says:6
A CSD that complies with these rules must be lodged within 6 months after the placement of a boundary mark on a boundary reinstatement survey.
[36] Mr Dallas is no doubt correct that the work that Mr McCarthy carried out necessitated the lodging of a CSD within six months.
[37] However, as Mr Martin submitted, there is no necessary coincidence between the statutory obligations that the respondents owed in their capacities as the owners of the land and their contractual obligations as the vendors under the agreement for sale and purchase. The agreement for sale and purchase simply requires the respondents as the vendors to “ensure that all boundary markers required by the Cadastral Survey Act 2002 and any related rules and regulations to identify the boundaries of the property are present in their correct positions at the settlement date”.
[38] Assuming for the purposes of addressing this aspect of the case that Mr McCarthy placed all necessary survey pegs in the correct positions, it follows that, prior to even the original settlement date of 8 August 2022, the respondents had complied with cl 6.1.
[39] In short then, I do not accept Mr Dallas’ submission that, in order for the respondents to have complied with their obligations under cl 6.1 as at the relevant date, a CSD had to be lodged with Land Information New Zealand.
[40] I was informed from the bar that, as it happens, the respondents complied with their obligations under r 113 by lodging a CSD within the six-month period provided
6 Cadastral Survey Rules 2021, r 113
for, but, for the reasons I have explained, that appears to me to be neither here nor there.
[41] Mr Dallas contended on two bases that, even after Mr McCarthy had taken the steps that he did, the respondents could not say that they had complied with cl 6.1 of the agreement for sale and purchase.
[42] The first basis concerns a missing peg which Mr McCarthy did not put in place. In accordance with the existing cadastral survey, this peg should have been located on a metalled section of the property which is currently being used as a driveway by users of the respondent’s property and neighbouring properties. Mr McCarthy’s evidence was that it was also an area where the information he had about the property indicated there were various services, that is to say, mains water pipes, sewer and storm water drains and electrical and related services.
[43] In the circumstances, Mr McCarthy’s professional judgement was that there was no practical way of identification by pegging or other methodology.
[44] Mr Dallas took the point that as Mr McCarthy had not placed a survey peg at this point it could not be said that “all boundary markers required by the Cadastral Survey Act 2002 and any related rules and regulations to identify the boundaries of the property [were] present and in their correct positions” at the relevant time.
[45]Mr McCarthy responded to this point in his affidavit evidence as follows:
15.5We were able to locate the correct position of the boundary. It is my opinion that, if this were the location of a new boundary for a subdivision or similar, an application would be made to LINZ for an exemption for monumenting the marker. It would almost certainly be accepted given the existence of live services and the cleared vehicle access area. It is also noted any steel mark would need to have been buried under the surface to avoid damage by the driveway, and therefore would not be easily identifiable by persons on the property looking for boundary positions.
15.6Rule 35 of the Rules outlines that boundary points must only be marked “if practicable”. Likewise, the boundary point is not “in conflict” (rule 35(2)(a)) and the CSD data we have provided is sufficient to locate it (rule 35(2)(b)).
[46] The Court therefore had expert evidence to the effect that, notwithstanding the absence of a survey peg at the relevant point, on the basis of industry practice, the boundary markings of the property were compliant with the legislation. Had the applicant wished to contradict this evidence it could have called its own expert on the point, but elected not to do so.
[47] In the light of Mr McCarthy’s uncontradicted evidence, I am not satisfied that it is reasonably open to the applicant to contend that the respondents had not complied with cl 6.1 because there was no survey peg at this location.
[48] The second basis advanced by Mr Dallas for this argument concerns the shared driveway that services the respondents’ property and others. Until comparatively recently, the Land Transfer Act did not allow for the creation of freehold titles that did not include access to public roads. One of the consequences was that, where there was a shared private driveway, the titles to the relevant properties would include a narrow strip along the private road and each title would grant an easement to all the other titles to use its strip. It was a somewhat awkward way of complying with the requirements of the legislation.
[49] That is the arrangement that was put in place in this sub-division so that the property owned by the respondents, along with all the other properties involved, owned a narrow strip of a designated private road.
[50]The Land Transfer Act no longer continues any such requirement.
[51] Mr Dallas’ contention was that because the narrow strip of driveway owned by the respondents but encumbered in favour of other properties was not marked by survey pegs, they had not fulfilled the obligations under cl 6.1.
[52] This was not a pleaded basis for the application. Accordingly, neither the respondent nor Mr McCarthy touched on it in their evidence. However, as Mr Martin submitted, the same logic that Mr McCarthy applied to the earlier point concerning the isolated missing point would appear to apply with even greater force here.
[53] In my judgment, the qualifications in r 35(1) to the effect that survey pegs need not be placed when it would be impractical applies. It would be impractical in the extreme to place survey pegs identifying the numerous narrow strips of land that are included in the titles of properties with interests in a private road. Moreover, as Mr Martin submitted, r 35(1)(d) expressly says that boundary points need not be marked if “the parcels on each side of that boundary are required to be … subject to reciprocal rights of way”, and r 63 provides in effect that non-primary parcels of land need not be marked. Non primary parcels of land are defined to include access strips. Although that term is not defined my view is that it would certainly include strips that form part of private roads.
[54] The view I take is that the applicant has been unable to demonstrate to the necessary standard that there is an arguable or tenable case to the contrary effect.
[55] For those reasons, I am not satisfied that the applicant can establish an arguable case to the effect that it retains an equitable interest in the property as purchaser. Putting the matter in an alternative way, I am satisfied that following the survey work carried out by Mr McCarthy, as at the date that the respondents issued their settlement notice, they had satisfied their obligations under cl 6.1, with the result that they were entitled subsequently to cancel the contract.
Result
[56]For those reasons the application must fail.
[57] In order to give the applicant an opportunity to take advice in relation to and if necessary lodge an appeal and seek a stay, the Court’s order is that the caveat will lapse at 4.00 pm, 15 working days from the date of this judgment.
[58] As to costs, the application has been unsuccessful and my preliminary view is that the applicant must pay the respondent’s costs on a 2B basis together with such disbursements as may be fixed by the Registrar. However, as I have not heard counsel in relation to costs I reserve them. If counsel are unable to resolve costs, then they
may file memoranda in the usual way.
Associate Judge Johnston
Solicitors:
J D Dallas, Wellington for Applicant
Saunders Robinson Brown, Christchurch for First and Second Respondents
3
0